I find that when I combine Elliott wave analysis and fundamental analysis (the economy/earnings) my forecasts are more accurate.
Understanding the economy is important, not only for buy and hold investors but also for short term traders, because it helps to confirm the Elliott wave pattern. Sometimes a move can be interpreted as an impulse wave (in the direction of the trend) or a corrective wave (against the trend). You can have two Elliott wave analysts with opposite views.
Take gold for example, many Elliott wave analysts think gold is in a bear market and it will decline with the stock market. I think the opposite is probably true, I have been saying for months that gold will make a new all time high based on the fundamentals and the impulsive nature of the waves up.
Gold is trading at more than seven-year high, my forecast was correct because I take into account the economy and what is happening to the economy is bullish for gold. In early March I posted this chart:
The trend is up because rallies in gold are impulsive (in five waves). In early March gold was at the end of the fifth wave so I was expecting a large pullback. This pullback came in March and gold declined below 1550. After a corrective wave gold will move up in five waves in line with the fundamentals. I predicted a rally above 1700 and gold is now at 1737.
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