Approach

Utilizing the Elliott Wave Oscillator (EWO), the Golden Cross, and volume, the strategy approach dynamically allocates in and out of core asset classes (stocks / bonds /cash) when:

  • Wave & Volume properties indicate a primary wave trend down (or up) in asset classes is occurring.

Elliott Wave Oscillator

The Elliott Wave Oscillator (EWO) is simply the difference between a five-period and thirty five-period trimmed mean – 70 percent.

When the wave indicator begins to put in a series of lower highs while the asset class price puts in higher highs a potential trend change is identified.

The basis of the Elliott principle, which quantifies market crowd behavior, works best in security types that (1) have great volume (liquidity) and (2) move according to key forces of fear and greed on the part of market participants. Stocks and bonds fit these characteristics.

The Golden Cross

The Golden Cross is a longer-term trend measure that utilizes the 200 day trimmed mean – 70 percent.

A combined measure

With a strong correlation between volume and wave trend price drawdowns, an increase in volume with a 1% deviation between the EWO and 200 day trimmed mean, signals a more defensive (offensive) allocation out (in) of asset classes.

Volume confirms the dominant trend.

Volume increases act to confirm a change in the trend direction.

Including high volume on falling prices and near bottoms in a falling trend will confirm the overall negative trend and indicate it will continue to fall.