Grand Strategy

By: Joseph Russo | Sun, Mar 25, 2007
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As follow up to our previous article, Trade Like a Spartan Warrior, we thought it wise to dig a little deeper, and provide additional clarity relative to aligning ones' specific objectives with fitting strategies.

It is not difficult to draw the analogy of war into the financial sphere. Long wars comprise a series of minor and major battles. More often than not, one war leads to another.

One glance at a long-term price chart and one quickly realizes that the peaks, troughs, and the sharp jagged edges defining it, exemplify a "war without end."

This is the first in a series of articles that will assist both traders and investors alike, in recognizing how and where they are best suited to engage.

First, we will outline a basic grand strategy overview. The balance of the series will explore strategy and tactical simulations from the vantage point of the four distinct areas of participation that follow.

Selecting suitable tours of duty
There are four broad market participants in theater. They are:

To launch successful campaigns, one must first reconcile the basic characteristics inherent to each of the four disciplines, and develop their strategies accordingly.

We will illustrate how participants in each of these four areas may go about sizing up a market, assembling strategies, identifying risk, and managing tactical campaigns through a completed trade or investment cycle.

Before we do this, we will address how to go about developing an astute long-view market opinion.

Taking everything into Account
Investment Accounts: Retirement Accounts: Trading Accounts: Speculative Accounts:
We trust there are quite a few top guns in the field, deploying calibrated munitions across the full spectrum of account types listed above. It is important that all such funds are earmarked and apportioned prudently.

To provide a level of continuity throughout the series, the broad market under study will be the NASDAQ 100.

Grand Strategy

Grand strategy encompasses the effective management of ones' total resources in the conduct of investment and speculation.


Adversarial Terrain: The NASDAQ 100

To form an opinion, develop strategy, and deploy funds in any time frame, one must first size up the big picture landscape, then work one's way down to gain optimal competitive advantage.

In the charts that follow, we have applied rigorous study in arriving at three contingent positions, and potential paths for the Nasdaq 100.

NASDAQ 100 Monthly Bars:

Quick Read: The long-term trend is down, the intermediate-term trend is up, and the shorter-term trend is up but approaching significant overhead resistance.

In our first assessment, the Nasdaq 100 is in the process of terminating a first wave of advance at minor degree, en-route toward a primary "B" wave retaliatory response to the devastation endured from 2000 through 2002.

At this stage, the bullish minor degree advance is susceptible to a minor set back prior to launching its next significant offensive.

At stake is temporary forfeiture of 50% to 60% of the most recent advance from the base established in July of 2006. Such forfeiture would equate to an 11% - 13% decline from current levels.

If the Bullish contingent were able to sustain adequate momentum, the current campaigns most optimistic target would be the recapture of 2/3rds its prior losses. Such success would equate to a near 80% advance from current levels.

Grand strategy charts like the one above, are in abundance throughout Elliott Wave Technology's Millennium Wave Quarterly Report.

NASDAQ 100 Monthly Bars:

In our second assessment, the Nasdaq 100 is in the process of terminating an (a) wave advance of intermediate degree.

At this stage, the intermediate bullish degree advance is rather mature, and susceptible to a more significant set back prior to launching its next significant offensive.

At stake is forfeiture of 100% of the most recent advance from the lows established in 2004 and 2006. Such forfeiture could equate to a 20% - 30% decline from current levels.

Should such an outcome prevail, the current campaigns optimal target would be reduced to the recapture of 1/2 its prior losses. Such recovery would equate to a near 50% advance from current levels.

Developments of lucid grand strategy perspectives like these are critical to the design and formation of smaller scale campaigns'.

Our Millennium Wave Quarterly publication clearly illustrates that no other form of market analysis is able to establish meaningful price path contingencies more succinctly than properly applied Elliott Wave Theory.

Because of its immense forecasting prowess, Elliott Wave Analysis is the cornerstone to our longer-term forecasting discipline.

NASDAQ 100 Monthly Bars:

In just two short years upon the onset of the new millennium, five crushing waves down destroyed the NASDAQ 100, beyond all recognition.

The Bearish contingent claimed unequivocal victory upon capturing 83% of the opposing forces advance.

Such complete and utter devastation has the potential to cripple a market for years to come. Events such as these often mark key primary terminals whose turning points become part of the historical record for decades.

In this our last assessment, the Nasdaq 100 is also in process of terminating an (a) wave advance of intermediate degree.

At this stage, the intermediate bullish degree advance is rather mature, and in this scenario, susceptible to a serious event-risk set back. Much is at stake should this occur.

In this setting, the NASDAQ 100 is vulnerable to complete forfeiture of all progress made from the October 2002 bear market lows. Such a set back would equate to a near 60% decline from current levels.

Should such an event unfold, the current campaigns optimal target would be the same as where it stands today, the recapture of 1/3 its prior losses. Such recovery would equate to progress of little merit from current levels.

Recognizing that all outcomes are plausible, one can now dig deeper into smaller time frames, establish working preference parameters, and approach the market with respect.

In our next article, "rules of engagement" we will explore principles of strategy and tactics from the vantage point of long-term investors.

The series will continue with strategy and rules of engagement for each of the following:

As the above framework shows, Elliott Wave Technology does not predict markets; instead, we respectfully take ownership of the dynamic price action as it unfolds.

Doing so impartially, with adept discipline, enables us to anticipate direction, and then formulate astute, unrivaled guidance based on the continual evolution of price.



Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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