Two theories are compared, Efficient Market Hypothesis (EMH) and Elliot Wave Theory (EWT), using qualitative analysis in the form of a direct comparison and technical analysis in the form of chart analysis. Classical economic theory and its leading proponent Efficient Market Hypothesis EMH represent the status quo and the idea of rational decision making in financial markets, while Elliot Wave Theory represents the idea of mass irrational behavior which is somewhat predictable. These two theoretical extremes represent contrasting views of how finance markets work. Crude oil is the chosen medium through which these two theories are compared. The comparison is made within the framework of gleaning useful trading and investing advice for an amateur with limited resources. The results do not indicate a clear cut winner, but offers insight into the strengths and weaknesses of either theory, and how an amateur could benefit.

REFERENCES
Aarts, P. & Renner, M. (1991). Oil and the Gulf War. Middle East Report, 171, 25-47.
Abosedra, S. & Baghestani, H. (2004). On the predictive accuracy of crude oil futures
prices. Energy Policy, 32(12), 1389-1393.
Achelis, S. B. (2001). Technical analysis from A to Z. New York: McGraw Hill.
Admati, A. R. & Pfleiderer, P. (1988). A theory of intraday patterns: Volume and
price volatility. Review of Financial Studies, 1, 3-40.
Allen, D. E., Cruickshank, S. N., Kingsbury, N.M, Sounness, N. (1999). Backward to
the futures: A test of three futures markets. Social Science Research Network,
Working paper series, November.
Andersen, T. G. (1996). Return volatility and trading volume: An information flow
interpretation of stochastic volatility. Journal of Finance, 51(1), 169-204.
Anderson, R. W. & Danthine, J. P. (1983). The time pattern of hedging and the
volatility of futures prices. Review of Economic Studies, 50(2), 249-66.
Banks, F. E. (1994). Economic theory and the Brent System. Energy Policy, 22(12),
993-1001.
Bessembinder, H. & Seguin, P. J. (1993). Price volatility, trading volume, and market
depth: Evidence from futures markets. Journal of Financial and Quantitative
Analysis, 28(1), 21-39.
Buchanan, J. (1982). The domain of subjective economics: Between predictive science
and moral philosophy. Method, Process and Austrian Economics. Lexington
Books, Toronto.
Campbell, J. Y., Grossman, S. J., & Wang, J. (1993). Trading volume and serial
correlation in stock returns. Quarterly Journal of Economics, 108(4), 905-939.
Chalabi, F. J. (2000). Iraq and the future of world oil. Middle East Policy, 7(4).
Chalabi, F. J. (2000). OPEC: An obituary. International Economics & Economic
Policy: A Reader.
Chassard, C. & Halliwell, M. (1986). NYMEX crude oil futures market: An analysis of
its performance. Pennwell Books.
Chicago Board Options Exchange (2009). The Options Institute, Online learning
Center. Retrieved April 24, 2009, from
118
http://www.cboe.com/LearnCenter/cboeeducation/Course_01_01/mod_01_01.asp
x
Clark, P. K. (1973). A subordinated stochastic process model with finite variance for
speculative prices. Econometrica, 41(1), 135-155.
Cootner, P. H. (1964). The random character of stock market prices. MIT Press.
Copel, T. E. (1976). A model of asset trading under the assumption of sequential
information arrival. Journal of Finance, 31(4), 1149-1168.
Cox, J., Ingersoll Jr, J., & Ross, S. (1985). A theory of the term structure of interest
rates. Econometrica, 53(2), 385-407.
Craig, S. (2009) Energy services, crude oil. Elliot Wave International Special Report.
Retrieved April 3, 2009, from
http://www.elliottwave.com/subscribers/alacarte/analysis_eod.aspx?outlook=eo&
section=eomajor&id=76&tframe=2
Culp, C. L. & Miller, M. H. (1995). Metallgesellschaft and the economics of storage.
Journal of Applied Corporate Finance, 7(4). 62-76.
Danthine, J. P. (1978). Information, futures prices, and stabilizing speculation. Journal
of Economic Theory, 17(1). 79-98.
DeBondt, W. F. M. & Thaler, R. (1985). Does the stock market overreact. Journal of
Finance, 40(3), 793-805.
Duarte, J. (2006). Futures and options for dummies (1st ed.). Wiley publishing:
Indianapolis,.
Ederington, L. & Lee, J. H. (2002). Who trades futures and how: Evidence from the
heating oil futures market. The Journal of Business, 75(2), 353-373.
Energy Information Administration (2009a). Energy in brief: How dependent are we
on foreign oil? Retrieved April 13, 2009, from
http://tonto.eia.doe.gov/energy_in_brief/print_pages/foreign_oil_dependence.pdf
Energy Information Administration (2009b). Weekly petroleum status report.
Retrieved April 13, 2009, from
http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_
status_report/wpsr.html
Epps, T. W. & Epps, M. L. (1976). The stochastic dependence of security price
changes and transaction volumes: Implications for the mixture-of-distributions
hypothesis. Econometrica, 44(2), 305-321.
Epps, T. W. (1975). Security price changes and transaction volumes: Theory and
evidence. American Economic Review, 65(4), 586-97.
Epps, T. W. (1977). Security price changes and transaction volumes: Some additional
evidence. Journal of Financial and Quantitative Analysis, 12(1), 141-146.
119
Fama, E. F. (1991). Efficient capital markets. Journal of Finance, 46(5), 1575-1617.
Fleming, J. & Ostdiek, B. (1999). The impact of energy derivatives on the crude oil
market. Energy Economics, 21(2), 135-167.
Fleming, J. & Ostdiek, B. (1999). The impact of energy derivatives on the crude oil
market. Energy Economics, 21(2), 135-167.
Foster, A. J. (1995). Volume-volatility relationships for crude oil futures markets.
Journal of Futures Markets, 15(8), 929-951.
French, K. R. (1983). A comparison of futures and forward prices. Journal of
Financial Economics, 12(3), 1-42.
Friedman, G., & Friedman, M. (1998). The future of war: Power, technology and
American world dominance in the twenty-first century. St. Martin's Press.
Frost, A. J. & Prechter, R. R. (1998). Elliott Wave Principle: Key to market behavior.
New Classics Library.
Fujihara, R. A. & Mougoue, M. (1997). An examination of linear and nonlinear causal
relationships between price variability and volume. Journal of Futures Markets,
17(4), 385-416.
G20 (2009). Enhancing Sound Regulation and strengthening Transparency. G20
working group 1, Retrieved April 18, 2009, from
http://www.g20.org/Documents/g20_wg1_010409.pdf
Gallant, A., Rossi, P., & Tauchen, G. (1992). Stock prices and volume. Review of
Financial Studies, 5(2), 199-242.
Girma, P. B. & Mougoue, M. (2002). An empirical examination of the relation
between futures spreads volatility, volume, and open interest. Journal of Futures
Markets, 22(11), 1083-1102.
Goleman, D. (1989). Brain's design emerges as a key to emotions. The New York
Times. Retrieved April 20, 2009, from
http://www.nytimes.com/1989/08/15/science/brain-s-design-emerges-as-a-key-to
-emotions.html
Grammatikos, T. & Saunders, A. (1986). Futures price variability: A test of maturity
and volume effects. Journal of Business, 59(2), 319-330.
Grinblatt, M., Titman, S., & Wermers, R. (1995). Momentum investment strategies,
portfolio performance, and herding: A study of mutual fund behavior. American
Economic Review, 85(5), 1088-1105.
Guth, M. A. & Philippatos, G. C. (1989). A reexamination of arbitrage pricing theory
(APT) under common knowledge beliefs. International Review of Economics &
Business, 36, 729-746.
Harris, L. (1986). Cross-security tests of the mixture of distributions hypothesis.
Journal of Financial & Quantitative Analysis, 21(1), 39–46.
120
Harris, L. (1987). Transaction data tests of the mixture of distributions hypothesis.
Journal of Financial & Quantitative Analysis, 22(2), 127–141.
Hart, P. (2008). Oil, house prices, credit? Three parts of the same story. The Oil
Drum: Australia/New Zealand. Retrieved April 13, 2009, from
http://anz.theoildrum.com/node/4673
Hartzmark, M. L. (1987). Returns to individual traders of futures: Aggregate results.
The Journal of Political Economy, 95(6), 1292-1306.
Haubrich, J., Higgins, P., Miller, J., & Futures, C. (2004). Oil prices: Backward to the
future? Federal Reserve Bank of Cleveland, December, 1-4.
Haushalter, G. D. (2000). Financing policy, basis risk, and corporate hedging:
Evidence from oil and gas producers. The Journal of Finance, 55(1), 107-152.
Hoffman, G. W. (1932). Future trading upon organized commodity markets in the
United States. Philadelphia & London.
Holthausen, D. M. (1979). Hedging and the competitive firm under price uncertainty.
American Economic Review, 69(5), 989-995.
Hong, H. & Wang, J. (2000). Trading and returns under periodic market closures. The
Journal of Finance, 55(1), 297-354.
Hotelling, H. (1931). The economics of exhaustible resources. Journal of Political
Economy, 39, 137–175.
Hubbert, M. K. (1956). Nuclear energy and the fossil fuels. Shell Development Co.,
Exploration & Production Research Division.
Huddart, S. (1999). Reputation and performance fee effects on portfolio choice by
investment advisers. Journal of Financial Markets, 2(3), 227-271.
Hull, J. (2002). Options, futures, and other derivative securities. Prentice Hall
Publishing.
International Monetary Fund (2008a). World economic outlook (WEO): Financial
stress, downturns, and recoveries. Retrieved April 12, 2009, from
http://www.imf.org/external/pubs/ft/weo/2008/02/
International Monetary Fund (2008b). World economic outlook (WEO): Housing and
the business cycle. Retrieved April 13, 2009, from
http://www.imf.org/external/pubs/ft/weo/2008/01/
International Monetary Fund (n.d.a). About the IMF. Accessed April 7, 2009, from
http://www.imf.org/external/about.htm
International Monetary Fund (n.d.b). Continued globalization (2005-present).
Accessed April 8, 2009, from http://www.imf.org/external/about/histglob.htm
International Monetary Fund (n.d.c). History. Accessed April 8, 2009, from
http://www.imf.org/external/about/history.htm
121
Isaac, N. (2008). Crude oil: A gusher of an opportunity (UPDATE). Elliot Wave
International Free Updates. Retrieved April 13, 2009, from
http://www.elliottwave.com/freeupdates/archives/2008/12/19/Crude-Oil-A-Gush
er-Of-An-Opportunity.aspx
Ivanov, S., Trapkov, S., & Petrov, K. (2008). The tentacles of the credit crisis,
Financial Sense Editorials: Uncommon News & Views for the Wise Investor.
Retrieved April 13, 2009 from
http://www.financialsense.com/editorials/petrov/2008/1110.html
Jackson, J.K. (2008). The U.S. trade deficit, the dollar and the price of oil. Retrieved
April 14, 2009, from http://assets.opencrs.com/rpts/RL34686_20080929.pdf
Jaffe, A. M. & Manning, R. A. (2000). The shocks of a world of cheap oil. Foreign
Affairs, 79, 16-29.
Jennings, R. H. & Barry, C. (1983). Information dissemination and portfolio choice.
Journal of Financial & Quantitative Analysis, 18(1), 1-19.
Jennings, R. H., Starks, L. T., & Fellingham, J. C l. (1981). An equilibrium model of
asset trading with sequential information arrival. Journal of Finance, 36(1),
143-161.
Johnson, L. L. (1960). The theory of hedging and speculation in commodity futures.
Review of Economic Studies, 27(3), 139-151.
Kahn, J. A. (1992). Why is production more volatile than sales? Theory and evidence
on the stockout-avoidance motive for inventory-holding. Quarterly Journal of
Economics, 107(2), 481-510.
Kahneman, D. & Tversky, A. (1973). On the psychology of prediction. Psychological
Review, 80(4), 237-251.
Kamara, A. (1982). Issues in futures markets: A survey. Journal of Futures Markets, 2
(3), 261-294.
Karpoff, J. M. (1987). The relation between price changes and trading volume: A
survey. Journal of Financial & Quantitative Analysis, 22(1), 109-126.
Karpoff, J. M. (1988). Costly short sales and the correlation of returns with volume.
Journal of Financial Research, 11(3), 173-188.
Keynes, J. M. (1930). A treatise on money. Harcourt: Brace & Company.
Keynes, J. M. (1936). The general theory of employment, interest rates, and money.
New York: Prometheus Books.
Kocagil, A. E. & Shachmurove, Y. (1998). Return-volume dynamics in futures
markets. Journal of Futures Markets, 18(4), 399-426.
Kolb, R W. (1997). Understanding futures markets. Blackwell Publishing.
122
Kolb, R. W. & Overdahl, J. A. (2006). Understanding futures markets. Blackwell
Publishing.
Kuhn, T. (1962). The structure of scientific revolutions. Chicago: University of
Chicago Press.
Kyle, A. S. (1985). Continuous auctions and insider trading. Econometrica, 53(6),
1315-1335.
Leblond, D. (2008). Reliability of oil supply, demand forecasts challenged. Oil and
Gas Journal, 106, 1.
Leo, P. & Temple, P. (2003). The ultimate technical trading software. John Wiley &
Sons (Asia) Pte Ltd
LeRoy, S, F (1989). Efficient capital markets and Martingales. Journal of Economic
Literature 27(4), 1583-1621.
Litzenberger, R. H. & Rabinowitz, N. (1995). Backwardation in oil futures markets:
Theory and empirical evidence. Journal of Finance, 50(5), 1517-1545.
Lo, A. W. & MacKinlay, A. C. (1999). A non-random walk down wall street.
Princeton, New Jersey.
Lynch, M. C. (2002). Forecasting oil supply: Theory and practice. The Quarterly
Review of Economics & Finance, 42(2), 373-389.
Mandelbrot, B. (1960). Global (long-term) dependence in economics and finance.
International Economist Review, 4, 79-106.
Mandelbrot, B. (1966). Forecasts of future prices, unbiased markets, and Martingale
Models. Journal of Business, 39(S1), 242-255.
Markowitz, H. M. (1959). Portfolio selection: Efficient diversification of investments.
New York: Wiley & Sons.
Marshall, A. (1920). Principles of economics. Accessed on October 12, 2008:
http://www.econlib.org/library/Marshall/marP7.html#Bk.II,Ch.III
Milonas, N. T. (1986). Price variability and the maturity effect in futures. Journal of
Futures Markets, 6(3), 43-460.
Milunovich, G., Ripple, R., Economics, D. o., & University, M. (2006). Hedgers,
investors, and futures return volatility: the case of NYMEX Crude Oil: Dept. of
Economics, Macquarie University.
Moore,G. (2009). „World‟s fourth most powerful man‟ visits hometown of Dillion.
Carolinalive.com. Retrieved April 20, 2009, from
http://www.carolinalive.com/news/story.aspx?id=270142
Muth, J. F. (1961). Rational expectations and the theory of price movements.
Econometrica, 29(3), 315-335.
123
Naisbitt, J., & Aburdene, P. (1990). Megatrends 2000: 10 new directions for the 1990s.
Morrow, New York.
New York Mercantile Exchange (2009). In the News. Retrieved April 29, 2009, from
http://www.nymex.com/energy_in_news.aspx?id=einheatoil
New York Mercantile Exchange (2006). NYMEX energy complex. Retrieved on July
23, 2008 from http://www.nymex.com/broch_main.aspx.
New York Mercantile Exchange (n.d.) NYMEX glossary of terms. Accessed from
http://www.nymex.com/glossary.aspx
Nguyen, D. & Daigler, R. (2005). A return-volume-volatility analysis of futures
contracts. Work in progress. Department of Finance, Florida International
University.
Organization of the Petroleum Exporting Countries. (2007). OPEC press release 146th
extraordinary meeting. Retrieved April 1, 2009, from
http://www.opec.org/opecna/Press%20Releases/2007/pr132007.htm
Organization of the Petroleum Exporting Countries. (2008a). 147th (extraordinary)
meeting of the OPEC conference. Retrieved April 1, 2009, from
www.opec.org/opecna/press%20releases/2008/pr022008.htm
Organization of the Petroleum Exporting Countries. (2008b). 150th (extraordinary)
meeting of the OPEC conference. Retrieved April 1, 2009, from
http://www.opec.org/opecna/press%20releases/2008/pr152008.htm
Organization of the Petroleum Exporting Countries. (2008c). Opening address to the
148th meeting of the OPEC conference. Retrieved April 1, 2009, from
http://www.opec.org/opecna/Press%20Releases/2008/pr032008.htm
Organization of the Petroleum Exporting Countries. (2009). Facts and figures.
Retrieved April 13, 2009, from
http://www.opec.org/home/PowerPoint/Reserves/OPEC%20share.htm
Organization of the Petroleum Exporting Countries. (2009). OPEC Bulletin, February
issue.
Parker, W. D. & Prechter Jr, R. R. (2005). Herding: An interdisciplinary integrative
review from a Socionomic perspective, Occasional paper, Socionomics
Foundation, 1-11.
Parra F. (2004). Oil politics: A modern history of petroleum. St Martin‟s Press New
York.
Peck, A. E. & Nahmias, A. M. (1989). Hedging your advice: Do portfolio models
explain hedging. Food Research Institute Studies, 21(2), 193-204.
Pennings, J. M. E. & Leuthold, R. M. (2000). The motivation for hedging revisited.
Journal of Futures Markets, 20(9), 865-885.
124
Pindyck, R. S. (2001). The dynamics of commodity spot and futures markets: A
primer. The Energy Journal, 22(3), 1-29.
Plummer, T. (2003). Forecasting financial markets: The psychology of successful
investing. Kogan Page Ltd.
Poser, S. W. (2003). Applying Elliott Wave Theory profitably. Wiley.
Poterba, J. M. (2001). Demographic structure and asset returns. Review of Economics
& Statistics, 83(4). 565-584.
Prechter Jr, R. R. & Goel, D. (2007)Comparing certain statistical properties of
Idealized Elliott Waves, the stock market and Random Walks Tests. Working
paper, April. Available at http://www.socionomics.org/papers/idealized
waves.aspx.
Prechter Jr, R. R. & Parker, W. D. (2007). The financial/economic dichotomy in social
behavioral dynamics: The socionomic perspective. The Journal of Behavioral
Finance, 8(2), 84-108.
Prechter, R. R. (1999). The wave principle of human social behavior and the new
science of socionomics. New Classics Library.
Prechter, R. R. (2002) Conquer the crash (1st ed.). New Jersey: John Wiley & Sons,
Inc Hoboken
Prechter, R.R. & Parker, W.D. (2007). The financial/economic dichotomy in social
behavior dynamics. The Journal of Behavioral Finance, 8(2), 1-26.
Prendergast, C. & Stole, L. (1996). Impetuous youngsters and jaded old-timers:
Acquiring a reputation for learning. Journal of Political Economy, 104(6),
1105-1134.
Ramos, G. (2008). NYMEX to raise margins for crude, related futures. Gene Ramos
Reuters news service, Retrieved April 30, 2009 from
http://uk.reuters.com/article/oilRpt/idUKN0651587320080506
Reserve Bank of New Zealand (1981). Reserve Bank of New Zealand Bulletin.
Reserve Asset Ratio System, 44(9), 443-446.
Richardson, M. & Smith, T. (1994). A direct test of the mixture of distributions
hypothesis: Measuring the daily flow of information. Journal of Financial &
Quantitative Analysis, 29(1), 101–116.
Ripple, R. D. & I. A. Moosa (2005). Futures maturity and hedging effectiveness: The
case of oil futures. Macquarie Economics Research Paper Series.
Ripple, R., Economics, D. o., & University, M. (2006). Energy futures market trading
versus physical commodity usage: A playground for manipulation or a
miscalculation? Macquarie Economics Research Paper Series.
Rostow, W.W. (1975). Kondratieff, Schumpeter , and Kuznets: Trend periods
revisited. The Journal of Economic History, 35(4), 719-753.
125
Samuelson, P. A. (1965). Proof that properly anticipated prices fluctuate randomly.
Industrial Management Review, 6(2), 41-49.
Samuelson, P. A. (1976). Is real-world price a tale told by the idiot of chance? Review
of Economics & Statistics, 58(1), 120-123.
Scharfstein, D. S. & Stein, J. C. (1990). Herd behavior and investment. American
Economic Review, 80(3), 465-479.
Schumpeter, J. (1939). Business cycles. New York: McGraw-Hill.
Segall, J. (1956). The effect of maturity on price fluctuations. Journal of Business,
29(3), 202-206.
Sequoian Financial Group Research (2009). Peak credit or how do you replace USD
25 trillion of demand? Retrieved April 13, 2009, from
http://www.sequoian.com/?pid=page&page_id=/pages/ext/news/x_news&x_new
s_id=0CC5EC45-7FC9-4582-9E5F-9957B0D00E54
Shiller, R. J. (1990). Speculative prices and popular models. Journal of Economic
Perspectives, 4(2), 55-65.
Sias, R. W. (2004). Institutional herding. Review of Financial Studies, 17(1), 165-206.
Silvapulle, P. & Moosa, I. A. (1999). The relationship between spot and futures prices:
Evidence from the crude oil market. Journal of Futures Markets, 19(2), 175-193.
Smirlock, M. & Starks, L. (1984). A transactions approach to testing information
arrival models. Unpublished manuscript, Washington University, St. Louis, MO
Smith, V. L. (2003). Constructivist and ecological rationality in economics. American
Economic Review, 93(3), 465-508.
Stein, J. L. (1961). The simultaneous determination of spot and futures prices.
American Economic Review, 51(5), 1012-1025.
Switzer, L. N. & El-Khoury, M. (2007). Extreme volatility, speculative efficiency, and
the hedging effectiveness of the oil futures markets. Journal of Futures Markets,
27(1), 61 to106
Tauchen, G. E. & Pitts, M. (1983). The price variability-volume relationship on
speculative markets. Econometrica, 51(2), 485-505.
Telser, L. G. (1956). The supply of stocks: Cotton and wheat. University of Chicago,
Department of Economics.
Von Clausewitz, C. (1993). On war. Edited and translated by Michael Howard and
Peter Paret. London: Everyman‟s Library.
Walker, S.C. (2009). Why wave analysis beats out fundamental analysis. Elliot Wave
International Special Report. Retrieved April 13, 2009, from
http://www.elliottwave.com/freeupdates/archives/2009/04/09/Why-Wave-Analys
is-Beats-Out-Fundamental-Analysis.aspx
126
Watkins, G. C. (2006). Oil scarcity: What have the past three decades revealed?
Energy Policy, 34(5), 508-514.
Wermers, R. (1999). Mutual fund herding and the impact on stock prices. The Journal
of Finance, 54(2), 581-622.
Williams, J. C. (1986). The economic function of futures markets. Cambridge:
Cambridge University Press.
Working, H. (1949). The theory of the price of storage. American Economic Review,
39(6), 1254-62.
Working, H. (1953). Futures trading and hedging. American Economic Review, 43(3),
314-343.
Working, H. (1962). New concepts concerning futures markets and prices. American
Economic Review, 52(3). 431-59.