Elliott Wave Analysis of The Value Line Geometric Composite Index

Truth be told, I first heard of this index some 15 minutes ago when I received an email from good old Bob.D. So I googled it and read the entry in Wikipedia.

“The Value Line Geometric Composite Index is the original index released, and launched on June 30, 1961. It is an equally weighted index using a geometric average. Because it is based on a geometric average the daily change is closest to the median stock price change.

The daily price change of the Value Line Geometric Composite Index is found by multiplying the ratio of each stock’s closing price to its previous closing price, and raising that result to the reciprocal of the total number of stock”

Can’t say it made me any wiser 🙂

But a look at the charts was quite revealing, and I am happy to share them with you.
I suggest that you open each chart in a new tab so it will be easy to go back and forth. Like always, my comments appear on the charts themselves and so I won’t add any more fluff. Enjoy and share with friends.

This first chart is a monthly chart going back almost to the time I was born. Pay attention to the time frame and the color coding that will help you spot where we are in the progression.

Valug23Feb16a

Valug23Feb16b

Valug23Feb16c

Valug23Feb16d

Valug23Feb16e

Valug23Feb16f

Valug23Feb16g



11 Comments

  • Voon Yuk Choy

    Hi Ramki, once again thanks for yr education charts. Does the rule ‘wave 4 must not overlap the area of wave 1″ applies to the ABC corrective wave after the termination of wave 5 as well ?

    • Hi Voon Yuk Choy, Within a correction we do see overlaps occurring. One might say that in a zigzag, wave A is made up of 5 impulse waves, and so minor wave 4 inside the wave A shouldn’t overlap minor wave 1.We try to be faithful to the Wave Principle as far as possible, and where it appears unclear, we scale down our positions.

  • BobD

    Dear Oracle of EW….once again the difficult is made obvious and simple by your analysis of EW rules and guidelines. Thank you again for all you do for us, the aspiring pupils.

    • Bob, I am flattered, but as always remain the first one to acknowledge that I know as little of the future as anyone who reads this. What I try to do is to give a structure to our trading and investment decisions, and therein lies the edge.

  • dan

    Amazing post as always,

    Isn’t it supposed to be down to I of 3? (instead of ii of 4 as you are suggesting)

    I am referring to the end of the correction

    In addition, how long do you think it will last?

    This is the first time I learn about the value line index. Very interesting. Thank you again for your analysis.

    Regards,
    Dan

  • M.D.Dharmendra

    Excellent analysis as always

  • Dan

    Could it be the correction from 5 to A actually an A B C movement (your A being actually C and the end of the correction this cycle without revisiting the lows ever again)?

    Thanks,
    Dan

    • Dan, Ofcourse, just about anything is possible. But I still prefer to call that the end of wave A. You should remember the goal of the EW analysis is to determine low risk turn levels. We knew that at the time of the analysis there was a reasonably good chance of a recovery, either as a new impulse wave or as wave B. That information alone was worth the trouble of studying the wave principle.Good luck

  • Dan

    The expected B wave is looking more impulsive than corrective, would you agree with that? At what point would you change your count?

    Thanks, sir.

    • Ramki Ramakrishnan

      Hi Dan, That is a great question, and I wish yo had asked it much earlier! The original analysis was done in February, and now, after 9 months we can do a postmortem of that wave count. But the right approach to trading is not that. We had a paradigm that an extended wave 5 was finished. And we were willing to buy on a retest of the minor wave 2 of the fifth wave. It didn’t get there, so we had no position. Remember, the idea was NOT a short trade. It was a long trade at the right price, and we missed it. As for the count itself, it could retest the top of wave % and then come off, but who knows! Just be watching it and if it starts coming off rapidly, then you would know that all we saw was a double retracement after an extended wave 5 and maybe we will reach the minor wave 2 after all. Our goal is to be alert to signals that work and exploit that insight. Those that turn too soon just left us behind, but that’s OK

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