Wavepicker and I attended a promotional seminar with Glenn Neely last night in Melbourne, so I thought I’d post up my impressions. While the purpose of such promotional events is to sell services, we still thought it would be interesting to see Neely in the flesh and see what he had to say. What followed was eye opening.
Glenn Neely for those who don’t know about him made several key market forecasts over the last 20 odd years, and won a host of trading competitions in the US.
He wrote, "Mastering Elliott Wave", which departed from traditional Elliott Wave principles and founded the “NEoWave Institute” and concluded: “in its original form many concepts and ideas concerning real-time application of the Elliott Wave Theory are not always clear”. Neely developed concepts such as “mono waves” and “poly waves” (but focuses on starting at the largest degree and working down). Just do a search for more information.
Just let me say from the outset that I have a lot of respect for Glenn Neely, and that he made some exceptional market calls in the past (certainly when I had absolutely no idea of how markets worked back in the 1980s), and is obviously a very gifted analyst, and certainly developed an elaborate revision of traditional Elliott Wave theory.
The first half of the seminar was quite interesting, and it was worthwhile to see him in action since most of the people in the room were familiar with Elliott Wave principles, so he got straight into the detail about where traditional Elliott approaches fail, and gave examples of how to avoid having to change counts by eliminating simple errors in analysis.
Wavepicker noted that there were parallels with Poser’s works. Neely showed where common errors are made in interpreting a range of patterns, which included the time different waves need to play out in proportion to each other, and in terms of price proportions to each other. This was really interesting work, and although I see this intuitively myself in charts, seeing this crystallised in a systematic way was beneficial (even at a simplistic level for a seminar). It certainly inspired me to continue to think more about wave structure.
For the second half Neely introduced his new flagship concept “River Trading” technique, which was essentially explained through an analogy as the market is like a kind of river, and the traders (fish) float downstream. Essentially the idea is that there is “turbulence” at the banks of the river, and the faster flow is in the middle of the river as it meanders and turns flowing to the ocean, hence if you can figure out where the “banks” are, you’ll be able to interpret this turbulence and set entries, exits and stops. He claims to have developed a proprietary approach to do this.
Another aspect of the approach was that there are 24 conditions where traders and investors of various sizes will get into or out of positions depending on their resources and time frames, and that essentially if you can work out which player is doing what, then you can use this to your advantage.
Frankly I wasn’t impressed. Sure psychology is involved in how markets work, and this subject has been covered in depth for a long time. If you’re a chartist, and you use a concept like Elliott waves, you’re partly looking at a representation of crowd psychology in the market, and the detail in the charts tells you something about sentiment. Looking at patterns is I believe an important part to this.
I got the impression Neely may have lost confidence in his forecasting ability, saying things like “I’m tingling just thinking about it” referring to his new “River Trading Technology”, but didn’t convince me sufficiently to pursue this right now. I think I’ll watch and see how it goes, rather than shell $5000 - $6000 out for a seminar on “River Trading”.
Wavepicker and I got a chance to talk to him at the end of the seminar, and while we didn’t want to disrupt his selling efforts still wanted to ask some in depth questions, some of which were challenging. I must say that I was both impressed on one level at the wave material, and disappointed on another about the “River Trading” concept. The teaser about “River Trading Technology” just seemed like a rudimentary version of wavepicker’s envelope cycles to me, but not as developed.
His view is that at certain times in the macro structure of markets, that forecasting becomes impossible using his methods since there are key times that wave structures allow very detailed forecasts, and times they don’t. The recent period he contended was very difficult to call since the wave structure was at a juncture which didn’t allow for good forecasts. This made a lot of sense to me, since I think a range of methods tend to vary in their effectiveness depending on a range of variables.
My suspicion is that Neely has had a crisis of confidence, and little hints he made during the seminar about losing $70,000 US in a day makes me think that he may have recently suffered psychologically as a trader, and may be going through a syndrome I’ve observed for many traders who have had excellent results with a system for a long time, and then a series of sustained losses during times when their approach/system is less suited to a market phase that they haven’t recognised at the time.
When I asked him if he believed that there is order in the markets, his response was dismissive. During the discussion, I found that he has a very limited concept of time and its importance, citing “positive time” and “negative time”, and certainly noting time in Elliott patterns in terms of the time a first wave and second wave in an impulse are related, which I salute.
However, he has totally moved away from “forecasting”, and claims his “river trading” approach is applicable in all market conditions. He is closed to the idea of using a range of cycle approaches in order to time the market.
I cannot be certain, but it dawned on me that perhaps Neely isn’t a pattern trader at all, although you would think that trading EW styles is inherently based on pattern, but perhaps not. Perhaps some people just see the waves, but can’t see (McLaren styled) patterns of trend. I suspect that if he both understood patterns of trend, and in particular (McLaren based) counter trends, and combined this with time cycles, this may ameliorate the problems he has been having with his analysis.
Neely despite using the term “counter trend” I think doesn’t really understand this concept, certainly not in the McLaren terms. Also, I suspect the way Neely has set his chart filters to highlight wave structures may to some extent actually obscure important elements of chart patterns that he’s not aware of. Interestingly he’d never heard of McLaren, or Miner, or a series of other players I would have thought he should have known about.
wavepicker and I discussed the ground he’d covered on the way home and both concluded that there are 3 core elements to effective technical analysis in the charting/forecasting realm, and they are (in order):
For wavepicker and I, pattern includes wave structure (wavepicker sees these as inherently linked), but I can see that there are patterns without wave structure included, or wave structures without other patterns included, hence I can see now how there may be some confusion here.
But a key element to technical analysis wavepicker and I agreed on is TIME. Whether Yogi, Frank Delernia, or I have different approaches to various concepts, we’re all lining up on the importance of time. Yogi and I for instance can trade primarily by time. I don’t think Neely has explored this area much, and the “positive” and “negative” time concept seemed very rudimentary to me.
I suspect that Neely is very focussed on his new theory to the exclusion of all other works in different fields. Not only is he unaware of whole bodies of technical analysis concepts, he is also apparently quite closed to even considering them.
While I respect the work he has done in the past, and respect that he has every right to think whatever he likes, and develop in his own way, to write off all other alternative paradigms without even understanding them I think is potentially a serious omission in pure technical analysis thinking. I suspect that he has missed several important pieces of the forecasting puzzle which may have the potential to restore his faith in his earlier works, which in my view were inspired.
To abandon the premise that there is order to markets and his revisions to Elliott Wave theory and forecasting altogether, and shift to what I interpreted to be essentially a “random walk” perspective embracing some kind of chaos notion about markets, is a monumental shift in thinking (he called it a paradigm shift – I’d call it a retrograde step).
In my view, Neely would have a much wider audience if he focussed on what he is good at, and that is explaining the pitfalls of traditional Elliott Wave theory, and how to correctly interpret wave structures. This is his core ability. I found his departure from this body of knowledge and forecasting in general, bizarre.
I hope he really has found the Holy Grail to trading, but I have to say, both from what I saw of the second half of the seminar on “River Trading”, and his unconvincing answers, that he is not open to alternative views that might help him to actually fill in the missing pieces of the puzzle and improve on his Elliott revisions.
I really hope he resumes his excellent work in wave structure, and considers looking at cycle based approaches more, and returns to the notion that there is order in the market.