DETERMINISTIC SYSTEM

 Determinism - ability to forecast price activity into the future

 Price Sensitivity - getting intimate with price action
 Price Discipline - building belief & structure to the method used

THE ELLIOTT WAVE PRINCIPLE

 Provides a framework for decision-making - Elliott Wave provides an orientation to view market
activity – it tells you where you are within the bigger landscape, what direction you are travelling in and
the various ways in arriving at your destination.
 Assessing probability - Once understood, the varying but limited amount of probabilities for price
action to unfold provides a concise approach to applying strategies, risk-reward assessment and
contingencies.
 Offers impartiality - the greatest threat to any trader is his unawareness of preconception – his building
of a scenario that often contradicts reality – EW can help eliminate this.
 Robust model - in tune with the rhythms of Nature, this methodology works no matter what market
conditions prevail at any time.
 1934 - Elliott postulates there are natural
laws that govern everything, from growth in
natural organisms to people and crowd
behaviour.

 1935 - Charles J. Collins of Investment

Counsel, Inc. introduces Elliott to the
Fibonacci Summation Series giving him a
book entitled “On the Relation of Phyllotaxis
to Mechanical Laws” by Professor
A.H.Church of Oxford.
R.N.Elliott

 1938 - Elliott publishes his book “The Wave

Principle”
 1946 - Refines his theories in his latest
publication “Natures Law”.
 1st chapter entitled “Rhythm in Nature”
followed by “The Great Pyramid Gizeh”,
“The Secret of the Universe”, “Human
Activities”, “The Law of Motion” &
“Pythagoras”.
“No truth meets more general acceptance
than that the universe is ruled by law. Without
law it is self-evident there would be chaos,
and where chaos is, nothing is. Navigation,
chemistry, aeronautics, architecture, radio
transmission, surgery, music – the gamut,
indeed of art and science – all work, in dealing
with things animate and things inanimate,
under law because nature herself works in
this way. Since the very character of law is
order, or constancy, it follows that all that
happens will repeat and can be predicted if
we know the law”– R.N.Elliott (1871-1948).
UNIVERSAL PRINCIPLES - 3
 Vibration - creation is continually in motion.
 Polarity - consists of positive and negative forces that emanate from a singular origin.
 Compensation - Sir Isaac Newton’s third law of motion describes this phenomenon as “for
every action, there is an equal and opposite reaction”.

NATURES LAW - 5
 Non-linearity - pattern and form appear to unfold in punctuations of alternating directional
movement rather than developing in a constant, linear straight line.
 Fractal - a term that describes patterns that are ‘self-similar’ on all scales of size. A fractal
object looks the same when examined from far away or nearby.
 Proportion - patterns evolve and measure to a harmonious set of mathematical ratio
relationships.
 Relativity - patterns are repetitive and intimately linked together through their relative
relationships – also termed as interdependency.
 Hierarchical - sets of patterns build into varying degrees of size which necessitates the
categorising of each so that the relative proportionate relationships can be determined for
ongoing development.
CHARACTERISTICS - 8

Market prices trend and counter-trend in recognisable patterns

The patterns are repetitive and unfold seamlessly forming interdependency
There are different sizes of patterns that form a hierarchical system
Progress unfolds into a specific five-wave patterned structure
Regress unfolds into a specific three-wave patterned structure
Wave 2 (of a five wave structure) never moves beyond the starting point of wave 1
Wave 3 (of a five wave structure) is never the shortest wave
Wave 4 (of an expanding five wave structure) never enters the price territory of wave 1
PATTERNS - 13

 Impulse-expanding
 Impulse-diagonal/leading contracting/leading expanding
 Impulse-diagonal/ending contracting/ending expanding

 Zig Zag-single
 Zig Zag-double
 Zig Zag-triple
 Flat-horizontal
 Flat-expanding
 Flat-running
 Triangle-contracting
 Triangle-ascending
 Triangle-descending
 Triangle-expanding
ACTION - REACTION WITHIN UPTREND

(5)

(2)
(3)

(5)
(1)
(1) (4) B
(B)
(4)
(C)
(3) (A)
(A) (2) (2)
(3)
(C) (5) (B)
(4)
 (1)
 A (1) (4)
(5)
(3) (B)

(2) (3)
(1)
(A)
(4)
(C)
(5)

(2)
 ©
ACTION - REACTION WITHIN DOWNTREND

(2)
 ©
(5)
(C)
(4) (A)

(1)
(2) (3)

(3) (B)
(5)
A (4)
 (1)
(4)
 (5)
(1)

(C) (B)
(3) (2)
(A) (2)

(3) (A)
(C)
(B) (4)
(1) (4) B
(1)
(5)

 (3)
(2)

(5)


Correlative Ratio Extension Ratio
 ELLIOTT WAVE PRICE FORECASTS FOR 2010

 Stock indices surge higher into January/February, but then completes

counter-trend advance that began from the March ’09 lows. Begins
sustainable decline lasting until Sep.-Oct. 2010.

 40 & 24 month composite cycle depicts modest price decline during this
period but identification of Elliott Wave double zig zag pattern during the
last year increases probability of a double-dip to re-test ’09 lows.

 US$ Dollar (index) is generally bottoming, but could sustain a slightly lower
low than 7417 before turning higher for the next sustainable swing lasting
12-18 months.

 Commodity prices have advanced into maximum upside objectives and are
approaching levels that are likely to record the highest prices for the entire
year of 2010 – sizeable declines ahead for base metals & oil.
“Every movement in the market is the result of a natural law and a ‘Cause’ which exists long before the ‘Effect’
takes place and can be determined years in advance. The future is but a repetition of the past…Everything
moves in cycles as a result of the natural law, of action and reaction. By a study of the past, I
have discovered what cycles repeat in the future” – W.D.Gann

Cycle work is derived from two original sources:

W.D.Gann
E.R.Dewey, Founder of the Foundation for the Study of Cycles

Gann’s Major Time Cycles: Dewey’s Major Time Cycles:

 84yrs from: “Cycles - The Mysterious Forces
That Trigger Events:
 60yrs
 17.75yrs
 50yrs
 9.2yrs
 40-44yrs (half of 84)
 3yrs, 5 months (40.68 mths)
 30yrs (half of 60)
 2yrs (24 mths)
 20yrs
Other Cycles:
 10yr
 36yrs (also 18yr)
 5yr
 8yrs
 1yr
 6.5yrs
S&P 500 | ‘Preferential’ Count #1
The ‘Deflationary’ Scenario
From ‘Wheels Within Wheels’ - by Dan. T. Ferrera, 2009 | http://www.sacredscience.com/ferrera/
Techsignal – Foundation for the Study of Cycles
S&P 500 | ‘Alternate’ Count #2

The ‘Inflationary’ Scenario

XETRA DAX 30 | ‘Preferential’ Count #1

The ‘Deflationary’ Scenario

TRENDS FOR THE US$ DOLLAR

Correlative Relationships ~ S&P | US$ Dollar | Copper

Techsignal – Foundation for the Study of Cycles
 END | FIN | ENDE

services@wavetrack.com