I have a probing question. .
Since EW seems to be working so well (IMO) at least in terms of general price direction, what happens when this technique becomes public information and everyone (almost) knows what to expect? What happens then?
Has EW worked consistently for other asset classes?
EW works for pretty much everything. From investopedia:
Ralph Nelson Elliott developed the Elliott Wave Theory in the late 1920s by discovering that stock markets, thought to behave in a somewhat chaotic manner, in fact traded in repetitive cycles.
Elliott discovered that these market cycles resulted from investors' reactions to outside influences, or predominant psychology of the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed "waves".
Elliott's theory is somewhat based on the Dow theory in that stock prices move in waves. Because of the "fractal" nature of markets, however, Elliott was able to break down and analyze them in much greater detail. Fractals are mathematical structures, which on an ever-smaller scale infinitely repeat themselves. Elliott discovered stock-trading patterns were structured in the same way.
Since markets are driven by public sentiment, the more liquid the market and the higher the number of investors, the more it will follow EW principles. I don't think it will ever become mainstream and will always be looked at with a degree of scepticism. However, don't assume that it's easy to use. On the contrary, due to its repetitive and fractal nature, it's very hard to determine the true pattern that will play out which is constantly changing based on where market sentiment moves.
