FILTERED WAVES BASIC THEORY R088 WERE By the same author - Behavior of Prices on Wall Street . Seasonal Tendencies in Stack Prices Bear Market Characteristics Market Indicators and Growth Company Ratings How Do You Use the Slide Rule ! Log Seale Construction ABC of Log Chart Calevlations Ghesa Openings Simplified : 4 sam roe seen vioacr Antss Published by ‘The Analysis Press, Chappaqua, New York My SagAll rights reserved including the right of | roproduction tn whole or in part in any form, Copyright © 1977 by Arthur A, Merrill \ DEDICATION Printed in die United States of Arnerien, Published by To RLSLE ‘The Analysis Press, Chappaqua, New York, Atways helpful; always inspiring. Library of Congress Catalog Card No. 77-7420 ISBN: 0-911894-36-5 Firat Edition, Firat Printing ! 0987654320 !FILTERED WAVES - RASIG THEORY CHAPTER -- CONTENTS -- PAGE 1, Why this book? 1 FILTERED WAVES: DEFINITIONS; METHODS: 2, What is a filtered wave? 4 3. How can the turning points of filterable waves be located? 6 4, How can a wave be identified and measured? 8 5. How can turning points be evaluated? n FILTERED WAVES: A FEW APPLICATIONS: 6. Can filtered waves be used with other methods? 13 7. Can filterad waves be used with individual stocks? 15 8. How big isa Bull? A Bear? 7 9. What is the life expectancy of a Bull? ABear? at 10. How big are primary swings, secondary reactions, and rallies? 29 LL, How big is a retracement? 33 12, Can filtered waves help in the cheeking of Jead time? 35 13, Conclusions. a7 APPENDIX PAGE Filtered Wave Warkeheet Are the Dow Jones Industrials representative? MI Historical Charts - Bull Markets Bear Markets IV Distribution Charts; Expectation Charts: Pull Primary, Percent Swing EWG 5 EWS 10 Bull Peimary, Duration FWo 5 EWG 10 Bull Secondary, Percent Swing FWG 5 PWG 10 Bull Secondary, Duration — FWG 5 FWG 10 Bear Primary, Percent Swing FWG 5 FWa 10 Bear Primary, Duration Fwo 5 FWG 10 Bear Rally, Percent Swing = FWGS EWG 10 Bear Rally, Duration FWG 5 . FWG 10 V The Dow Theory VI The Bliiott Wave Theory VIL The Dernell Every Classification ‘YVIIt Calendar 1753-2059 IX Elapsed Time Calculator X Bibliography 9 43 at 85 12. 14 16 113 120 122 124 126 128 130 132 Ba 136 138 140 142, 144 154 173, ama "7 178"] often say that whan you can meature what you are speaking about, and express it im numbers, you know something about it; but whan you cannot express it in Sumbers, your knowledge is of » meagre and uasatis- factory Kind; may be the beginning of knowledge, but you have seazcely in your thoughts advanced to the stage Of Science, whatever the matter may be. = Siz William Thomsen, Lord Kelvia Chagtes | WHY THIS BOOK 7 ‘The veason fer this book is in the quotation above ‘The chapters which follow develop a method for measur ing waves and evaluating tursing points. It expresees this knowledge fa numbers. ‘The measuring davice developed in these pages is an amplitude filter. Chemists use paper filters to remove auepended material from @ solution; electzieal engineers use filters to remove undesirable frequencies from a circuit; biologists use filters to measure the size of Small partictes, In this bock we measure waves by the Gilter required to eliminate them. In cimpler terms; if we gay that we will ignore all swings of less than 6%, we are using a 6h ster. ‘The use of a filter permits simplification. Stock market prices move a waves within waves within waves; this can be confusing. [fa filter is used, the important swings are clearly evident, ‘The most important feature of the method, however, is in the measurement of waves and turning points Swings and turning points car be classified, counted, examined, and expressed in numbers. ‘Turning pointe are important in many other methods. In the Dow Theory, the break of prices through a turning point is significant; in thy Blliott Wave Theory, legs are Counted between turning pointes trend nes ara drawn through turning points, Wha these turning pointe can, tbe evalusted, some of the rules of other methods can be translated inte pumbers, counted, and verified,‘The method {a simple, Answers can be found by muliplication and division, The measures are specific, twenty careful mon examining the game data will produce twenty identical results. ‘The methods are completely described in the first five short chapters. The remainder of the chapters and the Appendixes will put the methods to work, ‘The appen- Hixes supply, also, historical material to assist future investigations, To return to the quotation above, the aim of this book is to assist market analysis to develop from an indefinite "art" to the stage of Science,en ' 1909 o vetenst aed 5 \ @ @ 9 900) esol ® 8 ® © och: ® 7 oo Chapter 2, WHAT ISA SILTERED WAVE? so00 _ ow ousrRIALs ‘This method proposes simple classification of waves © by amplitude. The amplitude used is the overall swing cena from the highest point to the lowest, (4) Consider the 1966-1968 bell market, which is charted above, in the chart at the top of the next page we have filtered out all minor swings of less than 5%, and have connected the peaks and valleys of the larger swings with simple straight Hues, The designation "FWGS5" is the abbreviation of "Filtered Waves Greater than 5th," In the chart at the bottom of the next page we have filtered out all waver of Ieee than 10% (FWG10). Note that waves B-C, D-E, G-H, and J-K have disappeared, (@) Some analysts have measured amplitude by the 00! deviation of prices from a moving average, This is a good method, but it invelves some calculation, and the e determination of tha proper period of the moving average.Chapter 3. HOW CAN THE TURNING POIIS OF FILTERADLE WAVES BE LOCATED > ‘The rot step is to decide the amaliest wave to be charted. This is the filter size. In our studies of the awings of the Dow Jones Industriate in the appendixes, we bave used a minimum of 5% (FWG5). Suppose, for examplo, that we use a filter of 5%, and that prices have been rising, and have risen more than 5%. We continue to note new highs made in the swing, and for each new high point achieved, we divide by 105% to get a new reversal signal (RS). Now suppose that prices start to decline. We do nothing until the RS point is reached. When this occurs, we know that we have been in a qualifying decline since the last high point. This establishes the high point as a qualified turning point which can be plotted on a chart, In graphic form, the situation is this: Established turning point (Fwo3) Point A is 5% higher thon RS, Preceding rise of mora then 5x, Rs\~Prices have dectines Reversa! Signal. (RS) (Point and figure students will note that this procedure is similar to the change from a rleing column toa de- clining columa, 1a the procedure outlined above, per centage Gyures are used instead of points. } Now that prices are declining, new low points are noted. As each new low point ia made, it is multiplied by 105%, to got 2 new reversal signal (RS), If prices turn around and start upward, nothing 4s done until the RS level is reached. When this occurs, the preceding low point {8 established ac a qualified turning point, and ean be plotted on a chart, The situation is as follows: RSH - fea more te the development of the Dow Theory than Tee ee alton, You will understand my prejudice Pe ou lanes that Rhea liked to gaunt ana to megesres Tren Tee pe Uidestying these of the poole you ave read (an Thacdla wswsings are a goldmine of statitice for the serious atutent ome very capable students of the Dow Theory are actine Woauy, One af the boat ts Kickers Massell of San BRS Seal tas writien a book The Dow Theory Tox Tr sas supplements bis analyses of the market with Sitcs mocket barometers .¢ Schaefer, Another capable interpreter is E, George Sch: author of How {Helped More Thaz 10, 000 Tavestors to Dholit in Stocks. Fritts book, he develops his ideas of ‘ZWWNew How Theory. Another acute interpreter is Perry Greiner, who was fod with Robert Rhea in the last years of Rhea's Many books have been written on the Theory (See “Appendix % ), bet the fundamentals are not complicated, Hamilton wrote 'The esseace of Dow'a Theory can be gummed up in three sentences. Tn an editerial Decem= ber 19, 1909, he saya "The market is always to be con- sidered a3 having three movements, all going on at the Tame time, The first is the narrow movement from day to day, The second is the short swing, running from two eek to a month or more; the third is the main move~ Inert, covering at least four years in its duration, Harflton's quotatiaa was an oversimplification, of course. Actually, it is an example of the begianings of the "Theory." ‘The work of Harnilion and Rhea, and others. has expanded the beginnings into a fair-siged ‘book shelf. The outline which follows ix a condensation of these weitings. vas-146- 2iB DOW TEEORY -- A SEV POINT SUMMARY. Point (1) The fluctuations of the Dow Jones rail and in- dustrial averages avea composite index of all the hopes, fears, and knowledge of'everyone who knows anything of financial matters. They therefore can serve as a baro~ meter of the fature, Hamilton wrote: "Consciously or unconsciously the movements of prices reflect not the past but the futare, When coming events cast their sha- dows before, the shadows fall on the New York Stock Exchange. " Rhea believed that students should concentrate their studies on the averages - other statistics could be ig- nored! Point (2) The market consists of three movements, which are going on at the same tim: (2A) The Primary Markets. These are the great bull and bear markets. They last from one year to sev- eral years, These great movements are fundamental in nature, and are beyond the reach of manipulation. (2B) Secondary Movements: These moves ave called Primary Swings (or legs) when in the direc- tion of the Primary Market. When in the other direc- tion (rallies in bear markets; declines in bull mazkets) they are called Secondary Reactions, The Secondary Reactions are distinguished from minor changes by their magnitude (usually sufficient to retrace one-third £0 two- thirds of the preceding primary swing) and by their du- ration (three weeks to three months.) {2C) The minor or day-to-day movements, If the Primary Movement ls considered a tide, the secondary is similar to the waves that please the surfboard en- thusiasta, and the minor movements are the amall rip- ples. The minor movements ave not considered impor tant in the Dow Theory. -147-Point (3) The great bull and bear markets each consist of three phases. These are not related to the secondacy movements described above in (2), and ghould be cone sidered separately: (GA) In a bull market, the First Phase represents the improvement in public confidence and a correction of the undervaluation developed in the last phase of the preceding bear market. The Second Phase is a response to improvement in corporate earnings. ‘The Third Phase is one of rampant speculation, when stocks are advanced on hopes and expectations. (3) fn a bear market, the First Phase is a corrce- Hon of the speculative excesses of the Third Phase of the preceding bull market, ‘The Second Phase is a daterioration of prices in gear with a slide in the earnings of shares. The Third Phase ia 2 final deprostion of prices caused ie part by distreus selling. Point (4) The trend can be determined by the action of the’ secondary swings, Refer to the chart, The rise Avom point {t) to (2), at ine ime, might be Considered a secondary reaction ia the preceding hear market. But when prices wrned upward at point (3). which is higher than (1), the picture begins to look bullish, ‘Then, when prices broke through the level of (2) at point (4), the rise 4a known to be part of « bull market which began at point oO. In a downward swing, the same type of analysis would be valid. If the drop from (9) to (10), the claasi- fication would be “secondary reaction" unt{l the dcop at point (11), when the classification becomes dubious. ‘Then, at the breakthrough at point (12), the classifica: tion (a definitely changed to "Bear Marke This method of determining trends by "breakthrough has been aptly compared to the determination of tides by the extent uf waves ona sandy beach, if the fartheat sweep of a wave i¢ marked on the beach with a stick, andthe nest wave carries past this point {a breakthrough), the Ude te probably rising. 148 Point (5) in determining the tend in (3), 00h tndustiat rea Seasagee must be considesed "Changes and or considered ses DAPNENRS Moves ane. conticmed by abe actlone of TELS emia rae contirmiyy aeons hows Stans peed not be on the same day. ine (6) The averages sometimes move horizontally Ginn. st bands fortazce weeks or longer, When both wettyee de te, inte called "Line's When both avers Beoe Belek su attate inc™ inthe same dieweon, sa 1asoctant move in the same direction te probable, The sees ocay mace wits an inroase ta value. Hemiiton nated thor Mines" seldom eeu atthe box ginning of ending of secondary swinger bat awsaliy ia . Rhea's analysis recommends the consideration of nes! of eos han 5. If woth averageny for scampi, fave boon ming in 2 2% band, 2 Breakout bron eh Weald be vigniicna, hes found that in s bull market, downelds penetra- dione of linen are vesy apeculative, while pelle Ben Poiat (7) Volume: A market which is “overbought!” be- comes dull on rallies and develops activity on declines. Conversely, in “oversold” markets, the tondency is t0 become dull on declines and active on rallies. Robert Rhea supplemented Hamilton's tabulations with a detailed lating af all of the bull and bear markets and secondary moverenta in the period from 1896 to the time of his death in 1939. These tabulations have been charted in the two figures which follow. These trace the Primacy Markets with Reavy lines; tne light ines are the Secondary Movernents. In addition, the points of confirmation of the primary markets are Inarked withthe letter "GM" Profits and ovens obianed by buying and selling at these points of confirmation are indicated by arrows. Since the confirmation always fol- lows the top or the bottom of a primary market, the pro- Site are always Lees than (he total mows n't always You cam profit from this theory. It do Bure a correct forecast, and the forecast isn't always ‘when cumulated, clear. But the profits over the years, wh are the equivalent of compound interest at the rate of 11.7% per year.S80DOW THEORY - DATES OF PRIMARY AND SECONDARY MOVEMENTS - from Robert Rhea - (Prices are D-J Industrial Closing Prices.) & § 8 - a/10f96 19795 a/19097 gs1a/9T 3/23/98 8/20/38 20/49/98 4/3/99 571/95 915199 12/18/99 25/00 5/500 er1700 6/23/00 7/25/00 9124/00 erizrer wepason grigron 12/15/02 2neros afsios s/iayes —f--ss105 We. 1/2704 sytzio4 1ersyos vey esos afiasos, 5/22/08 ~F—ansios & 315/06 413/08, 13106 10/9/06 3/25/07 sysier -unsrer nee Lyaios 2pssos sfis/oa 6723/08 3/10/08 9fez/o8 Hy iayos. 223/09 29.64 ace 38.49 55.82 32.00 60.97 51.5% 18.08 erst 1.61 58.27 68. 36 56.82 59.38 53.68 59.02 52.98 78.26 61. 52 ett 96.75 75.39 85.02 53,00 oo.a4 50.62 15.12 70 85. 40 re07 88.38 19.90 E—11/i9/09 100.53 E909 100.53 sano as.os 2 syaro 94.56 rene 1162 apie 81.4 oreo 78.35 1of18/19 86, 02 gy 1ese/19 19.68 2taM1 86.02 iztyiy a 32 SLI9/L1 87.06 gy2stil 72194 fH os0ne 94s LAL/Az 85,25 s/s 88.57 3/20/13 18.25 fas 83.29 sais 913/13 93.43 pe iay2arie 53117 Tans 58.52 zpeayis $4.22 Sy30/15 71.78 S1ialis 60.38 LATS 99.21 afezfle 84.9% 11/21/16 110, 15 zfafiy 67.01 3/20/11 98.20, 1yefy 68.58 iypasii 14.23 f—i2/g/t7 63.95 2/19/18 82.08 ayia 75,58 S/is/la 8.04 este 77.93 10/18/18 89.07 248/19 79.15 Talia 12.23 8/20/19 98.46 Eanipns uy.6z 2 nea: 1 (Note: (a) This ie anew series, to bo comparatie, snultiply preceding figures by 0.7339 ) DOW THEORY DATES (conta) an/s/19 ryeziny Vs/20 2p2syz0 arareo s/1gf20 ajafea ayiofee gnitrea tarei/20 s/s/2y epearea reset g 1/tor2e E srasfaz eizez 10/4/22 ry2spee 3/20)? TpsU/23 ay29res roperyes, 2p lee 520/24 s/eofea 1o/1aj2a sy6res, 3/30/28 2s 5/30/28 ayuaree 10/19/26 19/3/27 toyez/27 sriarea ors/28 Hy26)28 1zysf28 arsfee sj2728 ister seg. am nn9. tos. 109. 39, 105. 37 94 83, 89, 66. 20, 53, ot 78 56, 30, 103, ye 195, 8 93, 55. ez 35 a8 98 $5 36 St 20 a 5 oF 0 50 89 a B 43 o 38 a 0 1% 99 -153- » 2 100 eH i toray29 10/10/29) nyisy23 asitisa 3/24/30 9/059 12/26/30 2/24/31 6/273 e/a /3i 20/8/31 21/9/34 wisps 3/sf3z ayape girs Bertha Theiss yo237 33 eh. 4/29/36 f—3/10/37 esas aytasar 1eapsa 1atyss. f—3/31/38 4/16/38 5731138 876/38 9128138 1112/38 1726/39 sn0/39 s18139 eros39, 6129139 1122139 easywaves mason mre Minor DEGREE BASIC ELLIOTT Bue waRKer oF DEGREE ~ EDIE Desneey ed “154 vean Appendix VI WHAT 16 THE ELLIOTT WAVE THEORY? Some refreshing ideas about the behavior of Wall Street were developed by Ralph Nelson Elliott (1871 - Jan, 1948), We have reviewed all of his published weitings, and have summarized them in this appendix. Ralph Elifott spent many years in Latin America as an accountant. In 1927 he retired to Los Angeles where he developed bis wave theories, These were published in 1938 in a monograph The Wave Principle, in a ner- tes of articles in the Financial World in 1939, and ina book Nature's Law published in 1946. His ideas proved a0 interesting to investors that he came to New York and, spent the last yeare of hie life writing a financial report. Basically, he believed that prices tend to fluctuate ural ways, The most important tendencies, he believed, were founded on the Fibonacci aeries of num= era: 121-2-3-5-8-13-21-34-... Each number in this series is equal to the sum of the two preceding numbers, and the ratios are found many places in aature. The count of seads in the whorls of sunflowers and pineapples are exanaples. Eliott found the numbers existing im the timing af waves and in the ratios of stock market prices at various turning points Elliott's most basie conclusions are illustrated by the chart opposite, which is derived from one that be pablished in Nature's Law. The tendency that he il- lustrates is simply that mover in the direction of trend tend to be in five waves; those in the contrary direction tend to be in three wa ‘The top chart illustrates the "major" or primary waves in a bull and a bear macket, The bull market has five waves: the bear market has three.‘The center chart illustrates the tendency toward the breakdown of the primary waves into waves of the next smaller or “Intermediate” degree, Note that each mie Jor wave in the direction of trend (up in a bull market; Sows in a bear marker) (a mado up of tive waves of in- termediate degree. These are marked 1, 2, 3,45. Bach wave counter to trend is made up of three waves. These are marked a,b,c. ‘The lower chart is a contiquation of the game basic tendency. The longer of the “Intermediate” waves is made up of five waves of minor degree; the shorter of the “intermediate” waves breaks down into three waves of minor degree, An’ excuption is the wave marked nar In the next table and chart, we have summarized and combined all of Eliiott's various examples forthe period 1929 through 1945. ‘This period spans the time begin ning with the first Dow Jones high-low statistics and fending with the lage analysis published in "Nature's Law" a few months before his death, The nomenclature has Been standardized, in order to mako it easier for a stu- dent to trace through Elliott's interpretation of the wave patterns. In addition to his basic conclusions, Eliott listed many variations, which are charted completely on the following pages. He listed some subsidiary conclusions (1) No confirmation is required by a companion average, (The Dow Theory requires confirmation of the Industrials by the Rails. ) (2) Actual high and low figures are used, rather than the closing prices. Elljete said "in fact it was only with the establishment of the daily range tn 1928 and the hourly averages in 1932 that sufficient reliable data be~ came available to establish the rhythmic recurrence of the phenomenon called the "Wave Principle." {3) News has Kitle effect on the course of a wave serios, fe may affect the amplitude and timing. (4) Prices tend to move ia channels. These can be useful in the interpretation of waves. (5) Elliott listed bis names for the degree of waves in the following order: ‘Subminuctte (only in che hourly data) Minuette Minute Minor Intermediate Primary Cycle Super Cycle Grand Super Cycle (6) There ave mony exceptions to the basic pattern. -157-ELIOT'S WAVES ecived from hie ~citing wiort’s waves DATE Eni Ey DATE _Buiowe waves EW. sop om awe da empnne Tie 2s ties | ozs se ous Yes | 83138 mes coat 25 08 2 ii | oe tee i no ote 2 ar | 03 ere 2 Gn 0 03 23 3 waseo | ora 8 3 nina i waco | 9238 4 iam oie 2 fear | ating aS won 05 05 30 a say | 013638 i awh ote > ge | oes 2 in 06 23 30 2 asa | ogo a 09 10 30 & tn | 08 on i Gin se ae ia f otek aun + rie | eos 3 io os at > nas | oa ‘ 2.56 1 oy at 3 kes | pss we§ wie ales 3 f oagSe | otis ae : on a is ‘ sat | 3608 a9 2 oh oroase reco moo | oclog Ad wk sponse | k oes | 98 2 4 i 12 es a 1 teat | 98 te ao a aus ot lear | itoese a3 208 earth goles | os oa i ies mia € Solas | OF ae at 2 Lee teat 1 gars | Gas aL 3 278 osm jaceo | oF os a2 , in mae BD moo | toma ved 103.8 12 06 14 : orisa 1 aise 2 nis | oeosae rete 3 te | uea “a O30 36 ‘ un | ag 8 ios ues woe | tea 6 ina a tee | oe > our 8 he | oe oe oar 1 ma A os star 2 wo 2 05 13 a7 3 se | tsoa we tee 4 a foaaa 1 wa 65 tate | 04 25 a8 2 192137 a his | orgs AS ss 13:25 Sr bk | cera 8 538 Peed re oamse | toe as 1 wae ten | is as 2 aie 8 ten | 8h oe as 3 oat are ary thy | ade ‘ on ani ed we | ea 0 5 sa Sie i nae 3 an 03 Is 38 2 tives ve f wee | gis 2 accent -isa- 159.ELLIOTT, upward teen Extension in Wave 1, Sowoward treod. Batension in Wave 3, spware teen $ alt : e Extearioa io Wave 3 Y 4 dosnwrd srond s 5 3 2 ‘ Y Y 2 WA v 3 . tapward trend, downward tren -161- VARIATIONS - IN LINE OF TREND- [Miott found that waves ia the Tine of frend (1,5) somata Gtongated fate fivd waver of the Same Gegree = eather than Breaking Aven inte five waves fs Lowes Gegrea, Thy slongavton could tethe last or Aith wave, Me called there elongatiens gxtenstonELLIOTT VARIATIONS ~ (N LINE OF TREND Since extensions are comparable with the other waves in a series, they may be equal to them and the entire movernent ‘vay seem to be nine waves of about equal size. (top chart) At the end of a major move, there may be a series of extensions of extensions in the fifth wave, ‘The move comes to an end finally on the last minuette wave of the last minute wave of the last minor wave of the laat in- ) termediate wave, (Middle chart) Elliott found that extensions tend to be "double-re~ traced"ie, by a downward and then by an upward move, (lower chart) This in interesting only in an extension of the fifth wave, since an extension ia the first wave is re~ traced by the second and third waves and an extension in the third wave ia retraced by the fourth and fifth waver, $——Entension of Minute wore fg —_—-_______sestenion of wt Minor ware snvermal wove fia. (10-8 tena Secont ne = 162- -163-ELLIOTT VARIATIONS- CORRECTIONS ZIGZAGS VA MINOR AS wixon: Y onverteo INTERMEDIATE 2 WAL : * INTERMEDIATE ¥ InverTED Eliott rocogatzed corrections of five types grog, fa, Lrreg triangel cenmplen Aiuetrated om this page, Ia the nor wlzey each wave fe sing in the Intermediate size, the i 35 found 1 ElMot" chart, in the MAJOR- & DOUBLE 2167a6 MAJOR INVERTED (rears ] A tn a aigeng the patvera in MINOR PSAs rae eto 30-5 2 Te give the Ala” cor ection 6 altovel appearance = ef i name 2 4 Exarnples af this correction ave minors Irie tigre, An example, s18, Nyy TVERTED is marked in the Basle Eatott Ehact arin beplening of ts 5 Sprendies A zigaag abso teibed for comparison INTERMEDIATE ~ INTER MEQIATE- INVERTED MavoR MAJOR INVERTED -165-ELLIOTT VARtATIONS - CORREGTIONS IRREGULAR ELLIOTT VARIATIONS ~ CORRECTIONS: Or by the height of the "B" wave, which : . X \ sors Sn Svreag mags nae, eee tas no more then the ‘exarspte a the 1929 peak waves. In the seal trang the lege car be single Normaiy the Bottom of "A Lhguetion in the third oF "© wave io assay more intensive thaw fhe fest” Telangles are found im the fourth wave cl a tive wave movement exelusivaiys They on Miran Ove of the boundaries of & Urtengle may be horivontah, The {itty eg may terminate within or cetaide of the boundaries THtangles nave been a3 shor? a2 seve hours fa short example 19 0% ‘he next page) and as long 49 13 years... Hamilton Botton outlined Wn year tetangie in his writings minor INTERMEDIATE 166lao iss 30] -Oow Jones Industricis - Hourly Dete- th Geteber 198 Ge} ngnallad af comediate overnents ihe dyadaite Octobe thel8 paste feitswea’') “ALK Bukow e/20)bs ‘THURSDAY FRIDAY sat wonoay}\ loriarsr lonsrat wone/s7| 1oniee37 ELLIOTT VARIATIONS — CORRECTIONS COMPLEX ‘ahi group includes some inthe words oF blow "TRE DOUBLE THREE shyihor ai costeciive soverants {athe moat diltieute fester of the wave principle TRIPLE THREE DOUBLE THREES MIXED-UPWARD oowNWwARDElliott had some problems in the application of hie Principle. Many of his turning pointe wore debatable his wave patterne tend to proliferate into variations. ‘The selection of turning points i crucial, You can identify almost any pattern if you select the proper turning points. When filtered waves are applied, some of Biltott's turning points appear to be quite light, and he seems to have missed aome important jzne, Another problem is the division of waves into aub- waves. You can divide a wave into almoat any number of subwaves, if you make the aubwaves email enough, We have tried to read Elliott's mind, from his lim- ited writings, in order to develop 2 basis for a meas. ured analysis: (0) In the breaiiown of waves into subwaves, the firet and most promising line of attack is a study of Elliott's own exampies. The turning pointe that he used have been tabulated and evaluated, and the average wave amplitude has been measured, (2) A second line of attack is a atudy of the "basic Elliott" chart at the beginning of thie appendix. This chart outlines a complete cycle. if you will count the number of waves of major degree, intermediate degree, and minor degres, you will find the following: Major degree: 8 waves Intermediate degree: 34 waves (4.25 times a6 many) Minor degree 142 waves (4. 18 time: many a3 in the intermediate degree, } Using this as a guide, we counted dowa the rank of turning point FW numbers: EW Number of turning point 80% 4 40% 19 20% “a 10% 170 5% 540 The frequencies in the Basic Elliott chart of 8, 34 and 142 are similar in proportion to the actual count in the selected groups of 10, 44, and 170. =170- (3) A third posetble approach is based oa Eiliott!s vtatoment that "a wave is divided into waves of the next smaller dagree, " If waves (ox Qirning points) are ranked in any given period of time, from the highest FW to the lowest, and the rank is scanned downward, you will find at a certain point that the waves are parts of preceding waves, This wave Classification. is evidence that you are moving into a sub- For example, the ten most important turning points in the period 1928-1962 are the following: ay 09-03 a ov 0B sz @) 030637 (4) 04 28 42. (5) 09 08 32. (6) 0227.33 (03.3138 (8) 111038, (9) 13.29 (10) 04 16 30 You will find that numbers (7) and (8) are, in time, Detween (3) and (4), and evidently form a eubwave. No. (9) and (10) are between (I) and (2) and evidently form « subwave. A similar method was axed to check the other srouping ‘The three approaches outlined above were combined checked to yield the following proposed clas FW: Elliott Wav v0 EH, OV, Primary oA BOD Intermediate 20 123.4 Minor mw abe ad Minute 5 -n-Appendix Vil GLASSIFIGATION USED BY DERNELL EVERY: coon+ 1s] PogR- ref seu, ir] seen “ie. This classification is used with chacts of on-bolonca- volume- YEAR TYPE LETTER- Go down column to first three digits of yeor than across to column of fourth di fond obtoin Year Typ Lotter, é 8 68 7? nz) 179] be0 lat t2| (es 184 as, 85. 187 188 189) 130 11 132 193 198 i968, 136 i97 198 199 200] 201 Boa) 203 20a 203] nize cine p|-orje zap aslo m wz w cine sion sie ott also mn > olomal>aolra oloaele ome oon plac ol zo xalzacimz>|-orlazolraszo x az cm z ole m alo moj omin > alomolpo clap alo 7a\D0 mre aim > hu oe zoxsjeocimes|-orp—olr oslo x azo x|nz ole njo > ojo taloom|>> aloma@onia > ole xalao ala ala zp ofr azloxalzocimz>jeme|> —olr o zor alzo xia paomja > ole aoeom ps wl ase onlae aloo sao as ocoma2l>—olrazloxnzemcinzale mz» - ols —lor aw lom a pla o mio polo raleo mooi >| o mae oma Plo! oa. it, Appendix Vill CALENDAR «1753-2059 USE: FIRST: OBTAIN YEAR TYPE LETTER FROM OPPOSITE PAGE, THEN FIND MONTH, GO STRAIGNT ACROSS To YEAR TYPE LETTER, THEN DOWN TO_CALENOAR, imme C[é mw [ok [a w]e a [ei [Fw nasan, Fesape [Oo Kia Ke Cle Nir Mle J |enres. WaR-ad'® H [Os [an Te -K]@ wet [ot [ne MAR APR sed FL TA WE K [8H 6s [61] om [soe aR. Wise sf oP tte} Lew [ew aw ex [ae maT TUNE sedan tet [ew [Os fr ute Ke] W [>on JUNE, HUY sal CTA Wee [ew fo ste t few [sie guLy Ce ET SEP wa @ N[B R[F Ue 1 le xo s[a N]ooeser. ocrsiale x pew [o s]a nw jc i fe wl * 1 [ne oor, wovsee 8 WO J [A WIE K ie w]e 4 [ot [sou nov atalalalatele Wie 086: -175--176- Appendix 0XAppendix X BIBLIOGRAPHY Alexander, $.S.: Price Movements in Speculative Markets; Trends ‘or Random Walks; Ind, Mgt, Review, May 1961 Allen, Leon B.: Method fer Stocx Profits; Doubleday 1962 ‘Appel, Gerald: Solacted Readings In the Stock Market: Systema and Forecasts 1974 Ayres, Leonard P.: Turning Points in Business Gycles ‘Macmillan 1940 Barnes, Dr, Leo: Your Investments; Am. Res. Council, annual Barron's: National Businwes and Financial Weekly Baruch, Bernard M,: My Own Story; Holt 1957 Boan, L.H.; How to Predict the Stock Market: Lace 1962 Bornhard, Arnold: Evaluation of Common Stocks; Simon and Schustec 1959 Black, Hillel: Watchdogs of Wall Street: Morrow 1962 Bolton, A. Hamilton: The Elliot Wave Princip 1960 Bratt, Dr, Elmer Clark: Business Cycles and Forecasti: tewin 1937 Bretz, William G.: Juncture Recognition Vantage 1972 Brooks, John: The Seven Fat Years; Harper 1354 Busne, Arthur and Wosley C, Mitchell: Measuring Business Cycles; National Bureau Economic Reeearch 1946 Campboll, Don G.+ Let's Take Stock; Bobbe Merrill 1938 Carpenter, H.G.: A Succesaful Investor's Letters to Hie Son, Simon and Schuster (534 Carpenter, H.G,; This is lavestment Management, Scarborough 1945 Cary, Elgin: Profitable Spreading Strategies: Austin 1976 Chestnut, George A.Jr.: Stock Market Analysia; American lavestors Service 1964 lasing, Henry K. Jr, Dow Jones Irwin Guide to Put and Gaill Option: - Dow Jones Irwin 1975, Cobleigh, Dr. Ira U,: How to Get Rich Buying Stocks; David McKay 1959 Cogan, L, Peter: Rhythmic Cycles of Optioism and Pessimism; William Frederick 1969 Cootner, P. H.: Random Character of Stock Market Price! Press 1964 Costa, Joseph A. ard Jacwin, Irvin Wm. : How to Accumulate Wealth through Stock Speculatinn: Kant 1958 Cragg, Alliston: Understanding the Stock Market: Garden City! 1929 Crane, Burton: The Sophisticated lavestor; Simon and Schuster 1959 Dabl, Curtiss: Consistent Profits ia the Stock Mavkat; Tui State Ottaet 1951 deVillters, Victor: Point and Figure Method: Stock Market Pub, 1933 MIT Dewey, Edward R, até Dakia, Edwin F.: The Selence of Prediction: ‘Monzy Holt 1947 Dines, James: Technical Analysis Made Easy; Dines 1967 Dine e, Jamea: The Invisible Crash: Random House 1975 Drew, G.: New Methods for Profit in the Stock Market; Motealf 1961 Elliott, RN; The Wave Principle: 1938 Elliott, R.W,: Articles in Financial World March- August 1939 Ellict, RLN,: Nature's Law ; 1946 Enget,, Louis: How to Buy Stocks; Bantam 1953 Epstein, Dr. Raiph C.: Making Money in Today's Market: Economica 1959 Farrell, Maurice L. : Dow Jones Investors’ Handbook: Dow Jones 1974 Farrell, Mauskes L,, Ed. Dow Jones Averages 1885-1970: Dow ‘Sones 1972 Filer, Herbert: Understanding Put and Call Options; Crown 1959 Fisher, Philip A, Paths to Wealth through Common Stocks; Prentice Hall 1360 Fisher, Philip A.: Common Stocks and Uncommon Profite; Harper 1958 Fosback, Norman G, : Stock Market Logic; inst. for Econometric Research, 1976 Gingold, Oliver J. Making and Keeping Stock Market Profits; Barron's 1937 Gordon, William: Stock Mazket Indicators; Investors Press 1968 Granville, Joneph B+ A Strategy of Daily Stock Market Timing: Prentice Hall 1960 Granville, Joseph E.: New Strategy of Daily Stock Market ‘Timing; Preatice Hall 1976 Gutman, Walter I; You Only Have to Gat Rich Once; Dutton 1961 Hamilton, William Peter: The Stock Market Barometer; Russell 1922 Harahus, David: On Market Speculation; Harahus 1977 Hardy, ¢, 0,1 Odd Lot Trading; Brookings Institution Heiby, Walter A.: The New Dyaamie Syntheste; ina of Dynamic Hetby, Walter A:: Stock Market Profits through Dynamic ‘Syathesin; Inat, of Dynamic Synthesis 1965 Hriaton, Loucas P.: Professions) Approach to Investment Profits: Larchmont Investors 1960 Murst, James M.: Profit Magic of Stock Transaction Timing: Prentice Hall 1970 Investor's Intelligance: Encyclopedia of Stack Market Techniques: Investor's Intelligence 1965 Jer, Wm. L.: How Charta Can Help You in the Stock Market: Comm, Res. 1962 Kats, Howard: The Short Term, 1964 Kelly, Fred G.: Why You Win or Lose; Kelty 1930 Kehy, Fred C.: Peychology of Speculation; Fraser 1930 Krow, Harvey A: Stock Market Behavior: Random House 1969Appendix X BIBLIOGRAPHY Alexander, $.5.1 Price Movements in Speculative Markets; Trends of Random Walls; Ind. Mgt. Review, May 1961 Allen, Leon B.: Method for Stock Profite; Doubleday 1962 Appel, Gerald: Selected Readings in the Stock Market, Systema and Forocasta 1974 Aysez, Leonard P.: Turning Points in Business Gyeles Macmillan 1940 Parnes, Dr. Leo: Your Investments; Am, Res. Council, annual Barron's: National Business and Financial Weekly Baruch, Bernard M.: My Own Story; Holt 1957 Bean, L. H.: How to Predict the Stock Market: Luce 1962 Bernhard, Arnold: Evaluation of Common Stocke; Simon and Schuster 1959 Black, Hillel: Watchdogs of Wall Street: Morrow 1962 Bolton, A, Hamilton: The Elliott Wave Priscipte 1960 Bratt, Dr. Elener Clark: Business Gyclea and Forcoasting: rewin 1937) Bretz, William G. 1 Juncture Recognition; Vantage 1972 Brooks, John: The Seven Fat Years; Harper 1954 Burns, Arthur and Wesley C. Mitchell: Meaguring Business Cycles: National Bureau Economic Research 1946 Gampbell, Don G.: Let's Take Stock; Bobbe Merrill 1939 Carpenter, H.G,: A Successful Investor's Letters to His Son, ‘Simon and Schuster 1934 Carpenter, H.G.: This is Investment Management, Scarborough 1946 Cary, Elgin: Protitable Spreading Strategies: Austin 1976 Gheataut, George A. Jr.: Stock Market Analysis; American Investors Service 1964 Clasing, Henry K. Jr. Dow Jones Irwin Guide to Put and Gail Options: - Dow Jones trvin 1975, Cobleigh, De, Ira U.: How to Get Rich Buying Stock 1959 Cogan, L, Peter: Rhythmic Cycles of Optinism and Pessimism: William Frederick 1969 Gootner, P. HL: Random Character of Stock Market Prices, MIT Prose 1964 Costa, Joseph A. and Jacwin, Irvin Wm.: How to Accumslate Wonlvh thravgh Stock Spactilation; Kent 1958 Gragg, Alliston: Understanding the Stock Mazket; Garden City, 1929 Grane, Burton: ‘The Sophistleated lavestor; Simon and Schuster 1959 Dahl, Curtigs: Consistent Profits. in the Stock Market; Tri State Cltent 1951 aeVilliers, Victor: Point and Figure Method; Stock Market Pub, 1933 David MeKay Dewey, Edward R, and Dakin, Edwin F,: The Science of Prediction: Henry Holt 1547 Dines, James: Technical Analysis Made Easy; Dinos 1967 Dines, James: The Invisible Crash; Random Howe 1975, Drew, G,; New Methods for Profit in the Stack Market; Metealf 1941 Eblott, RN: The Wave Principle; 1938 Elliott, RUN; Articles in Financial World March-Augyst 1939 Biliott, RIN: Nature's Law : 1946 Engel, Lovie: How to Buy Stocks: Bantam 1953 Epstein, Dr, Ralph C.: Making Money in Today's Market; Economica 1959 Farcell, Maurice L.: Dow Jones Investora’ Handbook: Dow Jones 1974 Farrell, Maurlce E., Ed, Dow Jones Averages 1885-1910; Dow Jones 1972 Eller, Herbert: Understanding Put and Cell Options; Crows 1959 Fisher, Philip A.: Paths to Wealth through Common Stocks: Prentice Hall 1960 Fisher, Philip A.; Gormmon Stocks and Uncommen Profite: Harper 1958 Fosback, Norman G. : Siock Market Logic; inst, for Econometric Research, 1976 Gingold, Oliver J.: Making and Keeping Stock Market Protita; Barrows 1937 Gordon, William: Stock Market indicators; Investors Press 1968 Granville, Joseph 5. A Strategy of Daily Stock Market Timing: ‘Prentice all 1960 Gronville, Joseph B.: New Strategy of Daily Stock Market Timing: Prentice Hall 1976 Gutman, Walter K,: You Only Have to Get Rich Once; Dutton 1961 Hamilton, William Peter: The Stock Market Barometer; Russell 1922 David: On Market Speculation; Hazabus 1977 Hardy, ©.0,: Odd Lot Trading; Brookings Institution Helby, Walter A.: The New Dynamic Synthesis; Inet. of Dynamic Syathe via 1967 Heiby, Walter A:: Stock Market Profite through Dynamic Synthesis; Inat, of Dynamic Synthesis 1965 Hriston, Loueas P.; Professional Approach to Investment Profits: Larchmont Lavestors 1960 Hurst, Jamea M.+ Profit Magic of Stock Transaction Timing; Prentice Hall 1970, Investor's Intelligence: Encyclopedia of Stock Market Techniques: Investaz'a Intelligence 163 ‘ler, Wm, L,: How Charts Can Help You in the Steck Market; Comm, Res. 1962 Kate, Howard: The Short Tam, 1964 Kelly, Fred C,: Why You Win or Lose; Kelly 1939 Kelly, Fred C.; Psychology of Speculation; Fraser 1930 Krow, Harvey A.: Stock Market Behavior; Random House 1969