Markets: Understand the Present to Forecast the Future (Part
Knowing where you are within a trend helps you see around the
By Elliott Wave International
[Editor's note: A text version of the interview is below.]
Steve Hochberg, our Chief Market Analyst, sits down with
ElliottWaveTV to talk about his background, how he discovered the Wave
Principle, and why "it's applicable to all markets."
This is part 1 of our in-depth interview. Come back on August 5 to
watch part 2, where Steve explains what else makes Elliott wave
analysis so useful and practical.
Alexandra Lienhard: I'm Alexandra Lienhard for
ElliottWaveTV, and today I'm joined by Steve Hochberg, Chief Market
Analyst at Elliott Wave International. Now Steve, everyone's got a
background, a story to tell, so what's yours? How did you become
interested in the financial markets in the first place?
Steve Hochberg: Probably like a lot of other people
did. Growing up, you start reading the financial papers and you
probably have a family member involved. In my case, it was my
grandfather who was involved in the market. So you start, you hear
things people talk about; you get interested in companies and so
forth. It really wasn't until college that I started really getting
involved in what was going on. I was in college in the 70s, and if you
remember in the 70s, we were in tumultuous times, you had the big gas
lines, oil prices were skyrocketing and commodities, stocks were going
up and down. I kept reading in the newspaper all the things that were
going on and you start to wonder, how does this affect me? And it
leads you to the financial markets -- so that's how I got involved.
Alexandra: And what about the wave principle, how did
you discover it and then ultimately end up at Elliott Wave International?
Steve: Well the story involves a dog, the 1812
Tchaikovsky overture and about 10-foot speakers.
Alexandra: Do we have enough time for this?
Steve: No, we don't have enough time! But if people
see me speaking at conferences, ask me about the story, it's a great
story. I started working for Merrill Lynch right when I got out of
college in 1983. Working with Merrill and the financial markets, you
kept reading about this man named Robert Prechter. In 1984 he won the
United States trading championship, at the time with a huge gain,
biggest gain, 444% in a quarter. I said, 'You know what, what is this
guy doing that I'm not doing? I need to learn what's happening here.'
So I started reading Bob's analysis. The interesting about the Elliott
Wave Principle and the Wave Principle model is they don't teach it in
college, there's no course on it. So in order to learn it, it's really
self-taught. You've got to go to the source material. I think that's
the best way to learn things in life. Not so much being taught about
it, reading in a textbook, but actually for yourself, going back to
the source material. Now, in our case, Bob did all the heavy work
because he actually went to the New York library and got all of R.N.
Elliott's original works and published them in a book. You were able
to go to one of Bob's books and actually read Elliott's writings.
That's really how I came to the markets, just going to the source
material and saying, 'You know what, this makes a lot of sense to me
in how I look at things.'
Alexandra: So you've been using the Wave Principle
for quite a while now. What do you find to be the most useful thing
about using the Wave Principle to forecast the financial markets?
Steve: Well, obviously, its logic. It's very logical.
There are set patterns that we look at, and it's not so much that we
can see the future, but we can understand what's going on in the
present which implies something about the future. So if you can
determine where you are within the structure of this psychology that
moves from optimism to pessimism, then you can kind of orient yourself
about what's going to happen. It's great for understanding the tenor
of the times, and it's applicable to all markets because people are
people. When we get into a crowd, psychology, crowd psychology as we
call it, or social mood, trends and reverses in these recognizable
patterns so you can kind of ascertain where you are within the
development of these patterns, you can make a forecast about the
future. Sometimes our forecasts can be very accurate because we know
exactly where we are, sometimes we're not quite sure, but that's OK.
Those are markets and psychology and people.
Alexandra: You cover almost every asset class. What
keeps you excited about covering so many markets?
Steve: When you're able to make a successful
forecast, that really gets you going because you're able to see around
that next corner. So many people think what's happening in life is
random, random events. The actual events themselves might be random,
but the tenor of the times aren't. The tenor of the times goes through
these trends. What excites me is kind of identifying where you are
within a trend because you can kind of see around that next corner and
that's kind of cool when you're able to make a good forecast, or make
a good trade in the market. It gets you excited about the next day and
what's going on.
Editor's note: This is part 1 of our in-depth interview with
Steve Hochberg. Come back on August 5 to watch the rest of the
interview where Steve talks about what else makes Elliott wave
analysis so unique.
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This article was syndicated by Elliott Wave International and
was originally published under the headline Markets:
Understand the Present to Forecast the Future (Part
1). EWI is the world's largest market forecasting
firm. Its staff of full-time analysts led by Chartered Market
Technician Robert Prechter provides 24-hour-a-day market analysis
to institutional and private investors around the world.