My wife picked up a weird little book for me (yard sale). It is called “Elliot Wave Theory”-it proports to show how stock pricing can be “predicted” by drawing elaborate charts of the prices over time-something like 5 peaks and then something is supposed to happen.
Like all stock pricing theories, I suspect it works mainly in hindsight.
At any rate, does anybody actually waste their time drawing up these elaborate charts? Are there any mutual fund managers who use this theory to make purchase decisions? It looks like mumbo jumbo to me.
They are called “technical analysts” and they see patterns in charts the way people see Jesus in toast.
They are pretty much wastes of oxygen.
If someone is selling this book in a yard sale, it didn’t make them rich.
I’m always just astonished by how many people seem to honestly believe that the market exhibits very simple patterns that everyone else doesn’t see. Really, how self-centered are we?
But out of honest curiosity, what’s the date of the book? There’s some evidence that simple chart-based strategies actually did work in the 1930s, so it might be a holdover from back then.
The Elliot Wave Principle was developed in the late 1930s.
sounds like biorythym for stocks
You apply it by writing a book about it and selling it to folks who want to get rich quick.
In order for it to work, you have to invoke the first rule of Elliot Wave Theory.
The book is “Elliott Wave Principle”, by Frost and Prechter (8th edition, 1996).
At least (according to them) the latest “Long Wave” bottomed out in 2010-so maybe we will be OK!
It seems very hard to apply this crap-you wind up drawing up endless charts.
again, have any mutual fund managers ever used it?
Yes.
There’s a LOT of mutual funds out there, and if that book was published in the 90s I’m sure there’s at least one who swears by the method.
I’d call your brokerage and ask, they should be able to locate a fund for you.
Take a look at Robert Prechter: http://www.fundmymutualfund.com/2009/10/robert-prechter-of-elliott-wave.html
Technical analysis is one of the nuttiest forms of mainstream stock analysis, you can find. It seemed immensely silly when I was learning about it for my Series 7 and the final nail in the coffin was when someone charted each of the digits of pi and was able to find many of the “head and shoulders” patterns that technical analysis claim are important keys to a stock performance.
But it’s not laughed away in the industry and there are some serious analysts who still use it.