Elliott Wave Theory

Hello again,

Yesterday I read a little about Elliott Wave Theory.  This theory is based around the fact that there are recognisable patterns to the stock market prices over time.  The idea is that a set up of a particular pattern may lead to a conclusion or prediction of future prices based on these patterns.

The idea of waves, which are phases in price movements over time seem to often act predictably given a set of indicators, it may be possible to further find information of the future prices and trends.

Each wave, which is typically a movement in a particular direction forms to make up a 3 or 5 wave group, or pattern.  The wave may also be broken down further into another 3 or 5 wave group of pattern, and so on.  The theory is interesting due to the fact that it seems able to predict that if a particular sort of pattern occurs, then the following pattern can be predicted, as well as possible prices, and so on.

There is motive, and correction, subdivision and truncation, trends zigzags and waves to name but a few titles given to the various elements of EWT.

This theory can be associated with Fibonacci through the fact that these patterns often exhibit 
movements that are a multiple of Phi, the golden ratio, 1.618, or its inverse, 0.618.

So far, I have only read about the basics of the theory, and so far, I can see how this theory fits into existing data, what I am now interested in, is how reliably it can work for future prices and patterns, in a given time-frame, and the returns that that might give.  There seems to be a fairly large number of recognisable patterns to choose from, so what will be interesting, is how quickly these patterns can be eliminated to the point that a prediction can be made.

I will continue researching this area, so that one way or another I can see how repeatable and plausible this approach might be.  My thinking is, the more of these theories and technique I know, the more likely I am to be able to understand how the stock market works, and I am then much more likely to be able to pick or come up with an approach that can work for me, and the way I like to invest.