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(I sent this to John Yesterday and meant to post it to the group, sorry)
John-
I am not sure it can be covered appropriately in this format. The seminar
tapes I have watched in past years spend quite a bit of time on it, plus it
has "evolved a bit" and I am still learning there.
Briefly there are two ways to use the 5/17 oscillator.
First when a wave 5 and 5/35 oscillator is larger that the previously
posted wave 3, it is a hint you are in an "extended wave" and if you switch
to the 5/17 you are able to see the internal count of the impulse wave (the
minor count). You would also would analyze the wave structure here using
"Localized count" meaning you are only concerned about this impulse, not
where it is in the overall 5 wave structure. Eventually it will be labeled
a wave 3 but for the time being this helps with the internal structure of
this impulse move and how to trade it. When the wave (impulse move) may be
complete (the minor 3 will be the biggest, the minor 4 oscillator will go to
zero or below a bit (but does not exceed 1.4 of the height of the minor wave
3, below the zero line (or above if the move is down) and the minor wave 5
will have divergence (be lower than the wave 3 height (or higher if a down
move)).
The 10/70 is representative of what is called a "long term count" and is
supposed to represent what the institutions or mutual funds are doing. You
switch to it when the 5/35 loses control (wave 4 oscillator goes below the
zero line (or above if a down movement) by more than 1.40 of the wave 3
oscillator height (really 40% but we use the fib retracement tool set at
1.40 to illustrate it on the histogram). If you look at the daily charts you
will see it posted on the bonds down on the histogram. Once that happens you
switch to the 10/70 oscillator and "Long term count" (before 1997 they had
us switch to an "Aggressive count", which I was used to doing). Earl
recently pointed out to me and I have since watched my tapes and they now
want us to go to Long term count (I am uncertain were Aggressive count fits
at this time, suffice to say it was a good tool to help recognize when a
wave 4 went too deep and a new 1-2-3 structure appears and the previous
1-2-3 becomes a big A-B-C).
The different counts are adapting to alternative structures that should be
considered when primarily the 5/35 oscillator loses control and also what
time frame trader you are and in that regard has been very helpful (Not all
of us can take the stop required for a position trade or handle the margin
requirement perhaps).
That said, if you can stack each oscillator below a chart, 5/17 then 5/35
then 10/70, by watching each either "stay in control" on wave 4's or lose
control (oscillator drops below the zero line by greater than 40% of the
previous wave 3 (or above if a down move) you jump to the next one and tends
to keep you from fighting "who is in control" with respect to buying and
selling. This is also a tool to tell you what time frame 60min, daily or
weekly you should be in at times but lets leave that alone here.
5/17 traders are very short term "day traders", and if they lose control
they exit immediately.
5/35 traders are more "positional medium term traders" and are usually
trading a longer time frame and that potential structure.
10/70 are the institutions/mutual funds (if a stock) and they are long term
traders.
So if the 5/17 loses control, that means, one switches to "Original count"
from "Localized count" and a 5/35 oscillator since day traders cannot win
(normally) against longer term positional traders, simply stated their
threshold of pain is exceeded.
If the 5/35 oscillator loses control then switching to the 10/70 and long
term count will show you if you are fighting the institutions, not normally
a wise thing to do, again the medium term players thresholds of pain are
exceeded (and stops hit).
If I may, let me give an example, early in a move the 5/17 traders buy an
apparent low, and trade with it as long as the structure holds, eventually
the medium term players join them and we may be coming out of a wave 2, so
both are in synch, also the institutions start to come on board now everyone
one is on the same side of this move (well not everyone, need someone on the
opposite side of the trade right). Then the wave 4 starts the 5/17's are the
first to leave, then the 5/35's and after an apparent wave 4, the 5/17's and
5/35's step in and buy (assume we are going up here), but the institutions
have not finished their profit taking. The 5/17's lose control then the
5/35's, their buying cannot hold the market up, the institutions are in
control. Once the 10/70 gets to zero the institutions now start reinvesting
feeling the correction has run its course , eventually the 5/17 and 5/35
join them and another move up happens (wave 5). Now if you understood all of
this, if the 5/35 oscillator on the daily stays in control then it is likely
a minor wave 4 on the 10/70 and it never reaches zero, so the institutions
are still long adding maybe but certainly not wholesale selling yet.
This is hard to verbally describe and I will see if a gif will illustrate
what I have just tried to say. Attached is a daily S&P chart. As you can see
the oscillators pick out the wave 3 pretty well, and the wave 4. The 5/35
traders (sellers) were in control at wave 4, the institutions were still
sellers, the 5/17 were blown out briefly (shorted early but could not stay
short). Of interest is the 10/70 is now to zero meaning this corrective move
up may be over and wave 5 down there could start (doesn't mean it will), the
5/17's are attempting to rally it and have put in a wave 1, and the
retracement to zero is wave 2 potentially, the 5/35's show similar action.
As I have said this is a very important area I believe. Can the 5/17 and
5/35 players rally it enough for the institutions to join in? Failure by
first the 5/17 and then the 5/35 players would spell doom for this market,
however if they are successful it will turn the market enough for the
10/70's to join in. At that point the 10/70 oscillator will be viewed as all
minor counts of a large impulse move down that simply ended.
That's the best I can do with my still hunt and peck fingers . . . hope this
helps and does not confuse everyone.
Good luck and "profitable" trading
don ewers
----- Original Message -----
From: <joach@xxxxxxxxx>
To: <dbewers@xxxxxxxxxxxxx>
Sent: Sunday, February 11, 2001 10:19 AM
Subject: Re: [RT] 5-35 Osc. and Elliott Wave
> Don you have give us a very good insight to the 5/35 Oscillator.... could
you
> kindly take some time and detail for us how you are using the 10/70 and
the 5/17
> Oscillators. So far it been very understandable and good reading.
>
>
> John
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