re Cr oe ee ising ELLIOTT WAVE MASTERING ELLIOTT WAVE Deena aA The First Scientific, Objective Moca aguanece d YT eo eo by Glenn Neely with Eric Hall Z a is 6 oy = ae 3 : Ee es Aq ae io true wher the theory) is proper oped.” fat Sok ‘er yeh Mies Pe WVAUIEyE vant See tn ‘eeMASTERING AOD WI it possible to AW ANY ict the future? ms Noted oe ide tires nme” Sore of be bc od Showed ae Tow ye eid frokcieg ch fe tare Serangoon og of he xs ron cred in lows predelondescin He ‘Send bere Tete targa recor ci (ig Beseckmale dwt bandh 0 Fay inca eicogy Wheto Showy blebs acest Respenonlnysty Thepralalsfomorst ‘icp inadchon poles elond be Sapermgmiamrepmer elie Bong ‘dinggonds deers on conmos podtareptonoearancderlopnrthh Paden nenpspocogy. Naeem pia Cag bo at ot Shotmober The pepecsaraks ores tral acen treing mown he gph ‘Shoda fas ep “elo Wve oye by RN Elon nh soy 19377 Sls, conte ond Satie be eryenon len fytlogrmereto) ion pena Sie NY thor deed prog to cry crn chek or conn nobel eee egerson ‘SSjug rd eho ott pct on onal engsherenfo cre soon Pann py edad resend re eect Vifornou,moorgelenn my eonaot co aoe rotring sane apcoen fh Tt Woe Thay wre baal coer, Mero dalek esheuve mea cl time tring ond teaching, Mr. Neely hos greatly ex fre te endl hs coc da Hone ean Nee anes SxTnclyel mpbpabhor steed et odin clipe dot on ssh cl ges woke acid wi ee re el yoo orm ro yet udesoding othe spree rr pt ton yes rl he ite pred he hrrer pf eb Keekihop you ace ta ul ero cher. Mastering Elliott Wave Version 2.0 Written, ited and Illustrated by Glenn Neely ‘Adttional Editing, Poduction and Computerized Rendering by Eric Hall by Evans Design Associates Published by Windsor Books for the Elliott Wave InstituteMastering Elliott Wave esion 20 Copigh © 198 Gen Ney ‘is iar eft fa wok ogi ublished ‘dete fou Waves a Mate? Copyright © 18 by Glen Ney Alligns reserved eligi of epics im ol vin pat any far yay tent out permis oe he ihe For information comact: ‘Winesor Books | P.O Box 280 Brightwaters, NY, 11718 Manufactured inthe United States of America ISBN 0.930233-441 For information on related product ad serves, write cal: Elliott Wave Institute 1278 Glemeyre - Suite 283 Laguna Beach, Califia (CA) 92651 Offve: (714) 497-0945. # TeleFax: (714) 497-0883 Disclaimer Nasting ca Wa" inependenty prods presto in Wave nse. very eon ase to ppl complts ed acute infamation. Howeve, ner Be are iow Pave Is, ox mone ee ‘Sse wiht pation sale ale fan ahi bs, danageiect ort cased oalepo a ‘Casey hisbook, ll dens an mati presented areal ths of tien not cess ree sof ‘Go publiir or becker, "Warning allconmesiy es pte chars sytem, ee. dcased nhs hook ferlasraie pposaly sndaenutbeconstutes ssa) recmmentasons Nometot trating riesingsfolrot wba {ty Thctorealvsy poss with avon elo vesting andrei an pas peformane ot aiagsyte or tebmigus i ano of fe vest sures. Acknowledgments ‘Thisbook hasbeen early adecade inthe making, Daring tha peri of tims. a multe of firs, ties and associates ave provided me with supp: helped me sly my ideas regarding the Wive “Theory and have indict assned mein creating te knowledge whichis peed in "Masteing Ellin Wave” Some fisted may not have realized er, throgh ime, my have frgovten thereon ‘my work. Here, I word like remember them fr tit consibutiors. Fit the curentaadpast“Elion Wave Telephone Course” clients to numer allberentiored, boutwho were insrumestal inthe culmination ofthis weatise. A few shouldbe singled out det their support beyond nommal expectations: Join Lux (ry very fist Cours client ~- you probly thought | forgot you; Coton, who gave me the encouragement andasistanceo write my fst ok (olonge available): George Limberg (gest te); John Porer hanks foal he help durin he carly newslter days, Jo Robens (oral the valable satiscs she provided); Percy Stokes (orks eterou suppor ay Walman hanks forleting mon yourshow and forbing a fiend); Robert B (aime teliever); Bob Stark (who hasbeen my fiend longer than canremembyr and has always ren ‘hee when T needed 3m; Mark Bante (one of Fe most devoted ad hepfl sudents Ihave ever worked wth; ike Waker who was notonly actin butaclose, pron ead from my hometown, Lafiete, La. and whe wil never forge thanks feral he fee corpus time, chars and supper Walter Koval (who, fr personal reasons, gives me the greatest sen of accomplishment for having taught; Donald Anderson (who curently holds te record for the hest amber of retakes of my ‘Telsphene course (s-times) and finaly and espesally Jack Suns (much more han acoure cit, hisbellet and support ave ben inaleulbte). Nes the close asiocits I would ike wo thankar: Davi Rif (ho provided ine wih some ofthe ‘most vlable knowledge Ihave ever eamed abut arkt behavior; Gerald risiman (thas bezo a plessure working with yu}: Jeanine Heery (hope ou relationship cortinuesforaengtime; im Bah (he best broker have ever known} Jeff Bower of Finacial News Network fr allowing me 1 bon 1isprogram an forbrng the ist one to exablish my Garu” stats; Richard Mogey of the "Foundation forthe Study of Cele fr maintaining te integiy ofthat orgaizaton and fr allowing me to beone oftciroccasional grt speaker; Larry Jcobs formtng me wo partpate in is annual Confereces; Irwin Mint frhisineestinexpandng the Institue’ shorzons:Phylis Kabn (of Gann Word forbing such caring tnd genous ren nda te lady; etn Gower ors romosionl plugs” ardent ter writing and simolatng conversation; Reber Debnam my best conse with Europe: Walter Murphy (Merri Lynchis resident Eliot Wave analy) Michel Jachschts for his valuable assistance and ‘fort above ad Beyer he cal of duty), Evans Design Astocaes fer rating the powerful grapes nie front coveran finally, Steve Sci of Windsor Books for hisinterestia pushing "Masting Eliot Wave" and for eting me doit my way. ‘A this point wea ike to thank a pecial grou offends who were invaluable in finalizing the nance of Chapter 3 (which Wok eight monhs), Teall hem my bea testers: Gary Long Calong-tie devote ofthe lion Wave lta hea for Caper were pirat design Jon Koons (he most enbosasic tester of Chapter 3 sho had some great des of his own), Ricard Slmolle (hanks forall hime you sent erorchecking ny rough dais), Joha Lomas (hanks for your ieas), Bill Wilsa (the most energetic Telephone Course client Thave eve taught thanks fr your inp) and to Bil Abas (that towering icon ofthe cast coast who beevoentl hel the "Big Ale in be palm of his hand).‘This nextperson hasbeen such abeiever and promeser of my spproach Eliott Wave analysis you ‘would think herana PR. fim end waschargingme forthe exposte. He his done o much tokelp me ‘overthe years andias never iskedforanyting in return (buy rendship) fat fel tony propriate ‘odevote an entire pragraphto giving him alongover de heart -ek" thank eu.” This wonerfl fl ‘ame is Tim West. Thanks, Tm, for you assistance at ry talks in New York City and Chicagoin 1989, "hanks for proof-reading so many of my manuscripts over the las ree yeas and forgiving ne your ‘opinions on prometionaliteretere and thanks feral your terrific Hess regarding Chapter 3, Tim West ‘is everthing you could expect ftom friend ani more. Even theugh we lire on opposite costs and I ‘virally never se him in perscn feel Tim poseses ll the quaities mos: people could oniyhope have. Tim, youra great frewl hope his makesup for any occasion nthe pat [andre] when have not remembered t thank You for Your help). Furthermore te fellowing personal frends who have never tpped believing nme: annie Bishop (shohias meant more tome hax se wll ever know) all the Avcoins (where saa begin Mrs Aucoin Yourean inspiration o sal, Cara «Ilineverforget you, youarethe best fiend lhaveeverhas, Kevin « the mos creative person Iinow, Kim and Doug, Keith and Mr. Aucoin; Ese Hall (without wim his bok could no have been done; Billy Leblane thank for beng fiend Claude -a terrific and long term frend, Kip-thanks forheing me get stared; Travis, Chueh, Hanna and Wright ~ the people to ‘esow in New Orleans; Myrle Blanchet, 2 reakor and an inspiration - she was things he way and ‘veryone steps ase to let hr have it Renee’ Havg, the most eninine and well adjusted Chinpractor ‘7 the west cust in to my wenderfl brothers and sister (Bobb, Brent, Karen and Ma), Finally, standing ovation o my mother, Doris Neel, who provide the most deal upinging {maginable, who his been an incredible pillar of strength (moaly financial and psychologically) ll these years, and vho has unccnsciously implanted the drive for perfection and the confidence that ‘enabled me to creat this book end wio I miss very much adda, whois the best proof eader ix ‘te state of Loulslan, helping tw mate “Mastrig Ellon Wave” a: error freeas possible ary errors sill remaining are exclusively of my own maki) Glenn Neely - 1989 (revised April 1990) Table of Contents eos Discos ate tne ene iSiesoeer vost tne ine ee eee togreeeetaces ee ii smyaetereea oe eRe Fe ‘Sees 5 soy Crt i rr sane Sr ed ae seer Eo savoir aie vara rec Sonics iS tsos Seteedtiaeate man cone senate ami SPS et a sigan orgs si pes Moet it may ‘ony senGeneral Concepts Whatie atone"? Wy Do Wives Occ? Winy Are Maes Important? eect Pca Patens owe You Categorbe Waves? Deve How Do ou abel Wives? Orono Prorat ‘Wha Daa old eed To Ante Wat How De Yer Plot Date? ow Compa Do Waves Get How 1s Ths Kaowiede Used To Analyse? Preliminary Analysis ‘Chart repraton ane Dats Management ‘teen torner Irn ‘af Nobn Gctigy Ralf Oharion Inpenenson Peston rs Pn init Did epee Splmsie Synopsis Chapter 3 2 eben 3 a a a am se sal Intermediary Observations Monowave Grape Rule o Simriy and Balance Rounds igh 3) “igang "DETOCR™ Test Contral Considerations Construction 3 Polyaves Ba Comers cmaualsacint geri eo og Trg tare ein tu on ‘Sahaine SW Bein acetone onstans arse ge ti eWay a Swoebme Daas Loney 2 si si se 0 raSire on UNeoLiniing Pot Tame ews ‘rea in Romig win dt Comrie Cot Seb cod Chapters 6 through 12 are almost exclusively the Neely Extensions of Eliott Wave Theory Post-Constructive Rules cf Logic Impubions TroSapee Pate Coimatin a VaneBcen Sinan Enero SaReneFaier Corrections Roginnens Pacem Caiman 30 53 3 So S36 o e Conclusions ‘Compaction Prederes Icgrn Progra Reset Complexity Ra nate Ware Rosia ‘Flow Carta rire Nely Method itt Wars Anais Construction of Complex Polywaves, Multiwaves ete. ‘Contruction of Complex Palyaves “Stan pe Nonidet “Sic Rance Cones Crt wi Sal We) Sem Corona rH) ‘Construction of fiaves npn ofan Whisk Wa xd Knowing Where Start Count Hs ft 49 rs a wrBasic Neely Extenslens: ‘Trendline Tout ois Time Rule Independent Rae SimtanenssOvcarrnce Escepton Fae “ae ‘tees Necesly of Maintining “Strate Integrity ocking i tractre laa "Progr Libs expansion a ates) Advanced Lopic Rules ‘astern Ilicatons -AutCarectns cept Tris) Treat Tretia ‘lngnigae ‘tng Tim, eet Noeceqe ‘reer Ieee alae Tagen ‘DokeArec amin Corecon Tap ier ene Corn Tene 4 a 105 ms 06 Ii Advanced Progress Label Application ‘mouse Pat-ns re) Moe dN Ene “hae SNe Ede Termin Niessen Nee SN Brendes Correstve Paterns Fs iene Serta Reig 13 a M6 aeTrnges oom, Advanced Neely Extensions Channing oie tien) Deacon fav, De The Weed gry Input lettin its Chanting Doe tsenn Correstions dentin ith Chanting eee Troe ete coe 2 ua ua 126 P10 mp Comptatatene Dest Tze Dante leone ha i me Danica ripe han Danie Tongro enttyng th Completion of Waves ‘Advanced Fines Relates Inge Pats Scan Comets Sechtece act mie Dad Tigran oe asta pera cee Mion een dtr? owt ey sca Wyse? Whicker pie? Elaon Danie Tp cies InWoebacson SiktneBaenn pansion of Fonitis Localized Progress Label Changes Appendix Forecast to tke Year 2060 na a tas 33 aedleation ‘This book is dedicated to Richard J, Teweles, Charles V, Hislow and Herbert L, Stone. None of these people have I met ortalked with, but they ae the authors ofthe back "The Camm Futures Game." Te was while reading hat book that If et my eyes en the phrase “Elion Wave Theory.” Forme, thats where it all began, his book was written withthe intent ofsgificanly advancing the viability of Elie: Wave ‘Theory by introducing a scientifi,objestive approech to market analysis. Tis innovative apprach, kw as the Neely Wethod of Elliot Wave analy, ithe result ofa decade of rang, eaching and— ‘exensiveresearchb he author. Inreading this book, you wil quick realize itslike no other you ave ‘ever found on market analysis. Preserted herein isthe fst step-ty-step agproich to Elion Wave analysis ever devised No aspect ofthe Theory i left for you to pender. Every detail i thoroghly expltined and inthe nord of Bruce Babcock (Commodity Traders Ccasumer Reports), "every senence Is devoted to something important ‘The concept ofthe Wave Theory was original presented tothe investment world by R.N. Eliott in te early 1930's. Going well beyond the original discoveries of. Elliot, this book reveals new techniques, rules andrarke price pater never tefore disclosed to fhe public ‘These new discowres will dramatically increase your market forecasting cocuracy and your confidence in trading, “Mastering Elion Wave” deals in get detail or the subject and aplication ofthe Neely Melo. In suppor of sch dtl the acuratepresiction ad orofitable wading ofa mirtetcn continuous basis requires a complex understanding of economic and financial price activity, nether reason fo this ‘eensive deals tensure the book serves as a valuable guide and reference for yest o come, Ifyoudesirethe lity to forecast ane profit fethe complex undlatons economic activty.his ‘bok wil help you achieve that gol keno other. Tn addition, ever effort as been made to cree in "Mastesing Eliot Wave" a wulyinteracive learning envionment wich willallw yout fell» the ‘book’nstuctions wal simultaneously analyzing real-time market tion, You wil definitly findthe [Neely Method tobe challenging and am confidert you wil find reading this book tbe ine wel sent. [Now tum the page and prepare yourslffora newacventure; yourentrace int the world fhighsech market analysis Glenn Neciy - December 1987 (revised Aprit 1390)Natwatnon rec Aedes ct ‘dtc Wey Lear ict Wave Theory? Mitts Maiterestetatn ewe eine near, Mephindtoner Cec Wy neon nei Pricing Sq Years Mater eines Poet Dacian et Simp sean nde ow Sou Yen Lente Ther? Wi Asher Bok on Ws Nea Adilind Techie gaeg NEY Spey Pcetn acta er ny Where the They Appia caer ow Shute tras wii A Werk wih andere? Oren dy nats What is the Elliott Wave Theory? AAAI Ee Price Patterns of Psychology From an Eliot Wave perspective, the plot price aciviy ofa markets the graphical epesen- {ation of erowd psychology. The Wave Theory describes how local plated data relates to surounding da, how data shoud behave under «multitude of circumstances, ven and bow psychological tends begin and end, how ane psyehological environment mandatesthe unfolding ofanther and what general — shapethe price atioshouexhibitupencompleicn.Inather words the Eliot Wave Theory orgies {he sosmingly random flow of market price action int identifiable, predicts ates bse nthe natural progression af crowd psychology. Individuals beheve in certain ways depending on theircuret opinions al feelings. When eed, that individuals actos wil invariably be distin different fom he seme nviduals ations when ‘kpressed. Just the way one person can feel exced or concerned about his cher personal utr, he same felings ean permeate and be manifested by society. When a majority of people have sind fesings (favorable, unfavorable, indffren) about thei, or society’, prospects forthe future, thet ‘mulitive ation ufos in predictable patems. Ha adition, the sme way an individ can hange ‘sor ker mind overtme (occasionally in an instant, scan the crowd. The Cash of 1987 was a ‘exinple of nalmos.anivers, instant” change inthe crowelsopinion ofthe sick narketandthefiare ‘ofthe United States economy. Once acerainpsyshologca mood asrunits course, people tendo get bored with anideaor concept (sometimes financial ruined by them),sothey gabontonew ideas, Ii this charging from one nood tothe next that ermeates one psychological tend price pattern) ard begins nother Natural, Non-Periodic Phenomeron ‘Theamountof i consumed by aspecificpar-soietal mood apears to have noshsolute nin ‘or axcmum ime retirement, but there are gene Kms. By analyzing previously completed pateros and applying cain rincples of ime behavior, is possible to approximate ‘he Best ime pci for ‘completion of formation. These techniques, many of which Ihave developed over the las ten yeas, will be discussed in hter chapter, Sorry Desa rr‘The “structure” of market movement shoul almost always supersede time observations. Some people consider is an annoying apect ofthe Tacory since they want to krow "when? to make rade, ‘naatvance! Elie virally proves tat absolute anticipation of market movement is impossible, Tae _reatest degree of predictability occurs immediately after a move hs teminated. Tn other words, you wait fora patero compete, then you take action, AUnique Anaiytical Toot Unlike most forms of ectical analysis, the Wave Theory was developed sity from « price tchavior standpoint. The Theory helps the analyst realize that wiatever the maket does, it des for & ‘asoa, There iso “chance” in market activi, a0 aberrations and no unkasifabe price betavior. A arge portion of market technicians spend ther ime trying to manipdlae price dat ond tht “magica key indicator. How eanairansformatonof peice dat be better thnthe original data Inher ‘words price shou be considered theultimate indicator. Is the only inator of market action tht «canbe absoltely dependsion and te only onethat directly affects your becom ln. Itdoes ot make {ny ference what Someone thinks or what an indicator signal, he bottom ines, what il the market ‘db? If prices are going up fand you are log), you make money, If prices r= ing down (you ae long) you lose meney, al oer indicators notwithstanding, ‘Some ofthe remarkable aspects ofthe Ellit Wave Theory ae: 1. Its adaptability to new technological developments and unexpected fundamental news; 2 Its thoroughness in describing ALL posible market behavior; ané 3. Ils progressive and dynamic characteristics, ‘The Theory inkerently indicates man and his markets, continually char new teitory andtypesof behavior. I stpuates that at no point in hstary js a markets ation or psychological environment ‘ential to any otter period. Skilartes are allowed, but at exact duplication. This canbe aoblem fortaders, and especially “stem developers, who endeavor wo formulate steps based on historic pice action and behavior. Unike most systems and forms of atayss, te Wave Theory warns the 'tnalystto look for shang ad warns him when and whee a mick will ot behave ait has in he past. ‘The “Elin” print of view, that "istry does nt repeat exactly,” sthe perfect explanation of why ‘cost mechanical ystems (and the forms of analysis based onthe expctatom of exact repetition fail Thisis particularly evident when amarketchang’s roma bullish bearish environment orice verst ‘Tre compute sge has dramatically and probly permanently’ altered certain aspect ofthe ading =nvironment ands markeibeavior. Thisisarexample of why working wit historical data way back 'a “who knows when” will nct necessarily make a mechanical system function any better. Ever ‘xpanding technology coniuousl transforms the decision element of the market, people. The way ope eat to, use ad lean from new technology cannot be decided by histrial study, A form of alysis which explains categorizes and stuctus progress, not repetition, is needed, Thats what the itt Wave Theory is capase of doing. Additional Examples “The 1987 crash vas. perfectilusrtion of hw a study of history could not have prepared ore for ‘whathappened Oct 19,1987, Even he args decining day during the rsh cf 1929 was only ball as detrimental (perc=stage-wis) asthe one experienced in 1987. Anyone ving the 1929 crash asa tcom:er may havecccided to buy the market aferithad fallen 10% So the Say of Octobe 19,1987, ‘expecting no day tobe worse than that experienced 1929, Of cour, anyonetaking such an apposeh ‘would have bea infra very unpleasant surprise Ding the 1987 advance, remembe: continually hearing people tk about (and secingadsespse) the exteme similares between 1982-1987 and 1920-1929. They assumed everything would corinue concou'se exactly (sme ime and percenage advance), with he 80 bull market eating he nine year ‘boom a if it were arcther 1920-1928. Unfortunatly, those who believed such ar easy comparison of Iistory was their oad to sches may now be doing something besides iavestirg ir the stock mare. Why Learn Elliott Wave Theory? mena TILT TLE ‘To the beginning student, the Theo's complet, multiple pater variations, alternate cunt” possibilities and appwent subjectivity stem almos-nsurmountabe tnd appear to uli the Thar’ validity. Thisis de tthe extreme demandof specifies required ofthe Elion Waveanalyst.Allgexeral ppatemcategores, arceachof its variatien,reqiresiferentrelaoaships, channeling, pice befuvie sl tecnica characterises, This creates the isin that the Theory is purely subjective and cin be ‘molded ofitanyone's opinion. While here may have been some jastication this tance in the past, before the publication ofthis book, thissimpy isnt true anymore. The Pre-Constructive and Post- Constructive Rules of Logie (Chapters 3 & 6, respectively), n elabortca with mamerous, om pletely new technics developed by the autho ver many years, wil greatly enkance you abil 10 ive ata single wave pattem conclusion. Caveat” These techniqnes, andthe specifies involved in plying them, ares numerous an vied that hei proper application can tke years of practice and real-time trading. Asareslt until you boroughs understand the concepts presented inthis book your conclusions may freyaemly be incomec, Multiple Benefits ‘Thelong-temn bereits of" Mastering Elio Wave" are numerous. Asa businessperson or investor, you can frequently amcipate major changes in the economic environment allowing you to sidestep aster or even prot fom the winds of change. Proper understnding of erowd psychology (he fundamental basis of te Theory) ean help you ave financially dangerous business dealings athe end of an exonomic eye Multi-area application ‘The Wave Theory can be applied to virally all areas of mass human endeavor: the stock market, conmedites, real eine, peoduction of godsand services, et; allthis required isaccuateconstent ‘dea. The beneis of the Theory’s moltarea application are obviows. il‘Numerous TechniquesUnnecessary When incorporating Eliot's orignal ulesand observations withthe Neely Method andthe new ‘techniques revealed inthis 200k, you have at your disposal virally ll esompassing description of ‘market behaviorandhow todecipherit. Tisallows yootokaow,undermos.sreumstances a ret deal stout the current position ofa market withoutany infomation other thin price action. You willnot need ‘w keep tack of namerous time consuming (and sometimes subjective) ndiators, Remember, no matter how good a mechanical system or indicator works during a particulr period ‘in history, the mime the pte (which was urfolding during the formatienof the system) completes, ‘hat sytem or indicator wil usually not work anymore, The envronmentin which it was designed 0 perform so perfely no longerexiss and (accardng othe Wave Theory) wll never exist agin. Helpful in Indicator Clarification you decide w use othe indicators (outside of Eliot) to “clrify" wave counts, the Wave Theory ‘is actually instrucive in qualifying where and when a particular indicator does and doesnot work. xanpl: Readings of invesorseatirent normally indicate a signiicart market ting point only when in ‘overbought or oversold teitery (usually considered to be around 75% and 35%, respectively). A ‘compreteasive understanding of Eli patems allowed me 1» recogni in 1986 and 1987 that sentiment could osilate areun neural readingsevenifamaor mikettuming pint was forming. This ‘yasa logical dedction based onan understanding of Hoszootal Tangles and Terminal pts (€, Gold Janne 1986 and $ & P00 Jan, - Sept. 1987), When mos were conéused by the ack of public ‘excitement generated during the 1987 stock market advance, conta warned clients that was sign Terminal Impulse wave (agonal triangle) staredinthelstquarer of 1986and would portendacrash, ‘in three months ot ss, back 0 1900 on the DOW and 230 on the S&P SO)Cash Index. Signals Infrequent, but Reliable Only after an ideniabe pater s complet ist safer desirable to enter amacke. Tis helps avoid ‘overtrading and prevents entering the market when there i litle potenisl. On the oer hand, ‘romotes dng when the probabilities are realy in your favor and ik saa minimum. The Theory ‘soallows forthe placemestf very objecive saps enabling yos ta know wien in ime and wherein rice your interpretation is wreng. ‘What else ould a tader ask for? Why the Controversy? MEMRAM Complexity ‘The Wave Theory is proba the most complexand all encompassing form of market analysis ever devised. I requires lot oftime and practice tomaster, Asa est most people donot havethe time ‘norinclinaion wo properly eamor apply it.The Theory takes mare ime wo Ferfect than most people ae willing to commit_In addon the idea ofan analytical technique allowing someone to ea. market ‘uring poins tothe day, even th hour, isconsidere by most tobe riiculous ar atleast suspect. When ‘amajocity of invests have trouble beitgon the right side ofa market, atermpting o pick te highest ‘orlowestickofa endisnoceven considered serioisposibiky. A Theory whichprofessestoproduce astounding resis willalways create Contversy and be eated wth skepicism bythe uninitited Public Mind Set Profitable application ofthe Wave Theory quires @ mentliy divergent Som the norm, To ural cll marke: tuning points demands Yoa Buc the crowd precisely tthe time the majoty is ‘mosteonvinced an event will occur {youmay poss yevenberdiuled for your beliefs one of thems ‘elable signs youranclysis score’), Extreme slconfidence isa mst conzol cf gree, sit money ‘management (whichincluesriskeonto), an opr mind and theabiiy change yourentr perspective (Grom bllish wo betas or vice versa the blink ofan eye ae all nscessary triutes and ables of the socessal anal: andor wader. Most ofthese characteristics are otal present n one person, mikngiifiul ote aprognosticatorand poftabe investor. Mary peoplecan predict ure market acion when no money oftheir own is ask. Waen trading becomes personal, everything changes, Years to Mester ‘Even if you hadal ofthe qualities mentioned above it could take years of practice confidently and accurately apply he Theory o realtime. Since mos people will ot spend the time necessary 10 ‘per lar the Theory, they misappyitand ove money inthe market. Thserestesdigriledex: sens who, of curse, blame their misforune on the Theory, ths contin ng he controversy Application Requires Time Evenifyouhavetse mentality andthe years ofezperizace and knowledge, u sill mis spendtine analyzing everyday oso stay in practice and keer up withthe current positon ofa marke. I yousre folowing numerousmurkes, this alone can ake several or more has every ‘Onmany ocasces, Ihave spentan entire weekend looking at one markt, tometimesjustone shar, ‘ying figure away ofall be imporuntelemertsof good count it the price patterns, Most pop want making moneyin the market (andallotherendcavrs) tobe easy. They work all day at anthrjob, 00u text, go1o the movies, then ight before going to bed inthe evening, pen Sor 1 ina on ther chars to decide” what the markets going todo the next dy. “This is jst one of many reason meat people ever make money tang. If you are in the ove smeticned category youare competing ais bar fof devoted, fl-ime professionals whoderive ther sustenance fron profitable wading orinvesing. The chances ofa par-siner voasistenly wining ‘guns this group arsenal. Ifyou ar ot abl w spend th ime required to follow markets progr, itisrecommended yo find a professional who can avse you on your investment, Endless Array of Specifics ‘Toppy Elion Wave properly underall circumstances requires te applicator of analmost endless amy of specific crierafiting pancuar situations, Relationships, channeling the sigifieanse of ‘certain taming points tothe overall cture, Srucure (Impulsive or Corective and what type of Tnpulsion and Correction) all need tobe considered when piecing together patten's coutMemorization From the statements on te previous pages, it shouldbe obvious that large amount of information needs tbe memorized onéer thasten the appication of importa Eilon Wave and Neely technigoes taprice series. This memorization is one ofthe msjor obstacles most students encounter to successful application of the Wave Theory oral time action. Frequent Indeterminacy The prior tne termination area of trend isnot predictable, wth ahighcegreeofconfden:e uni :mElliot Wave paterson he verge of complet on, Sometimes confidences notobiainabie uni act ' pater has competed. Ths fact keeps most ofthe public suspicious about the They. Why? Ifyou 'sk an Eliotician for his prdition of farure met sctvity Before a pate is near completion, the pobabies are high his ancl willbe wrong at leastin detail. As the market approaches te end of 2 move, the pater in progres segins to become clear AS it moves away rom the identified turning >ointofapreviouspattem an moves toward the middle of new patern, the nmberof possible pattems smprogressuguin creases. This isthe reason e»peienced Eliot analyte disigret onthe position ofa market during cerain time periods; each s choosing whathe ose considers toe the best oenario ofthe interpretation posible. ‘When persia th same field continuously disagre on the same subject has the very foundation ofconroversy. Ina ater chapter, a whole new concept develope bythe ator, wll be introduced to ene these areas af "uncerasty (se Expansion of Possibilities - Page 12-43) Dipfcuty The extreme complexity. subey, and demanding mtr ofthe Wave Thar prevents mostpeople from parsing his nea of aralys Also, mot ofthe ean ined thoughout Chapter! prevent the ‘Theory om beingcompleely computed. A>picaion of the They soni demands ms of ast thought, not aspect of te computer eaim. Fo exal, appiaton of al the ls under ‘erin czeumstanesmaylerveno obvious posses. These stations reir personal rainstorm ing sessions to “untck the count, smctime, merely pence walt fra count revel ise. Masry oftisormof alysis wilbeapliaefortberest of orl, Tere smo eed concern cust withthe possibility of heavy public pacpation, most wil pps i wrong. As Eliot has ‘evomeineresingy poplar the wae patterns smal maes compen, hve Begun tevelop on an ever more complex eve preventing amateur Eliticins from corey deciphering market ‘havior. Ain ts esto perpetuate the coaroversy in favor ct the Toys inadeguncy at the very les, ts supped subject. Why This Book May Create More Controversy LAMAR TEE “The degree of del coved inthis book wil sgifianyineease he amber of important aes ‘nd guidelines that have tobe remorized to properly apply the Theory. Most people fel there are aca too many rales associated with Elio Wave. Many experienced pracioners willdisagree vith some ofthe fincngsinths book proclaiming"my wave tehavior rita isin specific or demanding tobe applied to real-time market ton.” Tiss sloluely not tue. Its understandable though, acw these feelings might have come about in overs. “Many practitioners ve, for years, used cata toplo:theirchars which sinaccuntecrimpropedy pleted {forcing them ntoinvaid conclusions. Thisobviousy would affect ther percepion of te Wave Theory ‘Wen sia is inconssient (which it willbe when cllected and pled incorrect), its impossible © amilyzeamarker'sucionwithexactind, [For amore detailed description of what const: gooddata ant how to plot, see“How Do You Pot Data To Analyze Waves,” in Chapter 2] What Makes Elliott Wave Theory Unique? AKA HAHAH LTTE EL Complete Perspeuive ‘alike most al mechanical systems and many snalyticaltechnigus, the Elio Wave Tory allows theaalystto stody anytime frame: hourly, daly, weekly, monthly, yearly, etc. Even more intereging, ‘theanalstcan sty rItime frames simultaneousl, allowing adecsin tober an whichtime fame ‘curently provides he greatest rading environmen: and how all the long an sher-iem movements inexpay with one anther Quantification of Mass Psychology ‘Bvenifa sytemor technique tes you what tod inthe marke, rely wilt give you afeclag for the ecenomic outlook of a society or ofthe psyctology overshadowing all market action, Due tthe ‘Theory's muthematcel quantification of mass psychology, it allows you to experience the economic Phenomenon wit grester intrest and understanding Detailed Categorization Almost ina clas: by isl, Eliot allows forthe categorization of moves which cover just few seconds in length up chundredsof years Every move on2 price charthaits efecto thelarger pares that are evolving andeach an be labeled based onts specific mpact. Ifyou kxow what ype of pater isunfolding, you havea beter ida of what expect rom that movein the aca of speed, complexity, breadth, volume et many of these ares wil be covered Inte) Grand Simplification “The whole Elon Wave analysis process involesthe dexiphesingot smal ricepatters combining ‘hose with mumerouscthersintolarger pce pares and thn edn those cemplx pater bo ino simple: paters again This what aks the Theory so unique; evlopmentisthe sae on al ees. Clear Delineation of Price Behavior [Nematerhow smal orlarge tend ums oat be, youcancesl label themovementasanupvand ccoveetion ina dowtrend a downward corection in an uptrend, et Bana Dene 17How Should You Learn the Theory? Sma KHALAF PE Reading this took sa good start! "Mastering Elion Wave” the book nd the process) requires & !xofrea-time pretce. Inialy your chars shouldbe constracteton short erm basis until ou grasp "pebesicconcepts, Memorization ofumerous-uesis required along with understanding of general stapes and chanreting. Its recommended you fllow no mire than ene market anal you have ‘memorized the bs les and can quickly appy them toa market a it unfokds in eal-ime ‘Why Another Book on Elliott Wave was Necessary ATMA Additional Techniques Required “The purpose of this books io provide new, inrodoctory methods to ass objective aplication of the Theory and inlter chapters, ciscuss more sible qualifying techniques, These wl be required by the experienced aalyst io eakance the wave wackng process. These techniques canbe employed even ‘shen the market isdeveloping on avery complied bass, eliminating the need to resort oot types ‘less reliable indicators or techniques, Specific Procedures Described Despite the peponderarce of information row availabe on Eli, most people intrest in the subject donot know where w begin when tying wo apply itt re-time. The approach in his book is 'cogically progres from the simplest concep (many of which were deveoped forte benefit of my 2ourse clin’), othe morecomplexas cach stageot wave aalysisisundersocd, Inaditon ext star sap procedures aed dats-ploting methods willbe expine in del. Realistic Diagrams Previausly Non-Existent Even in Ellon’ original works, diagrams ofmarket behavior were very poor and unrepresenative frealetime mavketaction. Inrry early day of fighting with the Theory those diagrams were song ‘nflvenceonmy thinking, Tk icealizedpaters resented never reflected actual market behavior. Any student familiar with Eliot s original works wil greatly apprecinte the ation to “real-life” etal resent inthe cars of this took, Tn the erty seis ofthe book the typical” diagrams ae used to ins the genera shape ofeach Elliot paner, bt they ae quick discard later for mee acura Disclosure of Advanced Concepts Eventhough general descriptions of Eli’ stenes canbe found nll wrkins on the sujet, ery Jide is available onadvanced techniques and apglcations. Is in fat are tht this book really excels nme Deans Original Presentation Sequence ‘The difficulty mos students hae in the early stages of learning Elliot Wave is mosly duet the stendard method of presentation. A kt of impartance is placed on what I call “Progress Labels” (12,3445) toocaly in most publications. That area ofknowledg> soft i-portanc in theraly lexming stages it attends to confuse if aiscussed 0 000. Also,firtoo much sgnifienoe paced ‘onDegree in Eiot’s work anditsspinols Ifthe is any spect ofthe Wave Thecry that subjective, Degree is it For the above reasons, bo concepts are presented after more basic ideas are cover. New Terminology ‘The dicuty of discussing the Wave Theory over the phone olin an in book form reared ‘heereation of new tminology in rderto convey precise meanings. Some cained words tnd phases ‘ware ako needed to describe new discoveries and techniques covete in this took, In adiion afew oldternshave been: aed forclarity, Many “Sunlard and Non- Standard” Elio patterns have teen ‘broken down intomore specifi sub-catepries. This'4s done oath application of ‘patter spe fe” in guidelines hich will enhance you forecasting accuracy ad patter interpretation, New Discoveries, The Neely Extensions Rm HALLETT Inically, Tintended include a separate section on all he new discoveries (chennelng, Fibonsci, rz, time, sirvture, paterns, degre, relativity, mcmenum) Thad nade over the years. This prved twodiffeult. Forte cempletenes ofeach section, he presentation of enyoldiformation rt and hen ‘new information late would have equi itrodacing al the same categories twice. For ressos of coxtnuty and space aesevation, each new technige, concept or dicovery has bee nieve is rope place with the assumption that the reader will leary detect the presence of “never before resented” information, The vale of these Extensions to Eliot’s work wil be proven to anyone who ‘spies them proper. For those new techniques, orcepts nd discoveries which could not be incl.ded in the rormal flow of the text, there are several sections toward the end of the Book which present information that has cher never been presented before (1, Rule of Similarity and Balance, The Neely Exensions, Complexity Rule, Power Rains, Logic Rules, mulation, Reverse Logic Rule, Mising Waves, et) orhave ony been impli butnever explsinedin detail. Structie Series, the dominence of Strctre over Progress Labels, Compaction, Progress Label Application, the importance of Channeling, the diference benveen Extensions aud Subdivisions, How I Discovered these New Concepts and Techniques Ac HH HHT EEE ed The Telephone Course ‘When [stated my studies ofthe Wav: Theory, tran things appezed tobe msssng from avaible literature onthe subjec. Questions lik; "where do yu star a char, how do you organize chan, tow4o you plot price ection, how do you analyze and weat near vertical advance or decline ona pice chart ‘hatexibissno upand down price ston?” cam: tomind, This alng wth te rustationLexgerenced when wrong abou the direction ofamatket'smove, keptme searching for answers, Refusing believe ‘amarket could outwit me, believed with encagh time and wok the Thoory could be rediced to & ‘Sientfic approach where all market action could be explained and most future action sould be ‘mtcipated, My purpose was wo eliminate any subjectivity inthe analysis proces, therefore llowing ‘tional, logical ding decisions to preva Inanattemptto explain marketactin which not fiat the Wave Theory asR.N. Elion esribed .Tset out to quantify ever unquantfed facet As prof hissy, eight years of notes were Kepton all manner of market behavior in an attempt ro classify and reginent marks action above and beyond Eliot orignal discoveries. ‘Most of what Ihave distovered has come fom teaching “one of akind” Telephone Course onthe ‘Theory since 1988. Due 0 ths delle teaching proces, new ways of presenting the Theory 10 tegiones,imponant wave behavior discoveries (Sometimes very suble ind specific, Channeling ‘echniques,Flbomecirelaionships and charting approtches emerged. Theough constant application nd research, believe Ihave quantified alma’ every, up il now, unquant fied aspect ofthe Theory. Long Hours of Work Since I generlly work seven days a week, ten to fifeen hour a day ed have been staying this sabject since 198, Lestimte Ihave logged mene than 30,00 housinthe sty of Eliot Wave Theory. This alone was a good breeding ground for new ideas. Where is the Theory Applicable? HTT AAT LAT EPL ‘The Wave Theory manifests itself in maikets that have bad public sppeal and invclvement. Markets that are nore susceptible to weather and other natural events re les reliable followers of he ‘Wave Theory since the weathers nt dependert on human though or ations. Many indivisal stock issues are not broadly based enough ost nto notion ths natural of ras human psychology and ‘© may not yield consistent results. On the aber hand, markets such a8 gold, broadly based stock averages realestate eventtoughrelabe dala isharder'o obtain for realestate), work wel since litle ‘an happen to change the valu of the commit or index except human ation, Virwallyeny mass truman endeavor will exhib predictable progres as long as theres consistent, reliable data avaiable How Should You Work with and Perceive Elliott? EAE EEE ed Meticulously All market acon need t be accounted for and clasifed so produce bankable interpretations. Counts should be ui fro the ground upon a'moleculse" basis, Do nt sar the analysis process by ‘ying to imerpretalong.team rice chart fst. The long-term count is theby-produt of alle shot termstuties, Keep you short-tzm analysisacerae and the long-erm pss ilies wil usually become evident as they unfold. ‘Once chars are ganized on a dally, weekly en monthly basi, the analyst stould patiently wok wi the short-term cta uni clearly definable pater appesr. Lae it willbe ciscussed what 40 wi the completed fetter and what pat ofthe whelethe pattern becomes. ‘TheBiliwt Wave Theory the graph representation ofa natural aw whic scontinuousl work inal aeas of mass human activity. As n analyst working withthe Theory, done ry to crete coo seenarisr force the market into a pattem which vould favor your cure opiion of where the rsket should seheaed. Leeach patemevole, then obevelydedacehow thatputr,basedonthe highest cb ites, fis int grander Scheme, lot frequen allows you the pare (nelecually and financially) ofelling major tring points tothe day or even the hour, Ar these junctres you wil be “lone voice inthe wos” Hyou >have the courage to xt on your convictions, the Eliott Wave Theor will proce result for yo. Open-Mindealy ‘Topropery apply the Theory requires an open ind taal posites. Never begin the analy of ‘market with precor:eived scenario and then attempt tomoldan Elin count which would verily our opiniors. Your gonclsion shouldbe the by-procuct ofa caefllyconstuctel wave count. Als ty ‘ovoid l optimistic or pessimistic impulses. Whe ll techniques ee followed correctly yo dn eed tomake gues, che completed wave count wll wiualy el you what rice level the market shuld reach avin what ine fame tht shoulé happen. What's Next? RRR LETT UL ‘The next chapter of this book, General Concepa,is designed toanswer basic questions you may ‘have abou the Wave Theory but- ntl now ~hav> gone unanswered. The thin chapter, Preliminary Analysis, describes haw to prepare and maintin chat dua, how to enti waves, propery observe ware interaction and-nch more. Chapter3 contains the most complete and methodical explanation of Price analysis available, These techniques will allow the novice to accurately decipher even the most. ‘complex marketcondtions. The fourth taper. mmermediary Observations, discusses how tocomsine {nividual waves into acceptable groups to form "sandard” Eliot formatirs, Chapter 5, Cenral (Considerations advances further into the construction of peific Eliot patterns with numerous les explained to eliminate unsatisfactory wave development. Chapter 6 introduces the Post-Constracive ‘les of Lagi discovered by the author. These nes will describe how to con the authenticity of Patterns you have deified. Chapter7, Conclusions, wllhelp you soli your wave ptters sri ‘hel Strctre and prepare them for futureuse. Chaptrs9-12 contain vasarray of mostly new pers foraulsion, testing sv verification techniques, onary Di 138General Concepts Woatientaet Way Do Ware ecw Woy Ave Waves nortan How De You Label Wares? ‘Sree Orontin PopestLade What Dats Should Usd To As How Do You Pot Data? in Man Chi Are cy ow Compated Ds Wares Ge os Tas Knowle led To Analyae? u a 2 “ayer? What is a 2 ALARM {tssems quit renuiabl thatthe basis ofthe Wave Theory, wars," hasnever-tomy knowlege been cefined in any literature ever available on th subject. To make sense and beof use wave mast ‘bedeseibed in speci tems with absolte limits. A more general definition wll x offered ltr thee you have been introduced t some additonal concepts. ‘The obvious place to start with the definition of “wave” isin its simplest fore. Since waves fer ‘o bemovement ofa markt, and marketsare measured in pie, the definition wil depend on efereaces ‘orice action, Clea, the simplest price movement on a chart would be comprised of a staght line of any length movingin any direction excep parle! to the y-axis onan xy pane (see igure 2-1 oa the nexa page),Figure 2-1 - iS Tae Tae Tae Te Alictbesedagansremesen abo ftsnexceptt bot hi Tomar. fae pce actin resi tine flap Cant” dsb nr ns ftp. Ther sell, vet ce movenen impose Lo 4 ‘Todeseribe this type ofaction (which s parmount to our diseussions throughout this bok) it was necessary to coin new tem: Monowave see Fig. 2-2). A Monowaveis tre movement of amarket starting from actangein price direction unt the next changein price direction occurs andi the ‘Simplest type of “ave” InFigure 22a he stating point“ is wher the ce changed dectonfrom itspreviou course, The pont labeled nis were the next change in price action oecured, Between ‘ny “mn” and “n” you usualy witness a sraigh line. Except when the Rie of Neutrality i applied ‘explained in detain Chapter 3), even ifprice ction does slow down temoaraiy and then speeds up agai, (see Figure2-3b) theme advance or decline shouldbe cansidered one “wave” (a monowave) ‘ntl price actually changescrstio; when it oes, the "Wave" is ove. “Monowaves are the mic components (the aiding blocks) ofall wave ater. Learing how to Aecipher monowaves is you fist step toward understanding Eliott Wave Theory. Remember, all ‘market patterns and trends (no -nater how larg), begin witha sirgle move. Unfortunately, stlyeing {very move a market make is tedious, but usally necessary to comet interpre the large picture accurately ona cosistent bass Figure 2-2 Amonowar cnet ay ried ne don Asin 8 ceconsnaly novergpordout nth etter ton Bite oppose deci) he movement olde cons red |< monowave. The ms imports fea aan 7 [Wave analysis cemeaty inept moowaves Teenie her isd on th roped ison af masowares. eat cons Figure 230 ceagetaPse Diem Figure 2-3 (Chnge'n Pree Dieeton pot sgh Bat Tinie eR Cngelnrie tecnico! te Samoa Sietaneowe angen oe Why Do Waves Occur? RENAL “Waves” are the result imbalances which occur between the numberof by and sel orders an ‘exchange floor or in he open market, for whateverreason. When demand for pred, in relation to its appl, increasing (or inthe case wit commmotites, the tua numberof “buy” orders exceedsthe total nmber of sll” onders) the price goes up this vent could beclledan“up-wave.” When demnd for a prcduct, relative tits supply, i decreasing (n commie, te sll orders overpower the buy comers), he pice fallscreating a "down-wave.” Eachtime one force cverpowersarather, even forthe shortest pri of ime a change in price direction ocours which starts anew wave. These suply and ‘demand forces are cominuouslfllinginto and outof balance onsale of varying mmgitide (Deg) Why are Waves Important? RRNA Finances Market movements composed of waves which cortinually combine to form ger waves withlarer reacions. Accurate analysis of a markers wave paternscan give you m overview of curent economic conditions. Asa businessman, invesororspeculato an understanding ofthese ceadonscould dirty fect your financial sus and standard fiving by lowing you to profi fromeicumstances few ie expecting Psychology ‘When a market moves ina paniculardzecton for long prio of ie, it tends to tract the media “whothenaletthe pblc (the crowd), Thelongera met moves inn: direction, the easirtbecomes{Gre coud otlive the tend willnever sop or believe the ted wl continue much far han ‘zettlnels Ths fesingssffethowpeoplecondct basins epecilyiitisinaramtotreee ay and ca wl afet ho they invest. Sank, eterain consume, eHow mach many poopie pen kon wa they send it affects a whole list of ether prope sndiadusoien, Even peee ‘mvoledinspeculatng aivesng, heanbeafctedby leevensintesiackandcommnativinnien, Patterns {oreccminnionsofiativdl moowaves crear copie pes Eli dc ‘ered that certain types of action can be depended ‘upon wien specific. alters cur ‘Through much rte ard writs ps rach a aint whe eu a pr near sccuncy he pie and ine exten of amare move. Of outer dps cat ee ‘sch sil an pre pea felon, How Do You Categorize Waves? ‘memeeurtnN WT Classes Allmarket movenert under Elio flls nto two logical Clases pulsens (vending & emia pars) Tes ae he pater which occarinthedectioncf he {Fed Whee analy sont term marke movement, Inpulsionscan be monowaves ihe Inpss 'smore complex thana monowave, it wil be composed of five (Spremene Carrectons (non adng pastes): Tes atthe paters which ccur aginst the rend. Core Hons cit aio be mouonaves but, if ore complex, wll generally appear a sideways ronsliloheg (on price ctr and we usualy compose of tre (3) segments, ‘These concepts wil be covered in nceasngly reser ei as you progres througout this bok “Rule of Simirty and Balance,” Chapter 4) along with specific quantification mes Once youchooses aDezre Ibe and symbol fora partir move Degree akesona roe concste ‘meaning, Why? A frame of refeeace is created allowing comparisons tobe made stron al cies 24ers ‘moves, This frame cefeence will provide you with enough information to begin sling certain moves, ty ceaiain names. The names wil imply how & rove relates to another, not how Big o smal i's inherently. Duetote esoteric nature ofthe Degree concepts advised if yeu ars beginning sider {0 not spend much time or pay much attention to this area of the Wave ‘Theory uns peer ‘understanding of more important basics is achieved, How Do You Label Waves? SATOH Once individual mnowaves have been identified they will have tbe lasifed. This involves the application of srctae labels Structure Labels As mentioned in he las section, all market con is paced ino one of twe categories. Out of nesessiy, each ategery must be given symbol foruse in marking pice action This wil enable you to guieely note into which “Cas” pacular mov fall, Deciding on the symbols need to present wave Sucre was notlffcult As indicated inthe {aa section, impulsive pastes should alaays be coryprsedof-or though to be camprised of he 3) inividual segments, Comection are usually comrizedof three (3) inividul segments. Therefore the symbol to represent Impulsive ation iste numbesfive (5) preceded ty acolon(ue,"5"), Toreprsent coect.ve action, the symbol "suse. The colon before each mune is theres prevent ans dees, ‘souneeion to aden forms ofabelicg which you wil implemen later in he enalyos process, Serctre labels ar critical nal evel of epplcation tthe Wave Theory. TEey must be apd {0 waves of all shape, sizesand complexities, Stneme label info you whe hera movement ith or gaistthe trend “fone larger degree.” Prope tention to stact labels wll =i yo in answering ‘ha: ubiquitous market question, “which way i the market going?” Organization “fcr having designated numerous monowaveson shart with "3" 25," you wil be ableto {oll tae market's dvelopmentinto more advanesd stages, To achive this te spe setializron of those":3's" ands" ino groups willte necessary The groups created from te stslizaionpoe willbe gvendifferentrames (another fom of categorization beyond Sructre ib) which ntealy nate their CLASS impulsive or Cctv), but ther general appearance hae), Progress Labels ‘sou become mare profcientatthe tas labeling concepts presented inthis bok, more advanced fonts of labeling wll eventually need tobe mastered. Progress Labels a Gramati p forte beginner, The compleity ofthis subjectis such hata whole Chapter is deveted tit ater, A bet introduc follows to familiarize you wih the coccept, but complete coverage is scheduled fr ler, Progress Labels ar an essential and erticalpartoftesting a group waves fer proper development. The direct the analyst“down a narrow pa,” guiding though cerain condos and observations hich ars relevant tote cument environment, Progress Labels provide onder and Fmt to 2 marker’‘movement, allowing the sled technician to finalize his opinions and prepae strategies to ake advantage of» move which “shoul” take plein the fur, Unlike Stractre labels ('sand:55), which represent the inherent number of segments ia patter, Progress Labelsideniy the position ofeach segment within sandardizd pater. The five segmens inn Impulse rater ae labeled 25 such: “12.348.” Eventhough tere are generally only thre: segments toacoection exceptions dooecur For ths reason, more than te labels are needed, times, todescribe allsypesof Coretive behavior. The various segmerts of Coretive market ation are give) the fit tree or more ofthe folowing eter: “a,heden.” ‘When refering to marke action with the ae of a Progress libel use ike word “wave” infront of For example, ifyou are ciscasing a move which meets ll the criteria and inherent characteristics rogres label I,” you stould refer o that move as “wave |.” This may seem mundane to experience} Elioticians, bu it may’ not Be obvious to the beinner, sis included far completenes. Tn ation, to mike things perfectly clear each Progress Ibe i placa next to the termination ‘hemarketactio itrepeent. The labels are placed inorder Fomleftoright as each segment unol nether words wave-?cinnot be marked unl wave- is completed. Finally keepin ind that Progres labels thou note implemented until you become fair with numerous preliminary and secondary procedsres covered inthis book. Fer this reason, the discussion and application of Progress Labels is reserved for Chapter. What Data Should be Used to Analyze Waves? HTT TEEPE EE Closing Price Data ‘The use of losing prices ona monthly, weekly, daily, orheurly basis is thesmostuneiale way teack development of aurket fom an Elliot Wave standpoint. The closing price of amarkethasTite todo with the ation whieh t20k place itra-ronhly, weekly, aly, or holy. Iwi not give you any idea of how highorlow he market waded ding a particular pecod (Figures 24a. 2-dbillusrate why thiss the cas) hus making virualy impossible o apply thewide ange of pater spect" cetera presented inthis book. Fore«ample a marke could lly 10points during ‘he rst hou ofthe day clwe ea the low ofthat hour, drop 20 points thenent hou, recover and close where it closed the previows hour. Under tinge circumstances, the pling of closing data would ot accurately represent reli Therefore, closing Figures -over ay tine rae - should never be used unless nothingelse is available Ifyou want to employ hourly data, the correc way of collecting datas revealed on page 2-9 (se C Data, #2). Proverplotg of data, colecedover any time fame, i dicussed on page 21 Bar Charts Barchars reveal whata market has done inthe pasty showing the wading range whichexsted over ‘standardized sortion of tre ploted ona single, vertical line (Figure 2 e). The problem with br ‘hart, roman lot perspectives they do nt posses the necessary qualities toallow fr he analysis cof waves in absolutes. Hyou were to daw a line across only the higtsorlows of some rie action, you would have a band c price action similar to Figure 2-44. This produces the right idea, bu is stl ‘not the best representation ofthe entire day's price action. The motion important, but io correctly merpret marke action requies data be of «singular nature. The price aston ona bar chatconsists of ‘ual price factrs occurring simultaneavsl, the high and low. Only one figure pr time period should Figure 2a Intra-Day activity separated by the hour Day's Open } Day's Clase sch nv distil pric cach bourne hoagie?) The ext same chan do werepded tel, mins be te-hoar ales gure 2), Ech ony doing mas comneced ‘wha ie Theron mt even repent eon ca Seep Aotaevelpena gece schedule, titel ak ds ch on cond ur gang occur phe ess meester ibe gal tehgh ro. ‘usedon oats, te uly dose wil ely rosa fe rope omen oer te ges andes pice of the da. In fate apes, when relabontips awel o veay wave ers erica bestal gh an low eeore ora eke epson of os high {ons Isboulbe clear hisesample arbour css eno be wy pape tn Figure 2-40 Day's Open — forced bee previa d's et Day's Chose ach @ epee tect of ack oar err Gove 27— | Fue 244 T 1 I It fe oh we CT oe feeeeeen ee ee foveemesaan Only one figure pe sime period shouldbe employed otis posible to deide how each figure changes (fatal) the current expectsions and possiblities ofthe male. This does not mean ony oe igure day should be used fer your analysis, imply tha single igure prime uni (whatever ta ine wit is-one day, wek, hour, et optimal. Ths allows you w are ate definitive conclsion on caren ‘market conditions and fue expectations. & price band (he brine on ba chart) oes no: erable you ‘to make an absolute, immeciate decision on current and future market posibiles (ee Figure 2-5) Figure25 | Depeing on wie the ih row nhs oy came a cone change De poets fe ati eshte ow cane fine igh hee wesc» th wane extn ip om Ieipaetrthe previo op mone fay) mak be carci (3p) andthe down move ld be te wt oft new die. This I exam tse bow porn ow ' whether the high othe low came Fs, inforing r hr the coxcepr tat fat needs wo be ana on 8 siguirbssohae eal ne” autre For this example, lets assume the mart experiences a violent day. When ooking at char you notice the price action fer one day is above ind below te previous ay’ high and low. This creates Ailemma. Proper analysis requires you know which ofthe two(the highor the low) came frst to mae «decision on whether qrioe action is continuing a it should or devin from the assumed pat, indicating changes in opinion are necessary. Therefore, bar hts shouldbe avoided whenemploying Eliott Wave Theory. Reasons fr this will become clearer as you progyess through the bok Futures Charts FFutares chars present a unique problem the application ofthe Wave Theory. They contin én ‘lementof“derioration” When dealing wih distant Futures contrat ir most commodities the Cash rarketraes well elowrheFurures price. Asexpration ofthe Futures contact rs ea, the Fares ‘ce wil approach te cash and for os: markets will be equal at expiration, Occesonlly, supply and ‘demand factors in sone ofthe agricultural eommodiies can ereate severe imbaances which revel he Fares from equaling the cash at expiration. AScarrying charges and ater costs are subtracted rom the Fuires contract on dil basis a continuous an raual price eosionacurs during the life the (Over period oftime, the inherent price distonion in a Futures ark can wreak havoc with Ing: tem wave analysis In addon, some Futures markets (due to limited fuble participation’ aze susepibe to intentional or accidental manipulator by “strong hand” (wel capitalized individu or groups). Again, hiscan create great diol in deciphering an Eliot Wave ptr, Cash Data (the proper daa forthe sein of wave chs) Manipulation of raecash marketsarmore cult thana Fuuses markelan¢ requires muchore capital @ue toa Iackof leverage) and tine to inte. Therefore, theetumn on investment i less when atzmpting to manipulate aCash market. Additionally, a Cash postion is nat as liquid as & Fes Postion The resol, manipulation ofa Cash marie is seldom atlerpted or sccessfl ‘The Wave Theory requires a large degree of public involvement (which gexerally precludes or _ealy hinders any nanipulaton potential) tomarifet tel Since Cash markets always involve more peticipationby the pablc (through direc buyingandconsumption, sisthecas withcommositesthan Futures markets, ware formats alvays tend o he more standardized and pedicle when cashdala isused. In constructing your dat series use cas data whenever posible. Now, we ned o deal with another matter whch as tobe broken ap into the diferent discussons. ‘Asmentoned ear, proper analysis requires only one price data point occur per predetenined time ‘erod. How is this data obtained or decided upon? The nest thre numerical dvisons discus that problem: 1. For most Cash mets, there is no decision o be made; only singe price quote per day is swilate. When ony ane data point per day is availa, you simply plotthat daa vera predetermined, consistent horizonaldstane Case tne uni which represent oe fll wading day. Fach new data ‘ont will beploted an equal distance fom the next (his aways applies no matter what ime face is covered on the chart, 2. Itbecomes more difficult wo deal with a Cash market which has data valebe continuous all day (such asthe SRF 500, NYSE, MAXI, Value Line et). First you need todecide which minima time freme you lance following. The shorter the reframe the more sophisicaedtheequipmentand ‘or software necessary to track the data and the mae chars wich wil need piting and deciphering. Following shorter asd shorer time frames for wading requires you have a progressively grater understanding ofthe Wave Theor and warehouse” of memorized information a your disposal, The shorter the time fam: fllowed, the greaerthelikliiood one of the maay important, bat subtle ators necessary for proper Wave analysis willbe overocked inthe ruth and xcitemeat ofthe ading day. We ‘conical histhe Eliot time crunch” everyone issubject ni, somemorethan other. Guard youself ‘guns the danger of trying tote wit the Theery over shoes pesiodsof tne than can possibly be handled. If you do mt, adverse and unexpected market ation wil cure you cf the habit ‘The greatest beni of following a market on shor-term ine fame (you ae holding postions Sane nape‘overnight ist ineeases your ailiy to determine when apaterascompleted.* Personally usually «employ the intraday market action as part of ny chaning rsealonly when am looking fora low risk centy and price pattems indicate the end ofa campaign is epproiching. Asan analy tad orinvestr, you will aed todecde whichtime raneisbestsutedtoyourneeds. Ifyou decide one figure a day sal you would like to deal wit, you ae alto deciding the type of move you are imerestlin sone that ass several weeks to afew morths. Youwill ot be able today-tade {oliowing only oe figure er day, obviously. Toarsve atone figure pr dey fora continuoutly traded cash market, add the extreme (rea) high and bow together and divide by wo Q). Plotas decribed in “How Do You Pit Data," which immediately follows. Ifyou vant lite more daly deta by using ‘wo figuesa da, there are two choices. Youcan divide the day n two eqal pars and takete average ‘ofthe igh and low foreach session gr you cn use the high andlow forte entire day and plo them in the order they oezured (his ast approach iste bes). Tati, the igh the day came fit, reserve it forthe frst ine slot of ite two slot day ane plot the low secend (or vce vers). “There is a soall problem with pling re-high/ow readings that ae available for cash market indices based on nderying stocks. Notal seks open tthe same time. The practice of most exchanges {sto calculate the opening fc the few stock which are open erly in tke morning with the prviout days closes ofall stocks tot open during eat wading. This forces the ash market to alvays open approximately where itclesedhe previous day evenifhe Futures price “gis” attheopening By wing averages, you basically eliminate any sigifcrt distortion created by tis form of tabulating, Without any adjustment, comectly using a cash Inde's “real” highow plot ofien exhibits horizetal price ‘movement (rig the opening perio) even when the Fuures market ope hundreds of point higher ‘orlower. The only way toveidhissituaton st drop the fist 10. 1S minutes the adn day ror the recorded dan, then calcu the high and low forthe day. This way you are usually assured most stocks are open sd the openings (nt the previous day's closes are parte the curet reading ‘3. The last stuation cf cancer when ploting data isin reference to M4 hour markets, earkets no. {ns aded herein the US., but those which continue to trade around the clock on virtually every exchange nthe world, Curercy markets areaperiect exampleofa situate. How do youprozerykeey teack of such markets? (vera peri of ime, experimented wit pling the cash markets 0? Gol, Silver, Australian U.S Sand the Sviss Franc/Ausrlian Sin difent ways. Whes these markets were ploted asin dat available only dsing the te they uaded in ote pariular county (he US., London of Avsali), the ‘wave patterns were decipersoleandflfowedtypical Ein pavers. Anoiber approach wasto equals space the price action of 24-hour market aman the numberof marks in which the producti dee and plotthat action in conimuous sing. Another way ist separate the word into ime zones of equa amountsand place the price action ofthe imporant world market ‘at fllsintothat time zone on the chan Deering when aperbascompleed moses species picking pork ck ine market an 'stheasumed icy» making money inthe marks, Aways aig wah inno ly geting in attap orboaon bh isaverydmgeroustabtandsucte way laeancunsef mony ated nts ane Prfiseanasall bade nde when ening right fea makers acetone. Ths wl wep wel afer eighth etic. Insc, gn very pot ote mat ete ‘ven aly sale vy. ‘change wend hs oscaredbefretaigs postin. By demanding comatontefreneing a mat, You ce ‘ostawaysliniaa te postion cuphon be wrongsse oa gp" opening. Als fyouratetonis st focusdonsbr-emeroverihtatn lng patzrswhichhave en fening forman bse esscanunvindoveiht creating pani" oenings (A opening ors when the marke opens ually higher r lower ha he eis ays cls an sal ndash oping ous of be preiws oy’ stding range) Te Sher mate ‘peieneod one of tes peigstwodysinarow inn: Api 97. Thea” was pont ays at he marke ‘pened impreentng yon rom xiing earl wo wat set fram Deprevosy. Wong oso ‘njetone sah station on imine ene yer word of walag OS assuming ou apr). ina cominuous chai of events. The wave pater unde both ofthe last two approaches tended ot 0 uriniia exposure oth materi, you may simply wanto tow thei After reviewing this section, its recommended you cosine your own real ine chars direc ‘heist step mang chart st pick amare you wish to analyze and tha decide ona tring pointfor your observation, Withouta specific staring poi, ron ofthe techniques be esrb in thischantr will maken sense, Heri what youdor pot year of ata consist.ng ace of he igs andlowast pric feck monthin their ode of occurence (using the techniques deseribedearierwrder "What Data Should Be UsedTo Analyze Waves,"pcge2-Gand "HowDo You PlotData," page 21), then lock over tha wave chart and leat the monly monowave which is closes the centro he ‘entre priverange (igo low). [You wanca starting point which sn of storia infeance. Why? “Melor arming poise more dffelt t work wih under Ello since they ace goneally associ witkabsormal behavior. For our purposes we reed to make things as sigle cs possible} Nex, ascertain date whick fas round the price center ef that middle, monthly monowave (ncea dathasbeeresablished,beginconstrcing yout daily save cas (inthe proper amet) using aeproximately 60 cash datapoints ovring abut 8 nchesofhrizonal jae on shet of raph Daper. On this sale, onowaves should bereativly easy toideniy.aferconsrucing yourfistehar, ‘ick thecalestimpernthigh or bw thar ocumed (sce Figure 3-1. rom thatpit you want oasacond chic tht doubles the detail ofthe firs one (Figure 32astars from the important low marked ‘nFlgure3-1; lise sale hasbeen enlarged allow or close scruiny of mnowaves) notes wor, the sme 8 inches of horisatal space used forthe frst chart wi, onthe econd char, cover only half 1 mach time ashe frst and empley approximately 30 datapoints. Figure 31 Inthiscxample igue3-, an imporun ow ase made sound he etre tine perio. Fr xpi ae char vas are (gare 3-23) tat plays abot bl he imecovered by eis chr. Identification of Monowaves Aer the progr chars have been completed, identifying each monowave becomes the next step in the analytical proces. Using Figure 32a for demonstration purposes, stat from te lowest and earliest point (designated "Imponant ow"), Follow te price action upward datapont by data point until one {stn pont slower than te previos, ao matter how minor the amount. Once that change in price tection cars, you have fst identified your fest monowave, Puta DOT at the end of ha inital rmonowave (ee Figure 323). Follow the dea move frcm the dotted monowave's high (st pointy data pont), The first dts poin that is higker than te previous indicates the market completed is second monowave. Puta dot ‘exttothe second monowive's low (ee Figre’3-28) Continue this identification process unt youve ‘dotted the end ofaumerousronowaves. InFgure 3-2b all orowaves we been identified withthe ‘own dot (he gn the las monowave snot dite since a charge in price direction has not curred) =o A. / \A (tas example, be markt ns een a Varin rom aninvruntlew Haul swe have been ning frm ar ing Tun high emer woul an Endot Fire Monowave idea witha DOT Endo Sen Mononine A. Aw (Each change prediction theca a emiseniiehwtbadot Thermite ning and enn ns feck momma ‘Thesexvemes ae nbjo nein ny of ths pre ation comes nr De arisiion of ue of News (cover chy). Ome ieisconser- tapi wheres Pie Depsion ofthe dts ces i) “por low Figure 325 impcantow Rule of Proportion (groper sealing of chars) ‘When youpick panicular price andime scaletaplotamarket, youre alsosinntancously desing wich Eliot Wave pairs willbe vise and which will nt. In cher wor, each pattem develops bused anit own, unique priceime scale. To detec and analyze aputicalar Eliot Wave patter, your hart ust posses the coret proportions. The rope proportionality of market etonis predic on {the pener developing. Adherence to tte Rule of Proportion is essential othe accurate application of ‘th Rule of Neutra (covered after this Section! and othe standardized look of price pater,‘Thereason no singe time sale wil work eal analytical purposes is due tothe flexible ature of ‘me. Justas Eingein's Theory of Relativity revealed, times nol absolute, pt variable. In Einstein's “Theory, time was dependert onthe velocity ofthe observer. Under Eli Wave Theory (asi lates ‘markt action) ime sdepenent onmasspsyhology. Duetopychologica influences, imeexpands amd contacts ase financial and exoomic hes and fears ofthe masses: recorded trougy buying sn slling on an exchange flow. The easonm single price scale will were fr all purposesis du to tbe dynamic and fractal basis of price action under the Wave Theory. Price pattems develop simultaneously o all dimeasions large and sal. Before we can discuss the proporions ofan eal Eliot Wave cart, we mas define the two ways Frice ation progesesthrugh ime; Diretinally and Non-Ditectionally (this snot o be confused ‘ith Impulsive and Corie activity), Jus ical Eliot patems, if Directional or Non-Dietinal sxtion begins at aw, twill complete ats highand vice vers, Dizetional ation i always composed Ea series of monowares which onthe average and as a whole, create ar increase or deersase ina ‘ark’ vale (se Figure 33 below), Asa general ue, the firstmanoware of a Ditectinal period is raced no more than 61.8%, Directional action usually terminates when arionowave, traveling inthe cirection of the Central Osilaton line, is eraced more thax 100%. Non-Directona scion is ‘composedofasertesof monownves which, on theaverageandasa whole, createstagnation of mizket's ‘alu (see Figure 3-4). The frst monowave of Non Ditetionl pri is always retraced more than 1.8% Furthermore, all pases (withthe occas onal exception ofone phase of Non-Directonal scion aust bereaved atleast 61.8%. Nor-Directonal action usally terminates when price action moves teyond the range of teenie Non-Diretona period by a fac of 161.8% or more (see Figure 3-4), ‘Toproperly stuly amarict using the Neely Method Elliot Wave analysis dscusedin hl chapter nd throughout the boot), you most rive to achieve a prce-totme rato which wil produces angle ‘Fascent or descent predicated on the typeof marke action unfolding. Inespectve ofthe pic or time consumed by pater this ingle shouldbe implemented on chars of immed ate analytical importance. Figure 33 Did ito An a PE create Tien at Psa, [tac I 1 1 1 | contortion, ft! | | Sear J! 1 I iI | I i | i ! [Minoe retracement of mecha cohen | acts ! Compete retrcemen. of 1 ‘previous mocowave, 1 raceme. 4 fi =e | Directional Action ran a Figure 34 Noo Dita Acton ‘Tis keane Don Acton whi i on nee paiement pe Borba ‘Nie recoalaconsyldtve bce nly ei | WAL retin ation woud eve thane been std “Tiss fat manors a the Non. Dretonlseisit israel now bangla 8 NN ' ys Les naoincis | oly Sn | Treinen alps natn | ea ranmetmag (al | | ere Cy, tre an LBs n-Directi i sical oY ~~ Non-Directional Action oo —— i ‘What is this spedie angle of progression nesdedto view the Eliott Wave penomenon’? When ‘eating with rice action whichis Directional pt he dts soit travels fromthe bottom ft to toright ‘oriop Kft botiom ight comer ofa priect quae. Inoter words, he data shoal exile around angle which is approimarely 45 degress from santo finish (ee Figure 3). This emphasizs the —~ ‘mportan fat that the market dictates how chars sboald be constructed, thus eliminating the ned to ar pling parameters, Tris notmeanttosuggest tht every ime the market ‘tunges slope or ection, you thaw avay your event chart and tart anew ane Continue to update Figure 3 Complete rencenet ofTemtor ‘one ie) allprevious charts, but gia shorter tem chart atthe pont tie market Began a dramatically diferent {angle of progression, An example ofthis would bea shift from Diectal Non-Direcional scion (orice vers). Make ui ef your longer tem charts to help ya ident these important changes, Reali, when dealing wh real-time dat, tis not essential the angle of ascent or descet is exacy -Sdegrees, some variance fom iealisallowed, Figure 3-6ilesratestheprice anime rangeof error “which allowed when you tempt to proportion amarker'spie action. Asyou can se rem the cha, {deviation of ro more thn 25% (versalycrhorizonill) of he lengthof ne seo the square hot beyourchaning goal. An example of «downward sloping Diretional riod can be foundin Figure 1, Noicetheterminationpoints lightly theightofideal (ie) but well within limits of aceptabiy. Figure 3-8 iluszates a Directional period which terminated alte ro the lft of ideal (at). Figure 3.7 _ " Late Termination (acceptable deviaticn) Tepla h_ biecinal . A Bote Rik “Tx Det peacon witin fe Sg po poses rem be Ieo BAMTEN cx Th puter ented aie ia, ut is A ‘pectmeghatebodon caro sy Butea tf Proportion at ben obeyed. Nov, the Ea Watcpotemeitin be qari wit / ‘etapwdg hata egeran Eye ad Noy Ruxscan be apied wi colons Figure 38 Early Termination (accepabledeviston) ae a el a “eDiets pc stn withthe Sea popes itso foo ichatamleinseimghcamer Tetra te pater ‘chscenagtto top corer yt let Propertan mo Geyed TheEBoa Wareputer ibid rgarecannow teal withthe kowedge a al mpeg nd Het Riles an ‘epi wihcofsnce nd tate chats inthe ok eu coe ‘mbt ane pe anyon winesing on ou cha Figure 3.9ilstas the incorrect application othe Rule of Prozotion. ven though the market ‘advances into the top right comer ofthe square ad he action oclived around a ¢5 degree advancing ange, the Directional period ended too early (the Directional action in Figure 29 ended atthe soint dentified with an asterisk). To adjust, Fgure 3-9 should be redrawn a look like Figure 3-5 (pig 8) Figure 39 : Improper Termination (unacceptable éeviaton) eacivoenty Lt wanoave ‘ced mc thse To ira i mathe Dice tonal pes cn Fimo comple epi ihFigure 310 Non-Directional Action Shure A Ba craps The poner cine roe aly wh soleus ben dain with Non Dietinle setoe Acsrbedvigon ) Square Dah ines ahve ay int he ees Suan Figure St Non-Directional Action Conzacton pie tesminge be pcr ‘athe nema eve ny pot ee ‘When analyzing pice sction which i Non-Direetonal you wary the up and dow periods cover ‘ppronimately half o a priect square ‘see Figwe 3-10). Notice how the Non-Dizetional actin in Figure 3-10 Square A) terminates its horizontal period around the vertical Sb retacement point of ‘te square. Even wien a Non-Directina period consumes a large smount of tine and contains any ‘mmnowaves the gol isthe same (see Square B). Sometimes this go may ke imposible tobi if ‘he patiercontinuosely contacts overaperiodof ie. Forthose siations, make ure thefunbesipace level fom the bepimin ofthe pater falls around the 50% pointe Figure 3-1), To synopsize, when tis time to consmuct anew chat, the Rule cf Proportion directs you to design the prize and ime sele to fit the requirements ofte pattern forming. This wil help your charts look lik these inthis boo, thusalowing forthe mostdizect comparison and acuree analysis of the market scion, It wil als prepare your chan’ data forthe posible application ofthe Rule of Newly Rule of Neutrality ‘fer marking every chang in price direction en your chart, you wil find tht most monowaves trel ata diagonal the priceftime ass. Oveasinaly, you vil find a moaowave containing ce acion which is progessing more horizenally thn veicaly. Its tat ype cf behavior which comes under he jurisdic of the Rule of Newralty. TheRle of Neutrality explaias how to desl with hese problem monowaves and the dots which define ter boeders, “There are several ueasofsideward pce ction whichcoald come intoquestonif werestdiedFgure 3.2, pge3-3 (repeduced below as Figure 3-12). Those areashave een desigatedinFigute 120th ‘eaply circles. We vil spend sometime later analyzing those areas, First a detailed discussion the Rale of Newtrality- and how you shoul! apply ittoreltime- is nesessty, Flare 312 RN sgt RN Aspect “heonlyvasnthe chat wich aight eon the boron har the er Sal plre ve betel and da i ‘Aveta ty he apie "RN" Hue a ‘Newaly). sat bese ces at he Taleo Newry ould be ems.Horizontal price action can separate two weves that are traveling in oposite (counter) directions se Figure 3-13a]ortwo wavesthatare movingin te same direction (se Figure 3-13), To spot these |wo types of behavior and make the Rule of Newtality useful and applicable, the term "vinta" must defined. Creating perfectly horizontal price action on achart regres the same dats pont be plotted wicein sucession, Perfecly horizon price sions tthe ony action whichcan qualify for ‘consideration under the Ru of Neutrality. The ere "horizontal describes price ation whic operates -vthin Limits on either side of perfection; thes specifies are covered below Figure 3.138 orga Frice Acton teczoal Figure 3-135 owing snoving ne sine Diesen Ifyou discover pric aston which appears tobe moving meee horizontal than vertical, apply he following techniques. Draw zverica (90°) and orizona ("xs on your cha begining from the sar ofthe suspesed price sson. Next.f the manowave i mcving downward, daw in from the org of the ple throug the lower ght quant (elt had side of Figures 314a and 3-14) if he monowave if moving upward, draw alin from the ora ofthe pie through the wpper ht $usdrant (see Figthand sd f Figure 8-14 ind of 14h. Ts wil ate a4 degree agle tthe Sime (0 ans. The results the separation ofthe quae into two egal pars I pice moving downward ands guar blow the 45 (pl Figure 3-14 nd 3-14 is moving upward and is _mnocabs the 45 op ght Figure 3-14 and3-14), do notcorsdethe Rl of Neatly. market. action is moving downvard and is above te 4 (oto lt, Figue 3-1 or 3148) os moving "pwardandis below the (boom gh Figure 3-14uor3-14b he Rueshouldatleastbeconsdered The lose price seton meso the heiaontl xis te more ily the Ble wl ak ee 210 Pmtntey Amie Figare 3-140 Meneves ‘seed ; (More then 45. {yp terentucr Na on tatccoatie This Hodson Pre ‘sondas auaily "tes tans th Ver Depeantalect ewaiy should prot beapi Counter Directions Lesrhangs ‘eit shald ably applied Figure 140 Less tans Deges Rule sof seeralty1 price ation indicates you shoul consider the Rule of Newitt besomes necessary tcabserve ;e-and post horizontal acton to decide which Aspect ofthe Rulesppies he curet sittin ithe orizomal pie sction separates two counter. detional monowaves, Aspe 1 ofthe Rale applies (see Figure 3-150, Ite hoizrtal prod separates wormonowaves which ae movinginthe sume dietion. Aspect 2 applies ie Figure 3-16). NOTE: Aneasy way to decide whch pect ofthe Rule apie in Gy sation isto count the menberofenpyevcles required to ncatetheWoizotl price action. If ‘nlyonecirclets placed onthe price action Asgec- Ione) appli. Iftmo erp circle mast be drawn, ‘hen Aspect? (ov) isn epic (resudy Figure 12 [page 39 while contering this once) Aspect allows forte erasation of monewavs (0 our ove lows nd bow highs Figure 3- 15a), Aspet-2,apicblecalyaftethe fact als theanalsto vd asingl advancing reining hase (under the rroper contin int thre smaller segments gure 3-16). WARNING: Aspet- {shouldnt be applied th momowave,whosedotis being considered for anserenerfretced est ‘han 61.8% and hen the markt exceeds the end of sid monowave (se igure 3-158. Tnsimpleterns, Aspects testa "when dealing with horizontal or near-oriznt pice sion ‘which separates two wavesmcving in opposite direction, reso the rst monowave to thea sight, ‘the terminator of the Eovivontal price action.” Aspect? ses that "when horizontal (or near horizon) pice ation i owed separating two waves moving inthe same direction, the horizontal ‘etioncan be ignored eavingjeston larger monowavetn conten with, ork may beemployedto create tive smaller morowaves. Figure 3.184 ‘Aspect-l | revious soroaave “Temination of Santo ow —— Sepesat ta © Korte a [—— teow a Figure 316 ec Aspect:2 ina | Degg stoi ice Sage move If 2 \~etrna seni Une we go V's into eee cendions rrve woud died Stowe tno beesnaler| hl 2:2 Pen Anat Aspoct2 ofthe Rule of Neurality doesnot pei the “horizontal” price action scaly counter= ding monowaves. Whenever studying achat. he monowav under analysis will ‘beconsidered monowave number one (*n!." see Figure 3-19), The monowaesinimediately aie ml Figure 319 Past market action {Future market action contains mand additonal waves | | consis m2 and addtional waves Sore Chen manos mentally snc heb, al, When anayss1 be cr menos ‘ia, wil be eect arth mono arent) under aay. Later tl lp ‘Eng Dawe ps) cae 2d fate iw) mosome developer vil consist of m2 ancadditonal monowives. Themonowaves which oourredimmeditely befor nt consist of m0 andadional waves. Figure3-19 states how thechoosingofany nonowave on achat ‘mentally creates the relative abe "forthe chosen monowave. Figure 3-20 presents the observations required to discover where m2 cepted when m2is a smanowave, Figure 3-20 also demonstate the importance of brehing ete the high o low ofa before the finalzation of m2 ca ake pce, Figure 3-20b presents similar frocess which usd ia uncovesing the termination of m0. These techniques wil be wed ir the next secon, "Retracement Rules," ro calculate te percentage relation of mt m2, m0 to ma, to m2, ‘Figures 3-202 3-20h, m0 and m2 were monovaves. Unlike ml, which ul bea monowave (or «computed Elliot wave pater), m0 and m2 can be composed of one (ot a2y odd numb) of ‘monowaves, compactor uncompacted. The competion af m0 and m2is dependentupon the amexnt of market action that ces place within th confines ofthe highandow ofl. Usinganupward sling *Campacion covered dein Chater wsWh igh on bres 2 oer mal campltes he / fovea pte Seton igh tml andthe owes ah m2 caine complete at hislow okengag Unless m2 a compacted wave feemsign lm? op, the fst map in pre {cn rhe beak sos) sald eomplete m2 (Lan is conpleeat stow ‘a2 compete hishigh = Highet mt Uness m2 is compaced wave ‘Boap, the fist urmdown ign'rm: pte (ater the beak of ms oesCitte Bishi compe no. ‘maton of 2 ight mt Wea ow of broken 2 orci complt at ie aha pit wen ow Figure3.200 Moving backwirs, the last tine the mast was Shor ihe now establsed igh of mi.) would te confirmed eon a ihe wet pint Dewees Sie a sd a oe he Low oft High of mt save hr et ie te Seeks BPgei Sivan cs ISS STSL Low of at ‘completed wis ow 90 cxmplted i igh igh of mt Meving bckwarls,tho Ist tne the ‘maet was ove He now eb high of mm would be conlomed mapete oa the amon pice Scaon which pred te cdr Mah Wighotmt — — — — — = ‘a0 coi Moving backwais, the ast tine whe SPIRO NA market was bec the ow esublied Tow of tl, 1 would be conimee ie highest point baw complete low tm nd toler ow. \ eeeFigure 3.210 Future manowaveds) es oad ot ‘tl aadoare TT apse senda a micro eae sm fortis example, the right-hand sie of Figure 321 illustrates what maet action term may look "ike when m2 is commpesedot ene or more mon>waves, The lf-hand side fhe same Figureillustates what market action before ml may look like ven m0 is compesed of one or more monow2ves. more than ne monowave occurs bear the high or low of ml is eneeded, m0 and mi can be ete rane Ae Pat menorns) tare movers) Lane! ont ageengne | ait ISS gogo nena \ aaa a tected onsdered (if you pref) "monowave groups (mg and designated mg0 and mg? respectively (sady Figues 3-212 &). When ml isa monowave, mg) and mg? will usually consist of no-one than ve ‘monoweves, bat excetions can and do eccur. Te provide you with both penpecives, Figure 3-218 depicts "ml asa rising monowave while Figure 3.21b depicts "mI" asa declining monowave.Fast monoware) Future monowarets) Xe Occasionally whenimplerentng the Rerarement Rules (whi fllowthis section) todeterninethe _nteralStrucureofa monowave, the study of monowaves othe thn m0 orm? isnecessry. Figure 228, shove, demonstrates the Rulesof Observationas they apply to manowaves which occur befor mi and aerm2. Careful study ofthechart will demonstrate how to determine each monowaves' stating and "topping point based on ke High or low ofthe monowave before or after the caret one. 2:0 Pniay Ate Figure 322 Past monowareds Futoremonowavss) aa tes. performing tis procedure more preisel (and tedious) wih thes ofan eleeworc caleusor, ‘measure the verel pce coverage of m2 and divide ith he vericl pce coverage of ml. Mlply the result by 100. Themnber remaining is the relationship of m2 tora in percentage terms. Refer tothe able athe top of the ext age tiled RULE IDENTIFICATION) in hat isting cat the elationsip jst eeulsted. That ising proves yoo wih a Rule Identifier which represents pertcularcharacerisics of curent musket chavier. Next,moveforwad tothe heading which matches yourfindngs(.., Rule 1, Rule2, et). Funke clarficato ofthe make environments obtained yy Calelating tte mnt rato. Measure the price coverage of 0, viet by spice soverage and ‘multiply the sult by 100, Locate that percentage lationship under th "Conditions" secon following «ach Rule dizgram and trast the m0: ratio into a Concition lene lowercase Arabic ‘When workicg with Ree 4,00 wills be asked forthe relonshpbeween 2 and mths farker defines market ston into Categories (Roman numerals). Fay these Rules, Conitens and Cate- sores will inthe"Pre-ConsirotveRulesof Logic" section be transfarmed no Stricture labels wich reveal the ntral(aneen) make-up oft: monowaves unde analysis ‘When youhave deciec which pif Role applies toca situation, place hose akingsat heen cfm Wrteit on youcharin pencil or photocopy the orignal and weteon the copy. Aneven beter spproachreqies the we c pls acetate laced over your chart and dawing onthe acetate withachin. smarker. When you pice a Rule atthe end of mi, abbreviate the Rule and its sub-section to prevem: cluter on your char (for example, Rule 4, Condition ",” Category "should be abbreviated Ra 29 ay bie less than 38.2%, reir tole 1 lowe atleast 38.2%, but less than 61.8%, fer to Rue 2 (gage 24, exactly 61.3% referto Rue 3 age 3295; between 61.8% and 130% (exclusive), refer to Role 4 (page 3.2) atleast 100%, but ess than 161.8%, refer to Ral S: (ge 3-28) between 11.89 an 261.8% (inlosve, referto Rule 6 (age 3:29 more than 61.8%, refer o Rule (a 30) Rule 1 (a2 is tess tan 38.2% of mi) ‘nt is reunced Jes han 38.26 by m2, Rule Lappies note that fact atthe en of mi (Se Fgare 3.23) Mext, measur the relation of m0 mas previously desert then Sa Wa ratio inthe ist below. That wil prove you withthe "Condition Identifier (alphabetic companion) which is tobe placed tothe right ofthe Rule Identifier, Figure 3:23 Rule (extivation quirement) womb aey ‘eben shat A mS Te em ' a ‘an be composed of 1.3.5.” selene Conditions or Rule 1 Conon "a 1 is sth 1,8 of mt fas unde te justin of Rule a (proeess ve Re 1, Conon a of he Pre-Consactive Rls of Lagi) Contiton "6" es teat 61.8%, but shan 10% of mse properties of ule Yb ie ict (nove Rus 1 Condon" ofthe Pre Constcive Res of Lope) Conttion "e ~ tis bx 105 and 1GLBE of mt Gace), Rule emus be pit (advance o Rule I, Condion ofthe Pre Consrucve Rls of Logic"). Condition "a" ~ If ml is more than 161,8% of mel (inclusive), Rule Id should be considered (jump to Rue |, Condition “of te Pr-Constcve Rules Logi. ‘There Coercion gi mpaestRuled (2 isa lease 38.2 ot ess than61.8% of mt) le revaces at east 38.2%, bt ess han 8% of mt, Rule 2 takes ect (se Figure 324). Net, ‘observe therelition of id tomt to decide wichalphabeic Conttion demifierappies. Place hater tothe right of Rule 2 Figure 3:24 Rule 2 oct oiemen) Coniitions for Rule 2 I mis [ss than 38.25 of mi, ml falls urder te jtrisditon of Rule 2a (progress tw Ree 2, Condition “sof the Pre-Consrvtive Rules of Logic) Condition "6" -- If wOis at east. 38.2%, but ess than 618% of mi. “he properies of Rule 25 ace ‘elec (move o Rule 2, Condition "bof the Pre-onstuctve Rules Logi’) Condition "c”~ fm sat east 61.8%, but ss than 100% of mt, Rule 2c must be applied (advarce to Rae 2, Condition "ofthe Pre-Constructive Rus of Logic). Condition "a" 1 n0'shsncen 100 and 161,83 of mt dncusive), Rule 2 should beconsieed (Gump to Rule 2, Conlon" of the Pre-Constactive Rules of Lege) Condition "e"- If is mote than 161 8% of ml, then Rule 2s the appropriate (proveed to Rule 2, Condition "ofthe Pre-Constuctve Rules cf Logic). The PreConsracive ales fag en ngage 3-32 Ruled (2 isexaaiy 61.8% of mt) ‘An sxach 6.85 reracement of ml by m2 (See Figure 325) estlishes the dominance of Rue 3 ‘When market action sctivates Rule 3, the structie of ml isthe mst diffi te decipher snc the ‘eracement of mil istight onthe borderline of inli-aing mt is mow likely corrective or more tkely Impulse. To further clarify te marketenvironmertsuroundingmcalcule the relationship of tom! end find tat lationship in the lsting below to obttin a Condon Identifier for Re 3. Figure 3.25 Rule 3 (tvtime) Pts 2 “inte compose * jeri wuksarmee vetoet ‘i Conditions for Rule 3 Condition Ya"~- fais ess than 38.25 of ml. el falls under he jurisdiction of Re 3 (rozess 'o Rule 3, Condition a” ofthe Pe-Constuctve Rules of Logic"). Condition "6" tf 0 is at east 38.2, but es than 618% of a, the properties of Rue 3itke cffect move to Rule 3, Cntition "bof the Pr-Consinctve Rules of Loge) Condition “o" ~ Uf is atleast 61.8% but lssihan 100% of mt, Rule 3 trusts applied (advance 1 Rule 3, Condition "ofthe Pre-Constructve Rules of Logic"). ‘fms atleast 100%, butess thaw 161.8% of ml, hen Rule 3d shouldbe considered (Gump to Rae 3, Condition "of the Pre-Constactive Rul of Logic). 190 is between 161.86 and 261,89 of ml (ncusive, Rule es appropri (proeed 1g Rue 5, Condon "eof the Pre-Construcive Rules of Logic™. Condition "f" ~ Iwi is more than 2618% of ml, Rule 3fexersis influence (proceed to Rul 3, Condition "F of the Pre-Censructive Rules of Logic), The PreConsrucie ales of Lape egnon pase 332Ruled (m2 iberween 5.8% and 100% esclusve)) Rule applies when 2 revaces more han 61,85, hut ss han 1 of ml. Figure 3-26 gives example ofthisevent. Cle ste the elation of to ml; then usng thelist below, locate Condition enter, Next measure the percentage rewncement of md bym3 to obtain a Category Kee. vie 36 Ruled (extern) ae =" po rs Sey Condor Rl Condition "a" If m0 sss than 38.25 of a a falls under the unique jurisdiction of Rule 4c (ee Bue 4, Condition "a" of Figure 37. Condition "b" ~ 1 dis aL Lcast 38.2. ut Less than 1005 of mt, then the unusual properis of Rele 4b ake afect (se Rule 4, Condition "bof Figure 3-27). Condition "e" — If wi at east 100%, bal ess than 161,86 of mI, Rule 4 mast be eppied (xe ale 4, Condition “of Figure 3-27) Condition "a" -- 1 mis between 161.8% and 261,84 of ml inclusive, then Rue 44 shouldbe ‘sere (se Rule 8, Condon "a cf Figure 3-27). Condition “e" = 10's mare than 26185 of rl, then Rule 4e isthe ost appropriate ise Re ‘Contin "in Figure 3-27. Categories for Conditions "a" through "eof Rule 4 Category i~ IF m3 sat east 100%, bless than 168% of m2, then Rule 4-1is apropriate (proceed Rue , Condition" [the one curently infect}, Category "ofthe Pr ‘Constrctve Rules of Log). Category if m3 is between 161.8% and 2618 of m2 (inclusive), then Rule &?-itakes effect (procetd to Rules Condition?" [the one curently inetes] Category “i ofthe Pr CConstctive Rules of Lovic"), Category ii i 3s mone than 261,84 of m2, Rule 4” applies {move to Rule 4, Condition"? [the one curently in effect Category “io the Pe-Constuctive Ruesof Logic), ‘The Pre Contre Rae of Loic eon page 32 Figure3.27 rove] sate even Rad e Rule 4a Rule db Rule 4d. ear ee 3/ / Seaeare Reda Rule de igure 357 conta on nxt nt GsFigure 327, cnimed fon puge3.27 Rulede a [ ™ Seen \7* Severe x ‘ 1a Suman Rule § (m2 teas 10%, but es than 161.8% of mt) For Rule tote aetvatl, rat must be etre atleast 100% bales thin 161.85 by m2 ee Figure 3.28). Once shatrequremet has been met, you must observe ie relationship of mO to en. Find that relationship nth list below to determine the Condition Identifier which shouldbe atached 0 Rule 5. Conditions for Rule S Condition"a" ~ Im islessthan 100% ofr, then Rule Sa isactivate, make not of thatat the end lake effet (move o Rule 5, Condition "bof te Pe-Cerstrucive Rules of Logic) Condition "e" 1 90 ishgrween 161,85 and 261.8% of mt (inclusive), Rule Se must e applied (advance 1 Rule 5, Coaditin "ofthe Pr-Consructve Rules of Loge?) Condition "a ~ 1m ismace than 261,89 of mi, the unigu circumstances (explained ltr in this chapter) implied by Rule Sdshould be upheld Gump toRule$, Condition ‘sof he re-Consructve Rules of Logic). ‘The Pee Centra Reso opi bin oepage 3-2 2 tnt ae Rule § (2 is berwcen 161.8% and 261.8% of mt linclosive) For Rule 61o be cctivated, m1 must be retraced setvecn 161,88: and 261.8% (inclusively) by m2 (gure 3-29), Next-neasure the eatorshipof mi) oem; making ofthe tebe blow, this wll alow yor decide the 'Conton” of curentmarket sto, Figure 329 ae conte compu eat 1,3 Serer enone Re oct my 3 * cass fay Tromhut boc one Soot Sata Rule 6 (ccvaion aera) Conditions jor Rule 6 Condition "a" If is ss than 100% of mt, le 6 should be mplemerted (progres to Rule 6, CCoudition "a" ofthe P-Constntive Rules of Logic") (Condinon "b" ~ 0 is aLleast 1004 but less than 161.85 of ml then the properties of Ru 6 take effect (move to Rule 6, Condon "b” ofthe Px- Constructive Rules of Log), Condinon "e*-- If 10 is between 161.8% and 261.8% of mi (iclsive), Bale 6e mst be aprlied (adeance to Rue 6, Condition "ofthe Pre-Conscuctive Ralesof Logic). Condition "a" ~ Uff mare than 2618% of ml, then Rule 6s weivated; make poe of thatthe nd of ml jump to Rule 6, Condi "of the Pr-Consinctve Rules of Loge) "the Pre Consracio alr of ogc egnon page 232 Bale 2 (es more han 261.85 of) ForRule Ttobe activate, mt mustbeeaced mone than 2619 m2 (Figue3-30) Next measure ‘therelaconship of mito mi, staying the table on the next page, you can deide the "Conitoe” of ‘cent market acti ‘also see Figure 330 on the et page). j aFigure 3.30 RT soto eg sonora sora spe" 00 Rule7 RI (aatton reuiremen) Conditions for Rule 7 Condition "a" ~-\f mi sles than 100% of ml, Rule 7a shoul be implemented (progress o Rule 7, Condition" ofthe Pre-Coterctive Rules 0 Logic"). m0 istast 100%, but fess than 161,86 of mI then the properties cf Rule To take effet (nove to Rule 7, Condition "bof te Pre-Cersirucive Rules of Logie’) Condition Ye" ~» If m0 isheswssn 161.8% and 261.8% of mt (inclusive) Rule Te must te aplied (advance 1 Rule 7, Condiin "ofthe Pre-Constructv> Rules of Logic"). Condition a” If m0 fsqnge than 261.86 of ml, then Rule Wis activated; make not of hat tthe end of mt Gump toRule 7, Condition“ of he Pre-Cansisctve Rules of Logic) ‘There Contrainte of Lain onste332 Condition When you have complsted the Rule idenfieation process forthe cuenta, move f the next ‘monowaveinthesequence (which previously wasm2),make tharmonowave the new ml andrestat the Roleidentficatin procssfro thatnew pont If youkaveidentiedallof he moaowavesonyourchar ‘which you fel ae important at this time, proceed tothe "Pre-Covstrutive les of Logic” heading and begin transforming the Ras atthe end ofeach monowave inte usable Structure label Graphical Summary of Retracement Rules After becoming familiar wth the ideas presented in his seton, the disgrams on the next wo pages should simply the Rule and Condition identification process foryou. Toiplement, fist mesure m2 reuacement of ml in percentage tems, then id that rezacemet value within one of the relational ‘anges along m2’ ray under tre Rue deniieation diagram since m2 ocessafter mt intime,m2'sray ‘tend tothe right). Jot dwn the abbreviaedRle which satvated by tat reacementrarge. Once ‘Rule has been identified, he Sonitons whic surround should be clad. Moveto the Condition dentifcation diagram specif cally designed forthe Rule curently in effet. This time the ray wil represent m0 (the wave before ml) theeforeit extends tothe left. Locate the alphabetic Conltion sociated with he eatonl value you measured between m0 ard ml. Once this information has been bined, move 1 the seton possessing the same name under the Pre-Constractve Rules of Logi. Rule Identification Pecetge eaonsip of 2.0 mt Pecans ela 010 oem nah fal e Condition Identification for Rules 2 and 3 ocean 00 2618 1618 Lo) 618 ass | beraang | Og et oaeseuy | wef av guns tf Joye <7 ee oe Me" (Rule Dory) 6 6 @ oF Q oo Longsh of re) :Condition Identification for Rule 4 Percentage reap of m0 to mt ual 1618 1.00 eo, —_e" Taga ata Condition Identification for Rules §, 6 and 7 Perenage rip of 01 Pre-Constructive Rules of Logic RRREELE TELE ‘The purpose of the "Pe-Constuctve Ruts of Logic” section isto provide Structure Labels to replace the Rules you estib'shed earlier fr each analyzed monowave. All Rules (including their Condition enters) are lsd over the next 26 pages. Under each Rule are numerous paragraphs separated into reracementvahes based on thelength of 0m? orm3. These paragraphs query you on ‘reumstancesurfelding ia real-time on your shart. Based on your input garding market condition, specific suggestions will e made on the most pproprite Structure Label’) foreach monowave anda guess is usually made onthe mos likely Elie pater unfolding around ml. These Structure labels indicate all posible ocatiens amonowave can occur within an Elio Wave pater simple or omplex). Sometimesitisrecommended Stricture label e surrounded by frenthessorbrackes ths situation ‘develops on yourrea-timechart, those Structure labels in Bracks represent rare or exter unlikely possiblies. Stncturelabels surrounded puenheses simply havealoerprobablity of being correct ‘han those which possess 20 encasement (..,n0pareatheses oro back). 80a Ani ‘Tounderstand arc make complete use of Chapte3, atleast cursory knowedg ofall chatestiom 1 irocgh inclusive) istequred. I'you are stil a he earl stages o your Eline Wave learning carve, ‘any concepts and echniques(notas yt explained wil be suggest for use this section whic you donot understand ccrpeely or have ne workingkaowledge of Fothis reason, tecome fair with these cther chapters before stemping any analysis which sbackedby capital invesiment. Te Eliott, Wave Theory is such maze of inerlo-kng.inerdependent concepts tht an understanding of only Potions of the Thery is insufficient fr sceurate forecasting. The inherently cempex nature e the ‘Wave Theory makesit impossible to cocfidentt ppl the prognostintive techniques dscusred ia this seatioe without som» awareness ofthe general piniples which guide wave fatter developmen: ‘ier reading the book through te end of Cxaper 8, rerum to Chapter 3 and begin the andysis process; you will ther be beter equipped to undersand and apply te ideas resented. Fr thos sill ‘ecom.ng familiar wih general Eliot Wave conse, this section i designed to speed your laming eve by providing you with expert cocnscling en Wave analysis until you become pricen the process. Furhemo, applying the Pre-Constracive Rules of Logic isa great way to lara ef the runerous observaties and measurements required to propery disset marke action. Itiznotcecommecded you begin your analytical apis of re’ by constactng a highly deviled ‘urtandaterptingloanaiyzevery wae, Consructashor-erm chat nd begin with he curentday, applying theruleson: waveat atime and dating your char andanalrsisregulrly with diy data. This approach willallow careful consideration ofeach Rule a itapplis te specific stations. Applying the Pre-Constructive Rules of Logi inthis fashion should minimize the tedium cf -eitousappistion and the chances of alta err possble when dealing with such extensive relational calculations. WARNING: Thissection shouldNOT be readstraight through. The instructions which flow ‘will onty make sens and be useful, when appiedin conjunction wth realtime market action. If you currently do nat have a chart to analyze or this is your firs time reeding this section scan ‘through i then proceed to -and sean. the "Implementation of Position Indicators" (page 3.60). Transformation of Rule Identifiers ‘The relabeappeation of Stace abel toreslce Rule Weir nul quires the say of ‘rice action befor aud after. mt isthe frst menowave on yourchan, thee ism previo market cion'o help you intrecdy desde on the itera Sructre of ml. Therefore, siply place the entire Scture list, which appears immediatly othe ret ofeach aew Rue etn athe end of this irs ‘monovave. Forexerpl, tothe right of Rule 1 (ar page to see ising) appear tne Stature Tis (5) (3y(ce3)sL.3V33}. If isthe fest wave on your cha plas that entre Lt at the end of. ‘Warning: Donel apply these Rules to Compacedpaterns which exced ther own begineings recain ony the patte’s base Structure, Referto the top of page3-68 fra ful discussion ofthis, concept Figure 3260n the same page illstraes this behavior conditions on your char snot amicipted under te appropriate Rul ection, please verify youre working withthe comet Rul and then mae sue you ea the eondtons neces wo acivate thr Rule. fli amonowave an you sili there are nosipultions forthe conditionsen your char, seth entre Stace list next the Rl heading of each secon. If mis acompacta polywave or higher) pater and you, gun. fnd sostipalatons forth: conditions on you cha, move on the ect entitled plementation of o- siton Indicators (pe 3-60) and use surrounding Stroctr abel decide which Poston Indstor = ifany- belongs in ont of ms compte Structure label (i.e, in rot of "3" or") Remember, ll tine and price calculations shod be made fromteinaton rots (he dots sed cater 1o identify the end ofeach wave): this apples whether working with monowaves or compiced‘eave groups. Ifmessuemen required test the vali of satemertand the sateen: does not ‘secically menson wheterto measure pice ine, rice salvaysimple, Farbemore donot take theserelaionsip so src tha you elimiratea possi jut branes pacar wave ma OR ofl whenitwasspposciicbe" atlas 68K ofr.” Allspesiieraos mentioned in hist Sach 88618, 161.86, ct) mate gven a aightrange of emu. When wo ptems rele by 6.8 hat inane smallraf le two ay be anywhere Tor approximate} SE too te largrvave. This vies bout fur (4) penee leeway either side of an ea Fibnaeirelonshi. Finally he pase loos” and “lsc 0 sd roughout his ton ransateowithin 15 ofthe to atone" For the sue reasons thet readonsips detween waves cinnotalveys be expeced fo behave erect, when llowing the guidelines ised in this section if al eondons xcept ones seopu- ously adhered to (and the one which is not followed is off by just alittle), you should probably assume therales were comely flowed npc the suggested Site label list the end of. This ital ofthe Exception Rae dacssed in Chae 9, page ‘ne other and tine eaeuatone which involve escent of previous pattems mus be aken ecco as wen, Fretarpe nny Ges rghout ths wetion youll fd someting ke is ifm (prone incu seaced completely inthe seamount of roc atitnk oor oles) that stement must be ten lel I ht case, you would a4 one vandard me uni ete onstmed from oe data pointe nex oe nue of nits conmed yt the Cpa ‘hat ager amount othe number of dine uns taken by m2 completely race the length of ml. I the two moms are et or imal larger number, the statment abeve tue. im, ar such rocrecings, larger nanber than i, the atemen above woul bef