Interview: Doing The Wave With Jeffrey Kennedy by Jayanthi Gopalakrishnan and Bruce Faber
Jeffrey Kennedy is chief commodity analyst at Elliott Wave International (EWI). With more than 20 years of experience as an analyst and trader, he writes and edits Futures Junctures, a premier forecasting package that focuses on Elliott wave analysis of the commodity markets. Kennedy also leads Elliott Wave Junctures, EWI’s newest educational service, and provides daily video lessons on the Elliott wave, technical analysis and trading.
In addition to being published in Stocks, Futures and Options magazine, Traders’ World magazine, and The Technical Analyst, he has appeared on Yahoo Finance’s “Breakout” and Business News Network’s “Berman’s Call.” He is also an adjunct instructor in the quantitative and computational finance program at the Georgia Institute of Technology, where he teaches technical analysis.
Stocks & Commodities Editor Jayanthi Gopalakrishnan and Staff Writer Bruce Faber spoke with Kennedy on October 10, 2012.
Jeff, can you tell us about what you do?
I am the chief commodity analyst at Elliott Wave International (EWI). I’m pushing 20 years at EWI, actually. I have been counting waves for 20 years. I consider myself an Elliottician, but even though I use the wave principle as my primary technical tool, I am passionate about technical analysis as a whole. I love Steve Nison’s work with candlesticks. I love John Bollinger’s work with Bollinger Bands. I love J. Welles Wilder’s work with relative strength index (RSI) and even Andrew Cardwell’s influence on the RSI as well as Gerald Appel’s moving average convergence/divergence (MACD). I am familiar with all the great names in the industry, and I have been fortunate enough to actually meet some of these people over the years.
So even though I am a trained Elliottician and the wave principle is my primary technical tool, I still find great value in a lot of the other disciplines that technical analysis has to offer. In fact, I teach technical analysis at one of the local universities, Georgia Tech. If I can make it back this year, it will be my fourth year teaching there for their graduate-level class in option trading and technical analysis. I teach a portion of that. I love technical analysis.
How did you get started in this business?
I got into it because I thought this was the place to be. I was fascinated with Wall Street, and stockbrokers and currency traders, the final years I was in college. I wanted to be the guy who really knew what was going on. At the time I didn’t want to be a broker because they basically have marching orders that their brokerage house gives them to follow.
The analyst, on the other hand, seems to know what’s going on. It is the stock market analyst who understands what is going to go up and what is going to go down. That is why I zeroed in on the analysis side of the business versus sales or being a broker.
I live near Atlanta and became familiar with the wave principle and Robert Prechter’s organization, Elliott Wave International (EWI). I joined them in the summer of 1993 and have been here ever since, and have enjoyed every moment of it.
Can you tell us about the Elliott wave?
The Elliott wave principle was developed by Ralph Nelson Elliott in the mid-1930s. What he observed was that the stock market moves in these recognizable patterns that are essentially fractal. Basically, the wave principle is a form of technical analysis based on pattern recognition and crowd psychology. Within the actual discipline of the wave principle are two types of waves. The wave principle primarily gives the analyst and trader a tool to view price action. That context is provided by one of two waves: motive waves and/or corrective waves.
There are five basic or five core wave patterns that I work with as an Elliottician. Within the motive wave family, there are two waves: an impulse wave and an ending diagonal. Within the corrective wave modality or the corrective wave family, you have three. You have a zigzag, what we call a flat, and then we have a triangle. Those are the five core wave patterns that Ralph Elliott identified. These patterns again are fractal in nature. You can pull up a one-minute price chart of the S&P and you can see these fives and threes.