•

Edited by
ROBERT R. PRECHTER, JR.

INCLUDES:
The Story of R.N. Elliott
The Wave Principle (1938)
The Financial World Articles (1939)
Selected Essays - 1940-1942
Nature's Law - The Secret of the Universe (1946)
 ...... Ne.... DI....

Ralph NelIIon EIiolI (1871-1948) led an advenlur·

OUI and produdive tle. He ~ a temarkably
tueeeSIfuI aoc:ouoting career. inYoMng book
8Ulhoi1ll1ip. fI1lIllIIZine oontJb.JIiorw. lixl........ lraWll
and ""'" Ii U.S. Slale Depar1Jrlert ,""",Ill......
EMotI pc.mlitlhed his tnt book on !he SUIdl matkeI
mille lIlIlI of 87. N1 ill'ploallc:o, to IWl)'OIlOI facing
hill "dec:IlrIing" yea... EIiol1'. evident geniu.
,MChed lui ~ i'I fie. dec:ede of his lie, 'Atl&'l
he broI.Jght Ii great gift of Ia 10.. "'gii III mao*lnd.
1

EIott _ of lhaIllIf8it of breiidi, Ii truellCholar i'I

lhe plllCtlcfol wond of 1iIiinoe. l-k ~
Iheoly 01 itOdI rnatkiiI b8haYIor goes way biiyond
IIle UIUOII Imilalioni lhaI lIrii thaIa:tellitic 01 !he
bulk of !he 1itenduN. .... A. l-lllmiIIc:w'I Bc*ln,
Iooodet of !he Sank ~ ~ iiild. "He de-
Viiklped hIii pll..ciple ir*' Ii ralionIlI method of
itOdI matkeI aniilyiii on II .:ale _ beIor1o
lll&.it*Kl."

11'1 '-:to !he Wave P110 ~ ill far ITIOIe lhan Ii use-
fullll'llllyticell mettlOd. <Mr!he years, • has had Ii
pn;lb.i1d eIJea on lhoM .too not ony have !he
llblIily to ,eoogou. .Iheoly of 1o'.'llllll8 pnIdicaI
\IlIk.e, but who can apprec:liilii !he • I ltiillc beau-
ty 01 !he hI.man ellpIIrieolCe n!he iIbBlJiLl Thll
WI.,. Pt. lCiple has rucinliliid philolophers,
0'I'IllIhemllli, 1*fd')Io ....", lheobgIa. . and
INnciers aIikii. Now. IIfIef being out 01 pm lor
"'" , lhe CIIigO'\aI worQ 01 R.N. EIiolI havii
bMn i'llhil DOli ...... , .. hl.lItIbne.
 R.N. ELLIOTT'S
MASTERWORKS
The Definitive Collection

EditH, fonwonld, ",,11 with 01 biogNlpJry

by RoIwrt R. Pnclrter, Jr.

Published by New C1aaaiea Library

Th1_ One

IllllllllllllllllllllltI~
EVHH-LAR-eKZS
 R.N. ELL/07T'S MASTERWORKS

Copyright C 1994 by
Robert Rougelot Prechter, Jr.

Fint Printing; September 1994

Second Printing: July 1996

Printed in the United States of America

For information, addrea the pubt~hen:

New Cluaica Library
A div~ion ofEUiott Wave In~ational
Post Offict! Box 1618
Gainesville, Geo'lPa 30503
USA

The material in this volume up to a lll8.lrimum of 200 words

and/or fourchart.a may be reprinted without written penniaaion
of the puhlisher provided that the 8ClW'Ce ~ aclmowledged. The
publieher would greatly appreciate being informed in writing of
the "...., of any IIUCh quotation or reference. Otherwi....11 riirhtl
are relltlrved.

ISBN: 0-932760-37-0

Library ofCongresa Card Catalog Number: 93-87631

71iis 600(.15 tft,aUAu4 to
lUfn4JtlM ~rtJSt,
a t40r frinu£.

,.
 The Foreword and about half orthe biography were initially
publilhed in TM Major Wor" of R.N. Elliott (New Clauics
Library, 1980), which il now out of print. ThiIJ volume feature.
a greatly expanded biography, uPftaded footnotea. and the
Selected Euay8 lIllCtion, makini R.N. Elliotf. Maa~rwor.b a
truly comprehellllive anthology of the author'. important
writinp. Compl"tiJlta ma,y wUlh to obtain R.N. Elliotf. Momt
fAtt",. 1938-1946 (N"w Cl...ics Library, 1993), which oontaill.l
all orhia additional publicationa.

,
 •

ACKNOWLEDGMENTS

A number oCpeople have been instrumental in thai project.

A.J. Frolrt provided a copy of 'I'M Wot>t! Principk Illld copjea of
the Elliott Wa.,. Supplement. too the BaM Cndit Analyll, and
collabMated on the fore'llfl'lrd.ing comment.. Alfred H. Kingon,
editor-in.ehief of FiNJ/lCUU WM!d magazine, i1nerouely eoD·
....nted to the republication crt Elliott'. 1939 article•. The New
York Public Library yielded much information, and ia the only
library Imown to have. photoa>py aIth.. oripnat Natun'. Lew.
Cl.ire Chartrand, an .uoci.te of the late Hamilton Bolton,
helped dear up a few cloudy areu on the avail.bl, reproduc-
tiOIlll. The Library of CofIiI'eU provided the material for the
Selected Eua,ya lIeCtion.
One of the main reuolW. compRbemrive republicaUon of
Elliott'. worb has not been Ittempted before 'If AI the prolIpect
of the formidable ilhatratina job neceuary to do jUltiee to
Elliott'. conoepl.8. Hi. two boob are rather roughly illllAr.ted
and. mere phatographk reproduction would not have lIUffic:ed.
Robin M.ehdnslri ~Uy tackled thitjob, and 'If' are proud
to featun her wwk herein. Arthur Merrill of Merrill Analr-il,
Inc. provided m. invaluable photographie talomtl toward the
reduetioo of the illuatratioll8 to eaDlllr&-ready lize. The ropy
edili"ll for the C\1lTelIt edition 'NO dODe by Jane Eltell and Kareo
Latvala. The jacket design Wall erafted by graphics artillt Pamela
KimmOnJI.
For aeknowledgmeDIa relati"ll to Elliott'l biography, _ the
Authora Note 00 page Ill.
 CONTENTS
p ...
I ACKNOWIJ'iDGMENIlI
I FOREWORD

.
13

M
... BIOGRAPHY OF R41" NEI.SON £Ilion

,
DIE WAVE PBJNCIPLI UlWl)

II
Rhythm in Nat"""
Stock Merkel W._
"" m Identi/)'iDI tho W....
T ;......
'"lOll
1 08
"
v vi!!;;;;.".,;......
Fi8.b W.""
112 Cgrredjon.
114 Knepp",..
III ExkmmO' Of EltcooilKl'
no Boha. . . of MatkeI. Fonowinr EntnIioo...
lmcWar
'"
no
120
CorNo""",
&toq Correeliom
hUu...
121 WMn tho SlUMP' ja;o Doubt

'" TrianIl-

...
,,,
'"
14.0
1M
"'"
"'"
IX
Sp!!d, Volume and. Chamn,
MiKooIl...- N_: Cbartinr
AwlItIlllIho W.... PrInciple
Rori.... in the 1937.1R38 Beer M.rb,
HeIr MOO!!

'" x
Su.pp!.olDOlO!arY CrciN
",. W.... Prindp!ol in Oth« FWlela
'"
1M THE FINANCIAL WORlD ARTICI r 8 11m)
'M
11\6
AnDow>cinc tho w.... PriDcipl.
p"rt I
~
"" n
'" ""m
'"
'" """
"" v
no
'" ""
"" "
'"IX
'"
In "" "n
Par!.
110 Part!
1M p"rtn
1M p""m
SEI FcrKD gUrU ltfO,IH2
,,,
191
on.. Bam. of the Wn.. PrincipII
Hoor Iho W~ Principle Woob. and.1~ eon.leCion Wit.b
'"
196 nuratjM AI' Tim. E'.m""t

•
201 Market AP'll!u' _ Co.... and 1WmiJla_
204 ~ Crcl. <L Amenc.n Hi,IO!'T
209 ",. .....tUN Patt.rn '" 1.1>0 M...... 1Ot
213 NmJRm lAW _ THE SECRET or THE uNJYERBJ: UHf)
216 I"trod""""", Rhythm in Na1.Ure
220 I Tho G.-t Pyrunid GiselI
222 n NatUN" (.aw
m MiMlaMouIOlwtryation,
m m Hnmn Ad.jYitje,
229 [V DiAtU>c:live Feu\InlII of H........, AdiYltiM
'!I!2 Y CornrtiQ!!1
232 ZipAp
234 nato
237 C<mple2 ~
238 Tri.aocl..
242 III EllenMon'
:ua EJum'igu, ofE.......1jpn1
:ua ExwwioNI in Wave Ii wi Pre*'" iIak • I
U4 E............. Coun1.inl
~ Enlargemenl of Correcl>onl
2fll 5idnrj. Moyrmenl.l
us vn Itrecu!ar Top.
2110 vm A11en1.tioto.
21\2 IX S..I"
2M X E:aomplH (Au.Hollihton A'1IJ
269 XI The 'I'hir\ftfl Y.ar TrianI!'
2M XII lttfl.lI'an
267 XW I'rit!I of GoIcl
270 XIV Patenl.l
2'12 xv T..JIDig,J Futuru
2'15 XVI Dow Joan &oj! IMtq
277 xvn Tho YoJlleot'NmI
280 XVIU Cbminc
283 XIX ltt_unant Timing
284 xx Selaetian oITn.diq Madia
287 XXI I'Yratrjdio SymhoIa and K>w Thq .... Dio<o¥erod
:l88 Ilat.io Rultr
289 XXU The I.w <If MQljon
292 XXIII '"'" Gteo.t o..p..-
294 XXIV Erno/>ono.J. C)'clM of Individual.
'" XXV ..........
300 XXVI Mj_J1,ofQUl
300 \lq!p!DllofW._
30lI CirrlM
301 A.B B_
302 XXVII The 1!l.42.JlWj Bull M.Get
30ll R«rlow ,pc! Cqncluoion
3lIlI Bcferu_

,
Copyrighted material
 ,
FOREWORD

Hamilton Bolton aid in 1953, "For every ODe bWldred in-

vutonl who have heani of the Dow Theory, there is probably
DOt one who ltno~ about Elliott'. Wave Principle.oln the aer-
vice of juAtiee, the time hu eame to remedy thu overaitlht of
hutory.
Fordecades. demand has ui8ted for reprinl.8 o£Ralph Nel-
1100 EUiott'. major writinp, but until now no one hu Men fit to
bring .U the boob and articles together in one profeuioully
ilIlll1trated vol\lltle. I undertQok tbi, prqjeet in reapol\$e to de-
m.nd from ......denl of Frwt'. and my book and out ormy d....p
concern that the form oftlMo original di8eovery DOt be loet in the
duBtbin ofbilltOry. It ie for those who have an llPPnlCiation for
the hi.torieal record and who oriBh an undenta.nding of the de-
velopment of th" Wave Principle throuch itll dilKXlVerer, R.N.
Elliott, that thia book ill publiJ1hed.
Hiatory ill replete with example. ofinnovaton and discov-
eren, men ~IU'II or even centuries heron their time, wbOR ide..
reached lID far ahead of their contemporariel' thu they were
ignored by the profeMionl.l MtabliAhmellt of their cay. While
Elliott wu not ignored, he mofi certainly wu not affon:Jed the
recognition he deaened,
In my experillnce, there are two eategoriN or people who
have atood in the way or providing Elliott'. W.ve Principle a
wider audience. The fi,..t i. made up of thoae who ~ it, in_
cluding both thoae .... ho dillmiu any RUch idl!U out of hand and
thoIIe who graJlp the theory but chOOlle not to believe it beca\llle
they will not erpend the energy required to find out ifit ill true.
A neutl'al rNpo...... to UIlrt!uonable rejection of th. Wave
Principle would have been impoeaible for the discoverer ofthill
remarkable phenomenon, who undoubtedly reared that hia diA-
COVeT)' would go entirely l,UllKltioed if he were not able to c<.>n-
vince at ll!Ut a portion of the invelrtment world of ita validity.
The eloquence ofTM Walle Prindpk and the inteDllity ofNature'.
Law partly derive from Collina' and Elliott'1 desire to convince
the invelltment utabliahrnent not only thlt the Wave Principle
wall I vllid theory, but a1Ao that it wu the truth behind the
prugreaion of the Itoek market, and that in fact it reflected the
la.... govemini the form oCtile natural ptIth of all human activi •

•
ti"". My goal with thit book, however, is Dot oeeeMarily to con-
vince reade... that "EllioU ia the ~," but merely to lIlllke aVllil-
lIble knowledge oCthe WlIve Principle to those who have enough
lIel\Ml lind energy to WIe it.
Aa for the lleCOnd category, I find that among thOle people
who understend the theory's immeDlle value and apply it eue-
eeufully, lDOllt have done their bellt to keep it Heret. I have
been IUlked lIeveral times by Itudentll of the Wave Principle to
refrain from pubJilhing any matenalat all on Ellilltt'l great in-
novative work for fear that "tou many" people would etart using
the Wave Principle in their inveetmeot timing, thua diluting
the utility of the theory.
I must lay that at times I have had lIeCOnd thoughta. The
WlIve Principle frequently can call turnlI and projec:t. tergeta with
IUcll incredible accuracy that I mil find my....1f amazed. As II
tool for eIplaining the otherwise surprilling and indecipherable
w~ ofthe market, it hae no &qUill.
However, the relIder mUlt realize thllt, dl!llpite the buic
IJimplicity of the concept iteelf, "Elliott" analysis is not that euy
to do if your goal it to do it ..ell. On the other hand, it is very
l8IUIy to do haphuardly, and mOlJt pou1.--time practitionere do ""'_
aeU)' that. Even if the Wave Principle were to become popular,
there would be 10 many opportunittie haelu Doating about their
ill-considered opiniona that the l.l'Ilth probahly would be 10IIt to
the investment majority in the elUJuing babble. The degree of
uncertainty in wave pattern rKOiIlition, moreover, enauru
enough forecasting erron that the averagt! penon will dismillll
it after dillCOYering the imperl"ection of ita application. For moo
people, the best approaeh, even by far the beat approach, is not
enough, ... they demand the Holy Grail of perfection.
In Ilddition, let me say thllt even among devotees, it is one
thing to recogniu that the Wave Principle aovems stocl< pri""s
while it is quit.e another to predict the nm wave and still an-
other to profit from the ue.rciee, ae anyone ..ho ever hu at-
tempted to turn a good market forecasting Ipproach into money
knowll rull well. None of us can eecape our human nature, a
natunl that involvea us in the univenal deaign whether we wish
it to or not. I have met few men who invest or trade with a eom-
pletely rational Pl'Olll"aDl baaed 00 re8llOnable probabilities with-
out allowing greed, fear, erlraneous opinions or irrelevant
 n

judgmentll to interfere. Tolman ofluperiordillcipline, the Wan

Principle will yield a fortune; but then 80 will many other meth-
<Ida. What no other method of reading the market am give you,
however, which the Elliott Wa"" Principle mUM pouible for
the tim time, ill • framework within which to obeerve, reflect
upon and eqjoy the beIIuty of nature in the lIOcial activity of
~.

111..... in the end, I find my.telfpenuaded by the nobler wonb

ofbotb Elliott ud Collinll, whoagreed in their lett.en thet what
is important above all elM ill the ".eean:h forTruth."Thia ..ucll
ill, projeet for.U mankind, and keepioil dramatie new conoepta
from othen will only hinder prognu.
If the Wave Principle it nature'. w.:y of giving WI' peel< at
the future, we mUJIt nevertheleu realiu that it is only. peek,
not the full panorama. Foretelling the future with e:u.ctitude
all the time ill not nne oC the bleu:inp available to man and
likely never ...ill be. Elliott him.If, dupite his great achieve-
ment, ...... not fanatical.bout hill ideu. He knew that the Wave
Principle, for all ofitll value, wu not the be·&lI and end.all.-rhe
diacovery ohhe Wave Principle," he said, "hu only opened the
door to real progreu..
A1J you n!8.d EUiott'. worb, it may h..lp to recall hd wonh
of guid.nce to Charla J. Collillll when lui uid, ~I hop' you 'po
pn!Ciatoo that application of 1"\11... requirM eolllliderable practice
and a tz"IlnqUU mind."

- Robert R. Prechter, Jr" 1979

•
Copyngnted matanal
 A BIOGRAPHY OF

RALPH NELSON ELLIorr

by

Robert R. Prechter, 'r.

•
Copyrighted material
 AUTIlOR'S NOTE
Until now, nothing ..hll.tIlOever had appeared in print per-
tainina'to Elliott'a per1lOna11ife nr hiA activitiea prinr to di!lCOV-
erina the Wave Principle. The facta I WIl.8 able to put toeetber
WeN! gleaned partly by atudying hill. boob and market letwnl,
c:orTeapnnding with the Library of Cnngreaa, and talking with
fnnner uaociatea. Howard Fay and BN!nda Taylor wera helpful
in providing biographical information. Journalillt fetu Kendall
followed eevera11eada to ~lIent reaull. Uk" • determined pri-
vawlnvntigator, Market TflChniciana Aeaociation member
George A. Schade, Jr. in over two yean of re&earch "Y.temati-
cally uncovered a wealth ofinfonnation on Elliott'alineage, fam-
ily and geographical locationa. Elliott Wave International'e
Michael Buettnere:lplored the U.S. State Department'. archivee
to come up with atartling informetion on Elliott'a role with the
Coolidge Admlniatr&tion. Marie Eliadea took the photo ofEliiou'.
houae in Loa Angelea. and Paul Brodtkorh took the photo nf
Elliott'.......idential hotel in Bro<Iklyn. My deepetlt gratitude,
however, goea to Chari.,., J. CnlIine, who Hnt me the entire file
of early letwra between Elliott and himaelf. Not only wu that
6le one of the moet exciting coUeetiona of material 1 have ever
read, hut the lette.. told more tlan any other lIO\Irte about the
story nfEliiott and hill. diAc:overy nftlle nature nfmarket behav-
ior.
Significant information Wll.ll nbtained from the following
lIOurcea; U.S. National Archivea; U.S. ~partment of Staw;
Church of JflIIuA ChriAt nf Latter-Day Sainta Family Hiatory
eentu {AZl and Library (UT); Fairchild Sona Funeral Home,
Inc., Garden City, NY; Kinga Park Paychiatric Center (NY);
Little, Brown'" Company; Mra. R. M. MacLaury: FelTOClUTiIea
de Guatemala: Pottawatomie County Regiater of Deeda (KS):
Loa Angelea Cnunty RegiAtnlr-Reconler (CAl: Lexington Genea-
logical and Hiatorical Society, Inc. (IL); Grac:eland Cemetery
Aaaociation (ILl; Livingaton County Circuit Clerk (lL); Mont-
clair Public Library (NJ); CaliforniA Department of Health Ser-
vicea; Inglewood Park Cemetery (CAl: City of New York
Department of Health; Arizona State Reeearcb Library: Arizona
State Univeraity Librarillll (including Hayden): Pboeniz Public
Libnuy (AZ); Dominy Memorial Library (ILl; MaryeviUe Public
"
Libnlry (KS); Oregon State Univenity Library (OR); Brenau
Univenity Library (GA); Georgia State Univel'llity Library;
ChNtatee Regional Library (GA) and GeineMlJe College Library
(GA).
A. you read the atory ofRalpb N,,\..,n Elliott, you m-.y be
as intrigl.led .. I am t.h.lt. theory lJ(I remarkably unique, when
compared to other methods ofmarltet analylria U that time and
IIlVell tboae of today, could have ~n developed.., late in lif.. by
• man not of Wall Street baekground. Bolton uc=ate!y de.cribed
thfleDOnnity of Elliott'. feat when he Hid that "he developed
m. principle into a rational method or-toea market analysia on
• /ICl.1e never heron attempted.-
A BIOGRAPHY OF RALPH NELSON ELLIOTT

A man',flif., Jb. pi«» 01 !6pUl1)', is mMJ. up 01 many sun., wh#dl

... ~ mM<.•• pan.m; ftl ~I• • ~ 0fHt IIf)tJ 100/0; ., it .",.
In"'"
f1(1( 0I'iT dHlI'OyS ltIot ~, blJI gtVu In. flrn laJse 'IlIIlw. -
- Leamed H;wv:l

Wave One: The FOI"IIUltive Yean

Ralph Neoon Elliott'. family tree oont.ained IIOme dimn-
guiBhed Americanl. Hil maternal great grandfather, Jonathln
Hamblett, foughtaa a private militiaman at Bunker Hill during
the American Revolution. He waa wounded in battle and later
appointed one of General Washington'l bodyguAfiU. Elliott'.
grandfather, Hugh Elliott, WIUI • veterln of the Wlr of 1812.
Hugh Elliott was residing in Ohio, then at the nation'. we.tenI
frontier, when hilllOn FTanklin, Ralph Elliott'l father, 111'11 bom
in 1835. Franklin became I merchant and mamed VillPnia
NelllOll, who came from a wealthy flnning family near Philadel-
phia, ....he,.., her brothen and ei.ten each fenned 80 a<:ree. In
1865, at the dose of the Civil War, Franklin and Virginia Elliott
had a daughter. Anna May. She WIUI three yeara old when the
family moved to Maryaville, Kall.HIUI, allIIUlli community by the
Big Blue River in the northeaatern part of the ltate. Franklin
hed oontinued hi. father'. practice of heading west with the
nation as a whole, u at that time, Marysville WlllI a bu.etling
edge.-:>f-civilization stop for the Pony Express and travelen on
the Oregon Trail. The family'e eeeond (and lut) child, Ralph
NelllOn Elliott, was bom in Marysville three yean later on July
28, 1871. TIM! family then moved I few hundred milea ....t to
Fairbury, Illinoill, a small and pfOllperoUll fanning oommunity
about 100 miles lIOUthWetlt of Chicago, apparently a better loca-
tion for a merchant. The femily lived on Elm Street, where El-
liott .pent hil early childhood.
By the end of ISSO, Elliott had moved with hie parente
and .ieter to San Antonio, Te..... During hie teen years, he
learned to epeek end write Spanieh Ouently and developed a
love for Mexico, the border of ....hic:h wall 150 miles to the IIO\lth.
He vieited Mexico at timllB during hill youth and in fact lived
there wben be was 15 to 16 yean old.

,.
" R. N. EuK)tT'$ MAlITDfIOUS

In 1891, at the age or 20, Elliott len home permanently to

work on the railroads in Mexico at the heirbt of North America'.
great railroad boom. Shortly thereafter, in the early 18908, his
family moved to La. AngeIN, California, where hiA parente and
lrister t<!mained for the rest. oftbeir livell. Elliott stayed in Mexieo
thro\li:hQut hill early tw"ntiN, w}woe he .... uemp!oyed .... riooely
.. a lineman, train di8Jlatcller, atenographer, telegraph opera-
tor and at..tion qenL
Around 1896, Elliott entered the accotlnting profeMion,·
though by what educational path i" unknown. BecaWlOl he had
already learned the indUlltl)' from the bottom up, he developed
the specialty of railroad accounting. FO!' the followin, twenty-
fivlll )'ean!l, ElIio" held l!JIO:!'Cutive poeitiOM with" Dllmber of 0;:0.....
potation., primarily railroad companietl, in Mexico. Central
America and Sou.th America (including Argentina and probably
Chile), many of which wen! U.S.-owned.
In hie three decadellllpent mOlltly in that region, Elliott be-
came intimately familiar with .11 claue. of people. -Latin
America ia a land ofextrllmea,· he later wrote in a manUKripL
"Rich" and poverty, health and aickneM, enliihtenment and
dirNt ignorance, virtue and vice rub lIhoulden continually, pre-
IIf!nting conb'uta perhape u atrikiqu in any other partofthe
......Id.· He colorfully deecribed IocallJtylee of Jiving that ~neeted
great affluence and lUIUl}''' well u abject poverty and eQ.ua-
lor, .. ~neeted by the following ucerptll:

'The wealthy L.tin American build.. ~Ifa palace, driveoo

npenaive automobil_, pI.,. bri<J&e f.,.. a doll..-.,.. monla point,
nee. hie tboroua:hbrede, and enjoya hi. eulUlive c1ube, hie
-.II appoin!A!d born" and ita leviehly ee..-f table. Hie wife
and cbildren are exquilitely druHd, and are denied nothing
th.t mooey can buy; their Engli.h and French are Inothingl
ehnrt of perfect.. Hie eountl')' houee will bout e ewimmin. bath,
tennia eourta and landllc:.pe gardene, ao<l not infrequently e
rae&-trac:1t and e IOlf COW'IIf!. Even (there,1 hie iUeeUlll'lI fur-
niehed with the e...... ebolee imported wi"'" and viande, eerved
by perfectly trained domMtiCi.

'Some nHaJ'Chen mey dieeover libr..., ..-.:ll of e Mr. R.N.

Elliott (F.C.A.) .. bo _ • stud,- r.,..
the lnotituta or
Chartered
Accountanta in Alntreli.a. ' " ' - reeonla refel'" In. different pe........

,.
 BWgraphy
"
The bome of the ptJOII ia tdU&11y a mere .bacl< whoee walla
and roof are olleave. and p-aa. The noori. bare earth; furni·
ture, if any, and cooking utenail. are of the _ primitive
kirK! imqinable. Animall of all ~ript.ion•• bare the d_ll·
ill(place. Dop atld pip [proYidel wannth. Thefllth and ~ua­
lor ia beyond deecriptiOil. They are ignorant ... atld ridden with
aupentitiOll, land have] little deIIino for improvement. When
drunk, ... a thougbtleu word, alligbt differeme ol opinion, an
acc:ideDtal puab. fW a quan-d over women ia .uffic:ient to pr0-
voke a bloody pit.<hed battle with maehetea, .... u1tint in faa....
ful. guheo atld not intn.qu~tly daath.

Whfm rec:ount;1li a number of penonal anecdotes iD the

same manUKript, Elliott revealed hia nperie~a to be oonaid-
en.bly more adventurou.o than OlIe might &IIII\lIDI! liven hi. pro-
felUlion. For eIl1llple, in one JHWUl(1l he recalled thia incident,
..hich probably involved employeee at one of the ooltlJHlDi...
where he worked:

So..... idea ol'"Ule innatolllllvapry ol'"thep«>M' mll,)' be gath_

ered from an experienca oftha write<" lIOfDa little time back, in
a CentnJ American port. Two la~. both hopeleMly in.-
toxieated, were arrested and thrown into jail for fighting with
Imi""" on the beach. On the following day, when they "",no
relatively...bet, they were interrogated by the Port Comman·
dant, and profeued to be tha belt of lnenda, statillf that they
had been fighting "par glillo' (for fun). The quality ofthi. grim
amlltement mll,)' be gauged by the faet that the I. . fortunate
of the plll,)'etI had moretban forty guhetI on hia race and body.

Elliott 8.lplained that wealthy landownen, with wborn he often

stayed, typically looked after their laboretlllB iltbe)' were an
extended family. He teClIlled thia lICene illu.strating the role of
women in carryilli out thia duty:

Late at night, during a hea¥)' thll.luieratorm, a little Indian

boy came to the door olthe f.armhouae (where Elliott waa ata,y.
illfl and informed. the family that hia brother waa dyina;. Qui_
etly calling ffW her horae, and paclcillf IIIme medicin"" and
proriaiona in a buket, (the )'OUIlieI' daugbter of ~teenl
let off for a three mile ride through the rain and wind. The
write<", who wu privilepd to ac:c:ompany ber on thia errand of

,.
'"
mercy, can vouch for the di..,.,mrortll of the journey, and aleo
for the utter lKk of fl'atitude dilplayed by the unfortunate
euffenr, who proved to be menoly Wider the innuence of an
overdoN 01 alcohol.

BMidea revealing hill relpoDllible nature and hinting at a

lubtJe.-enBft of humor that he .u.played more than once in hi,
profeMional writing1;, tIli. pUnS. at leut info:>rmt UlI that El.
liott Willi an aa:ompliMIed enough boneman to ride three miiN
thrt>ugh. thund"'J1It/Iml in the middle of the night. He further
COlDJDellted, "{The foodl i8 of, moo uninvitinr nature.... No hem
that walu, flies or awima i. deapised from the standpoint (of
edibility]. The writer has seen lIQuirre1A, lizards, parl'llU. foxell
and even anUN, cooked and eaten with evident guato.- Theee
myriad obMrvatiolUl eould not have been made by I. man who
lpent all hd time in comfOJ'Uhlll hotala or corporate offlOlll.
The chal1enae of eonductina bu.in.,.. in primitive condi.
tions and in • different culture, particularly one that continu-
ally preltlnted llItfeme penonal and political nib, was
partieularly daWlting. N EJlioU explained, the "lack ofmeans
of communication, the .hortage oflabor, landl almOBt impau-
able road8" made induatry particularly difflcuJ.t. "It may take
one man .U day: he Hid. "to haul. 1000d of coffee (by o_rtl
from the plantation to the railroad and mum empty." The per-
~nality of the locala ,I~ preaented ob.tac:lel that had to be
understood and dealt with. In deacribing aubordinatea' method
of dealing with IUperion, for i.n.Itance, Elliott obIervecl, 'The
vel"J antitheail of the [bluntJ North American, be win anawer
quutiooa In a oourteoul manner but calculated to please for
the moment,"lrreapect.ive of the truth. The teJion wu ,1.10 "con-
.-tantly -oring with intrigue," he noted, in prefacing thia di.
CUllion of hil Iituation in Guatemala yeU'll later when that
wuntry'l ptNident died,

From niaht to morning, the wbole COWltzy hu t-n thrown

into eoof'uaioo. Soldie... are patrollina the atl'eetI and are atI-
tielned at all the public buildi.Daa- There il manifut reluctanee
to meet (JUt elf doon, and IpeculatiOO il rire .. to what turn
eventl may taIuo. On the one hlllld, nothing may happen. On
the lither, a r... da,1 may _ the whelle nation pJunpd into
blllGdy ci't'il war, with ita attendant harrowini _ _ of_CIDlen
and children beillllhClt OOWD in cOld blood, elr pneral chlOl

,
 BiOflraph,

and of murder, rape and plund&r, Everyone reaJiza, though

perhape unconaeiouely, that be is living on the brink ofa lmol-
dering volcano, aDd that in the very nature of t,hinp, the ......
ment of IflUtestaeenUng tranqllility may precede a devutIltina:
eruption.

An individu.alauch III Ralph Elliott., who Will at ease in dealing

....th auch an environment., will certainl, wellauited to handle
tbe tl'anaitioDll £rom "tranquility" to "devllltating eruption" in
the Irtock market.
Elliott proepered in hia special niche not only by being rug-
ged and adventuroua, but ironicall, by being an ata'ImpliMled
-people penon" III well Elliott later explained that Latin Ameri-
CllfllI place tremend0U8 value on "a auave and engaging penon-
ality: a "never failing urbanity," above all other character traita.
Elliott'l complex ability to deal with all atrata of lIOciety, hia
reliab or the el<tremea of Latin American life, and hie inaightful
underl!ltandinjj: of the character of the people, made him an in-
valuahle _ t to U.S.-hued companies whOlle own... preferred
to reBide in a more .-table eetting atateside.
On September 3rd of either 1902 or 1903, Elliott married
Mary Eliubeth Fitzpatrick (1861l19-1941), who wu two or three
~ara hie eenior. Mary wu a naU" New Yorker but wal appar-
ently working in Mexiea, probably with a te.m of U.S. curTency
refonn advieors to the Mexican government, when they met..
Thie city-bred !ruh Catholic woman elthibited a lubtltantial pio-
Deer Ipirit in traveling with her huaband throughout the Latin
American region in thoee dayl, although all indieationa are that
they led a relalively comfortahle middle cIa.. life, not infre-
quently ...clalizing with the well-to-do. From time to lime, the
couple returned to the U.S. to viait Elliott'a family. Once wu in
Fehruary 1909, when hia mother died. She ..... buried in Ingle-
wood Park Cemetery in Inglewood, California, where Elliott's
father and liater were later buried.
AI. Elliott praeticed hie profeaeion, hia corporate poeitiona
became more and more important.. The main relUOn wu that
hia eJ:pertiM waa proving much broader than aimply account-
ing. AI. later documenta reveal, hia value to a compllny .... pri-
marily in the area of buaineaa reetructuring. AI. he put it in a
book in 1926, "Accounting, like everything elae, ia undergoing
very radical steps in evolution: it ia becoming Mrvieeable in a
vutly broader Mnee." Fulfilling that vieion, Elliott fmancially

,
 R. N. EUJOJT's MAlI1V.f/fOIWI

,."".-ganw.d num.eroua corporatioll8 by inltalling new Iyatema

of record k~ping, Inticipating futun expenditurea, and apply-
ing a principle of pereentage alloeation ofrevenues, which in a
maguine article he later eaIled "the only llAfIe method ot con-
trolling any bu.aine. lIUc<:eIIf"ully." Much like an independent
buaineaa conaultant, Elliott ultimately lerved many elienu., 11.1-
thoogb btl approac:h we.. to ai.gn on with companies one at a
time, remaining with eaeh one until the reatru<:turing waa com-
plete. Elliott mll5t ha", RIved many corponotiona trom ehronie
loueII 01' increaled their profitability, .. over the yeara he earned
a lIUblrtantial reputation u a bulIinelll organiution upert.
The ElliottB might well have remained in Mexico for the
reat rJl their live., but cin:umNncea ultimately torced their re-
turn to the United Statel. Beginning in 1911, Mexico experi-
enced a HTies orviolent revolutiolll that extended over the next
IflYeral ye..... Relationa between Mexioo and the U.S. were
atrained by the Wileon adminiatration'a refuaal to reoognize the
government ot Victoriano Huerta, who "",ized power in early
1913. Temiona increaaed. aharply in April 1914 wben U.S. Mil.·
rinea o<::eupied the Me.x:ic:an _port orVeraf;J'\lz to retaliate tor
the aeilurtl of a party of American .ailo....
In July 1914, Huerta'agovernmentwu overthrown, but the
ruulting COlIlition government lOOn aplit, and civil war broke
out. On March 9, 1916, rebel general FrancilOO "Pancho" Vina,
who eontrolled mueh of the northern part rJl the eountry, led an
attack on Columbull, New Mexico. Preaident Woodrow WiltlOn
ordered General John J. Per1Ihing to puraue the rebel army acroelI
the border and capture Villa. The expedition tailed, aerving only
to ille!'elUe anti-American aentiment in Mexioo. ANaulbl on U.S.
citUell8 and ~etionorAmerican-4wned property in the coun-
try were widely reported. Railroada appear to have been a par-
tieular target ofboth the rebels, wlHl destroyed trneka and rolling
atoek, and the federal government, which began to nationalize
the railroadA in mid_1914. Nationalisation probably affected
Elliott's employment aituation.
When the Marin.... landed in Veracruz in April 1914, the
ElliottB moved to Frontera, a small port town on the Gulf of
Me:z:ioo near the western edge or the YucaUn penilllula known
for ita Ml\Y8lI a~haeological aite.o. Elliott may have come to the
region with the railrnad,'" the main C08.stalline from Coatza-
COlIkoa to MErida rulll thro~h the area today. Bec:aulll the area
w" IHIme tor Illveral Ameriean-4wned mahOfllny plantationa

,
 Bict1mphy

and an American community of ""rta, he may han ""ught em-

ployment and ",fllie there. away from the center of political
UlU'e8t. Eventually. civil atrife throughout thtl country reached
a point ofcmil, and In June 1916, in Elliott', wona, "when the
PrelIidl!nt ordered all AmeriCllIlll out" of Mexico, he complied and
returned with m. wifl! to l.oI Angel..., California.
Wave Two: RetnacluneJIt and ConaolicbUoa
Having been thu. dil!lodged from hialongtime am of work
and .....idence. Elliott .ppe.... to h.ve underaone a period of
dilllll.tiafaction with hia aituation. Over the nezt four yean, he
changed joba twice, invl!ortiK.ted two lIthen, and lII!YI!ral timtlll
made planl to retW'll to Latin Ammca.
Nume...,.... detaiJ. ofthill period attest to Elliott'.reIt1.......
1lllU. In early 1917. he wu living at 720 Beacon AnnUl! in l.oI
Angel... and wu employed by the Type'll'Titer IDlIpe<':tion Com-
pany. On May 28. hiafatbtlrdUod. and on July 10. ha bl!pn work-
inK u the e.port manager" for Blake, Moffitt and Towne, •
wholeu.le paper comp.ny with officea in New York and Loa
~lllll and production facilitil!ll in the northwutem c:itil!ll of
Portland. Sl!a.ttle and Tacoma. In Decembl!r. by which time he
wulivil1i at 801 Beacon Avenue, Elliott .pplied for a pl.Mport
to travel to Cuba to accept a poaition with the William P. Field
Company of Havana. In JanU.llJ'}' 1918, he canceled m. trip to
Cube, applying inste.d for a pal!sport to return to Mexico to
promote ezport busilllllll for Blake, Moffitt and Towne, which
he later deecribed ... being frUlItratingly "difficult ... under ex-
ilIting conditionJ."In his pa.uport application dated January 25.
he li.ted an ambitioua itinerary th.t included viaila to Sinaloa,
Sonora, Colim., Jalieco and Nayarit in Mexico, aa well u Gua-
temala. EI Salv.dor, Hondura•• Nicaragua, Coata Rica and
Panama. The outcome ofthilljo\ll'MY on bl!halfofhis employer,
or even whetber it took place, iA unknown, u it wu not mM-
tioned in hill nut pullport application. The revolutionary senti·
ment atill in the air in Me:rico could have affected the eJlport
bWlin_ and therefore the anticipated.u.cceaa oftbe trip. Fe...•
1_ of the political climate, Elliott wu back in Ml!llico the fol·
lowil1i year. living in Tampico from June to Decembl!r 1919 and
workil1i ... an auditor for the U.S.-owned Pierce Oil CoEpora-
tion. During t.heae montha, hi. wife resided in the popular re-
IKlrt area of AaheYille, North Carolin., staying in the U.S.
undoubtedly becaWl<l oftbe potential danger that .tillexisted in
Ml!xico.
 R. N. ElllOT1's MiIS1WlIWOllKS

(R,tJp/l(pn:IbMNy
Nfison E/liolt
prior
SBVtmJJ
to -'--'I)' 1918 )
y8BfS flltrli"'J
 BiotJraphy
"
It is fortunate for biographel'll that Elliott traveled 110 much
and that upon the advent of World War I in 1914, pulIporW
wete required of U.S. citizeDll for the flf'St time. Hill vanoUi paas.
pori; applicatioDll, beld by the National Archives, contain a good
deal ofinfonnation. They reveal, for instance, that he we. 5'8"
tall, had blue eyell, brown bair, a rompleIion described alterna-
tively .. "ruddy" and "fair,- and wore eYeelUMB. Photoe taken
in hla mid-to-Iate fortiell ahow a IOU with a aturdy frame, a
hardy appearan"" and an air of aelf-llMUI'llfICe, all of which well
aervecl Elliott'. active life.
Eniott'a main pia during thia time were to perform the
type of work that he eqjoyecl and to return to the region where
he had lived mo.ot of rna adult life. He obviously found hia em-
ployment durill( thi. time unfulfillill(, possibly becauae he we.
doing buainelll development work or simple a_ntill( illlltead
of the Itruetural O!pnWng that he eqjoyed.. Hia low opinion of
.tandard accounting we. expreaaed unequivocaUy In a 1924
magaxine article:

I believe it ill we 1.0 .ay that moat IlCCOIlIltanl.l do not like

their ealli"l, and ~ being the cue, can you a>q>ect that otb.
en, ... ho ano not familiar with the tenn. and obj«I.I. will rel-
lah dilcuMiODl on the .ubjeet1 When I InU'oduced mr-elf to
one youna: l.dy and opened the IUbjeet or acc<IW1tina, abe Aid
that the very word "accounting" made her lick at be!' atom-
aeb. Now, I do /lOt like aecounting, but I do like the work I am
dom,.... I am not exaetiy an aoeountant, but poalibly the word
"efficieney" comea _ to it; however, that IOWldlabout u
bad. We an like efficiency in othera, but not in ounelvu. Now
I am goi"l to lIlpl'<Ollt my financial aDd aecountill( pilla 10
that you will like them.... WhtJt I am trying to do u Mip JOll
""'''''' """"",.!emphuiladdedJ

That last. aentenoe certainly reveaila drive that would later make
atock market foreeuting an aUractive vocation for R.N. Elliot1-
For now, bowever, that wea the furtheat thing from hia mind ..
he lIearched for IIOmethini that would challenge hi. orraniu-
tion.altalenu.
Elliott returned to La. Angelea briefly in December 1919
(perhaP'!' to be with hillliater for the Chriatmaa bolidayal, then
paeked up immediately and moved to Ridgewood, New Jeraey.
He Bta.yed there a ahort time befonl obtaining a reaidenee at 142

,
"
Weet82nd Street in New York City, where be waaliving in early
Man:h. 1920. He may have moved there becallH of a corporate
traMfer or perhapl to p l _ hi. New YOf"k-bonl wife, WhOM
mter, Mrs. Milton T.11lompeon,lived in Upper Montclair, New
Jel'HY, an affluent luburban town near the city of Newark.
Whatever the reuoo, it was oot becaU8ll he had seeured a highly
desired profeMionai po$ition, .inee he aggreuively continued
hill quest to fllKl.uilable employment in lAtin America, where
he obvioully preferred to reIIide.
In M~ Elliott apin applied for a passport, thia time to
travel to Muioo City and Tampico "to attend to IIOme property
acquired durilli a Ion, retlidenee in MeDc:o." Th1e viAit w. . to
have been folloWllll. by tnlvel to Cuba. thi. time to invmipte"
pGIIition with the C\lh. Railroad Company. Elliott'a ahilitiN ob-
vioualy WeTe widely known and highly regarded in Latin
America, lince he ..... offered tIli. pooIitiOll dNpite the fact that
it already had been accepted by IIOmllOne elae. All the company'.
vice pn"ident and pneral manager wrote to Elliott, "If we
thought you would come, we would notifY thia party that the
offer to him W1lI withdrlwn." Such energetic IOlicitatioll8 for
Elliott'allerVi.,.". ........ not unUltai. The ~it.ion he n.d coMid-
ered accePtin&' in Cuba ~hree yean before had been offered to
him in an urgent cable that read in part, "Your aerviCf!ll badly
needed." Appanntly, he wu the most talented bilingual 8CC01lD-
tant and COll'Orite reorganiler available to theN Latin Ameri-
can companiea.
Then came an abrupt change in Elliott'alife. For whatever
reaaon, be suddenly called off hi. trip and ceaMd hiI effortl to
find employment and relideooe in Latin America. Perhape the
relllOn wu aimply that in hia fortuitoUl move to New York City
he had found another place that auited hia adventuroua nature.
Wave 'I'brer. ProductlvUy and p,~ a
Elliott, now in hill early fl1\;j. . and with a new base of op-
eratione in New York City, maintained a remarkably bUly lIthed-
ule over the nen IevenYeanl. Later lettel'l to CharleliJ. Collilll
reveal that he traveled to Canada, Germany, England and
France, though for what reaeon (perlODal or buaiDeII) iI un-
known. Hillargeat company reorganization out.l:ide the railroad
field wu Amlinck "Company, an eJfport.-import hOUlle of five
hundred employeea.
 BiOfJmplly

Elliott once again decided to epecialiuo, and in reaponH to a

newly popular indWltry, quickly developed a IJeCOnd epecialty u
a buaineu coneultant to reatauranw, cafeteriu and tea. rooma,
which wu as well euited to New York City as hie railroad epe-
cialty had been to Mexico eDd Central America. He dieplayed
hie lllIU&.l energy in elltabliBhing thia new niche, and in the pw.
celIlI in<:reued hie profeuionalltatUl1l yet further, thie time by
writing for a profellflional journal. In the lummer of 1924, El-
liott joined the editorill etaff of the New York bued monthly
bWlineIM magazine, Teo Room ond Gift SIwp.
'I'houih the term "tea room" ie now quaint, tea roome were
a booming bWli..- in the 192011, and their popularity w&lIspread-
ing rapidly to the point that entrepreneW'8 from ezperienced
rutaurateW'8 to hO\l.M!wivea were trying their hands at them.
TN Room "nd Gift SIwp avenged 30 pagea an iaaue, MIld for S2
a year. and bouted 8000 profeuional readen around the world.
Elliott's anival at the maguine wu marked with aome fanfare,
with nearly a full page devoted to introdllcing him to ita read_
era. Here ie an excerpt:

Mr. EWoU dow Our Staft'

We are glad to be able to make good 10 800ll lIOllle 0( the
promi_ of a "bigger and better" Tea &om. and Gift Shop
made in tba August numw. One of the very important stepa
toward inaeued....-vice to our retlden i. ~he addition of Mr.
R.N. Elliott to the corpa of experta in the "anOIa probleUll or
our field.... Mr. Elliou will conduct a departlD8n~ d.... oted to
the fmancial ph..- of tea room oper.tion.... Mr. Elliott, in hie
con.eulting practice, hu been able to 10000te the financial Ie...,
the riolationa of .dmini.trative principles. which have pre-
v,,,,ted Ian] edeqv.ate retllm.... Mr. Elliott has the aceou.nting
background. and ",hat ie exoeedingly important, the husinea
acumen, to he or veal service to our .ubacriben.... Hia .... t.-
look ia not confined to .....o'ulling, but incllldea kindred mat.-
ten u related to the aeDera1 probIllU1I of the operation of an
eatina place.... We heve hetitated to .pp1y NCh a label u ~M,­
counting," "Operating COlIW," or ~Yinence" [to the .ubjectl.
Althouah Mr. Elliott il thol"l)llj:hly equipped in accounting
knowledge and .. a co~tant in general tea room, reetaurant
and cafeteria operatioll, he i. primarily a butinea mIlD.
 TEARoOM AND

GuS' SHOD

.......
......,..
~-~ ---- ~'

"
... _"""-
-'c_ _

NOVEMBER, 1924 ZOe. A COpy

 Bicljrophy

-- ..... _ 4 .•

-- ....
..,._
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"
-
Mr. EJliott's Column
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'"
Elliott'. monthly eontribution wu entitled limply, "Mr.
Elliott'. Column," and generally ran ,bout two pagelI. Each one
wu announoed on the front toYer and ._~niedby hiJI photo,
one ofonly two writelll' photoe in the publication. Elliott'. first
artiele, which IPpeared in tile Septemberiuue. preaent.ed ~me
bamc idelJl lod ...,licited quMtiolUl from the buaineu people who
read the maguine. SubMquent columf18 anaw"red the question.
IlUbmitted. EllioU practiced wha~ • Department of Commerce
bulletin from the time ClIlle<!. "eeientific manllgOlment," and ....
gued that aeeollnting wu "j\llt comi", into itll own" and hewm-
iog rar more than juat bookkeeping, .1 he hime"lf had
d"molUltrated during hi.JI many y"..... of company """lIuir.a·
tiOD. Hia attitude toward the food Mrvice buaineu, and to bu.i-
OeM in &enenl, i• ...,...,nably wen exp.--ed in the following
collection olcommenta eulled from hie MY"n articln:

Tea roo..,. apparellUy well pIItronized ..... IlUPpoMd [by the

proIIpective entrepren.eur] to be "coinin, money." (Ho..pet',l
"Survival of the FitteR" ;" trull in tell'O<llN" in other clueel
of I",u"".,. Competition;" • ,..;tal r _ . It ;" [my) object to
,,",ution p.....l*'tiv.. 0WllfI1'lI "";nat mdcono8ived ide...,.., that
failurea may diminiah.lt ia all Yet")' weU and proper tbat reci-
pea, decon.tiona, etc., ahould receive due attention, but afl.er
all. you lITe in the tea room buaineaa to make mOIle7. Many tea
room ownera may think they are makina: a profit aimply!)e.
cauM they have more mone,. in the bank at the end of each
month. but thia ia not neeeaBarily a fact.. ExpenMa which do
not occur every day ahould be anticipatad. Aaaumiq that the
financial fundamental. have been pro""rly """"iderec!., the
q\1l!ation" whether)'O\l are mWq money, and if not, WHY.
To be ahle to ucertain where the difficulty li , it ia nN orry
to keep record.. Md. tram keepill( .-orda hich the aovern·
ment may require for income tax purpoaea, one might .. well
not keep any boob at all u.nI_ thoy lITe handled in web a
way aa to gift reliahle information aa a guide for future ac-
tion. 'The aubject ia a very broad one and requireo verbal and.
graphic "planation.

Hia advice waa not merely technical but came from e:tperi-
ence. FOl'" inatanee, he urged hopeful nDTieea tint to obtain em_
ployment at a auc:ceuful elJtahliahment at any wage offered,

,
 Bictlrcphy
"
_ume u many duties u poll8ible over a period of time, and
learn the buain. . from the bottom up, a path that he billUelf
had taken in developing hia railroad ao;:l;OUll!ing apecialty. He
further adviHd that people not "follow a buaineu that dDl!tl not
appeal to them'- regardleu of the applll"ent linanciaI benefita,
an adage that be certainly lived by. Hia waminp apilUlt bor-
rowing to atart a bulinea reflected numeroua aperiencea with
companiell burdened with debt, whicb he considered one offour
primary reuona for buaineu failure (the other three bema in-
experience, inaufflCient capital end inadequete reeonIa).
Otber commentll from hie columna renected ideas thst
eerved him well in the futUTe. For inatance, hill admonition that
"indeciaion ia frequently more harmful than a wrona dec:iaion"
later directed hie unhedied calla on the market. Hia idea that
reeonl keeping ia primarily 'a guide for future action" WlUl di-
rectly applicable to hie approach in atudying the atock market,
and hia penchant for 'graphic explanation" helped him aceom-
pliab it. Hia general obeervation that -every buaineu that ie
newny fuhionablel ia liable to be overdone periodically" hinted
at hia experience with buain_ eyelee and know1«lge of boom-
and-buat fade. He even dillCUlllled the peyc:hology ofaatiafied cue-
tomen and explained where to find boneat opiniona about a
buaineu' lhorteominp, directiona that renected a healthy .,If-
..teem that later allowed bim, when he WIJl unknown among
market profeuionlle, to .alicit the opinion of the nationally fa-
IllOUS Charlea Collins oonoeming hia Wave Principle diecovery.
Then, .. today, the reetllW'8nt buaineaa presented a etrong
attraction for many proapective entrepreneun, relIulting in sub-
atantial competition .. well .. a high failure rate. M a result of
both facton, the indWltry WI\.I hungry for adviee. Elliott'e com-
mentary wa.a populu, and the opening letter addrueed to him
in the November ielme began, "Your oolumn ia moet inte...,.tjng
and I can plainly _ that n. Ram md Gil 3lt:p will have to
be enlarged to accommodate your oolTMpondence." The eateem
with which hie oolumn was held in the restaurant aceounting
and management field ia renected by the fact that in late 1924,
Columbia Univenrity invited him to apeak on the subject. Possi·
bly beclluee of tile very renown be wu eaming, Elliott wu foned.
to decline the invitation, ae he wu once again on hie way out of
New York on buaioeM from hiJI then-",aidence at216 Weal 79th
S....C
" R. N. ElliOTTs MA!1T'u~

Elliott', qgreaaive mobility and eorporate eervice over the

yean oecuionaUy brought bim into contact with influential
people in the academic and political world. Hi. pel'llOnal cbarm
served him well, and hi, ruclnating range of experience and
eteadfut integrity must have made him an enjoyable aaeociat.e.
One of Elliott" contactll Wall Dr. Jeremiah Whipple Jenu,
• di$tinguWled. lawyer, academician, politicaladvieor and au-
thor of nearly two dozen boob on poliliCII, Mlcial iMU8II, religion
and bu.!lineu. Durillll' the mid·192Oe, Jena wu Chairman and
Prw!identofthe Aleunder Hamilton IlllItitute in New York and
Research Profeaor of Government and Public Adminiatn.tion
at New York University. Elliott undoubtedly metJenb tbrou,gh
profeuionailUllOciation, u Jew bad alao lIel'Yed on the board
of diredon of lM!Veral railroada, including the Pacific Railway.
of Nicaragua. The two men may have become acquaint.ed .. early
.. 1903, when Jenu wu. profellllOl' ofPolitieal Economy and
PolitiCllatCor'neli University. H" had apentllOlDtl time in Mwco
that year eerving all a COIlllU]tant to its govemment on matten
of Nn'I!ncy reform I.t I. time when Elliott WlUIl.n llDCOuntant for
the MflIican railroad. What'. more, becaUM Jenkl' time in
Melico coincided with Elliott'. marnllile, and ainee both Mary
Fiupatrick and Jenk.l. had traveled from New York, it_ma
relUlOnable to epeculate that MlU')" may have been working for
 Biqrraphy
"
Jenk.8 when she met Ralph Elliott. Whatever the date, at lIlIllIe
point Jew' and Elliott'. common interoe.tIl in the railroad in·
dustty, finance and Centni America brought them together. The
characters orthe two men appear quite different, Jenu a Victo-
rian-style moraliat of the academic and political world and El-
liott an earthy, praetical profeaaianal in the corporate world.
Neverthel_, their common inl.erellta led to a mutual relIpeo:t
and friendehip.
One of Jenb' main goale was promoting a strict c;ode of vir-
tues as a -.>Iution to llOciai problema, and in researching hie p0-
sition, he became widely read on the eubject of human nature,
particularly as exprl.'lllled in llOciai eelion. In one book (1'hI: Po-
litkol and SociDl SiKnifimn« o{tM Lift and Tra.:hilt6' ofJellU),
written in 1906, he included the followingeommenta and quota-
tions:

Every llOciety il built upon bumllll nature, and il ilie prod-

uct ofbere<\ity and environment. Each llOciety will differ fr'OlP
every oilier eociety, but when the question ia one of funda-
mental moving fon:ea. human beinp &nl much ilie aame in all
times and <:oUIItri.....
'To undentaDd man, bowever, we mUBt look beyood. the
individual man and Ilia ad.;OBl or inl.el'Ml.l, and view bim in
combinel.ion with hill feDowl." - Carlyle
Vrtry frequently, men in llI@(ICiation .. grouP' or llOcieti....
or natiooa ad. in wllJ'1l quite different from tbMe ofindiridu_
oJ,
*A large put of all the eocial action in which many indi_
rid...la take a COI>OIIrt.ed part is impuillive ....ther than delibe...
ate; and. ther"f....e, many of the dramatic eventl of hilt<Jry
IUlVe been impulsive eocialactlonl." - Giddinga

Needl_ to ...y, thill line of thinking '" fundamental to the Wave

Principle and indeed validated by it. It ie JIDIl"ible that aome of
the ideas about human nature that Elliott ultimately expree-d
in hie boob on the ,toclI: market percolated from diacuaeiona
with Jenb on the subject yeara earlier.
Elliott', longtime lIlIlIOciation with Jeremiah Jenu proved
fortuitou& in providing Elliott a fucinating reeponsibility as well
as a bit of adventure. Jenb, in addition to bi, otber aetivitiee,
h.ad eerved on a number of government eommieeiona, inc:luding

,
.
the High Commiuion ofNiean.gua. In 1912, the !oog-atanding
liberal guv"rnmentofNQnguA '"'" overthrown by. ""'-'p. The
U.S. MarillH entered the COWlUy to effect a turnover ofadmin-
istrative control to the U.S. government for the .tIlted purpoee
of protec:ting American intere.ta in Nicaragua. Aftolr a dozen
yean, the U.S. State Department tired ofit.8 role and appointed
the High Commi.uion to advi.e it On bo'/ll' to help atabilize the
NiCllrllgUan government enough to allow the U.S. Marinea to
withdraw. The Commi.uion rapidly INlt up national electiona,
which were held in November 1924. The newly "l..eted c:oalition
government in Nicangua then eontr&<:t6d with Dr. JeDb, aa
reported by The Nl!w Yori 7'imt'" "to reviM! the bankina and
financial lawl of Nicaragua" and "to eatablilh a new banking
aywtem in the /:IOUD.Uy." U.s. banking interelltll apparently wanted
to finanee and modernize the Nicaraguan raill'Olld aylJtem. an
effort which would have interested both Jew and Elliott. One
ofJenb'fint actione wu toaet up the Nattonal Bank ofNieara-
gua and tterve as a direclor.
At JenD' recommendation, Ralph NelllOn Elliott wu cho-
lieD by the U.S. Department of State to MIlum" the poet orChief
Accountant for Nicaragua. On o..c:..mber 18, 1924, Elliott met
with Sec:retary of State Charles Evana Hughe.l in Wuhington,
D.C. to receive hie formal appointment and ilUlb'uctiolUl. The
following week he applied for hia paallport, and in January 1925
!let nil for Nicaragua, ac:<:ompanied by hia wife.
The State Department invitation and aceept.ance were ef-
fected. 110 lIWif\ly that .. hile Elliott wu mWDg plana to leave
New York, an advertiMrnllnt for hia oonauitillll" ...rvices, as well
u hia column, ran in the January isaue ofwhat wu now called
&,WUJ'O/l./ and Tto Room Jmt.r1101. Hia last column, ..hich had
been aubmitted in December to meet the publiahing deadline,
ran in the Febl'Wll')" illllue, at which time ElUatt wu on the high
aeu to Central America.
The ahip arrived in Managua in February, and Elliott im_
mediately belld to apply rna extenaive ezperieooe in corporate
reorganization to reorganilillll" the financea of an entire coun-
try. The Jenb millllion arrived ahortly thereafter, on March 24,
1925, and began advialng the newly elected. coalition govern-
ment in what waa probably a joint effort with the State
Department'a appllintf!ea.

•
 HI

_.".n. bl_
~eelor~ 1M. 15,24
Dr. 'r.... l .. IIIII~e.

L.\la . . . .tr.lre.

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lD,46_. --"1!.
,
36 R. N. EUJarr's MASTKRWORXS
 "
Though originally llCheduled to.~ lUI long lUI two yea...,
EJliotteerved in hitoffici.1 ,..,...ernment poIIition only unl.il June
of the INlml! year, when the U.S... MUted itself from Nicara-
gua. At that time, the U.S. recalled all State Department ap-
pointee. all well .. the Marine. under the ...umption that calm
and order had been sufficiently restored.·
From Nica.flli\'a, Elliott returned to the U.S., but only for a
month. Whether or not there had been any caunl relation,hip
to the termination of m. column four montlui eaTlier, /W.tn...
rant and 1M Room JOUJ7IlJ1 wu foldirli. Upon dillCOVering that
the mag_nne had jUIt mailed ita 1118t iUlle, Elliott applied for
an executive polIilion with tm. International RaiJ_y o((}entral
Ameri<;a,' U.S. rompany blUled in New York whole atock waa
tl'aded on the New York and London Stock Exchangell. He wu
hired immediately u 11.11 General Auditor, another top euc:u.
tive poeition. The Alary of $9000 a year (a figure that tod"Y,
nonnaliled to $390101. gold, ia equivalent to $170,000. year af-
ter lax"a) reflected Elliott'. corporate earning power at the time.
Ralph and Mary Elliott promptly eet out once again, on a nine-
day voyage to the companya center of operatiolUl in Guatemlla
City, Guatemala, arrivina: on AuguBt 8. This wu to be ElIiott'a
IlUlt profeMioll.l.l pclfIition.
While....-ring in Guatemala, Elliott wrote a comprehenaive
176-page book entitled Tta Room and C<J{euna Monagp;rMnt,
an enension of hill earlier magazine artid.... The book w.. pub-
liahed in August 1926 by Little, Brown" Company. The fint
faV<lrable review appeared in TM New Yor. Huold Tribune,
and apparently ita international edition aa well, on A~ 8. A.a
the reviewer noted, "Mr. Elliott hlUl had yean of experience aa
(an] organizer ofmany different liDell ofbwlinea." T1U' New Yot".
TirMa Book Review printed a favorablemtique in itaAugulit 15
edition. The reviewer commented that "Mr. Elliott writes with
authority upon all th_ matten becaWle ofhi. wide and varied
bu4inllflll experience lind observation."
A practical fWde to opening and managing a restaurant,
Tto Room ond CD{euna MaM.ift!rMnt deal. primarily with "th.
"Th, Marin.. left Niearagua in Auguet 1m al\er , 13-year
Iplltl of u.s. occupation. Without U.s. INPPOrt, the rulina" coaI.ition
immediatflly eoll.peed ""del" ""bel p...... ure, and within "'ontba civil
wu wu ,..,mil. Tha Marin... WenI lent block to Nicaragua after I.....
than a YNr'1 abMnnt and atayed. ""til 1933, oomple\.iog a 21-1"u
lpan of occupa\.ion.
. R. N. Eumrr's MASRllY«JIWJ

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 BiOflN!phy

economical aspects or the prepantion of food at a hUllinestl."

Eniott'l book concernl not only the fmancial end of the bUllinl'll
but the aesthetic as wen. Ada for the book refel'l'ld to Elliott as
-an "peT!. organizer.- Indeed, as he certainly mU8t have done
with aU hia poIitionl in bUllin..., he gave frMlllt attention to de-
tailing, arranging, analyzing and planning. abilitiu that were
later rnanifelJt in hi_ erpomtion of the Wave Principle. Several
puaage_ reveal bit. and pieoe_ of ElIiott'l background. inter-
IItI and plI'IIOnality, including once ap..in hill aubtle "nle of
humor. For inlltance, after dillCUllling the abeolute necellllity of
obtaining adeq... te capital for atart-up purpoeel, a precondition
that many would·be I'Ntaurateun he knew had naively iMiated
upon ignoring, he commented:

On the other hllDd, circumRaDceI mll1 &riM where. there

being a real demand for a reluurant in I CflI"tain neilhbor-
hood. patronage IMJ' be relied upon from the Itart. Such COD-
ditiolll, coupled with the poMible fact that theowner,: 1Ie1_.
in that particular loeality. a hou.Ie furniabed with all neeel-
ury equipment which can be utilized for the ~ of I tea.
room, mlY be """",""",y taken advantal" of to open ......
taurant with vlSrY little initial ootlll1. Here the owner will pay
no additional rent and will, 10 to lpeal<, merely lUUlI\e the
reaponaibility of feedin,; I l.arpr family. H. may aiIo. more
nearly to inVeRt himHlf with all the Utopian advantagea, be
pnIIlf:IIed of I vegetable garden, chicken 1"UD and perha~ even
I cow nrtwo.

Elliott may have written thia paragraph fO!' the benefit ofthOlMl
who miiht otherwilll have taken a courae at the Lewil Hotel
TrainingSchool ofWaahington, D.C., which Elliott noted in cor·
~pondence was "in the habit of trying to penuade people that
a tea room can be atarted with $50.-
Several Jllll'1lgI'lpha in the book reveal Elliott'a Interelt In
hulinl'll cyclll. Hia profeuioll would have brought luch cycllll
powerfully to hil attention, and hill internt in them Wall obvi·
DUlly keen. In a chapter entitled -Fluctuationl," be commented:

It ia a ....ell·known faet thlt plWJIUity and depreuion fol-

low each other in cycleR, and the waveR of theM are IItreme1y
variable. but nevertbel... eertain. Thia;1 not the piaw to dil-

..., .....
CUlIlI the C8W111 of theIe cyc1l1; mfliee it to lIy that they an!

,
40 R. N. EWOTT's MASTli/!YICJIIK1
 Biogmp!ly

Elliott referred to bUllilll!llll cycltll in his conclusion poetically II

"the ebb and now of circu""'tance," a phraae that uM& the liquid
metaphor he later called "wavy'-
The publication orthill book announced Elliott'. deci.ion to
re.ume his career u a restaurant management specialilJt, and
hi! begUl to make plan. accordingly. Mary Elliott retumed to
New Vork in June in anticipation of being IIOOn joined by her
hUllband. The lut of the aeveral Spanish language letters and
telegralIUl that Elliott wrote or received .. an executive in Gua-
temala is dated Oet.ober 15, 1926. His pauport application to
return to the U.S. ia dated October 21, and his corporate corre-
.pondence is indexed until October 25, at which time it..........:l.
A=ml.ing to International Railway. records, an "Interim" Gen-
enl Auditor had been appointed by mid-November 1926, by
which time Elliott had returned to New York City. Tboqh the
International Railway. of Centnll America WII hudquartered
at 17 Battery P1aoe, New York, Elliott had tIl.ken a aabbatical
and WII noton companybUllinen. He had returned to New York
with a definite goal in mind: to promote the book and cement his
stature II the preeminent colWultant in the restaurant man_
agement fi",ld. From hie temporary b(Ule at the Woleott Hotel on
Fifth Avenue, Elliott iuued. numeroua communicatiol\.l to the
publieh",r regarding th",ir ooordinated book promotion.
AI important II Elliott's profeuional activitillll were to him,
they we", no longer hie only pu.I!Iion. Tha State Department
appointment in Nicaragua had fOCUlled hie talent for problem-
lI01vinr in an entirely new realm, and Elliott found that he had
a contribution to make to politics II well II to bwIineu. During
his few weeks in New York, Elliott brought another reeently
concluded project to the attention of a publisher, II revealed in
a letter re&iding in State Department filea tbat Elliott wrote on
February 23, 1927 to Secretary orState Frank Billinga Kellogg.
The letter mentiolll a memorandum be had written "a year Or
more ago," near the.tart of his tenure in Nkaragua, in which
he had propoeed a broad economic plan for the U.S. to impl&-
ment in lAtin America. Elliott noted that talks were then un-
derway between tha State Department and Nicaraguan
Preeident Adolfo Diu "on lines proposed in my memorandWll..~
AppaNlntly, ideaa that Elliott had foml\uated during and after
hie brief tenure in Nicaragua. were already lubetantially ehap-
ing U.S. economic policy in the region.
 R. N. Eworr'8 MASfU'IfOIWJ

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The main purpolI8 ofEliiott',letter wu to obtain the bl__

ing of the State Department for publieation of another volume
he had begun writing immediately after the publicetion of hi,
reataurant book. The 1000pelt' typeacript (a carbon copy orthe
original with handwritten emendation.l) that Elliott forwarded
to the State Department constituted about half of the planned
book. Ita theme Will a l~r exjl<)Sition of hia pnlviOU51y pro-
polled U,S. economic policy toward Latin America. Elliott ex·
plained that he had founel a publiaher in New York who .....hed
to proceed. but only if the State Department approved the tellt.
perhape becaU8e the book dealt with CUf'nmt and potentially
aenaitive policy mattel"e. The Department'. ",ply Will pointedly

•
 Bi"llruphy

noncommittal, thanking Elliott for hi. courl.ely in bringing it to

their attention, but declining further comment. If indeed the
Department had beeD engaged in talks with Prelrident Dfu, it
may have preferred to preRnt the id... aI thoM of the Stat..
Department rather than fL one individual. The typelClipt wu
eventually filed in the United Statell Netiooal Archivell. Sixty-
lM!Ven yelll'1l after it Wal lent., it wu discovered dW"ing rnearch
for tm. biography.
TM Futun of Latin A/Mrica ie a remarkable doewnent, not
only beeauee it is a hitherto unknown work by R.N. Elliott but
a1JK> becaWHl of ita content. For one thing, the volume is. treK-
Bun! trove of information on Elliott the man, revealing him aI
an individl18l of wide.ranging experience, u indicated by the
excerptl quoted earlier in thie biography that were taken there-
fmm. VIlriOUll pusagell eIpreM a deep undentanding of Latin
American culture and a genuine love of the region, ita arll!l, and
ite people. The tl"eatiAe further revealA Elliott'. knowledge of
the various idioms oftbe Spanish language, Spanieh literature,
"the richnl8ll and beauty of which treaeure: he.said regretfully,
·are eeldom .UlIpected," and the region'e mulJic, whoile "gayest
meaeure," he noted, "hat: alwayll an underlying and undefinable
note of pathoe."
Elliott identified the Latin American aI "a channing and
puuling mix of incollllietenc:iea, the belt of good fellow. when
properly approached, [with al pefteption and intuition little .hort
of marvelous.- His occalional blunt criticism. of the region'e
euetoms and character further attelt to the objectivity of hie
obeervationa aI wellu his compelling deei", to deduce the mean-
ing of thinp:

[TJhe Spanish American i. unfortunately rather a man of

wordB than of action. There have been. of COurN, many thou·
sandi of Btrilr.ing er.ceptionl, but I I a pneral rule L8tin Amen-
CII.DII Hem W1able to oven:ome that .....ntal inertia that h.. led
them to .urrer for centurietl under the oppreIIion of political
abuee, without any orpni&ed attempt at reform.
A study of IIOme of the COIlIU'\Irtionl of the Spanish lan·
guage i.I 1100 of gJ'Ut interelt in attempting to undentand.
oomething of Latin American thought. A IeJ'TI.nt, ruilty of
baving dropped a plate or g\llIll will invariably lay, ". ell"'"
(it fell). He will never ny,·1 dropped it: hut prefen to endow
inanimate objectB with life rather than admit that he bimaelf

,
 R. N. EUJOJT's MAn"UWO#lU

<:<IU1d p<M&ibly ~ve had IIny part in the dituter. The tame
ide. is renlll:ted in matte... of ...,Iatively ,...,at importance.
Notbinr ill ever motU to hppen. ItjUllt "happen.o," .. hether it
be .n epidemic or • revolution. There appears little dlllire or
e1rort to proboo the ca..... oldiKomfort ord.iauter. Thia "don't
care" Rpirit is to be met with in all countriet ofSpani,h America.

Elliott recognised that the chief obtltaclel to economic

progreM in L.tin America were •• taggerin( burden of debt and
a eomewh.tcavalier .ttitude toward ita reJlllyment. H~ a _
ment of the -atuation at that tima oouidjuat u well h.ve been a
deecription of the region'. variOWl modem day -debtcriMl." '"I'he
finencial histoQ" ofa1mofi all of[theee n.tion.1," he lIIid, "l.one
long tale of default," due to Latin America'. ~ving "not yet.e-
cepted the fact that the payment of deb'" i.t • moral obligation.-
He blamed thia attitude on a political procesa th.t allowed Un-
relenting plunder and favoritillm and on a c:itiul1l')' that allowed
it. The extent of the political COI'TUption he revealed in this para-
itaph:

The ~hi.,",llianingenuity di,pl.ayed by diBhonNt adonin-

iltrlltorl in enrichm, themRlve•• t the expeDIII of their com-
p.triol.l .lmlNlt palaell belief. The ..riter bill on lIever.l
occ.lionl made carefulltud,y of the methodlI of th_ fraudu-
lent adminimaton, and has compiled figureI ...,lati"" to the
UIIt lou ruu1tin( to the defrauded nations by the dishonesty
and ma1adminiatrlltion of thoR in power. The relUl'" "ere
~,andindicated in .-orne m.t.ance. • filtrlltion of Il10n
then 5O'lio of the lI.tionai revenUII. For obviOUll (pel'1lODa1...t'etyl
it it, 01 eoune impouible to Ii"" concrete uampl""....
1'tlIIIOn.I,
This _til of aft'aira tellda to diBcourap thriIt., ind...tly and
initi.tive.... There ere CUM On record where Wlduly hilh ratH
ofintereBt [wenla<Cllptlld], lenillj" the quMtion ofptl)'DIent to
be dealt with by future adminiltrlltioN.. Jfthe)' continue along
the downwud ptIth whiCh they h.ve choRn, the..., ill DO end
in lilbt but economic lUic:ide.

Elliott'. analytia of the .ucial and economic problema of Latin

America Nt the .~ tor hi. comprehenlive propoeal tor creat-
ing economic ability and luting pfOlperity in the region. So-
fore beginnilli' he dillmiaRd the tradition.l view of the U.S.'.
role in the region with relpect to the Monroe 1lQetrine. the ori_

,
 Biography ..
gin ofwhich. he pointed out, wll8leu noble than commonly be-
lieved. -AJJ far .. the writer can _ : aid Elliott, "there h..
never been any attempt to outline a eonstnlctive foreign policy
along pl'8.ctiCllllines:
To achieve that end. Elliott outlined II plan to be imple-
mented., not unilaterally but by mutual agreement, "whenever
a Latin AmeriClln country approac:hee the United. Statea with a
request for financial or politiClll aid, ...Iwhen it;'J:in luch dire
financialllb'aita that ita very national exiatence il threatened."
The plan required the hoet country to a110.. unobl".r'uftive yet thor-
oughly inteerated. U.S. developmental adminiltration in ex-
change for a number of reform•• including ...lriatanee in the
iafluanoe of natiooal debt payment bonda guaranteed by the U.S.
government, the retirement of old debt to European O'l'lditora,
full payment ofintemal debt, to. reform, the reviaion orall tar-
iffl. civil aerrica reform, and thfI chutering of an American bank
to handle the financeaofthe rl,!jfi0D. Money raiaed from the U.S.
guaranteed bond &alea would then finance development of the
country'l infraatnlctuno in the form ofrailmada...uerwaya and
porta, all to the ultimate end ofbuilding a lItrong ellOUll"h economy
to payoff the bonda. The bolIt country would gain the Itnlctural
ba.ae for economie growth and atability, and the U.S. WOIlld gain
-new outleta for IUTplua production and capital" through in-
creaaed invelltment and trade. Neighboring countries. he pre-
aumed, would recognize the benefita reaped by the first nation
to adopt the plan, and followlluit. He advocated. a corTfl8ponding
public information campaign in both Latin America and the
United Statea, designed to overcome the Spanilh Americans'
jWJtifiable averaion to foreign preaenoe .. well ....hat Elliott
..w aa the U.S.'I provincial attitude in not involving itaelfmore
.ubetantially in -promoting good will [and] mutual proaperity
and advancem"nt" overae.... and in "initiatillB Latin America
into the secreta oftbe proaperity of the United Statea," which he
....... a .....oral obligation to mankind.' That duty, moreover,
involved -ab80lutely no right or juatifiClltion in attempting to
influence national thought [or culture] in any way whataoever:
Given thO' mutual benefit Elliott envaioned, he concluded. "it;'
simply a buainell/l propoaition:
It il not \llU'eaaonable to aMume that Elliott'. m"moran·
dum and manuacript bad a role in Ihaping later U.S. policy to-
ward Latin America. In many way. hi. propoaed program

,
. R. N. ElUOrf'l MMnJlWORQ

reMmble. later effort.t ,uth .. the "Good. Neighbor" polic:y afthl!

Franklin D. Rooeevelt IuIminiBtration and the more l'ea'nt pro-
development ""liei"" of the World Bank. Certainly. Elliotteamed
the reaped of the Coolidge Adminilltl'ation, u an internal State
Department letter dated FebrulU)' 2, 1929li,ted him all. po,>ten-
till appointee fOf another govemroent polIt. in Nical"afUll.
Whateve!" political influellCll Elliott', ideas CO!" Latin Amerio:a
may have had, it il of HCOOdary importance to EIIioU'. later
achievement In diecoverina' the Wave Principle. In that regard.
'I'M Futun of Latin Anwrica ~ primarily meaniniful in reveal-
ing. mind that wall comfortllble in . .imilating mountairw of
detail while lrimultane0u8ly holding the big picture in penpec-
tive to the end ofMllving. m-.ior puzzle or dilemma, a prerequi-
site ability for di8COverilli and eodifYini the Wave Principle.
One paMB,ge in particular conwM a c]"'aT hint of Elliott'.
diJIpomtion to _ pattern in the nature oCthinp:

'!'be prec:eding ehapten m.,. bave led the "'~ to the eoD-
elUlion that the problema of the United St.ItM and of lAtin
America lend themMlveo to mutu.a.l ...Iution. By .. ~ming
coiNeKk_. but wh41 mGJ' -U N /I prooisil>n 0( ""t"... ...."...
'''Ii i" <>ea>nfon« with 1<J.w. not ~ properly WIlkr.tood, all
Uloae thinp which Ule United StaW laeu ..... to be fDUDd in
profumDII in Latin America, and the neecb of Latin America
are IUeh u the United Sta""" i.I beIIt fitted to provide for.IEm-
phui, added.1

Here Elliott implies Ulat na.ture tenda toward a eompenaatory

balance, in wbieh acarcity ofone lIOn i, CO\lnteTe<;l by abundance
of another eon. Thill idea binta a~ the rhythmic, or dynamic,
balance that he later found in the atoek market.
In a 8f!rt;on deacribing the huard.t of political .u~ion in
the retPoo, EUiott writN, "By a curioua coincidence, while writ-
ing thi. paragr.ph, the author received new. afthe death afthe
president afthe country where he haPpeJled to be relIiding." Thill
atatement inoficat.n that Elliott waa writing then in September
1926, when LUato Chae6n llUCCeeded to tbe prelIidency afGua-
~moIL
Elliott wu worlring on TM. F'utlln of Latin.Ami!riaJ u he
brought hi. career in the region to a eloee. With one book IIOld
and a new one in progren, Elliott had two promiaing reuon.s to
 BilJgrophy

~-
.-

~.

return to the United State.. There Wall a third relUlOn, though,

one not nearly all happy. After decadea ofbealth and vigor, and
ironically jUlt .. he Wall preparing t.o return for an UDlIpecified
time to the U.S., Elliott auddenlyfound him..elhuffering from a
lNlVere alimentary tract illness caUlled by the organiam lU7IOO!OO
huttJlyti.ca. Though Elliott'llifeatyle had been rather adventu:r-
oua for decadea without Ilerioua repercuuion, time and eh.t.nee
had alught up with him, and New York offered the promi.lle of
an eJ:pert medic:al review.
Unfortunately, the illness Itubbornly peniated durin.- the
month or two that be WBll developilli book promotion lJb'ate([y
in New York. By January 1927, Elliott had left New York City
and taken up reaidenee in Lo8 Angelee, hi. old home hue from
ten yean previoua, in an apartment hotel euite at M8 South
Spring StreeL Having left behind all hia old bulineu oontacta,
he oonc:entrated every effort toward Nlloeating hie ooDluiting
bUlineu while attempting to reoover from the m.lady that had
.
.tricke" him. Curioldly, for a man woo later connected the Fi_
bonacci lIeCluence mnumben to human life, this change of ca·
reen and lifMtylea oc:eun'ed when Elliott WaJI 55 yean old, 21
yea,. before hia death.

OPEN A TEA ROOM

Wave Four. The Craab

'I'hrougbout 1927, Elliott remained inteIUJely active. He lIeDt
the aforementioned letter and manU5Cript to the State Depart-
ment in Feb.....ary and continued to market Tm Room lind ear-
,kri4 M~tMlU, which 801d fOT $1.50. Elliott Mnt the book
to reviewen, got. copi" into boobtorell, obtained liatll for the
mailing of cireullU'll, and UTaIlged for advutieementll in RV-
er.l magazinea, including the January and June 1927 i.$tUeII of
Good Houa{'II.Npi"ll. Addit>onal favorable r-ie.... poured in from
Tiu New Yor. World, the National Reatllurant ANociation,
which invited him to lpeak in Buffalo, New YOI'k, on September
26, 1927, ud othen. He advertieed for client., probably !Wing
language ,imilar to that in hi" ad from the January 1925 is/JUe
of &IIoluant lJIUl Tea Room JounuJi, which .....d:

R.N. EWoU
May be "oppd to
Report on IOeAtiona, ...piuJ and reHrYe,
Report on p......,.,t .u.tua of. buain....
Keep boob on a boil that pr<mdea a guide ror action,
Take care of intome tn.,
Comult on all matt.enl pertaining to tea l'OOIIl.I, cafeteriu, ete.

My ~ it adapted to out-of-town ownen.

Inquir)' doea not inwl", obligation.
The o:oa ol my llel'Viee tomelI out or additional proflta.

That lut gu.t.rantM rould only have ~n made by a man who

was confident ofhia ability t.o add value to a buaine"".
 Bfugruphy
"
Elliott's reputation, baaed on a dilltinguilhedcareer, hia new
book, and a long HlIl. ofreferenees, wu once again _ring. Hia
goa.I of aecuring a lufficient number of clienta in hil new loca-
tion wu rapidly being fulfilled. Though he had prudently re-
tained the profeMionai option of returning to Central America,
the persistence ofhill medical condition made -..ch a return in-
advisable, while the rapid pace of his newest luc:celIlI gave him
every rell.llOn to remain in the United States. The two situatioM
combined to prompt him to lIettie down. In December 1927, af-
ter thirtY-3Q. yeara of intenee work, travel and hotel living, El_
liott tIeC:Uf'ed a more permanent reaidenoe at 833 Beacon Avenue,
a 15,1150 lICluare-foot, three-3tory hOUlNl built in 1905 that had been
converted to apartmenta in 1920.
Ju.lIl. when Elliott'l future appeared ita brigbtest, hia ind.
pendence and financial security seemingly aalured, diaalter
Itrock, IllItead ofrecovering from hia iIIneu, Elliott's condition
worsened. By 1929, hia amiction had developed into I debilitat-
ing CQI of pernicious anemia, involving chronic fever, dYlllln-

-,....--
833 Bn ... A~, LO$ AngNs, ElIiolt's home frDm 1927/0 1938
. R. N. EUJOTT's MASURWOIlKS

t«y and weight lou, le8Yilli him bedridden. The adven\.w'ou.t

and produttive R.N. Elliott.u forced into an unwanted retire-
ment.. Hia book 00 Latin America. whether bealUM of the State
Department'. noneommittal rtl5ponH or hillaccelera.ting debil·
ity,"'u never publiahed. He could Df1longer tnIvel, and had to
abandon hia OCIlU1ultin(r practice. Several times over the neIt
fi"" ye&I'8. be came utnmely clo.e to death. Each time, he man-
qed to re<:over. Hia prof_ione] photograph inFinoncial World
magui.oe a decade later abo•• that the relentlees aflliction took
ita toll, leaving Elliott much thinner than in earlier yeara.

",. """""'"
o.pite being phyJlieally debilitllted by hie malady, Elliott
needed IIOmethina: to occupy hi' acute mind while recuperating
between ita wont attacD. All cin:umAtanee. would have it, he
wu living then through the IOOllt eJtcitine period in U.S. IJtoo:k
market hilltory: the peak yean of the """;ng bull market of the
1920lJ and immediately thereafter the _ t dramatic bear mar_
ket amuh on record. Th""" event.. IJl'll"lcing hill interest, he read
Robert. Rho'. 1932 book, Dow Th«>ty, and became one of the
firat IUbKribe... to Rhea'. atock market lIeni.... Dow ~
Commt'ol 0932-19371. It ... around 1932, then, that Elliott
began turning m. full attention to Itudyin& the behavior of the
ltoek market. He began punuing a miMion that he had enunci-
.ted for all ~lpoMible men in his man~pton Latin America.
'"!'here ia. reuon for everythiq,~ he Hid then, -and it ialone'sl
duty to try to diacover it. ~
Not unlike the Dow Theory geniua Robert Rhea, who luf-
fered from tuben:uloail and WlUl bedridden It the time, Ralph
ElHou, who lpent long boun On hia front porch I'flCUperIlting
and atudying, began to make lOme fllllcinatini obael'Vlltionl con-
cemiq the movement of prieea on Wall Street. Hia -..till
path ofiDQUily,I.e., loolrlng for paltema in ~te ltoek price
movement, WlUI undoubtedly direeted initially hy expofUnl to
the tenetll ofDowTheory. However, EllioU'1 ultimate dillCOVery
Will all hia own, lUI over. period of MVenl yeaD he pailllltak-
ingly UllCOYered the Wave Principle of market. behavior by Itudy-
ina empirieal tnridenoe. '"!'he mono desirable the goal,· Elliott
had Hid once before, "the greater the triall which have to be
met and conquered. for itll uhievement." In invlllltipting the
poaaibility offonn in the mlrketplace, Elliott eumined yearly,

•
 Biography
"
monthly, _kly, daily, hourly and even hair-hourly chart,., of
the variOUll induell covering .eventy·five yean ofstock market
behavior. He constructed the hourlyehartll from a data seriN
that began for the Do. Jon.... lndWltrial Average on October 5,
1932 and the half-hourly ehartlI from fIgUl1ltl be collected off the
tape in the tnlding room of a brokerage house.
Around May 1934, jWlt two monthB alter h~ final bl'Qh
with death, Elliott'. miMion began to be fulfilled, H~ numeroua
oblIe"ations of generalatock market behavior began f.lling 10-
gether into a general eetofprinciplea that applied to all degrees
of .ave movement in the stock price averages. Toda,y'a scien-
tific term for a large part ofEliiott'a obeervation about markete
ia that they are "fractal: thereby coming under the umbrella of
what is today called chsne l!ICience, althouah he went far further
than moat .tudie. today in actually dellCribing the component
pattema and bow they link together. The former "EIperl Orga.
nner" of busineuee, through a meticuJoWl .tudy of detail, had
uncovered the organizational principle behind the movement of
markete. When he started applying th~ principle over the nut
seve",1 months to eJ<pec:tationa for the future path of the .tock
market, he felt, as he later put it, ·""mething like the inventor
.ho ie Uying to become prnficient 811 an operator of a machine of
hia own deaign." Aa he got mDnl proficient in the application of
his newly diac>em.ed ruIllI and guidelines ofwave formation and
coJ'TeCted initial errol'l in their formulation, they began to amue
him with their accuracy.
Thouah Elliott never enjoyed full recovery from hia illnllM,
hill health improved after these IlOveral Uyingyean, and hill old
energy began to return. However, after yean of abeence from
hie lifelong profeesion, h~ previoua aucceas and renown were no
longer a ticket to further advancement in hi. fanner field.
At thia point in his life, Elliott'. financea were at a precari-
oua 10..... HUllI8.vinp, which had appeared more than adequate
nearly .even ye&l'I earlier, were aIm""t entirely m-ipated due
to the npenRl of h~ illneaa, the impolll!libility of punuing hia
counaeling bwrineaa, a dependent wife and several _mingly
aafe investments that had suffered tremendOWlly in the 1929-
1932 bear market 1ID8IIh. Hi. depleted financial condition, hia
developing faacination with the atock market, and hi. undeni·
ably important dixoveries combined to prompt Elliott'. deci·
lion to undertake a new profl!l..!lion. He decided to "begin all over
"
again," as he put it, "e.peciaUy in work that I like, whieh i. half
the battle." So, at the age of64, Elliott launched a neweareer
and IJtarted what he later referred 10 u -Wave number five of
my own life.'

WI"' Five: The Wave Prineiple Revealed

By November 19S4, Elliott'. confidence in hi, ideu had
developed to the point that be decided 10 present them to ,t
leut one member of the financial community. For quite 110m"
time, Elliott had .ub.cribed t.o • market .ervioe founded and
edited by Chari.... J. Collirul and publiAhed by Inv""tmentCoun_
lIel, Ine. Oater Invelltment Letters, Inc.) olDetroit. He wu par-
tkularly impressed by it.. Elliott felt that he had learned enough
.bout Charles Oollil1l through hi, ltoek market publielltion to
tnat him with hill dilJeovery. Thill usurnption, to Elliott'. great
.d.... nlai", PP'OYed. correct. AlUr an 8-year receaion in fortunea,
Elliott 1VN abo\lt to embark upon a l3-year riee.
On December 2, 1934, Collin., prHideot of Inveatment
Cov.neel, received from Elliott a letter marked 'PERSONAL and
CONFIDENTIAL," dated November 28. Therein Elliott flS:-
plained that he had d""",vered three DOvel f...tUfWI of muket
aetiOD.; recognition of wa"" termination, classification of wave
degree and time fOrealllting, wbich were "a much needed compl.
ment to the Dow Theory: He even fo~ted that the market
advance then wtfolding would be followed not by a oOtiec:tion,
a. bad been the case with the two previo"," Wit" ofadYanOl!, but
by "a cajor bearcollaJIH."(Thil il eJUld.ly what happened later,
a. the dramatic market decline of 1937-38 erued 60 pe~nt of
the market'l value in twelve months.>
Emo" lllIked Collin. to finance a trip to Detroit 110 that he
could preaent hia obaervationa completel,y to him, in hopea that
Collina would decide to UlIe the technique of the Wave Principle
in hia atoek market letter to their mutual benefit. Elliott flVen
commented that Collin&, if he prefeITed to keep it eecret, need
not inform hie readera that he wu uaing the Wave Principle lllI
a balis for hie inveatment advice.
Collina WlllI intrigued but not convinced. He filed Elliott's
letter and returned a .tandard reapoltlJl to the effect that he
would be happy to monitor Elliott's "calls- on the market, by
telegr.m collect or by air mail letter, feN' one complete market
cycle to 1M iftbey had sny real merit. If they JlrtIved aoxurate,
then he would oonaider further ItepL
 "
Collina had developed this method of putting off the nu-
menlWl """",,,poodenta who continually offered him 1IY"1Al1IUI for
beating the mllTket., on the 88lIumption that any truly worth-
while Iyltem would 8und out when applied. in current time.
Not lurprilringly, tm vallt majority of theee .,..terruI proved to
be eIilmal failurea. Elliott'. principle, however, Willi anot.her.ft<H'y.
Although Colli... """ure<! Elliott he need not divulge hit
method, Elliott began llending ColiiDil a ""ri.,. of lette,.. Rod
ehatt8 ouUining the buia of what he referred to Var1OUl1ly as
......ve theory" or the "Five W• ..., Principle.- Elliott ~ th.t
sinee his fmancial lItatua wu difficult, he whed to acquaint
ColliM with the theory and prove iLl value without waiting two
or more yean for II complete market cycle.
Included with Elliott'" lIOOOnd letter to ColliDll dated De-
cember 9, 1934 w81I a brief but thorough eJtpolliUon of the Wave
Principle, iocludine an introduction, which IlOMtltUted the fint
wordA EIHott ever wrnte to another on hi, theory of the stock
market:

The market may be lii<ened to II. river. It hu rather ..ell

defined bOllie... ofwill'orm width, lICClI.Iionally becomell blocked
by barriet'll and suddenJy breau a"'a,y from them. When the
channel ioI nlllTOw the apeed i, greater and vi"" vena. It CW"'l'H
aceonling to noaioltan"".

AJ!, paaaagH in hiol two earlier books bad already auggflated,

Elliott'a intereat in mathematies, rhythm and repetition waa
keen. He waa UlIing flnd·time cydell in biB Il.nll.l)'lia at that time,
llIId referTed apecifieaily to a nine week eyele in atoek prieee,
v..nable to twelve ween, which ia atill quite regulu today. ThiB
intereat turned out to be only a tempol'ary divel'llion, but kept
him thinking in the right direetion. ~All life and movement con-
ll.iBtlI of vibratioNS," he said in hiB aecond letter, ~Md the ll.toek
market iB no uoeption.· Exoept for aueh ocea.aionaIl COlllfmlnlai,
Elliott atayed focuaed on hi. empirieai oblIervationa, which in-
aeaaingly revealed pattema that far edipeed the aimple con-
cept of repetitive cycle•. Theae obaeryationa ultimately
aceumulated to the point ol'gellilli"with hi. grander notiona into
a practical and deeply aatillfying undel'lltanding ol'the marker.
PlIttema, aa well aa their mathematieai baae.
Elliott'. lettel'll to Collina revealed a finn belief in the vir-
tue ofindividuai inibabye, which virtue he certainly pr&d.ieed

•
.
himllelf, and a rec:ognition at the harm of government regula-
tion of blllinesa. One letter referred to the "unprecedented un·
l:OlUItituuona! meddling in economics by politics.· (Significantly,
there ia 00 record or Elliott or hi. wife ever haYini obtained a
Social Security number.) In another letter, he dillCUned the
plight of the raill'Ollca, with which he "as familiar from long
es:perienee:

I _Iit.tle 01' no hope 0( activity in durable goods 10 long as

Regimentatioo ia diop1acinllndiridu.al;"m. But roc Individu-
aliam there would never ha"" been anything to regimenL The
rail. have been in a .eeular decline llinte 1906 [whell] politi-
cians and labor unione oombinf!d to harau them. The Utilitie.
are getting tbeir doH of politi.. now; their treatment ia re-
flected in the a""ragel to the IoOrrow of tbowanda of innocent
in_ton.

During this letter writi"ll' period, Elliott continued to dis-

DOver new tenets of the Wave Principle u hilnudiea grew more
thortlUBh. While prwv;OWlb' attemptl"ll' to count five waVeII in
IVery mov""'lInt, for inatance, he cam" to ODnclude that all "tri-
aDglell, perioda ofheaitation, flata, are equivalent to 'COrTediOIUl'
of the ruling trend," Leter he found that "diagonal trianglea art!
inevitable terminations of movementll of their degree.-
Sinee COlliDll ..... in Florida that winter all w.... hia CWltom,
it waa not until January 4, 1935 that be began ffllI])Onding to
Elliott'e "flood ofletteI'll," all Elliott himself put it, a ta8k that for
a few weeu had been lefl to an llMOcia.te. On January 11, COI-
line eent a telegram to Elliott willi him to diapatch a wirt!
when a particular minor declining wave they wert! tracking had
ended,
A wNk later the Dow Jone. aVeragelII were ltill in a declin-
illi ph.... and, all EIHott put it, "the wiseacrea around hert! an!
very beariab,- At that time he waa forecutilli that the Raile
would break their 193410.. but the Indunrial. would not, a pro-
diction that mUit have .truck COllina later as uncannily accu·
rate. Hi. first telegram in ruponae te Collinl' requeat for
pinpointilli the bottom of the oorrec:tion was dated January 15,
1935 and read, "CORRECTION ENDED LASI' HALF HOUR
TODAY.-Tbe ea\1 ..as perfect, and a rally enaued immediately.
On January 22, Elliott reoognized the rally aa a oorrective atyle

•
 B'Oflraphy

advance, and aftu the cloee he wrote to all'y, "the pittl>re i.$ bear-
iAh asain.· The rally peaked two trading boun later. He then
forecut that the Induatriala would llip below 99 to 96, and the
Ra.ile would crack 33, ularger WIVell 3, 4 and 5 downward un-
folded.
Moat of the predictions that Elliott made in hil barrage of
lenera (even thoH that took yelltl to praveJ were correct, many
to perfection. However, in the approach to the actu.al bottom,
which was made at 96 as Elliott had fltllt fllnlCll.!!t, he changed
his mind IIeveral times in an attempt to call the low euctly to
the hour. Elliott'l changes of mind, newly dilJl:'OVeted tenetl and
occuional wave relabeling bothered Collina, who wnKe Elliotta
long and courteaua letter on February 15 pointing out weak-
n _ in Elliott'a methodil and end""ing IIIme ofhia own work
on a five wave theory I.lI applied to long.term price movernentB.
He auggeated that in order to remedy hia financial aituation,
Elliott manage aome rilIk capital and begin a letter ..,rviee to be
cireulated to a ""lett group while he developed hiA theoriea to
completion. Even at thia Itlge, however, Conina obvioualy rec::.
ognised the ....Iue of Elliott'a work, u he offered to introduce
him to the day'aleading t.ec:hnical anal""t, Robert Rhea.
Elliott countered Collina' grounds for delay by listing the
varioua imperfectiol13 in Collina' own market letter'a invel!ltment
decilliona of the previoua two years. He strongly rellflinned hil
wish to become\l.8lOtiated with Collina, whoee lettere, he atated,
were 110 well dona that there wu"no comparillOn between your
letten and thole of any other service that I have aver _n."
On February 19, 1935, Elliott mailed CoIlina lIeVenteen j'I8gflI
of. haatily organised yet metituloualy detailed treatille entitled
"The Wave Principle.· He lent twelve more pagea and five addi·
tional charta over the next two months along with his regular
colTellpondence. The fltllt page of the treatille containa Elliott'.
statement of the utility of the Wave Principle:

A careful.tudy of certain recurring phenomena within the

price Itructure itllelfhu developed certain f.ttB whieh, whila
they are not always vocal, do nevertheleu fumjah a principle
that determinea tha trend and gi"... clear warning of revena\.

Collina thel'<:'af\er began to write Elliott mo.... frequently

and llent him several boon, book recommendatiol13 and artidea
"
or interellt, inc1udingOn The &/atioll 0{ PhyllotruU to M«lw.n.i-
c:cl LaW6 (1904), a pamphlet by ProfeMOr Arthur Henry Church
of Oxford Univel'llity. PhylJotuis R the term for the a .....nK...
nant of leaves 011 • stem, which in ..:line plantll had. been (\lUnd
to follow the Fibonacci ~UI!noIl. Th_ mailinp indicate that it
wu Ch.rles Collint who introduced Elliott to the eo_Pi of Fl-
bonaeci numben and their mllllifell.ationa in nat.ura! phenom-
ena. TInw, 1M! mlllt have been the lim penIOD to notice that the
D\lIIIber of Elliott'. WBveII ..,produced the Fibonaeci l!equenc:e
when counted at NoceBIIively lower degrees. theile oblIervatioll8
ultimately provided the apark needed for Elliott'. theories to gel
into their final fonn five yeara later. One book that eolliJa MDt
wu SirJamea Hopwood Jeane' 'I'M My.kriolu UlliwrH (1930),
wbieb contained the follO'lliing pasuge:

Many would bold t.hat, from the broad phil"""PhicalRand·

point. the outstanding ..,bienment aft..entieth century phy.
ia i.o not the tbfJory of relativity with itl welding together of
apaoe and time. or the tbfJory 0( 'Iuan18 with it. preMot 41>'
pannt nepotion or the law, of ea\!Muon, or the diseeetion of
the atom with the reml.t&nt diocovery that thinp not what
they -.:n; it ;" the general """'K'rition that we DOt yet in
COlltaet. ";th ultimate ....ality.... To bot Iow Locke'a phrue, "tbfl
real_nee of aubataneea" ~ forever unknowabl.. Wf <'Gil on/:I
PrrJtP'f!" b,. dUc"Ui'W 1M klw. wltic1l gowrn 1M eha. . . 0{
,,,b,fanor,, GIld '" prodlUY tit. pMIlO""'1I4 uf 1M uUtrnal
world.

In referring to the tflpetition of the five wave pattern in tbe

atock market, Elliott reaponded, "Pouibly the rea!lOn why I have
DOt yet, and pouibly never will know why thia..nell oa:un ia
beeaWle it ia a law of nature. The la....a of nature, and inciden-
tally ecooomiCll, aM ruthlua, which ia .. it should be."
Collirul' traditionalakepticism wu abruptly dispelled with
the next oec:wTflnce. The Do.. Jon" avf!J'888ll had been declin-
ing throughout early 1935, and Elliott had been pinpointing
hourly tuma with a fair degree of a<':WIlley. In the _ d w.....k
of February. the Dow Jones Rail Average," Elliott had pre-
dicted, broke below ita 1934 Jowof33.19. Ad..vora were turning
negative and memorl... of the 1929-32 <:ruh were immediately
ndondled u beariah pronouneementa about the future coune
 "
oClhe eeonomy proliferated. The Dow IndWltriaia had fallen about
eleven percent and Wen! approachinr the 96]_..1wbile the RaU.,
from their 1933 pull., had f.lIen fifty pereent to the 27 level.
On Wednesday, Man:b 13, 1935,jl18t aft.ertbe c1_ oftrad·
ing, with the OowJonN .ve~ tl.nillhinjr ....... the 10W1l for the
day, Elliott Hnt hi. famoWl telegram to CollilW and flatly .teted
thefollowing;"NarwrrHSTANDINGBEARlSH(DOW)IMPLJ-
CATIONS ALL AVERAGES ARE MAKING FINAL BOTI'OM."
Collina read the telegram on the morning of the nen dll,y,
ThUJ'8day, Man:h 1". 1935, the day that marked the cll»inll'low
for the Dow IndWltri,l. that year. The day prior too the telegram,
Tueeday, Man:h 12, marked the c1""ing low for the Dow JODe.
Rail..
The precise hourly low for the Indu.triala tXCW'I'f!d at 11
Lm. the following Monday, thirteen trading houJ'lI after Elliott',
telegram w" HDt, with the Rail. holding above their prior low.
The opening HUing puahed the Industrial. just eenta below
Thunday'alow and a hair', breadth above Elliott'. target of96.
The thirteen month <:ornoctive wave was over, and the market
immediately turned to the uplIide.
Two month.late"r, Elliott'. call had proved 80 pTetUely and
dramatically COlTeCt u the market continued on iu upward climb
that Collina, "1mpreeeed. by hi.8 dogmalUrn and llCI:\U"8.cy," wrot.e
and pl"O)Xllled that Invel!ltrnent Couneel mb.<:ribe for payment
to Elliott'l fOl'ee&ltl and commented, "we ani oftbe opinion that
the Wave Principle il by far the best fo..--tina approacll that
tu... rome to our attention.·
Elliott Rlponded with a proposal that GoDina mbAcribe to
hi.8 market timing eervice for II period of two yean. Then, ifln-
vestment eoun.el wereltilleatWied witb Elliott"m~,f\er
the two year period, Collinll, whom Elliott coD8idered II muter
writer, would prepare II book on the Wave Principle auitable for
public diatributioD. Elliottat;pulated that the book lhould carTy
Collina' DIlDle U luthor, but Elhott wU to receive full credit for
the diecovery and development of the Wave Principle. The copy-
right wu to be in both their lUUIll!ll. Elliott appllTl!ntly felt tbat
ColliD8' name would be uaeful in giving tbe book wider accep-
tance and diatribution. He added that ifColliD8 wiahed, be would
h.ve the option to m~itute Elliott'l D8me u author but Col-
lina would forfeit any copyright claim lIB a ruulL

,.
"
Colline aceepted Emott'. t.enna and invited Elliott to Michi-
gan to be hi.8 boWIe llUest for three d-.ya over a weekend in the
INtllmu of 1935. Elliott went over h~ theory in depth and thor-
oughly familiamed Collins with the worlring details of the Wave
Principle.
For the next two yelU'll, punuant to their agreement., Col-
liM received and monitored Elliott'. call. on the market. Hia
a=aq remained true, and at the end of the lM!ClOnd year, in
March 1937, Collina began working on Elliott's fiJ'IIt monograph,
TM WlIl't Princip~. which WQ ba-.l on Elliott'. originalt.rea-
tiee.
ThroUihout this time, Elliott had maintained contact with
IIIlveralaequamtanee. &am hie _11Il.ting ...~, notably George
P. RobillJllln. RobillJllln had. financial con.wting firm in New
York City that Hl"Yed corporate clienta. While commWlicating
with Collina, Elliott had .. lao prellented the theory of the Wave
Principle to Robineon, who had become i~uingiy intel'l'llted
in the lIt.oclt market aa a tool for corporate financial inveltment.
Miele £rom Collins and Elliott, Robill8On ia the only penon known
tol have Wled the WI"'" Principle prior to the publication of
Elliott'. book.. Robi...,n and hi• .-aciate Todd II B..c:ker (later
an invntment ItlalUllfel' for a IlTOUP of ore e;q>IOllltion oompa-
niea in Toronto) took EllioU'. work lIerioualy and apent time
atudying it. In MarclII937, .. Collina began work on The Wa~
Principk, Robinaoon and Beckel', probably while co,,",sponding
with Elliott, pN!ciaely caUed the 1937 top UJling Elliott'. new
diacovery. ,.. Becker recalled in a telephone conversation, "It
..... 1IO clearly the fifth oft.he fifth wave up."
The Rood to Wall Street
By 1938, Elliott WIllI eo involved with the Wave Principle
that he inafated that ifhe wen! to be taken into Collina' organi-
zation, Investment CounBeI'. atocli: marUt. Hrvice would have
to UJIe bia ap~h en:IUllively, a propoul that Collina could
DOl. aealpt.. However, in appreciation of Elliott'. deciaion to con-
fide to him the detaila ofhia dillCOVeT)', and in fulfillment of their
qreement, Collina completed The Wa~ Principle, which wu
publiMled on August 81, 1938. The 8 1/2" .. II" monograph wee
coPyrillhted by Elliott and printed in dark blue lIOfteover with
no cover markinga. An estimated five hundred copies were
printed.

•
 Bi<lf1raph;y .
The tint chapter of The WalH! Pri=ip~ makell the follow-
illlJ .tatementa:

No truth m""ta more general acceptance than tba~ the

universe ie ruled b;y la..... Without law, it ie aelf-evideDt there
would be omoo., and ..hen oba"" ie, not.hins I•.... Man ie no
leu a natural otUect than the Bun or the moon, and hie ae-
tiona, too, in their meuical occurrence, are aubject to anaJ,y·
m .... Very e:deMve research ill conneet.ion with ... human
act.ivitie<l indieatal that praotieall;y all developmelltll whioh
.....u1t from our aocial-<!<.'Onomk pi 00. ._ follow a law tha~
eawoea them to repeat themaelves in mnilar and conat&ntl,y
reeurring aerial. of wavea or impu\aell of definlta numbel- and
pattern.... The stock marbo illuat.ratet the .... ave impulae com·
mon to ""';al-economic act.ivity.... lt hu itlllaw,juatu l'lnIe
of other thinga througbout the unIverae.

Within w~ka af\er publication of tbis ground·breaking

book, Elliott paned up hia belongings and moved with bie wife
to the Standiab Arm:o Hotel, 169 Columbia Height., Brooklyn,
which afforded a spectacular view of the Brooklyn Bridge and
lower Manhattan aCl'Ollll the East River, as well u Staten b-
land, Govemor'alaland and the Statue of Liberty. Hia new ...i·
denee Wall ideally lrimated for launching his new career, being.
abort aubwe.;y stop from Manhattan'. financial dilltrict. lroni·
cally, it 11'I88 an area with wbich he waa already familiar, having
prepaI1!d aCQllUnting nports for Wall Street area restauranta in
rna former life. It ill inta.....ting that while both of Elliott'. per-
80nal corrective WaVN (two and four) took place in LoB AngelH,
hia aharpeet adva.ncill(wavell (threeand five) took pl~ in New
York City.
The good. fortune that Elliott had provided to George Rob-
illllOn and hia cliente the year before retllmed to Elliott'. favor,
Bince RobillllOn made hia officea available to Elliott any time he
wiahed to utilize their reaourcea. For rna part, Charlea Collina
gracioualy provided Elliott eome financial ....illtllDOe, referred
to him a number ofdilla'etionary accounta, and helped him ""t
up hia office at 25 Broad Street, where Elliott began mana,;ni
80me .peculative funda (or aevenl well·to-do client.. Th.,n on
November 10, three montha after ~ Walle Prindplt wall re-
lened, Elliott publillhed the fil'llt in a long eeriea oflnterpretive

•
60 R. N. ELLKnTS MABTUWOIlD

11le SWlcMII Arms Hal. (noll buM 01 MiIn srr.dilh on f~J

1e9 CtM:JnlbUf HMg/Ir., BnxlI\1yn, N.w YI;If1r

-'.....--
nom.
E/Iioo'. from ISI38IO IP47

Lette"" which outlined and ro:recut the path of the market in

!.ermA of the Wave Principle. He iMued the one to four page let,.
te... irrqularly (.... lb. ooca.sion ~..ure."), ranrilli from three
to aeven iuuell annually between November ID, 1938, and Au-
KU8t 6, 19<15. Elliott initially pric:ed hiJIlnterpntive Lette....t
$60 per year and continued to make available hi. monograph,
which he called "the Tn.tise: for $15. RN. Elliott wu fmally
back in the ...ddle, and .. independently in bUllineN" he had
planned elev.n yean bero....
For. number ofyeara, Inveetment Couneel'. advertiaementll
in &uron.', had deaeribed CoIJim,' market letter u"A weekly
lIervioe bued on TM Dow Theory." Immediately following pub-
lication ofrM WOIll! Principk, new ada appeared referring more
generally to "an.lyse. of significant economic and technical
tnmd•." Clearly, Collins no longer depended only upon Dow
Theory but U8ed the Wave Principle .. well. Yet Collinll never
mentioned the Wave Principle in hia market publication or ad-
 Biography

vertUing. Hill reu<l1lA wen later atated in a 1967 letter to A.

Hamilton Bolton. where be commented, "I did not give the 'El-
liott' rellllOn for my ~t, at I think the Il!lIlI hia principlea are
diAcuMed. the better working tool they will prove." In fact. CoI-
lina aeveral tim.. counaeled Elliott againat overly publicizing
bill f'indinall, a 8lIntiment that be voiced again in a 1963 letter to
Bolton with reaped to the now famouaFinJ;Ut(:iaJ World articlea.
(That letter alllO revealed the aad atory of what happeIllld to the
buJi. of the c:ornlIpondence between himaelf and ElliotL)
Deapite Collina' ""ntimentll, Elliott conaidered exposition
ofhill diBcOYery a neceaury atep and inlisted on it. Hil ",ewa on

. ..,.'.....
.......e".,-."0'='_
"-

ie U>o r.woU 00<100 110 tho 11_ioJ. .0.1<1 _ bo ..,,_

01010 pobllcl'l fo. ~o .,...... t hd ... "'"(\lO ~ . . . . . or I<
. . I tI>o<IflI' bo booI _<IWIa >ID1q OIl<! ohol&lol bu114 "p • foJ.1oo_
!lIoI .:1\1>00.. bl'Ood..-u. &IML>..... ol boo . . &1<1 I.. SO..ol<l ....
bo ~ , bo -.ouloI ,:roll\ b1 U>o ,d>l.Io1tl..... " .boo _,,~
or _1Q\>.o ... ~ _tzll•• «>r
ohIoio ""0) I hod "" .........It'"
11nobc4l.
_ _••
(1 "',J..!
.....
to,,,,.
_ or..., • do "" \bon port ,In I"'hlld'l .... DlleU,
51»00 _ boT p.Ibl.hb04 "'" N'loo 1 ~ obeo. -...ld bo ot
b ........ 1 ..,.
,..... _ , but Il I nan Into
_~
OIQ" ..... cIo,.,. _•• I. _ . _.._
ol nu""t'o ~

I'll 010.. I. ""••

--, 000'. botllotr to _""olodp. ",,:t-o "",..,.t OCT ot 1J.ll<>«'0

......... ,
,,~

1Iull... lIoJ.'"", .Ioq •

sl..~-::t""
. .l .....
l.2.4'
• eo.....,
• S........ ,
"otNol ~,. Coao<Ia
"
revealing knowledge had already been artieul,ted in 'I'M Fu-

when happily revealed IIfICretli w_

ture of LDtin Anwrieo ""hen he Wl"Ote that, "Gone are tlwo day1l
jealOWlly parded for the
penonal .dvanOllment of their pooI.e...ra. It bu been proved
time and time again that true and lutinr lIUceMa lies in tbfl
diMeminaUon of knowledge ,..thet than in itt oonculment.•
CoIIiIW bad been writing regular feature artielell for Fina,,·
eUd World map.zine lUId in flUly 1939. at Elliott', wging, he
contacted the ed.iton and inuoduoed them to Elliott and hd work.
N • multo Elliou .u c:ommiNioned by ~ World to write
twelve articlea 00 the Wave Principle. After their initial "an-
IlO\lIlCemtlot" on March 29, the maguine opened the..mel! with
the following atatement:

During the put .even or eight )'eVI, publilhfn of finan-

cial m~ and O<plli... tione in the invatment advi.oo:Y
fi,1d bavi been virtually flooded with '.~' for which their
proponent.. have daimed I"'at aocu.racy in f-..ting atoe"
market lDOVemeOtL Someofthem aPJ)ellTed to work ror ...
bile.
It wu imrnedial.e1y obviou.t that othen bad no value what-
ever. AU h.... been looked upon by TNt Fill4ACw World with
i"N-t Keptidllm. But after ;nvest.ij:.tion of Mr. R.N. EUioU'.
W.... PriDeiple, TM Fi,...ndaJ World became amriDced that
•""'*' of ar'lieJe. on em. lNbjeet would be interMting and
m.truetive to iu readen.

The fim of Elli~'. articlee appeared in the April 5 iasue, and

the;,. publication continued regWllI'ly into July. Theae defini-
tive utidell elItllbliJIhed Elliott'. nlplltlltion with the invelJtJnent
com.mll.D.ity. They had great lItaying power and lIWVived in van-
OWl (CJnll.lI OVer th" yean, whil.. the monorraphR ...re .... v..r re-
printed.
BroalkninIJ 1M PrilIcipk
In late 1939, after the pIlblicaUon of the FiIWnCi4l World
utidu. Elliott bepn writiq in-d..pth folloW-lip ~I on van-
0UlI technical upectlu well u bl'Ollder implicatiol1l oftbe Wive
Principle. TheM quickly evolved into. (ann'" Edllcatioruol Se...
vioe, whicb he pIlbliahed £rom 1940 to 19« and for whicb he
or
charged $60 per yeu. One Elliott" earlieet. -U\lU.t;"ne! Bill.
I.. tin," wu a JI'OIlnd-breakilii work that lifted the Wave Prin-

•
 Bfugrnphy .

R. N. ELLIOTT, 1939
....,*" .... _ -

ciple from a comprehen.sive catalog of the market's behavioral

pattel'tl8 to a broad theory of collective human behavior unpar-
alleled in the fieldB ofeoonomiCll and lIOCiology.
Since 1935, Collirul had been lIendillj'boob to Elliotton the
role of the Fibonaeci l!equenl':fl in natUl'l!. By 1940, Elliott had
read Baldauare Boncompagni', publication of Leonardo
Fibonacci'. original worb and two boob by Jay Hambid,ge on
the ,ubject of "dynamic ,ymmetry; a tenn u.lled by Euclid to
deecribe the deeign. that reeult from nature', purpo.eeful em-
ployment ofwhat are now ealled Fibonacci mathematic.. Ham-
bidge wu an American artist who until hi.d.ath in 1924 applied
the principle. of geometry to art and architedUl'l! in aevere.l
boob. Elliott.lao readNoture'. H ~ Unity: A 1'rMtiu On
1" &l4tioll to ProponioMJ Form (1912) and ProportioMl Form
(1920), both by Samuel Colman and C. Arthur Coan, and ~
Cu~~ o{Uft (1914) by Sir Theodore Andnol Cook, III of..hich
di.ec:uMed the role of the Fibonacci ratio in nature'. patterne.
EUiott'e additional important observation from hie 1938 book
that the Wave Principle applied to data lienee outlide the atoek
market waa another impetul to hia inveltigation into the
broader meaning of bill ID!IroVery.
By the early 194<¥, Elliott had developed to oompletion hi.
ooncept that the ebb and flo.. of human emotion. and activiti""
folio.. a natural p~on governed by law. of nature. The
culminatioo ofthia train ofthought wu a treatille of a tl'anKen-
dent importaneeequal to thatofhia original book. On October 1,
1940, Elliott publillbecl hi8 finltdiacuuioo olLeonardo Fibonacci'.
"Summation Senea of Dynamic Symmetry" in an Educational
Bulletin entitled -rile Ballia of the Wave Principle" Wlder the
aubheading "Ho.. the Wave Principle Worlr.a, and ita Cllrrela-
tron with Mathematieal Lawa." In it, he tied the patterna ofool-
leetive human behavior to the Fibonacci, or "rolden" ratio, a
mathematieal phenomenon known for millennia by mathemati·
clane, lICientiata, am.ta, arehitedl: and phiiOllOphera All one of
nature'a ubiquitoullawa ofform aod pl'O£fSl.
Thia ground_brealcing p.........,tation led to what may have
been an incident of intelledua\ piney. On May 19, 1941, leN
than eight montba after Elliott'a treatille ..u diseeminated to
hia aman liR of aubacribera, Borron', publiahed an article
authored by"Etbon Been." E<bon Beere "II a p""udonym of
Edeon Gould, ..m- middle name w.. Been. The article, "A
New Idea for Speculaton: Applying the Principlea of'Dynamie
Symmetry' to the Stock Market," purported to introduoe thia
unqueationably novel idea yet neglected. to mention Elliott, ita
original and forernOO proponenL Gould confirmed in a telephone
ooovereatioo that the editor of &rron', told him he bad received
a call f'tom Elliott, who .... (jU8tifiably) angry about the article.
Gould inaccurately reoo1lected. that hi, article on the ,ubject had
appeared in Marcil 1935 (the date of one of hi, foreeaeta in
&uron', baaed on fixed·time cyclell), thu, predating Elliott'a
work, when in fad it WII publiahed lrix yean later. De-pite gentle
probing, he declined further commeot 00 the aubjed.. History
wulciod, however, and in eWluing dl!Clld.... afforded Elliott full
credit for hie remarkable intellectual aehievemenL

,
 Biography
"
Bran.ching QuI
Elliott'l lubHquent Educational Bulletillll eltPl'nded fur-
ther upon hill theaia .. he came acrnaa new observationa and
ideo. Titlea included '"I'echnical Featurea," MAiternation," "TIle
Buill of the Wave Principle," "Duration or Time Element," "In-
flation," MDynamic Symmetry," "Two Cyclea of AoHrican Hi..
tory," "TIle Law of Motion Mand "Nature'a Law" (I. p ~ to
hie IIeCOnd monograph).
Elliott'a other ael"'ticell included:
- Forecut Let.ter8 marked "Confidential,Mwhich were .,ld
at Mconventional feea." Tbeae one paK1l bulletina provided inveat-
ment timing recommendatioD8 "for thGlMl who deaire prompt
advice when important reve....a1.a are due in averaj;l!II and indi-
viduallJtocb.~
- Special reporta for "bueineae e:teCUtivea" deaigned to .....
aiat in detectiq "peUI and IllIWn ofproduetion."
- A "",rvice called MInformation" wherehy nOllllubacribera
were allowed to !lind I atamped aelf-lddreMed envelope and uk
Elliottanyqueation about the Wave Principle. Elliott .....ponded
with a quotation of the fee he required for hill reeponae and,
upon payment, the an_ft". "'Iltil novel aervice," Aid Elliott, "fill.
a long felt need."
- A 61.8'11ruler, which Elliott probahly created IJ5ing a drat\-
illlil: inlltrnment called a "proportional divider," the fulcrum of
which can be moved to obtain different ratiOll of meuuremenL
Elliott'a ruler enabled the u!IIr to ucert.ain without the bother
of cakulation when the ratio between two lengtha wll 61.8'11.
Elliott offered it for nle at 25 centa.
ElIioU Mid in 1935 that ·wa~ do not make eITOn. but lIlY
vereion may be defective. The neaN!r one approacheB the pri-
mary law. the leaa I!JT<lf'lI will occur.~ By virtue of all hie paina-
taking atudy, Elliott rightly conaidered himHlfthe aole authority
on triA diacovery. Toward the l!ltahliahment of that polIition, he
delivered the following warning on the front page of TM Wot>t'
Primiple:

Whom a newly diacovered phenomenon ia diac:loaed, ae1f·

appointed "ezperta" immediately appear. Conaiderable upe-
rience i. required to interpret correctly ....vea which are in
66 R. N. EUKYrr's MASTU'rOUS

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proc:eu of fomultion..•. No intel'pretation of the Wave Prin-
ciple .hould be _ptfId u valid unl..... IIl8de by me or by •
Irtw.\ent directly lieenBed by me.

In fact, Elliott did have I cl_ oht\ldentll whom he taurht

at ilTf!rWar intenal. from hie small office at 25 Bl'OlId Street.
Carroll Gianni, a memberofLhe New York Stock Exchl.l1ie, W.I
an oa:alIionaietudentofEliiott'.f'rom 1939 to 1941. Hedeecribed
the one hour IIelllIiOll8 all informal but Soaatie, with Elliott finnly
in the polIition ofprofeBllOf.
On ~mber 30. 1941, Elliott'. wife Mary Elizabetb. who
had n!mained with him throqhout hia travel., career changes
and medical misfortune, died at age 72. They had been married
thirty...,ight yeara. A few montha later, in the Iprina of 1942,
Elliott moved hie office to 63 Wall Stl'eet through In interestil1i
chain of _ .. nta. Philip K. Sweet, then prellident of Fundamen-
tallnve.ton, Inc., had worked for Edgar r.w...,m,.. Smith in the
late 1920s with Anthony Gaubi., who in 1934 became auoci-
ated IlII I junior ~er with Chari". J. Colli"" at Investment
Coo"",,1. Gllubi. had met Elliott in 1938 at Inveatment Coun"",l
and I.ter introduced him to Sweet in New York. Sweet, who
admired Elliott'. work, offered him an office at 63 Wall Street
where Fundamental Investora wu located. Elliott accepted, and
moved hill bUllin..... from 25 Broad Street to itll new loeBtinn.
Around t.hiII time, Elliott lieelUMld at leut one atudent of
whom there ia lOme record, a man named Richard Martin, who
publiahed four market lette", entitled 'The Wave Principle" from
March to Augu.at 1942. Elliott made certain to protect hia di.
eovery even from his protegefi and had the lettera copyrighted
in hiaQwn name. Mr. Martin'acareer with Elliott wall brief, how-
ever, poeaibly becal,llle be found hm..eJf in diaagreemtlot with
Elliott on the outlook for tha marut. Whila the poaitiOD of the
market under the Wave Principle often alklwa Hveral pouible
outc:omH, rarely ill their order of probability a proper point of
oontention. While EliioU wall willing to dillC1.lU different point.
of view, he rightly conaidered hi. interpretlltion. expert and
refUNd to unction deviatiolll. Martin dropped from view but
reappeared in 1948 II author ofa booklet called TrfIUt Action, A
New Mrthod ofFOI'K08tiIlJl. The booklet propoMed an analysill of
the market in a faahiQn aimilar to Elliott'a, but now purported
" R. N. Eu.JOJT's MASnJIll'ORU

to be refined from II syllt.em developed by Frank H. Tubba and

published in 1929 all part ofa <:<H,II1M! titled"Tubbll AnalytiC8." It
..aa onee lugge8ted that Tubbe WaB annoyed that Elliott had
uploited. 'his" dil,mvery. Howe>rer, Tubbll' surviving literat>.Ln!
dianally fail. to indicate anything but II luperficialaimilarity to
Elliott'. Wave Principle, thus negating any t1aim orplagiariam.
Throurhout the fint. haIr of the 1940., Elliott investigated
further in the fieldllOfphilt..uphy, art, dynamic 1)'Dllllet.l"y. math-
ematial, phyaies, botany, and even Egyptology and pyramidol-
ogy. Olle of the article. he read wa. "Do You Know Your
Emotional Cycle?", which appeared in the November 1945 IMu"
of&dbooJc magazine. The article dillCu..aed the work of Dr. ReJl-
(oni B. Hel'1ll'!y, II lCienti8t who diacovered the cyclic.lity ofhu-
man emoUol1ll (today called biorhythnuo:). HI! ai"" readProph«.in
ofMmhi-ZAda ill tM Grret Pyramid by Brown I.ndone, ufe'.
Riddk Solwd (1946) by Dr. John H. Manaa, preaident of the
Pythagorean Society, and other vol\lfIlell, IIOIIII! ofwhich are lilted
in the Refereoeu Metion at the end of Notun'. Law. M....., lind
more, hill concept tol>k on II .. holeneM thII.~ fit into what he even-
tually came to wi "Na~ure'. Law" and 'The SecTet of the Uni_
verM."
Some time prior to 1944, EDio~t eolTflllponded with Manly
P. Hall, founder of The PhiIOllOphica1 Reaean:h Society, me., a
private reHarc:h and educational organisation in r.o. Angelee,
California. Elliott requeeted permialrion to reprint the picture
or Pythagol"lUl thII.~ Hall had contributed to John Manas' book.
Pennillion wu granted, and Elliott reproduced the picture in
NlJtun'tl LtJw. Hall, who chronicled man'. lIIIarc:h for the eeeret
of "univenal wi..Jom- and who maintained that "all the uni·
....T8OI i, eternal growth," may have influenced Elliott'. thinking
by the time he wrote Natun', LtJw.
During th_ yean, Elliott vitlited hi, old friend, inveetment
couolllllor ~ P. Robi~n, almOO daily in hi, offic" at 14
Wall Stn>et. Robinaon employee Howard Fay became /Hemitl with
Elliott and visited him lIIIveral timea at hia home in Brooklyn
Heightlll. Fay deac:ribea Elliott ae "intelligent and ,h8l'P," but
"omery at tim_," and I.... than patient with th.- who dilagreed
with him.
By 1945, Elliott Willi eetabli,hed to the point that he Willi
advertiainj: for Graphiea Stoeb, a monthly range ch.art.llel"Vice
 Biography

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published and updated every two month&. ObviOUBIy hil Itu-
dentl needed ch........, Ind F.W. StepheDJI, the diJItributor, felt
that Elliou c:ould luppl;r him -.e buaineIa by recommendina
them .. ideal fur illWl1rllting the principlea IIf wave muvement..
AnnuallUboo::riptioDJI""d fur 160.
How ironic it _ml tbat the owner lIfa challengina market
analylil buaineea and I man of inere&$ingly expanlJive philo-
IIOphical thOughtl would take the time to write I dry practicll
booklet, billed on hia earlier career .. an ac:oountant, entitled
"Farm Tax Aecountina M. You Go'-publilhed in January 1945.
It ia aa if, with only a few yearaleft to live, Elliott w.. not only
br&JKhing out in lIeVeral avenUN ofinvestiption and thought
but alao flniJIhiq project.a klnll planned yet previowIly left un-
done.
The Fin.ol Ytora
Durilll the IlUIt three yean of hiJIlife, Elliott'a clientl ron-
tinued to call him, ~y for advice on the very abort term lDlIV""
in the market.. However, he celllll'lli to IIOlicit new bU8ineu. El-
liott wrote the I..t a hia Inter'pn!ti..e {.etten m Augun 1945
and apent the reat otthe year and th. flnt five muntho of 1946
puttilll to(rether what he obvioll8ly coDJIidered hil definitive
work, No/u.n'. Law - TM &em of/M U,.illflrw. No.tu.n'. Law
incorpDrstn part of The WON Princip~ and indudn the addi-
tiWlal...u-veriea and obIoervatiOIlll that in the intervenilll yelll'B
had been detailed in hiJI Educational and Interpretive Letten.
Thia final monograph irn:ludea almoat every thought Elliott ever
had mnceminlil the theory of the Wave Principle.
The reader of that volwne ahould keep in mind that Elliott
w.. a pioneer. Much of hia diacovery ..... ream:led .. it ....
formulated, and little time w... available to .pend on CC>lIllMltic
ed.itilli. At 75 yelll'B or.,. and &till aufI'erinll; from anemia, El-
liott undoubtedly felt a aenae ofurgent)' about liletUng hiJI final
thouahta on the Wave Principle into print, an urpnty that took
precedence over a well orpni.zed terl. In an effort to pt the
book out bef",", age and ill health finally cauaht up with him,
Elliott opted for apeed and irn:lusiven_ over the metieuloua
orpnization evident in hia previ0'U8 ..-tic1ea and boob. Indeed,
many of the ~ were iIllleJ'ted direct1y from hia Educational
Letten. Deapite the lack of cohea:ion that more time for plan-
nina would have allowed, the book ia neverthel.... a ml,jor con-
tribution to market literatuno.
 BinlJrnphy n

The publication date of the book WlUll June 10, 1946. It wu

printed in an ~. :I 11" buff colored 80f\.c0ver rina binder, and
the I'f!ported 1000 copillll BOld out quickly to variou6 members of
the New York financial community. While copiee of The Waue
Principle and each market letter E11iott wrote had been meticu-
10Wll,y IIIlnt to the Libl'8.ry of CongN!u, Elliott apparentJ.y ne-
glected to IIIlnd a copy of NQture'. Law.
For nearly five yeartl, Elliott had been living alone. By thi.t
time, the only immediate relative o(Elliott'. atillliving 'IV'"hill
aillter May, whoee laat name at one time (from an apparently
brief marriage in her youth) Wall Nul'tez. Relativllll through mar-
riage included only hia wife'a niece and nephewa, Mrs. Marcella
Thomplllln Makinaon of Upper Montclair, New Jeraey, and her
broth""" Milton, Jr. and Ralph ThomJlllOn, both ofwborn lived
in California. Howard Fay deacribell Elliott .. becoming quite
lonely in hi. apartment at the Standillh Anna Hotel during thia
time. Neverthelell8, he waa viaited ooeaaionally by a few Wall
Street friendll, one of whom waa Robert M. Macl.ury, a broker
with Lord Abbott and later a vice president of Kidder Peabody.
Mll.et.ury often brought him hia buainesacorreapondeDCll when
he w... too ill to come to the city to collect it.
Elliott managed to iMue at leut tW<l additional periodical
pagea, in July and December of 1946, but hia chronic anemia
w.. catching \lP with him, IIIlverely affeetm, hia health once
again. By 1947, Elliott'a Wall Street frienda persuaded him to
admit hiIIllllllf to Methodiat HOIJp;t31 in Brooklyn for a health
review. Tbeae aame frienda probably helped Elliott move to Kinga
Park State HOIJpitai. one of New York'a leading paychiatric hOlt-
pitala, a type offacility that in thoIle da)'ll alao aerved .. a bome
for the elderly. There Elliott'. basic need.a were lIB.tiafied .. he
lived out the final montha of hialife. Elliott and Collina contin-
ued their ooeuional meetingB and remained frienda and COrTe-
apondenta. According to ac:oounta. Elliott remained mentally ..
aharp .. ever right up to hill final day.
Elliott died on Jan\lary 15, 1948. 11le cause of death Wall
lilIted all chronic myoearditia, a pIlrsilltent inflammation of the
hean muec:le. ~ with the amoebic infection that Jed to the fon;ed
retirement from hilearlier career, Elliott a1moet certainly eon-
tracted thill iIlneB8 durlni hill time in Central America. In that
region, chronic myoearditia ill often call8ed by a typeofparaaitie
infection called Chl\lfll'l' diAeue, which can c:auae death many
yeara after the Initial ezpoeure.

,.
"
One (onnu tnder claimed that Elliott'. fiiendll took up.
m1Jectioa (I common pn.ctice.beP. ~..., Ietl. no immedi-
a\e re\ativM) (or Ilia awDatioll,.hidl tool< pa- two days later
at the ..... b PoacI. Crematory ill Middle Village. New York.
Reconb olF.irchi16 SoN ~ Home indicate that arra.np.
men\e (or tht' cremation 1l'l!ft made b)' the Eliiou.' m-. Mar-
c.Ua M.kjneon, .bD teOI!iYed ElliaU'1 am.. .. ,be had Mrs.
EUiou'.lUyean~.lnie.ie.iDatbe"-'lII1 file at the
liuMnl boclot. • I ept ntati.... I"BDal'ked that in all her yean
at the (Killt)', abe bad hal'd1y..en I 'btdlier..-d, the (_
detail. ~ by IllS. N,nnllML A death DOticIlPpeared in
1'IIc N_ Yori 7tma 1111 JllDuary17. INS.

UUOTT_ . . . . '-.J-.1J.l ..

.
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8._11' I PM So'_y. lu U. 1,••. -..

On December 18, 1953, EllioU'lliAe!" Ib.y, who bad lived

aixty yean in 1M Angele., died.~ the ~ 0(88, 1eavinr no ehi'.
d,..,o. Elliott., bel...- cbildl_ himMlf, thu. had no dinlCt or indi-
rect deKendantt.
The WIve Prinelple After EWott
Af\er ElUott'. death, nODe o{hla Itudentllttempted toean·
tinue his publication where be len ofI'. Yet hla Iej'acy . . . 80
powerful that hla method aided the _ohhree of the great-
Nt r ~ in tbe m.t.ory olmarket anaIym: Ed80n B. Gould,
E. Georp Sc:baef'er and A. Hamilton Bolton.
EdllOn Gould, who developed the "Th.... St<lJ* and.
Stumble" rule ud the -sentimeter" and. ...- eyd. and _ .
- . I ~u.enul ill b.iIIwon. wu f ......... for mUilll preciM mar-
ket predidio..... H, d.imed that ilia methode ofr-.tilll....-e
all ilia own w:ept for the Decennial hu.em. whieb wu devel-
oped by £dear t.ew,euce Smith. How••ei, wbm ....ed about
the . . . for ilia JUchIy eperific fOllc",te, be aft.ft ",plied by
citilll ilia ~ Step" rule, i.e., -upec:t three ltepe but be pre-
pand for • fourth," whir:h ill limply . . .nen.Iiu.~of EllioU'.
buic priDciple. 1Ddeed., GouJd'I prim dw't& ..... typically . .
l.lted with numbers 1llCIleuent, IIId be OIli1tinually ~ and
f~,"" "'threIl ~ (or ~ "thret~") OD the
uplIide, lIepart.ted by two col'nlditlDJI. Moreover, eorrellpGndenee
between Bolton and ColliDJI that mentioned Gould a1w~ re-
ferred to ru.. .nalyaia u ·implying th.t w....e III may not yet
ha...e ended," or concluding th.t ·the rise from June 1962 inau-
gur.tea hia W.ve Five,~ and the like, implying tbat they knew
he wu uaing the W.ve Principle.
Gould Itarted with the Elliott W....e idea th.t bull market.
have. trimilarity of form and then "'-rved the time IIlId price
ratiOll between them to make lIGme of the mOllt IICCIll'ate Iolli
term foreeut. in .tock market hiatory. FCN" inlJt.anc:e, in 1963 he
forecuted. major hiih forthe Dow Induatrial. of"l066 in July
1966." Thf! orthodox top of the bull market was ....ched in Feb-
ruary 1966 .t 996, while the priee pe.k wll regiatenld. aeven
yean I.ter.t 1061 (the "theo...tieal intnlday" high Will 1(67).
In October 1972, he predieteli a low in the 640-660 rlUlie fur
Auguat 1974, which he .d,jueted in M.rch 1974 to "550-650 in
October or N(lVember." The double bottom of OctoberlDecember
of th.t ye.r rej'iatered an intraday luw .t 670. In November
1979, with the Dow depreseed in the three-digit range, Gould
foreeaated • Dow pe.k of 3475 for J.nuary 11, 1990, .ueceIIll·
fully indic.tirli the IleOpe of the uplide potential th.t II,)' .head.
Nu .ppro.ch other than Elliott's Wave Principle baa ever al-
lowed such bold furecalting. It ia perhlpll ill&tructive to note,
moreover, th.t all three of Gould'. moo famoua: forecutll had
been I!MeIltially made previouely (and more .CCW'.tely, u tlMy
ultimately turned out) by Iclmowledj;ed Elliott WIve InalYltl.
In 1960, Bolton forecuted ·Do.... 999" (h.ving forecuted "Dow
1000" .. early u 1963); in 1970, A.J. Frost fOl'llCllllted"Dow 572"
(Collinl and Bolton hIving CIllled for 635 as early u 1968); .nd
in 1978, Froet and Prec:hter forec:aated • Dow near 3000 in El.
liott WOIlO! Prindpk (which Prec:hter reviaed in 1982 to Dow 3885,
with the Dow then in the 900II). Thouah the Wa...e Principle ....
never credited for Gould'i forecaetl, it .ppean to have merited
• great deal.
Dow Theory ,",pert E. George Schaefer kne... Elliott and
bepn publiahing the Dow ThftJry Truckr (1948-1974) the year
Elliott died. There illIOOle evidenee, but no proof, th.t Schaefer
kept. tloee eye on the market'. mesaage from the ItIndpoint of
the W.ve Principle. For inatanee, .uthor.nd technical ana!yllia
innlMltor James Dillflll, one ofSchaefer'1 early .ubecribe.... re-
calia th.t Schaefer mentioned the "three phUH" of the 192Ol1

,.
" R. N. Eworr'tI MASTUlWO«U

bull market. ThUll, jWlt u one Dow Theorist (Robert Rhea) bad
iMpired Elliott, woo began publiahing the year after Rhea died,
Ml Elliott may have provided ilI8piration to &:haefer, in effeet
returning the favor. In .. Dearly perfect loong-tenn performance,
Schaefer turned bulliAh on atoda in 1949, e.tehing the entire
postwar bull market rliht up to the orthodOll top in 1966. He
turned beariah and Rayed that way throughout the Cycle ..ave
IV bear market Wlttl be died in the Bummer of 1974. Hia t ..o
long-term lignala were thUll identie..l to &lton'. (_ d~ion
below), The influence olthe Waye Principle upon DowTheori.tlI
eamed through more explicitly to Richard RUlIHIl, who while
c:onfening with AJ. FI'OIIt publW1ed • number of remarkable
Elliott Wave foreeut.8 in hiADow TMoty utknduring the bear
market yellnI o:>f Cycle ....ve IV.
Though Elliott'. concept. powerfully lhaped the work of
IIeVera1 of thia century's IlXWt IUcceuful market forecuten, it
Wall A. Hamilton Bolton, the brilliant ana1".t ofBolton-Trem-
blay, Ltd. of Montrql, who tnI1y kept Elliott', name and the
Wave Principle alive. BoJton, who w. . a.tock brobrat thetime,
l'M.d Elliott', FiIUJllcial World articl". in the apring and NtI1-
mftr mont.h.o of 1939. He mad. a point of contectinlJ Elliott on
one or two oceuiona on hia triJlll to New York and cornlllponded
eontinually with him until Elliott'a death. In 1946, the year
Natun'. Low wall publiahed, Hamilton Bolton and MauriC4l
TTemb'-,y formed a mooey management fum and began pub-
lWrlng 1'M BaIl4 Crfliit Alwly.l, a monthly market analyli.
hued upon Bolton'a pioneering reeea.n:b on the I'l!latiol1lbip b&-
tween bank credit atatilltics and trends in the etock markeL M
a retlult ofhie conailtent auccese in fonlCUtinlJ with thia method
of"fundamental~ana!yllil, Bolton eommanded lJI'tlat and ever-
increlUling respect within the investment community, particu-
larly among illltitutional inveeto....
While bank credit ltatiaticl wel'l! Bolton'a bl'l!ad and but.-
ter, the pilei of corrupondence to Collinl, FroIt and othen ehow
thlt he.1UI eaptiVflted by the Wave Principle. Five yeara after
lJtaI'ting hia monthly publication, Bolton decided to lllIIUJne the
task or publicly analyzing the market in terme of what wae by
then ref'ened to .. the ~Elliott- Wave Principle. Hil firat "polIi-
tion Oil. the IUbject appeared in a 1953 "'aupplement- to 'I'M BanJe
CnditAnaly.l. The long-term bulliah forecut it preeented, at a
time when to molIt analyatll the market appeared "bijh" WlllI

•
 BU!tlraphy

not only daring, hut accurate. Bolton'l anaIyaiA proved M! popu-

lar that the Elliott Wave Supplement became an annual feature
publilhed each April. Hil thoughtful oommentary and dramatic
euccea with tM Wive Principle kept wan Stnlet interested in
the concept for thirteen yean.
Elliott'l Wave Principle got another Iman boolIt with the
inclusion ofa c:onci.... lummary in Garlield A. Dn=w'1 1966 edi·
tion of N~/IJ M~tMd.l for Profit ill the Stocll Moml (1948). In it,
Dn=w, who rna, have eolicited the oommentary from Bolton,
wrote as followl:

AtLer a linn start in 1949-1951, the put two yean, at

leut, have dett'aCted from long term 1948 forecuu of IllOR
baaic cycles. Iftheae projectionl had been oorreet, atoeka should
have reaehed a bear market low in 1951, building activity
should bavebeen on the dowDlJ'"Ide until 191i3, and 1961_1962
ahould have been tM troua:h of a depression. There iJI one ex·
""ption, howevN'. Elliott', Wave Principle aeerna to have Rood
up better than anythin,r elae in the field of IODg ranp fore-
cast. There WII more hesitation of stock pricea in 1947-1949
than original.ly anticipated, but the buic theory WII quite c0r-
rect that the llUt important move would not only be up, but
would abo ex~ the 1946 top. At the Ume time, it wll aiM!
fOl'lCallt that, eventually, a fifth "wave" would eueedevell the
1928-29 top for stock priCN. Thlt _med utterly fantaltie in
1948 when the 200 level would have looked "high," but with
the Averap havina; alnady hit 360 in 19&4, it no IOngN ap-
peen quite eo impoNible of ultimate ICWIllplilbment.

In 1960, while be WIJI president of the Financial Analyeta'

Fedenltion, Bollon publi.hed The ElJi«1 WallO! PriN:iple - A.
~ ApproiN/., the flTllt book on the Wave Principle .iDee
Elliott'INalun's LauJ. In that volume, he made hil famous fore-
cast ofa major Dow peak at 999, reached lil[ yeara later almost
to the dollar. He at.o documented (without referring to him by
lllUllI) Collinac' concept of a 1932 orthodo:l Supercye1e low f....
ltocks, Ellwtt'. concept of a 1942 orthodox law baaed on I 13-
year triangle, and Bolton'l own interpretation of a 1949 ortho-
dox low based on I 21-year triangle. Th_ difl'ereneea of opinion
ronatituted a point of good·natured diatlgreement among Itu-
dents of the Wave Principle that luted a decade. A.J. FroKl re-
counts that Bolton, juat months before his death, changed bis

,.
mind on the 21·year triaDile, ~ with Collila tha~ 1932
marked the ort1'Kldo.I: low. SubMquent market action confirmed
thia wave labelillg to be correct.
On Fehruary 11, 1966, two dey. after ~hat decade'. hillh
and the peak of Cycle Wave III, Bolton wrote to CoIIiIa, whom
he had met twice before, and uked him to contribute to TM
1IanJI Cndit NIaly.t'a 1966 Supplement, which "1IlI published
in April. Therein Conine gave h.iI t.IJouihtl on the market and.
explained thelltoryofhill relation.hip with R.N. Eniott. He then
outlined the Intermediate, Primary, Cycle, Superqcle and Grand
Supereyele wave ODuntl for the .toek market and enrreet1y iden-
tified the top of the Cycle wave advaDOlll'rom 1942. At the QIIle
time, he f;A1led for an enauing fourth wave to be made up of a
large A·B-C formation carrying ultimateb' to about the 525 level
on thfl Dow IndWitria1&. Collllidering that thfl Dow at that timll
.... cl.- to 1000 and bellrl ..ere eearce, Collilll' prediction wu
tnl.Iy remarkable, not only becaWle it forecut thll W1thinkable,
hut becauee it came tnle. The end of the 1966_1974 c:orrec:tion
envillaged by Collina came a~ 570 (intraday reading) on the Dow,
jun 411 pointll from the prqjllCtion made eight ylllrI earlier. In..
CompUu ElIwl W...... Writing. ofA HomiltOit Bolll>lt (New CI. .
.Ice Library, 1993) preBentl both hia and Colline' entire pub-
liahed c:ommentaty.l
AJ. Froat, .. vice prelident in charge of adminilb'ation a~
Bolton.Trembl~,'11''' abuRney uaociate of Bolton'. from 1960
to 1962. He became and remained one of Bolton'. cl..-stfrienda.
TIley c:otrelIponded frequently and dilc:uQed in detail the mar·
ket and the Wave Principle on many oc:euionl. A1I:er Bolton'.
deflth on April 5, 1967, Fn:.t .... choeen to Ull\lme the tuk of
writinll the Elliott Wave Supplementl. Froat wrote the 1967
Supplement and conaborated with Ruaell L. Hall on the 1968
Supplement. The JlIlIt Elliott Wave publication iaaued by TM
1IanJI C,..,dit Analyll, which had been purchued by Stotey,
a.-kh" Aaaociatu foUowitl&' Bolton'. death, Willi Fn:.t'.1970
Supplement, which inclwled hi. flllDllUB cakulation Wlill( houtly
figureI that the bear market then in Pl"O(lreM ..ould bottom at
572. 'fbe hourly low four yean later w. . 572.20.ITlle Compk~
EUWJ4t Wauc Writin,r. u{AJ. Froot(to be publiahed by New CI..·
triae Library in late 1996) prellenta both hie and Richard Ruaeell'.
entire puhliahed CODlIDMtaty.l

•
 BWgraphy
"
The Wave Principle m:eded from public view In the 1970..
Aaide £rom briehllmmari. oCthe theory in a few book chapten
and uticlee, the aforementioned diecuse:iolUl by Richard RUAell
and Robert C. Beckman's The Elliott WallO! PrindpU4I AppliN.
to t~ Lon.dJ:m. Stooll Marut (1976) were the moet ambittou. writ-
inp on the subject durina' this period.
The Wave Principle ReDewed
The reoeeaelon of Elliott Wave eommenttlry ended with the
rel_ of Froolt and P'reehter's 1978 book, Elliott WallO! Prin·
ciple -1CQ to Stooll MarUI Profit., the first book toarnnp all
mown IUlpect.lI of the Wave Principle in lagieal sequeoce and
add points ofmblt.lu,e to the llte...ture.
In late 1976, while I wu a teehnlcal analYllt with Merrill
LYl>Ch in New York, I bepn correepondilllf with A.J. Flwt. I
had been publiahinK reports aince April on the stat..... of the
market in tenna of the Wave Principle and WIUI betPnnillll' re-
Han:h fOT a new book on Elliott. The Market Teehnici&nll AlIllO-
cl.tion contacted me in early 1977 and wed if I would al'T1lJlge
for Fl'OlIt to llpealr. at its annual conferellCll in Pl!llIUIylvani. that
May.
When Fl'OlIt and I met at the conferenee, we enjoyed ..ch
ather'a company immeneely and became fut menda. Frost eJ..
plained that he a11JO Wall in the proceaa ofwritilli a book on EI·
liott, which Wall to he a collaborative elfort with laD M.T. MeAvity
of DelibcrotiolU (for artwork) and Richard RUSIlllIl. Froet added
that he would lilte to include tIOme of my recent analytical ....ork
III a chapter. I IIl:I'"d and began work on the chapter while con·
tinuing reeearch on my own book.
Frost spent mOlt of 1977 writing a draft summary of the
Wave Principle for his book. Then latll in that year, MeAvity
and R...-n contacted Froat and explained that their b\IIIy Kbed·
u1H precluded their Involvement with the book. Frost wrote and
wggeated we coIlabontll on the volume and in December in_
vited me fOT a weekend to hie home in Manotiek, Ontario, to go
over our pllDII. lepent the Dm IIllVlln mQntha IlUbltantiaUy u·
pandillll' on A.J.'s drat\, interrupted only by a deliKhtful week-
end viait with Frostand CollilUlat Cc>UllUI' retreat in F"orida. By
July the book ..... <»mpleted. The neIt several weeu were de.
voted to produetiQD detalll IUch II drawilllf the iIluatratiOllll,

,.
"
photorrlPhilli them and developina the photoll in the buement
darkroom at the home of 1t.ati8tical market analyst. pioneer
Arthur A Merrill. By Augu.st the rnanu.eript _ at the printer,
and in November it wu releued.
In April 1979, lien my pHilion .. Market Specieliat with
Merrill Lynch and began publishing 'I'M EUio« W(J~ '!'MrNUt,
which I hope will track the fifth wave in the e:tlf'n'nt Supercycle
.. well all Elliott tnlcked the tint and IJllCOnd, Bolton tracked
the third and Fro8t the fourth (and .. CoUina baa tracked them
all).
In 1979, I began uaembling Elliott', original writings for
publication. The ruult i. this volume, which I hope huleft. DO
IJI.mUl untumed in helpine make Ivailable to R.N. Elliott the
wide audience tu. pioneerilli ide.. .cl richly deHrve.

- Robert R. Prechter, Jr., 1980

19lN1Addendum
Moo famoUl.we1r. market raean:ben made their careeno
in the market. R.N. Elliott wu an excepl.ion. He wu not prima-
rily ••toek market guy, hut. buMineuman. All hie biography
attut8, he "u competent, uprtlUive, QOnfident, independeDt
I.lld "e.... tile: truly an Ameriean ren.i....nce man. Can you
imagine -.meone coming afreIIh to your field and bnlaking brand
IHlW ground when he wu67 ye..... old?That "'u howolll Elliott
wu when hi. first. monograph on m.rketl wu publilbed. After
building an international tt!putation u I. buai_ accountant
throu(h corpor.teI IetVice, magazine columDl, boob, and even
a government conuniMion, today he ell,joyl. I. fllr larger tt!puta-
tion for having made and developed the.uilring OOHtvl.tion that
mVNiment market behavior ie patterned.

covery. Moo people can apot wave )Hltteml. 0_

It ill diffieu1t to appreciate the geniua behind Elliott'a dia-
they atudy what
to look for. But what kind ofpenon loolu at price nuetul.tiOnA
cold and di.acerna the )Hlttem8 in the lint place? Only Benoit
Mandelbrot, the father ",ffractal eeometry, bu aeaxnplil.hed a
eimilar feat. He obaerved the phenomelHln in mountain ranf1!l,
tellcoutl and riven, in other wordl., other natural phenomena.
He noticed it in market pricee, too, but R.N. Elliott wu ahead of
him, both in that diecovery and in ita depth. Mandelbrot bu
become flllllOWl for l'et1Olfllizing that in nature, the emaller flue-

•
tuations, which he considel'llotherwiee unpattemed, are euetly
.. compln as the \argt!r one., ju.t on different _IN. Elliott
oriIfimikd that same idea, in the IIOCial realm, and then went
far flll"ther in di$overing that there are actually potU,.... to the
nuetUlltions. Thia idea h.. not been recognised in natural phyai·
ali phenomena by chaoe theoreticiana, but given that III pro-
C8Il8N are governed by naturallawa, it ilIlibly tbat it will be. It
ia only a matter of time.
TocIay, tbouaandB ofinatitutional portfolio managei'll, trad-
en and private inveltol'll employ the Wave Principle in their
inve.t.ment deciaion making. Ralph Elliott undoubtedly would
have been gratified to aee it. Even now, however, Elliott'alepcy
haa only begun to manifNt itlelf. Hia contribution to knowledi:e
ill far greater than limply a useful method of m...1uIt analY"a,
.. graat .. that ill.. Elliott'a di.lIcovery pertains not only to mar-
ket movements, but to the dynamiCl of alllOcial mood chanp.
In thia biosrapher'a opinion, it will lOme day be recognised that
Elliott'a contribution to lOciology ia a breakthrough equivalent
to thole that oocurred in the 16001 and 1700a in the phyaiea.l
lciencel. BecaUlle he .... both meticulOWl and principled, El-
liott may bava been the fil'llt aociallcienwt. in the Met eel1llf!
of the tenn. Given time and attention, the Wave Principle will
ultimately live lIOciology frum the realm of meandering apecu-
lation and place it flTlllly in the aphere ofacienee. AJJ a bonua, it
affonh a rare opportunity to appreciate the aesthetic beauty of
the human erperience in the abetract. Surely, few contributiolll
to our knowledge have been greater.
In 1987, A. Hamilton Bolton became only the eighth penlOn
ever to be awarded the FAF'a higheat honor, the Nicholu
MoladOVllky Award, which ia -preeented. periodically only to thole
individualt who have made outstanding contributions of aucb
liillifieance as to change the direction of the profeuion and to
raiee it to higher atandanh ofaccompliahment.· Simply for ap-
plying the Wave Principle 10 ..uctellfully, Bolton ia parha"" the
only man who allO deeervf!ll the Market Technicians AlIIaociation'a
higheat awan:!.
Thi.. month, on May 18, 1996, the Market Technicillll AJJ..
lOciation honond Ralph NellOn Elliott, the man who diacerned
the Wave Principle in the firllt place, with ita award for ·out-
&tandingeontribution to the field oftechnicalanalyma.· The MTA
preeented ita firat lIUch Innuallwatd in 1974, the year the Dow
JOntltl IndUlitrial Average fell to i~ Io r clumnelline..,d Ucl<ed
olfth.. great bull marketofour tim It hu pre...nted itl award
to R.N. Elliott in the year that the Do... hu finally, 22 yl!al1l
later, reached itl upper ehannel lin... That Ii.... datee bad. to
1937, the year Elliott began writing hi. fin~ book, 'I'M Wow
Principk. There o:ould be no better time to honor R.N. Elliott
~han when the IlllllHt version ever recorded of hi. five-wave
pattern i. up on the wall for all of UI to_.

- Robert R. Prechter, Jr., 1996

 PUBUSHER'S NOTES AND REFERENCES
For an uplanation oftbe market'. fractal nature and ita rela.
tion.hip to cb_llCienoe, _ Robert Pncbt.er'. 1986 report. -n,.,
Fractal Deeign at Social Prosreu" and DT. S.J. Goem...... artiele,
"Und~di"lr The Order Producing Uni""....• (.vail.ble from
the publaher for $10 each).

The lim letter from Elliott to Collin., lI&n~ in November 1934,

i.reproduced inEl/iotl W""" Prindpk{New CJaAicsUbrary, 1978;
upended 1994).

'"I'be 8llsiA of the Wave Principle" and "How the Wave Prin_
ciple Worb, and ita CarTel.tion with Mathematical La....• an . .
printed in the &l«t«l E....y. eection of tbi. book.

All available copi... of Elliott'. lnt.erpretive Lel.tenI and eduea·

tiona! eIIIYJI have been republi.hed, along with. F"""... ord pro-
vidi"lr a 1DClre complete dilCUllion of Elliott'e aerricee, in R.N.
EI/ic(t'. MllThl Ltlten, 1938·1946 (New CllIIi"" Library, 1993).

All of Bolton'••nnual Elliott W.ve Supplemente to The &nJo

CrediIAAaly.t, .. ... ell .. hi. book, The Ellidl Wa"" PrilSCipl.-A
Cril'iaU Appraieal, bave been republilhed in TNt CompJek EllicU
Wa"" Writin,s'.o( A Hamilt4n Bolt<:HI lNewCllllics Library, 1994~

A.J. Flwt'. 1967 and 1970 Supplemente to TM Bank Credit

AAaly.t, RUM H.II'. 1968 Supplement, and all of Richard RuMell'.
Elliott ....ork will be included in The Ellictl Wa.,. Writillgl 0( AJ.
F1wt (New Cllllli"" Library), due in 1996.
••••••
In Elliott'. original printing of The W""" Prin.t:ipk, moa~ of
the charta and diagram..o weno placed in tbe back oCtile book.. For
euier ...ference. we have ...lUTI.Ilged their pl.acem.pt ip the eo..
going material to appear within tbe text wbere they are di8Clll8ed.

MillOl'editipg, including comma placement, letter CQ/!II, apell·

ina: ohome pumeral. alld an occaaionally .dded article, w.. per-
formed tbrougbo\lt Elliott'. material. No .uhatanti"" chang... were
m.de. Where ••ubstantive edit i. required, the oririnal teIt baa
been left. intact and. ch.nge .~ted ip • footnote.

,.
 If a nladerp<l""_ Elliott memorabilia, or has any addi-
tional knowledge, no matter 00.... trivial, about the life of R.N.
Ell>ott, plene ronte.ct the publiaher. The neIl two JNI8N have
been left blank to accommodate any information obtained in the
futunl.

•
Copyrighted material
Copyngnted matanal
THE WAVE PRINCIPLE
by
R.N. Elliott

,
. R. N, EUIOTT's M~

'0 •. .,,,.tt
_.....,....
n _ ...

-- ..... ..•• '. ,ost

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...., _ . " . _ ...." .. - , _ .....- . ............ "DO to ........

........ <t,
(0) ....,"" .... _ t o (>0»00 »- ...... _1.
e-) _ '" TO_"'- _ _ .. _ _ rr.-.
(0) _

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..........'
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I _ " .. 1.0 , , """ •• m ..

•• ' ••n .....

... ....
-.-
 "
"
R. II. lLLIO'TI',

R. II. Illiott.

....tod.", 110. _n
to •• prod.uro '~100 pupar"
V"'- tlw
1>7'
."tho.

I. I. ""• • 00.,
SI.O.I>dU' St.o.U.tln Co. In.>,
~. r.... k Stoalt Ia....... ,
hr."".,
Ilo.-J
t'ho II.U-t P1B&... ld _11.17.
00., lno.
_'oorl"ll 1.U.... lnc of . . . . . . . . d _
b,. tho .,,\/>or ,Dol 10 prot..ot..d "" ooP7"IIM.

".nl,,&' _ .....11 U • ..-..... p h o _ 10 41 . .1.....

.. It-o.ppolnted "npwtoo' ~dlU.l,. 'PP"'U"'

Clorl.ld....bl. n""rl 10 Uqu1tH \0 !.nwr,nt

oo.... tl,. . . . . . .""elI I .. l"'..... of to.... u ....

Lone dlol.aMO to...... Unc .0quiT•• U>or",,&b

tulllo:rt"J' rit.llllhl.o'lad p.....d..,t.. DlarI"C°
\ho n•• t t .. ,...... \ho _kot 0111 not tolloo
v.. po.tt.orn .b••,..0<1 ..., , _ 19)2. ..... 19H.
110 Inwl'l'..t.otlOCl or tho , ••• "'wl,l> oha.<ld ..
....,ted .. nUt ....1... _do by _ .... "" • ,tutent.
(1'''Ur 1I......d II,. • •

R. II. 'IUet.t.

1\0>. lork •

• WhoIt Elliott meant .... tluot 1>0 .aUieo in thoI few , ...... follo.._
mil publieetion In Ins would devalop into fiv v. bull market.,
since II bear market oCCycI. degreot ....... till in P from 1937.

......
He wu abtolutel,. correct. N. "bull market" oceunw:I until IlM2-

,.
 I

RHYIllM IN NATIIRE
No truth meetl more ~neral aeoeptanee than that the uni-
verse it ruled by law. Without law it i8 Mlf-evident there w0\I1d
be chaOll, and where ch_;", nothing ill. Navigation, chemiatry,
aeronautiC3, IU'Chitecture, radiotnnmnillaion, aurgel)', mWlic-
the gamut, indeed. of an and lIcie~ _ .11 work., in dealil1lJ
."..jth tbinp an.hnate and tbingJI inallimate, under law becauee
nature henelf worlu iJ:l thi, w-.y. SinCf! the very character of
law ill order, or c:onBt.ancy, it foUOWJI that all that happen. will
repeat and can be predicted IfW1l know the law.
Columbua, maintaininB that the world ..... round, predicted
that a weetwatd OI)une from Europe rnu.tt eventually bring hit
ahipe to land and despite KOlfen, even 1lm000g hill own crew,
AW m. prediction rNliud. Halley, calculatillll' the orbit ofilie
1682 comet, predicted its return which Wall atrilringly verified
in 1759. Man::oni, after hi. d\1diu in electrical kuwni..ion.
predicted that eound could be conveyed without wi..., and to-
day we can oIit in our homee and listen to musical and other
p ~ from acrou the ocean. TbMe men, u have counlJeu
more in other fieldll, learned tbe law. After bef;,omi.., thUll potted,
prediction wu euy bealuee it became mathematical
Even though we may not undent.and the cauae underlying
a particular phenomenon, we can, by obeervation, predict. that
pheoomenon'. recwTeOO8. The sun wu erpeeted to reeurrently
riee at a fixed time tbouaanda ofYIlllra before the callH operat-
ing to pMduce t.hi.t reeult wu known. Indi.arul fix their month
by each new moon, but even today cannot tell why regular In.
tervall chanlcteriu thia heavenl,. eign. Spring plantinga are
witneMed the world over hecallH summer ia expected u next in
order; yet how many plantera uooeratand why they are afforded
thia cormancy of the Huon&? In each instance the rhythm of
the particular phenomenon wee muteTed.
Man ill no I... a natural object than the sun or the moon,
and hiJ actiona, too, in their metrical O«IlITenc:e, are eubject to
analy.ie. Human ectivitiee, while amazing in character, if
approached from the rhythmical biu, cont.in a preciee and
natural answer to some of our moat perplexing probleml.

•
 .
Furthermore, becau.ee man i. aubject to rhythmical procedure.
cakulationa havm, to do with hi. activiti... can be projected rar
into the future with a juatification and certainty heretofore
unattainable.
Very utenaive reaearch in connection with what may be
termed human activitiea indicate. that praetieally all develop-
~"" which result from our lIOcial-eeonomic p.oce...ea follow.
la. that call8e8 them to repeat the"""]""", in .unilu and COD-
aLanOy TeWl'Ting lIerial, ofwave. or impuIeM ol definite num-
ber and pattern. It ilIlikawi8e indicated that in their intenaity,
theee wavee or impu\eell bear • conai.tent relation to Doe an-
other and to the passage oltime. In order to beet illu.trate and
expound thill phenomenon it i. neceuary to take, in the field of
man', activities, .arne uample which fumishell an abundance
ofreliable data and for such PurpoBe there i. nothina better than
the stock escltange.
Partieular attention has been given to the stock market for
two rellBOllII. In the first place, there if! no other field in which
prediction hu been "geyed with Ineh gnllt intenllity and with
10 little reIIult. EcollOmiata, statisticiana, technicians, ~ineell
leaden, and hanken, all have had a try at f......telling the futunl
ofpriCl!ll over the New York Stock Exchange. Indeed, there hall
developed a defu\ite profeuion with market forecaating .. ita
objective. Yet 1929 came and went, and the tum from the great-
eat bull market on record to the greatellt bear market On re<::ord
",light almOllt every invutor offguard. Leading inveatment in-
Aitutiona, epending hundre<l.t ofthounnds of dolla... yearly on
market ruean:h, were taUiht by a\lrPriae and auffenod milliollll
ofdollanlOll8 becaUlle of price ehrinkage in lJtoek holdinp that
were carried too long.
A lIeOOnd rU80n for ch_ing the etock market .. an iIlll.l-
tra.tion oftbe wave impulae common to llOcial-e<:onomic activity
i. the great reward attendant on auc:cenful .tock market II"-
diction. Even ac:cidental e~H in lIOIlle eingle market foreeaat
hu yielded richetllittle ahorl of the fabuloll.l. In the market ad_
vance from July 1932 to Marth 1937, for iIIll.1tral.ion, an aver-
agt! of thirty leading and representative IJtoeb advanced by
373'110. During the lIIlU1'tIe of thia five-year movement, however,
there were individual .toto WbOM per cent advance wu much
larger. Laetly, the broad advance cited .bovtl wu not in a straight
upward. line, but rather by a .eeriea of upward. and downward

,.
90 R. N. Eworr'IJ M~B1!'/tCIWI

atepe, or lig-ua: IDOYemen~ of. number of monU\8' duration.

Theae lelllleT awinp afforded even greater opportunity for profit.
Delpite the attention given the at<xlr. market, auCCNlI, both
in the aceuraey ofprediction and the bount.iea attendant thereto,
has n_....ril,. ~n haphazard becaUH tltoAe who have at.-
tempted to deal with themarltet'. movement. have r.ned to ree-
ognile the ntent to which the muket il • paythologiea'
phenomenon. They have notrruped the fact that there i. regu·
larity underlying the fiuetuatioM of the market, or, .tated ath·
erwille, that price movementa in lItoc:ka are lubjecT. to rhythmA,
or an on\end lMlquenoe. Th.a market predictio~, as thoee who
haytI had any experience in the aubjed well know, have lacked
cert.-inty or nIne of any but an accidental kind.
But the market has ita law, jlat .. ~ true of other thinp
thn;l\ljloout the Ilnivene. Were there no law, there could be no
center ,bout which price_ could revolve and, therefore, no mar-
ket. In.tud, there would be • daily fleriu of di.,rganWld, ron-
fused price nuetuatioM without TI!UOn OT order anywhere
apparent.. A dOH ltudy of the market, however, as will be aub-
.equently diaclOHd, proves that thia i8 not the eue. Rhythm, or
I'fIlI'Ular, m&Uurtld, .nd harmoniOUl m.,..elMnt, ia to be dia-
cemed. Thi8law behind the market an be diJJeovered only ...ben
the market i8 vie...ed in it. proper tight, and then ia analyzed
from thia .pproach. Simply put, the stock Darket i8 a crelItion
orman.nd tbeI'flfoI'fl reflecta human idia.yncruy. In the pagee
which (oDow, the law, or rhythm, to which man reapondl will be
dillCloIIed u registered by market moyement. that fluctu.te in
accordance with. definite w.ve principle.
The W.ve Principle i. a phenomenon th.~ hN a1....y. func-
tioned in every human activity. W.yea or different degreea 0c-
cur whether or not recording machinery ia preeent. When the
machinery dellCribed below ia preeent, the pattema or ....vn are
perfected .Dd become vilrible to the experienced eye.
A. Enenaive commercial aetivi~y repreaented by corporationa
..h_ ownenhip i. widely diMbuted.
B. A genera\ market-pl.ce where buyer and aeller may con-
tact quickly through repl'elenUlUyea.
C. Reliabl.. ncord and publicatioDl of tranNCtiona.
D. AdeqWlte _ti8tica availabl.. on all matten relatillll to cor-
JIOI"IItiona.

•
 Tiu W...... Principk
"
E. Daily high and low raD&" cbar1.lld in IUl:h a manner .. will
diKIOft the wave- ..fall degreea aa they occur.

The daily nmge of stock tr"annctiom was inaugurated in

1928 and the hourly record in 1932. TheM ..... nac:!aary in or-
der to oboJerve the minor and minute waVelI, elIpecially in rut
market..
The Wave Principle doea not requinl confirmation by two
averagee. Each average, group, atock or any human activity is
interpnlted by ita own waV(!JI. Behavioror ..avell has ~n fairly
well explored, but application ia in ita infancy.l

FOOTNOTES
I Hen. Elliott luggeota. a>rTlIrt1y I Utinlr., that Oil.. Olle lrnowa
the PrincipIa, it is ....y to l'WCOlPlize and foUo.., but it tak. pnctioI
to be abla to forecaat the m.artat frolll it. On tbe other band. it is I>Ot
nec:eaaary to fOl'flCUt in order to trade aucaufully. As Elliott oaid in
a 1eI.ter to CoUi.na,"' ~_ that it ill far more important to .." ......
..hen the terrnilla\.l .... aetuall1 reached than to rorecaat a 'guHI'"

,
 II

STOCK MARKET WAVES

Human emotionl, u mentioned in the preoeding diJlcu9ion,
are rhythmical. They move in waves of. dmnite number and
direction. The phenomenon OCCUf1I in aU hUlIlan activiti",.,
whether it it blai~, poli~, Qr the purauit of pleuure. It:ia
partieululy evident in thoM free market. where public ptlrtid·
pation in price movementll :ia e:rterwive. Bond, stock and I>'.lm-
modity price trend, are therefore npecially lubject to
uamination and demonstnltion of the wave movemenL Thill
treati" has made UHofprice rnovementll in.tocb to illustrate
the phenomenon, hilt aU the prineip''''' laid down herein are
equally appliublto to the wave movement in every field where
human endeavor it regiltered.
A eompleted movement conl;m of five wavel. Why th:ia
abould be live rather than 110m. other number ie one of the II&-
eretll of the universe. No attempt will be made to upl.in it, al·
t.houah, in paaaina, it mii:ht be oboIerved that the figure five :ia
prominent in other buic pattem.l ofnature. Taking the human
body, for example, there Ilre five f!:rtensiona from the to....,_
head, two legs, two ..,....; five exteflllioM from head - two eara,
two eyea, the noee; five exteMiona in the form of fillllera, from
each arm, and in the form aftoN, from each leg; five phyaical
IItln8ell - taste, lImell, .igh~ touch, he.nllll; and 110 the .tory
might be repeated eilltlwhere. In any event, fi~ wow. a", 1xuJil:
to a camp/tim. ....cud mooe1lU'IU and can be ac:cepted witho...t
neceuity af reuoniDB the matter oot.
Three oCthe five "'avea that form any completed movement
will be in the direction of the movement; twa of the WaVN will
be in a contrary direction. The firat, third and fifth ....Vel repre-
Hnt the forward impll1ae; the aecond and fourth waves, thecon-
trary, or corrective. Stated aU..."';lMl, the add n...mbered wavea
are in the main direction; the even nwnbered wavea, against
the main direction. Thil il iIl....trated in f'igl.are 1.
Five Wav" of one climenllion become the f!nlt wave of the
next greater dimelllion or degree. Aa an eumple of this, the
five Wf!v.... in Figl,Ire 1 progreaIItld from point M to point N. In
Fill\lre 2, however, repreaentiDB I next hijber degree «move.

,
 "
ment than the onejult ilIulItnted. it will be _n that the move-
ment from M to N ia but one _VII of the five-wave movement M
to R. The movement M to R, in turn, becomes but the first wave
of « movement of.till hiaber degree.

',,1<1 .
N nlO¥Wl"

R
M ~01

,.
 III

IDENTIFYING THE WAVES

In the preceding di8cllAion the wave movement in .tock
priaoa wu rather generally trNted, the mllin point elJtabli.hed
being that. movement consUlt. offive wavee. and that the five
wav"" of Dna movement eqlal the lint "ave of. next higher
movement. At thi. point. lIeCOod bame fact with relIped. t.o the
wave movement ahould be introduced. Thil concern. a differ-
ence between the odd numbered and the even numbered wavee.
Wav... Om!, three and five, it will be recalled, are impu.l_
in the main direction, whereu wavy two and four are reverse
movementa. Wave two Mrvu to correct. wave one, and wave four
HrveB to correct wave three. The difference between W1IveII in
the mIlin direction and ".veII againat the main direction il that
the fonnllT are divWibl. into five ...velI o f l _ oUW-, wbenllUl
the latter aredivillible into but three "avell of the l _ r degree.
In the Precedilli diKuuion, the movement M to N ..aII .-hown
all in Figure 3.

•
 "
N

Were thie movement alM! broken into wave. of one lower

delfree, it would appear u in Figure 4.
Note, in Fi(unl .., that the second wave (wave 1 to 2) and
the f"ourt.h wave (wave 3 to 4) an! each made up of three amaller
_VN, where.. "aVeII one, three, and live each have five .arnaller
_veil. The relu to be derived £rom thw illuatl'ation - and these
rulell an fundamental to the whole wave a\1bjec:t _ are:
1) Wavee in the direction of the main movement, Ol' the odd
numbered waYeII, are made up offiv., l_r WaVeB.
2) Con-ective waves, or wavetl agaiDllt the main movement
(even numbered ..avell) are made up of three 1 _ wavo.
To further illuatrate the abovt! rule., Jet UII take the move-
ment 1 to 2 in Figure <10. ThiJI Wall . .ave number two of'the five-
wave or complete movement from M to N, and wu made up, lUI
all COllective movementa .hould be, of thrM ..avea. The three
..avet of the movement 1 to 2, however, fonned, when ~Iated,
.. dilItinct eorreetive movement, and, under the above rul,,", the
odd numbered wavee (or waves .. and c). Irina! they are in the
direetion of the enm <XIlT1lCtive movement 1 to 2, ahould eaeh
be made up of five lallilei' wavee, whereu the even numbered

,.
.
....... (01" wave b), which iA again8t
the direction of the movement 1 to
2 and thWl ia a correction in luch
movement, .hould be made up of
three wave.. If we now pte8llDt the
movement 1 to 2 in terms of itl
lower "'IlYN, it will appeu ... in
Fipre 5.
For puI'Jl<l8elI of convenience, •
let WI designate the odd numbered
waves of. movement ... cardinali
.... ve. and the even numbered
_vell .. corrective WaYN. Let WI
aI/IoO remember that the cardinal
waves will <:ontain five _vee of a
lower degree, whereat the COI'Tective w ........ will oontain three
wavee of. lower degree. Other rule. and pnintR ofintere.t with
I'Npect to wavee follow.
The wave movement appliH to atocll.veragel, lJUeh u the
Dow..Jones, Standud Statisties, New York Timn; to groupll of
Aocb, auch .. the ateela, the COppeR. the telltilell: and indi_
vidual ata<:b. 2 When individual atocb are Iwdied, it will be
found that /100m" an advancing while othen are declining or
IlDdl!l'iOiDa • <Xlilective movtlment. The great mDjority of indi-
vidual iMu. will, at any lfiven time, be (ollowinll the "me pat-
tern, however, with the relIult that the averagu, 01" general
market, will break down into the wave phenomenon. It follows
that the greater the number of .tol:k. in. market .verap, the
more perfect will be the wave pattern.·
W.vea are not of unifonn leDith or duration. 4 An entire
movement, colIJI.U;Ung of five w.ve., is .lw.Y' due to some one
or more controlling influeocel, but the three upward .... v...
(wavel one, three, .nd five) which, with their two corrective
W.veI (W'veII two and four), go to make up the entire m0ve-
ment, may lCCODl.lll.od.te themJllllvell aomewb.t to curreot de-
velopmenu.1 The fundamental ClWNl behind .ueb movement is
generally not recogniud until.ner the effect haa played out in
the fonn ofttle complete movement, where.., durinr the coune
of the movement, current ne..... i••vail.ble to every one and
thua modifilll, both III to uumt and duration, each of the five
w.vea going to make up the completed move.
 "
M a gllneral rule. it may be UlJumed that wave three will
reach a mlher level than wave one, and that ....... five will IfO
higher than wave three. Likewise, wave fout ahould nol. carry to
u low. level u ill attained by ..ave two.' Wave two rarely can·
cela all of the ground gained by "ave one, and "ave fQW" rarely
cancew.ll ofthe vound gained by ..ave th~.' The completed
fivlI>-wave movement, in other words, ill normally diagonal in
W...acter, u ill....tr.ted III Fiaunl 6.

To properly obeerve a market movement, and hence to MIg-

repte the individual wavel ofauch. movement, it i, neceQU)'
that the movement, u itpn:.gl !Uel, be channelled bfltwMIl paf.
allel lines. Moo IJtationen' ,hope carry in stock parallel ruJ.ers
and the WMl 01: 811th • device greatly facilil.llta the channelling.
A channel cannot be.tarted until way. numbers one and
two have been eompleted. In Figure 7. __Veil one and two have
ended, leavillll three e:q)Oted eontactl, or pointa which lland
out alone. The fil'llt u",*"" lXlDt.aet i' the atartinll point of "ave
number one; the IMlCOnd upcwed contact it the termination point
of_v., number one u well u the .tarting point or ...,,!! num-
ber two; the third erpGIIfld contact ill the tennination point of
.
w.ve number two. Theile point8, for
PurpoeelI of illuatn.tion, have been dN-
ip.ted M, N, and O. In pnparini the
channel, a hue line .bollld fint be
drawn between upo»ed c:ontactll M and
O. At:rou lIxpo1!ifld contact N m8,Y then
be drawn • line parallel to the bue line,
dHignated all the "upper channel line.•
Thia upper channellio", ,hould be ex-
tended 110m" distanee to the riihtofN.
When thi. operation h.. been com-
pleted, the channel will appear all in FigurelI8 and 9.

M M

Wave number three .boold DOrmally terminate at around

the upper ehannel line. lfw.ve number three exceed, the upper
channel line, the upmovement has taken on tempo:w...,.lItrength,
whereu if wave number three terrnilatea below the upper chan-
nel line, the uprnovement hu developed temporary weaknea.
In any event, when wave three hal terminated, the old channel
can be abandoned in favor of. new one. The new cha~l ia
""t.ablillhed by drawin( an upper channel line to eonneet point.lJ
Nand P, or termination pointll of wavee one and three. A liM,
IltiU dNign.ted .. the hue lin", puallel to the new uppercltan-
n",! line I, drawn ac:rou"polIed contact 0 and utended to the
I"iihL It i, .bout t.ru.line that wave four .hould terminate. Fir-
ure 10 abo.... both the old, or di8earded, and the new ehannell.
or OOurM, if the third Wive terminates at elUlctly the origin.J

•
 "

FltJUrB 10

u.pper channe1line fi.... t drawn frnm point N, the discarded chan-

nel and the netr; channel will be one and the same.
When wave four h.. terminated, either on, above, or below
the new hue line, the final wannel can be drawn. Thil channel
ill quite important .inee it heJp8 to locate the eDd ohbe fifth, or
lut, wave. It ill on the termination of. IOIllf movement that
invuton and speculaton mU5t chiefly conaontrate if their op-
erations IlI'll to prove 8WXl!Mful. The (lila! channel ialoeated by
dr..rilllf. connectil1lf line bet......,n the eItn!me terminal or u-
poeed contact nrwave number two (O).nd the terminal or eJ(-
poeed contact of..."e number four (Q). Parallel to thie hue line,
and touching the terminal of wave number three (P) i, drawn
another or upper channel lin•. Thie is ahown in Figure 11, the
diecanled flf'llt and RCOnd channelt of the diagram above bav-
ing been erued for clarity of illU5tratioQ.f. Wave fi"e ehoold
nonnal1y terminate at around the upper channel line. although
tbiJI aubject, becauae o{ita importance, will be tnlated in detail
in the wcceedinr diKuMion outlinilli wave chanacteriatica.
When the fifth wave hu terminated, there will be. down-
ward movement or COfTllCtion ofgreat.et' proportions than \.hoee
previ0u81y recorded durilli the progreM of the ehannel dilJeuMed
a1xrve. Tbit wave become. number two of the nut. hirber de-
gree or movement, jlYt .. the fim five waYee previOWIly a.n-

,.
'00

neled are DOw renumbered u "ave number one of the nen higher
order. Channelling on • highl!r -e:ale QUI be lItarted at the tel'-
miNtion of .... ve number two under the same principle. u laid
down in Figure 11.

FOOTNOTES
I "Cardinal" iI u.. origin.aI ~rm. l.n. the Fi""""itJ W<ll'ld ......
tiel.., he .... l.he term "pt'ogr-.ive" ".YeI, d laW>" in N<>tww·.
Low, "impulae" ...y . . . Elliell W...,. l'ri"",pk gi th_ c.enna dif_
ferent, tpecific: mean.lnp.
• Un or t.M Wave Principle with individual otoc:k. ill_ reli-
able than with averagft.ince the pben""",non ... nec\.l mau poychol.
"81. or u Elliott put it, "eztenai.a public participation in price
moyement.o••
• &ridJ,}' apeaki"l. thU atat<oment il l>OI. tn1lI. An uerag. made
up of IBM and G.neraI Moton alone mi,ht better rebet the Wn.
Principle than an u."'p of ten t.hinl,r traded two-doll a\OCb.
Moreover. I am oonYineed Wt tile publie vmbility of_ m bt index
IDoIJ enhance itolutllit1 with reprd. to the Waye Principle. 'I'bua the
Dow, which iI m.de up of only ~ 'loch, .....' boo .. m~ ...J'lril.iVtl

•
 '"
......,....jQt or til_ Wave than u.)', tM Value Un. Compao;it<o
Principl~
inde~ lOin.,. invuton luIy•• ~)'CbolotPcaI un.radian with the Dow
lnduatrial A,erage that they do nol.nperience with other inclexu.
• u. Me<ruoril,. of uniform lang\1I or duration. Tbey
e.,rtllholy tw, and .~ tim" are.
• Thi. a niOfl eannOl be IN., moe any °enlU'e movement" L.
","rely one ohhe wavs of. moYemenl. of larger degrM. What IWi..e.t.
""'.... il simply thlot " .... appeara to atre« the dl.~ of ......... of
Sub-Minor detree_
• Loowr Elliou. "',,\.ended that W . .I ' .bould not """p be!Mf tIM
peak of ....... 1•• ..u. tbat experien"" ...eril'ift.
• If the W...... Pri"cipl.;' to have • ..,. "'IWmtenoy or value, tIM
"'<lni "rarely" .bauld read """ver."

,.
 IV

TERMINOLOGY
In dallllifying the wave movement .. applied to the awek
market (or as diKerned in any otherfillid ofhuman activity, for
that matter), it ia nllcelllary to dll~ .ame n(lUlllnc:l.ture by
whith the WIVY of any OM delllW will be distinguished from
the waY""" of. greater or lower degree. For all p...ctieal pur-
plIfIfl& the following degrees of movement will COVel" Illch atudiell
of the ,tocl< market &II are herein preaentecl, or lUI the student of
IIlIlrket trenda will need in hit own rneanh work in the phe-
nomellOn, The followina' order ia from the lower to higher de-
greea, five wavy OrOM deiJ"H aoing to make up th. tint Wlvt!
of the nut higher d"!l""'. Five S\lb.Minuette W.VetI, for eu.mple,
eompollll wave number one ora Minuette movement, five Minu-
att......ve. equal WIve number one ofa Minute movement, and
110 on. The order folio. .:
Sub-Minuette
Minuette
Minute
Millor
Intermediate
Primuy
Cyele
Sllpe. Cycle
Grand Super Cycle

To avoid confUllion in the letterilli of WI vel on chartll pre-

MOted herein, .. that the movementll of any one degree can be
readily diffllrentiated, at a glance, from the lD(JVement.s of an-
other degree, the following number deflignatiOnll have been de-
viaed flll' the nine movemenb! cl....ified above. L

__
D<g~
Sub-Minuette

Minute
....
NUm«r

,. ,
A.. E
Dtu:riptwn
SmaIlletten
Capitalized
Arabic NumeraiJI
'"_
Intermediate
, .. V
®"0
Roman Numeral'
Romans rit<:Ied

•
 Tiu Wa~ PrifICipk
'"
""_
Cycle t'fi::c~ Double cif'ded
Preceded by ~c~
Pr..ceded by ~K"
Super Cycle KltoKV
Gt"and Super Cycle pel to pc: V Preceded by 'pc"

The reader need not pay too much attention, at the mo-
ment, to the above nomenclatUrtl and itll nurnl!rical designation,
but will rmd itnfincreuing u.efulneAlUI hiJI8tudie8 into 8tock
prir:e mov",m",nt8 P1'Olll'M8.
A Grand Super Cycl", in 8tock prices got under way in the
United Stat...s in 18ll7. The tint wav'" of thi8 d"'llJ'M of move-
ment ran from 1857 to 1928. The 8flOI)nd wave_ repreaentiDi a
correction of the first wave- ran from November 1928 to 1932.
The third wave in the Grand Super Cycle atarted in 1932 and
baa many y"'lU'II to run.
The Grand Super Cycle wave from 1857 to 1928 ia refel'1'1!d
to lUI ~No. I~, but it may have been No.3 or No. 5.~ A lIeVere
depreeaion oamrred from 1864 to 1857 similar in duration to
that of 1929-1932.
Wave nwnber one 3 or the Grand Super Cycle, the upward
wav", that ran from 1857 to 1928, WIUI made up of five wavetl
whicb, together, may be deeignated IU one complete Super Cyl:le.
Thi8 Super Cyl:le may be 8ubdivided .. follow8 C_ Figure 12):

...,
.
OM

., -
••
""
• lLw ... 1 Co. ...)

F"ogurs 12

,.
".
1867-186<1_ Super Cycle waYe number one
186+-1877 - Super Cycle correction (wave two)
1877-1881 _ Super Cycle wave nurnbet- three
1881-1896 - Super Cyol" <:orTeetion (wave four)
1896-1928 - Super Cycle ",ave number fiVft.

The only reoord ohtock pricee available as rar back as the

beginning of th.. prNllnt Gnnd Super Cycle is the Axe-HOI.Ill'h-
ton Index of repre8entlltive inues (publilhed in the New Yor.
n"",a AnMlilJll which records movemenUi from 1864 to date.
Let UlI, in further iIIustZ'ation, now take Super Cycle WIlV"
number five and break it down into iUl next lmlalJer degree. This
"'ave, running from 1896 to 1928, under the pnvioUllly stated
nomenclatunl, would be desipated u .. Cycle, and thi. Cycle
would be made up of five .... avel. These wav"e were .. fOlJOWB
<_ Figunl13):"

-- ~""""'~"e""-'"~~~'l"'e<,·!"CI~,~w~-"'l·""'''''k",.I
.
;'l

- "

•• - - - - - -,."" - - - - - - - - - - '

1896-1899 - Cycle ..eve Dumber one

1899-1907 _ Cycle <:on'eetion (wave t ....o)
1907-1909 - Cycle wave lIumber three
1909-1921 _ Cycle ClIITIlCtion hoave four)
1921-1928 _ Cycle wave number five.

If Cycle wave number five _ the wave nmning from 1921

to 1928 - ill now reduced to iuleaser degree, it will be found to
have been compoaed offive Primary waVelI, 8.8 folloWll <see Fig-
IInI 14):

,
 TM Well,. Principl.
""
DJIA Monthly Range
.........,""
Pi.OUt: Auguol 1921

,4
I

June 1921 to MarclII923 - Primal)' wave number one

Man:h 1923 to May Ill2/. - PriIlUll')' ~OD (....VOl two)
M..,. 1924 to November 1925 - Primary wave number three
Navember 1926 to Man:h 1926 - Primary C<lITl!ICtioa (....... four)
~h 1926 to November 1928 _ Primal)' ""v" number fivl..

In lib manner, the Primary wavu of tba Cyclical wave

"mning from June 1921 to November 1928 can e.. th be broken
down into Intennedi..te wavee; the Intennediate wavee can each
be broken down into Minor ..... v...; and.a on through leuer and
leuer degree until the IIlOlIt minute movement of record i8 prop-
erl,. analyaecl and clauified.

,
·'" R. N. EUXJJT's M,..,.;n1tJfO/Wl

November 28, 1928, with the

Dow-Jone. Average of thirty
industrial stocke Blanding at
295.62, came at the end of the
fifth Minuette wave of the fifth
Primary wave of the fifth Cycle
"'ave of the fifth Super Cycle
wave of the lint Grand Sllper
Cycle wave. Stated otheoole,
one who wu uacing the .toek
market'. pattern in 18l'1li8 of itll
decade by decade, year by year,
month by month, week by week,
day by day, and hour by hour
nuetuatiOIlA, wu notoon1'u8ed as
to it. Inlnd during any part ofthe
palIt decade but wu able, even,
to fill not only the year and
nl<;lnth ..hen the iJ'Nt bull mill'-
!let terminated, hut oould even
d......nnin.. thfl day and hour of
the end - and evt!n the minute.
From the Super Cycle down
F/gU,. 15 through every l _ r degr.... to
thtl most inlinitesUn.llIll1Vement
recorded, the market, before reachins ita fmal peak, had to com-
plete a fifth "ave or each '-"1JeJ" degree. The fint revenuLI down-
ward in Dec;ember 1928 wU lignalled by the extended minor
fifth wave up to November 1928.
It will have been noted that the top ofthe fifth wave of the
Super Cycle ia IlKJwn u having ended November 1928 (the or-
thodoz top) and not September 1929, the extceme high. 5 8etween
th_ pointll are registered (Me Figure 15).
_ _ve A from November to December 1928 (down) and
_ wave B from December 1928 to September 1929 (lip in
three minor wave.), in an irTegIlIar reversal.
WaTt! C ruM from September 1929 to Ju.ly 1932. Wave C WaB
IIUbdivided into five waVl!ll down, and the irregular top lipalled
• rut, Itraililht down movement..

,
 '"
The same irregular pattern occurred at the top of A\lilUIt
1937.I Thi. in'egular pattern is detoeribed in detail uDder the
caption "ColTectioJa"

FOOTNOTES
I Fro.t and I prefer. labelittJl; .yo...... iJI. .hiob latun ....
I'MaT'ftlCl only for OOl'TeI:tive "'IV,"" . . bile numbllln ..... uoed for all
impulo.e WUK.
• Elliott', lIM of 18117 . . . Supercycla wave \ow i. aboolut..ly
~ but at!bi. time, be lac:ked!.be data \0 be",,", ... bieb Dwnbet'
it .... u• ....". firml1 to the oo....... t """,cl""ion that 1857 .... the low
of 1.aIlld .... ve of Supercycle de/ll'M in l.be lnterp'etiVI LetteJ' dated
Au(IUt 26, 1941 (_ F'igIuio 98 in NlIlure'. Lawl.
I ThTee, aetually.
• FI'OIII. and I pref.... the count ~ted in EUi«t W..... Pri,,·
r:iph, although we UN' difl'erent data to arri.... at.ourmnd\Wione..
• I prefer the interprelatioo that 1929 marked the onhodo:z top,
alabelina that EllioU in fart..- once, in 'Tbe Fut,,", P1Itlarn .fthe
Market" £rom 19-12, .hich is reprinted in the Selected Ena,1 oection
at tlu. book.
• Qu_tionable. See footnote 3 in eh.o.pW> XX of Ntl.IW"". Low.

,.
 v
WAVE CHARACTERISTICS
In the preoedioS diacuaaiona an attempt baa been made to
.tate, u lIimply as pouible, the live-wave phenomenon. In the
present diaeuaBion attention will be devoted more to detail, in
ordw that the .tuden~ of the wave movement can fully maater
the trubject, and thllA be prepared to develop hill own studies of
price and other movements ofhwnan orieill. and influence.
Invelltora and apeeulal.or1; in .toeb are partieular!y eon-
cemed with the tenn.ination point of a fifth wave, as thiB event
marb the point at which all. entire movement i. to be 00lTIlcted
by • reverse movement of .imilar degrM. Stock market move-
mente of important dimelUlio..... Ineh all Intermediate .winga
l'\lIU\ing over a number of montbll, and Primary awinga nmning
over a number ofyeara, will witneu, at termi~tion, a eoneider-
able price cornetion, and 8uch terminal pointll call for diBJX*i-
tion of atock holdinp. It ie Iilr.ewille important that terminal
correction. be identified, u th_ points l"I!p..-ot price areaA
where long polIitioDll in .toeb are to be ....tabliJIhed. In the foJ-
10'lring paragraphs the fifth ~ve, lUI well u the correetive wave,
aN! d....elt upon rather fully. Other Cattors bearing on terminal
pointll are alllO d~.
The Fifth Wave
In fuingtheend o(a movement in Itock priCflfl, it Ihould be
borne in mind tIult before the movement hal terminated there
mUlt be five waves of the Den I_r degree ofmovernent, that
the fifth wave of luch next I_r degree will also require five
waVllll ofa atill next I_r d"'flI'Ole, and 1IO on. For illustration, an
Intermediate movement will end on the liI\h Sub-Minuette wave
of the fifth Minuette wave of tile fifth Minute wave of the fifth
Minor wave of auch Intermediate movement. In Figure 16, the
fifth Minor Wive baa been broken down into itll five Minuette
wav"",, and the fifth Minuette ...ve baa been broken down into
ita five Sub-Minuette wavee to iUuatrate the foregoing principle. 1
The fifth _ve ofa movement, particularly the larger luch
all the Intennediate and above, jenerally penetl'atea or "throwa
over" the upper puallel line formed by channelling the tenni-

,
 The Well,.. Prinripk
""
~,
•

,
•
. ,
, 'Y
,

FIgUre 16

nation pointa ofUae lJeCOnd, third and fourth waVlllIU dE!llelibed

in the pnocedilli diacuAion, and U ilh...trated in Figure 17.
Volume tenda to climb on a throW'ilVeJ', and when thilI throw-
over ia by the fifth Intermediate wa"e ola Primary movement,
volume ,hould be very beavy. When the fifth wave 01 any de-
gree fll.i.la to penetrate or throw-oVeT ita upper channel lin, and
decline oa:ura, thia ia a warning of weakneaa. The ertent of the
weakneaa indicated ia IlIlCOrding to the degree of t.he wave.
no

F/g(Jre 17

FIgure 18
 m

Sometimes, near a point olthrow-over, a fJft.h wave will fail

to immediately complete, and the fourth wave flattena out be-
f_ number five lItartlI <_ Figure 18).
In locating "throw-ovenl," a lop.rithmic _Ie ia highly rec-
ommended for thote charte: on which the market, or individual
.tocka, may be followed by me.na of the weekly pri~ range,
wher.... an arithmetic Kale .hould be UMld. for daily ranae and
hourly charta. At the tope ofprim&Q' and higher degree move·
menta the arit.hmetic acaJe ia much mora likely to prod~ throw.
""enl, whereaa at the bottom of such movementa the teVf!t8f! i.
true; that ia, the logarithmic ecale ia more apt to de",lop throw-
""era. In both CUM the arit.hmetic acaJe would be deceptive, in
wavea of NY SO poilltll or more. To clearly iIIunrat.e one of the
foregoing .tatementll, a monthly range chan of the 1929-1932
movement of the Dow-Jonee Indwrtria.l A","ifl on both the loga.
rithmk and the arithmetic acaJeII ia ahown in Figure 19.
Fifth wavea will aome-
timea deploy or apread out.
Thia haa been deaign.ted a.e
one type of ·atreto:hing.~ In
- Aoill,,,n:
.uch an event the fifth wave,
rather than the terminating
movement of which it wae a (
part, ia followed by fOUT other
..aveaoflowerdegree. Thatia,
the fift.h wave baa .imply aub-
divided into five wavea.
Str'eto:hing ia a charact.eriatic
of muketa that are unuaually
atrong (or weak, where the
.treto:hing occura in a down
movementl. Eumplea of up-
side atretching were witneeeed
in the 1921.1928 upawing, the
eulmination of a lIeventy·two
yeu advan~.
\
FIgUf8 '9

,.
c........~
While the wave principle is very limple and uceedingly
ueeful in (orecut.ing, neverthel.."" there are refinementa within
the priDciple that may baffle the lItudent, llIIpecially when wave
movementll are in p ~ offonnation. The betlt ....y to IlIplain
what ill meant by refinement.- ill to chlU't them all shown below.
The e:u.mplllll are theoretically perfect apecimellll; the student
will fmd the actual developmentoftheee pIltterm not eoaimple,
in all cuetI. 2
Com!cliOJlll alWI,)'.have three waver which fall into fOUf
areneral typee, but while in formation it ilIllOmetimell diffieult to
rorec:ut the end pattern and extent.. 4 Once completed the pat-
tam indieatAlll the strength of the ensuine move. The typea shown
in Figunol 20 through 28 are thoee of very amall eolftdiollll.
The general outlinee ofpatteme an the aame in an degrees.

",,'"

V\ A C

rl(/lXfl21

, ,

~C A

•
 TM Wa~ Pri...,ipk

The n.me typeeu above, but for larger degreetl, are ahown
in F'igu.rell 24 through 26.

•,

c
VA c

FI""02'

"""'•"

Stilll&r'lfer typee of corredione, although of the earne gen-

eral pattel'Il8, are thoee aeen in Intermediate and Primary de-
greea (aee Figuree 27 through 29).

,
...

c
"""27

---•

E:l:telYio...
Enenaiolla may appear in any one of the three impulau,
.ave. 1, 8 or Ii, but ranI!Y in IlXIO'e thaD 0lWl. U....-II, they occur
in _ve5. I Eumpl. anowwn in ~ 80.

w."" WSlI8 3 , ,
,
,
"""30
 The nme ruIn lJOVerTI both exteWlioWl Ind uteWlionll of
ertelllriOlUl. In Figure 31 will be found three typea of e:rtenaiollll
of utellllioni Ind the atandard type.

Extension of
Standard 1s1 wave

Extension of Extension of
3rdwsve 5th wave

Beh.vior of ar-rket PolIowiD. E:rienalons

A thorough l,llldentaoding of uteMiolll ill very importent.
Wamin,p ofthill phellOlUenon have been IOUght without ~oeelII,
end for certain nlUOM it is probable none uiat. I However, w.-
ClIn be avoided and profits obtained by learning the behavior of
the market ~beequent to their OIXUft'enoo. The rules,,",:

,.
n. R. N. EUJOfT's MMrDft(}M;3

1) ErlenaioDJI ooeur in new territory of the current cycle.

2) ~teMione an retraced twice. 7
3) The fint retraeement will oocur immediately in three
Way" to approximately the becinniniofthe extension (wave
2 of the extension).
4) The second. retraeement will oceut in the IlJUaI progre88
of the market and trnel beyond the e:rtemion..
5) Howeve!', when an e:tterulion oceun, for eumple, at the
end of a fifth primary (....he!'Wl a m¥r Mve....] ia duel the
first and IJeCOnd retneementl herome _vee A and B of an
irregular «J!Tel:tiOD. 'I'IWI eomplifll with the double retrace-
lJUlot ruleL Wave C will be ""m~ offive ...avell down-
ward, fast and probably to the beginnin(f of the fll\h primary
of the precediog bull markeL I The only eu.mple l of true
JIflrticu1ar ltind ia downward from November 1928, upward
to September 1929, and downward to 1932. (See Figure 15.)
6) Occuionally extelllliona occur in bear markete under the
_ ru.lee, $lIeh all, for example, during October 1937.
7) An extension ill never the end of" movement. '0 This does
not inflM' that higher 01' lower level. may oot be _0 even
without an eWlI8ion.
8) Ret.raeement meane that the travel of. deecribed move-
ment between two specified point.ll is covered qain. For
example, a COfTeCtion and "",umption oftlM trend i. a double
retracement.

If a uader i. holding "Ionge" when a downw.rd exten.ion

appean, he .bould not...tl then bee"..... the market will imme-
diately retcaoe the uteneion in three wav"", before eeekm, lower
level•.
Important exteneione have ooxurred .. followe;

I/ldUBtrilm Upward In<lrutrial. Downward

July-NOTember 1925 No....... ber 1929
Octobe.... November 1928 October 1937
July 1933
March 1936
RoUt Upward
FebOllllY 1936

•
 m

While the rll'St llltl'acement will ocroT immediately and in

three waves, the lIeOOod might not develop (or a conaiduable
time, but it will eventually lIod in the CUI'l"eot cycle. The ~ttem
of an eIteollion ll and double TeU.eement i, illustrated in
Figure 82.

11t'lII'!IH+'MJ

Figure 32

1rTeJU,lu CoJTeCtiolY
EI&Illplf!fl of COrTeetiODB have alneely been shown but not
as a part of the waves of the previOUll movement being COrTeCted.
S....:h exunpleallre ahown in FiIJl.U"" 33 and 3<1. The letten -A,"
"B" and .C" indicate wavl!8 one, two and three of the corrective
mov"ment, il'Telf\llar pattern. Note that the second wave "8"
ueeede the orthodolt top (5) ofth. previoUll movement.

Figu~33

,.
'"

8tl"onf Coliectioru
CotTectiOll8can prove UlIeful u warningll of !Jtrnng mov....
menu. Figure 35 i, angular zig-zll& pattern, whith indiClll.e8
ordinary lItrength of lIUt.equent movement. Figuno 36 it a flat,
indicating strong lub.equent movement (Me wave" Primary,
July 1933 to July 1934).

/Jf'<Jinory

,
Figure 87 .hoW.I pattern where the end of the correction
at "2" i. higher than the end of_ve -A" ofthl! eorTeCtion, indio
cating unuaualltrength of the lubBequent movement. (The_
and eonection shown in FiIP'"' 37 la weaker.)
Correctione of bear trends, that it, correetionl following
downW1lN movementll, _VII! the aame characteriMtia all thoMl
of advl.llcing movementll, but in revene (_ FiIJUl'U 38 through
40).

•
 no

3 c

A
""
IlTellUlar c:orT'lldiOIUI in bear t.".ncb aNI alIlo _n, but very
nrely. Note that af\er I five-wave down trend, an irreguIu eor-
reetion wo"ud appear .. in Figure ""1.

Foll_
in the pattern .hown in Figure 42, the fifth wave failed to
naterialiu, and stock ahould be IJOld at "B." Note th.t there are
five ..avell down from the top It -3; whereu .. corred.ion should
be c:om~ ofth.- w.v.... n... ~l!r i. that "8- ill the noll
top from whic:h only three wav. downwanl.-..e repnered. That
ill, the decline IItole two ....vetI from the advance. Put in another
_y, the regulu number upward ia five plus the regular number
down ill three, total eight.. In lhia cue then! were three upward
and fivedoW!1ward, aame total eight.. Such pattemll art! rue but
are • Mri0u8 warning and abould be acted upon immediately.

,
 ".
When the Student b In Doubt
In the po*tion shown in Figure 43, the trader m~ not know
which of the following patterns will develop, i,e" an uteMion
or an irregular CO!T'llCtion. Volume may fumiah the IMWer. EJ.ee.
where it ia .tated that volume diminiah" during the varioue
W8ve11 of correction (zig-zap, nata. triangle.), therefore if vol-
ume ill extnlmely light in the lut wave .hown, then it ill wave B
of an irreiWar oorreetion. If relatively heavy, aD extenaion ia
generating,l2
,

Trion,...
Wave ~mentll oceuionally taper off to • point or broeden
out from a point in the form ofa triangle. Theile trian(lll1ar for.
matiorw au important ainee they indicate the direction the
market will take at the conchUlion Ill" apPl"O';'mate ape,; of the
triangle.
Triangle. ..... of two daues - horiUlntal and diagolUl.
HoriUlntal triangle. repreMnt hesitation on the part ofpriceB.
At the conclu.ion of. borUontal triangle the market will ...
Iwne the urne ~nd _ upward or downwanl- which it wu
pursuing previ(lUJI to triangular heeitation. Horizontal trianglea
a.re limply hellitationa and have the lJaIlle significance u f1atL

,
".
Ir. dB-zag appelll'a lUI wave 2, a nat or tn_llile will appear as
wav.. " (_ Figure 44lY' u.
nat or triangle lICC'\ll'1IlIJI wa...e 2, a
:ug_ug will appear ....ave" (Me Fiiure <1.5).1<

Eumples of horizontal trianglell are ahown in FiiUJ'e 46.

They are of four typ"o

Ascending: Descending:
lOP liar. IJoItom ~ng borrom liar, lOP descendng

Symmetrical: Rewrse Symmetrical:

bot!om _xing, lOP d6s0tJncjng widttns from st.ltt ro finisll

•
 T1ul Wa"" Pri"",pk
'"
Eumpleaaf diagonal triangle. are ah<>wn in Figure 47. 11ley
are af twa typea.

Flgvre 47

1'rianglell, whether borizantal ar diagunal, .. will be noted

from \.he above iIllllJt.ration, contain five ....v.... Where \.hereare
leu than five waYea, the triangle falle outllide the wave phe-
IIOlllenon, ae herein di.e<::u.Med, and .h<>u1d be ignored.
The mOiltimportantthing to be noted withreepect toa bon-
:wnW triangle i$ .. here it begin•. TIt•• i$ beealIMl weYe number
twoaftbe triaIlilemuet be defmitely fixed, aDd to fa wave num-
ber two it becom... _ a r y to id~ntifY wave number one. Wave
number twa ie important, becalIMl when the triangle h.. ended
the llIerket will move from the trian(le in the ume direction ..
wave twa tnlvelled. If In Figure 48, the direction ofwave two of
the horizont.a.l triangle ia downward. At the conc1uaion of the
fifth triangular ..ave, the market, which hu been belritating
during the couree ofite downward travel M·N, will reeume the
deeline.

Figure 48

,
,,.
In Filr\ll"l49, the reo:ord oCthe five triangular wave. iI liP-
ward. The rnulr.et bottomed at M and ill heaitating after the
Ilpward movement M·N, prior to relIumilll the advance.
In Figure 50, wave two of the upward diagonal triangle ia
downward. The market will AVenMI its direction at the end of
trn. diagoMJ (that U1, ..hen the fifth triangular ......ve has termi-
.......
nated) and will return to about the baH of the triangle, lUI illul-

The fifth wave of all b!.J.t revenMI triangl~ fl'l'lQuently falb;

.holt of ita channel or triangle line. Oeeuionally, however, ..
,bown in the iIlunration above, the fifth wave will penetrate ita
triangle line.
Irthe I..t Wllve (the fifth Intermediate) ora Primal)' move-
ment develope. triangle,II be prepared £01" • rapid revenal.
All .... vell in a triatlll1e must be part. of a movament in one
dirfletion. OtherwilMl no trillJ1i\e ill present., only a coincidence.
A diagonal triangle oa:un only ..... fifth .... ve; that ie, it
lIhould have four ".VelI back of it of the n.me degree .. it will
bo.
When the range (weekly or daily) in a triangle embracu
the entire width of the tril.llgle, the end hu about arrived. Con-
finnat.ion .houId be requ.ired in .ave number five. A throw-over
i.I not _ntial.
UlIUally trianglee arequite small, and all wavea tmI not d....
veloped in detail. For the tint time, between October 1937 and

•
February 1938, one ClC:-
turred of lufficiently
large proportionR to
demonRtrate that all
five waves should be
compoeed of three Mi·
no.... Each ofthelle five
wavell formed a diffe....
ent pattern, I?
The Do....Jollellln-
duatrial Average doeR
not Ihow WI period ..
a triangle, but the Stan-
dard Statilticl, 348
ltoclul, ...eekly range,
makeR a perfect picture
.. shown in Figure 51,
a perfecl; triangle and
the lugtllt on .....,.,n1.
Being a weekly range,
the chart d~ not show
."
the oompollition ofeach FIgu,. 51
of the five wavea, but
another average daily range displaYI them all lhown in Figure
66, chapter IX.

FOOTNOTES
I EllioU adopt.ed I 1 _ form of Wullntion in order 10 make
more eoonomical UN ot.erticaI .pace in hil boob. I h..... chllllled
p~onR _ionally to adhere more cIOH]y to oormal wave ch.....
aeteriBtica. EueptioNl are the figureR in tba Fjlt<tIlei4l World .....
tid-, whicb lien. in\.lo<:t .. Elliott had them_
• Thi. type or a>mmen~ belJII mocl..... te chll1'iW or Elliott'. doc·
matilm.
~ UnI_ they are triangI... Later Elliott dixovered double thJ'MtI
and triple tbtees. TheM letter variation•• along with double ~g-up,
were later added in NtJlunt'. Law.
• See fOO\.nOte 2 8bo't'•.
• ONpite Elliott', tontentioo, eKperience lbo.... that wave lhr-ee
ill m..t ofWn ~be extended e. Elliott'. ezperieoee wi~h tbe le'll_
1929 and 1932·1937 bull m ket&. both of ..hich oontained elttended
fittll w....... rurely inlIuenoed hil thinking on \hil point.

"
 I Tru., .. fer .. I can WI. 'f'heN .... 10m. JUid,elineo, .. Fro.t
and I point ""t in O\U' book, but flO rull1. See rClOtilOte IS itI ehapIM IX
of tho FiNutci4l World Ntida and the <On'eIIpondinJ lut.
T Ert.o""iono .... I"ItnIoIol twice on1J' ir the ute........ """""' in
the fifth irapulM "UI. Elliou e1ati~ thil point in ehlpw VI or
Hallin" Low.
I U.ually, Illtbou.rb nOl. n.........uy. An ~Ar ..,..,...,uoo will
lOIl1atimN bold tho boplllling of tho rlftb primary or t.ba pre-
cecIing bull mart 8M EUion W..... l'I"iMipk.
I Thia eumpll io """ a partieularl)- po<l """. The l:nanaiOll in
t.ba fiftb ...... or the 1921_1ll2ll riM .... lIOt ",tI'aeed tbe firot tim.
(that ie, to tha "bopnni", of the utenBioo") by ...... A .. Elliott
"""",to it, linc:e ..U. A .... utnmely lbart. W.... C II Elliou countl
i~ dU tet:reee m....:b orthe fifUl ...... twioe, once itI tho October 1929
.....b and apin in the 1930 rally. A ....,.. It.'aigblIOI'Ward count
labeli.... the bottom or the 0d0beT 19251 .....b .. "A" {an irTeruJAr
•• ~ fr<ml tha ortbodo. top] and tb. 1~ rally .. 'B" (an itI¥1T'l1<t
ri....l, .......td bot_ Uti-ltY the dOl,li)la retreC>elunt rul•.
10 Tha orthocioJ: .nd al. """"'emell~" ill the diTec:ti altho maill
U'lnd ie the termiIIlll poitlt ohbe fif\.b "ev. of. five- ""'I.........
What Ililiotl 'PPM" to be I&)'in( here il that .. ben an .otenoion
llCltUn ill the rlft.h ...... up. an ~ar top will <:an)" the marlt", illto
ne" bilb IJ'OUIId, tbereby ..tolld"" the "movem.nt" booyood the
orthodoo top or the fiftb ... y ••
II Elliott'l UM or'lll" to..-t1 an ••tend..! "u. i.uMI"ul.'...
Itudenll bay. IDIploy..! it.
II Tbio It.I.~nt io true ror Imall d...-. but not tN. ror
..evil 0( higber than lntennedioto d The 1961-62 rally _
mn'tlCI. on .~mdy hillb lumeand '11" ....... The 1930 rally,
a ....,...,uy...ev••dy." , occurred OIl yolume bia;ber tban thot .t
the peak in 19251.
I' 'nU. rule ie poIrt or.. h.t ..... l.w dubbed the Rille orAlterna-
tion.
,. Elliott later moclifi..! hie rulll to inclieate that a trian,g:I.
a1..~ P""'"'!.. the Ibt.aI impulH ....... itI • ""'lU...... Tbuo, a tri_
...,to ..... n _ oeeur ........ t..o ill a five-...... eeque....., only ..
...... rOW" (or .. "ev. B itI &II A·B-C corTettion).
to Thia <lilCUllioll ie IUperlluoua if 011. UIIlierwl.alldl the "u.
P"itOoti 0( the rormation.
,. That ie, a cli..,:mal triangle.
17 A Yf1r1 important poUtt. Thia il an«ber r.... t 0( tho Rule of
A1temation.

•
 VI
I
SPEED, VOLUME AND CHAR11NC

Hij:h apeed by the market in one direction .l~t invari-

ably produces. torreepondinr high.peed in the r'lrIeru.l, all for
example, the midJrummer 1932 advaJK:e covered forty point.
(Dow-Joll.elI IndUBtriai Average) or lOO'i1> in nine weeIt. This
wu equal to" 112 pointa per week. Note the der:reuing speed of
.dvam:ee from 1932 to 1937 in Figure 52.

(1)
~-­
~, ... "' t N>.5
H<Jy ~ 10 """"" W37

Figure 52

,.
 In fast marketlllike th~ advance of 1932 and 1933, it is 118-
Mntia! to obeerve the daily .. well .. the weekly TIlIlge8, other-
wiee chancteristie. of importance may be hidden, auch .. fO!'
eumpl~, trianglea and entlrWollJl.
In a .ub.sequent headina entitled "Charting," a reference ia
made to -linea." In the average market, alow apeed and the <!.I_
cluaive UK ofdaily range may COllOlla! important patterna. T....e,
fO!' uample, the period from the Jut week of January to the
fint week in June 1904, five montlla, during which the maxi·
mum ..-nge or daily clOllinp (Dow-JoDell IndWltrial Average) was
only 4.09 pointll (50.50 - 46.41). On the daily chart, the appear-
ante is an uninterestinaline, but wben condenaed into a ...eekly
range charta perfect triangle ie diaclO»ed, with the aeoond wave
pointina up... ard, lhUll USIlI'in& the trader that the market would
move upward followina the end of the triangle.
Vohulle
Volume dlllCTeue. gradul.1ly from the beginning to the end
oChorizontal triangles, flata and other typea ofClOl'ndiona. Vol-
ume often helpe to cl.rify the character of. movement. Ho..._
ever, when marketll .n .bnorm.lly "thin," the u.u.1 volume
eignalll are fIOmetimea de<:flptive.
Chancterilltica of volume an very imprellllive when con-
aidered in conjunction with the five ....ve cycle. For e.Iample,
during an advance or a decline ofllOme importance, volum~ will
intreIIH during wave number one, diminieh duri"ll number two,
increue during number three, deere...... during number four,
and increue durilli" number five. Immediately following num-
ber five, volume .bauld be fairly well maintained, with little, if
any, further progreu in price, indicating reversal.
Henin nfenllOll ill made to volume and ratio. "Volume" i.
the actual number of.barM tranaferred, wherelUl "ratio" i. the
ratio ofvolume to listed .hare. on the New York Stoc:k Exchange.
In ita bulletin for July 1938, the New York Stock Exchange
ooted in chart fonn lIOllle intereet.ing comparieona of volume and
ratio. An upward nltio Cycle .tatted In 1914, completed five
PrimIlriN, ending in 1929. Then began a downward Cycle, end-
ina June 18, 1938 (eee Figure 53). Precieely the ume phenom.
enon occurred in the price of Matll on the New York Stock
EllCh.nge Ieee Figuree 54 and 55).

,.
 '"

, ....•
,
,
,
•
•
<l!
, ..
, ,,
<l!'

, ,• ""
'"
, ~

,•

The ratio ".vee an not eM}' to follow in minor detail for

the reuon that volWDe variee according to the momentary di·
rection afthe market. However, ae fll,lct;uatio... in.tock exchange
.eats are not affected by the momentary direction of the maT-
ket, theM become. \llIeful guide to the ratio aeale. See chapter
X, "The Wave Principle in Other Fields,"
Aooording to tlHl bulletiM of the New York Stock Exchange,
page n. the ratio for May 1928 was 12.48~, and the ratio for
May 1938 wu 0.98'lt. I calculate that the ratio for the forst 18
~ of June 1938 wu 0.65'1.. On Satunlay, June 18, 1938, ae-
tual volume wu 104,000 Maree, equivalent to My 200,000 Ilharee
for. five-hour eellliol\. FotaeveraJ. ween previoua toJune 18th,
volume WaR .., 10.. that long interval.a frequently occurred be-
tween WllII of important Itocb in the aVerBgetl, with the result
that occ811ionally Sub-MinueUe ..avell failed to appear in the
hourly wav..., or regiHered when they ahould not. Hourly vol·
ume wu occasionally deoeptive for the Al'lttle N!ll.lJDn. Fort\lnately
IIUch low volume .hOl,lld not re<:\1r for 110m" twenty yean.

,.
 On the fint page mit. monthly bulletin for November 1937,
the New York Stotk Exchange DOted volume ratio to price change
of the period between A~ 14th and Oetober 1937, and aeven
other periods ofequal duration. I have reduced the comparison
to pen:entag1! and find that the 1937 period Will, by far, the most
remarkable of all.
lloII>;I, "' ... 5If, ......... - - . . .. ol><... <hort
= -r"'--""'"e-",.'''''-'''------------,

-•
•"
•
:L --C~''___=__=~,(;!.LJ
 TM W....... Principk
'"
Data obtained from the Puhlic Relatiollll Department rela-
tive to money value of trana.ctiollll are ahown in Figure 56.
The following outline of compariaollll i.a interellting:

~nt ~r mar.hl
Top. Man:h 10. 1937: 195.59
Bottom, Man:h 31, 1938: ilUJl
Deeline: 98.13 points, or 50.1'1>.

Time: 1 yeu, 3 weeo.

MoM)' lIOlue 0(.1ocIe trolUGCtioM on 1M N.Y.S.E.

March 1931: $2,612,000,000
May 1938: 499,000,000
June 1938 (eaL): 187,000,000
Decline: 92.9'1>.

Time: I year, 4 montha.

Pria-VollllM Rillio for 64·Day PtrWd& (which wu the dUflltion

of decline from Augwlt 14th to October 19, 1931. Compvi.tollll of
thia with other period.I ia u folloWll:)
AugwIt 14 - October 19, 1937: 22.2'1>.
Mareh-May 1931: 10.9'1>.
Late 1929: 11.1%.
Febl'\lal)'-April 1934: 6.5%.
Other periods: 2.1%to1.0%.

NtllJ York Slot:k &:c.oo"llt &au

Top, 1929: "",000
Bottom, June liS, 1938: 51,000
Decline: ",.,

Time: 9 yellt1l.

Volume decline from March 1937 to June 1938 .... 87.5'1>.

,
 %~:t:*
.$IIxi £cJu CI*
,...",
.YadIl9'.Ub ....1938
L....,...~, .. .saa .....
FOOTNOTES
1 Baaed on the abrupt chang. in orpniUlUonal.tyl.. (and "u,e•
......n point., IUch U lpellincl, I conclude that chapten VI, VlJ and
IX written by Elliott and in.1Ud by him al\er Collin.' manu_
IICript _pl,ted.

,.
 VII

MISCELLANEOUS NOTES: CHARTING

1) Topll ofbig mOl/eli aeauer or fan out in different lP'OOplI
and lItoclu, whereu bottoms of bill moVeII coll8Ol.idate; that ii,
differentgrouJ18 and .loeb tend to eetabllah Iowa lIimultal1eolWy.
During July 1932, for iMtance, bondt, stocke, production, in·
IIIlJ'lUlee salel, Ill\d many other mljor spherel ofhuman activity
bottomed together (He Figurell 69 through 79, chapter XI. That.
of eourae, wu" bottom to wav. two l of the Grand Supereycle,
and therefonl the pheoomenon wu naturally drutically em-
phuized.
2) When, in the coune of .. mov., the numberilli become.
confuae<l, the relative ,iu ofwavetl may help to di.sti~ Olle
degree ofmovement frtlm aDOther. The Wle ofthll expolMld ron-
tact. (that ill, cluumelinJ: them) ehould help to clarify the move-
mM'
3) AIw">,, connect O!" channel two eIp<.lIle(I. contaeu.
4' Alway••wait development of point number (our and the
dtawing of the final channel before determining culmination of
the move (that ill, the apprGIimate point wlHlre _ve five .hould
end).
5) Width of channelll mUllt be pl'(!lll!rved in an mOl/emen",
of the ume catellOfY, or, atated in other wonU, the width of a
channel of the aame movement mWit be preaerved,l "",,""pt th.t
number five m&y not reich the top of the chlnne!.

~ •.
6) The larger the c:.teJll,lry, the more probability of. throw-

1) In channeling: on .., .dv.nce, the b.ee line Is bel... w; on

• decline, lhove.
6) Strength for the mlin move i. indic:.ted when the hue
line ill huwed. See the movement from J"'llllry 1921 to Jllfle
1926 in Figw'e 1<4 .. one ilhatrlUon.
9) In order to properly visualiu the wive phenomenon In
iularret' upect.I, certain m.thoda of chll1.ing are _nt;&I, U
foil.......:
- Weellly rl.llge of the daily e:ltreme high..,d low, on log.-
rithmic lCale, preferably .~rlted two or thl'M WoN the
l1Iu&l pnc:tice.

"
 R. N. EturYrT's MASnR'rfWIJa
'"
- One .heet for each complete advanee of five primaries,
and itll correction.
10) Theae rerommendationa apply to the three principal
Iveragea (Induatrial, Rail, Utility), to email groupB and indi·
vidual.1tocb. The daily range of the three avemges, of groupll
and ofindividual,toeb in which the investor may be inte~,
'oould .t.o be maintained, and ordinary arithmetic lIl:ale ia lilt-
iar_etary.
11) There are three important realIOlI8 why weekly range
chuts are ne<:tls.ry:
- Only by thia method ia it poalble to Dbeer've the move-
mentover I aufflcient hiatorical background in order to judge
the nature of the lMlveral degrMI of W1lVN, ""pecially the
Illl"geT.
- ScH:l.1led "linl!fl" are ronverted into PD.ttel'Tlll of nat.ll or
tnang!elI, composed of three or five waVN, respectively,
uaeful in determini"i' or oonfinning future movements.
- Any d_ptio~ of the aman daily range are obviated.
12) AlwaY" pl."" the pou1.ieular movement under supervi-
mn, whether it be a Minute, Minor, Intermediate, Primary, or
even gnoater degree, on one cbart. OtherwiH the numbering of
wav.,.,. their Nlative mllillitude, and the ehanneling of move-
menta become distorted and confwled.
13) The beat time meallUTflll for Primary ..nd leuer move_
menl.lare ...eekly, daily and hourly ~hartII. Never be guided en,
tirely by any ooe ol th_ three important time m6UUfl!8, but
keep them all ill. mind ill. I.IIIl)'%ingwave numbera. In fut mar-
keta the hourly and daily movemenl.l are the beat guid...; ill.
.10... muketl, the daily and ...eekJ,y.
I') For the first time eill.Cl! 1928, .toc:b, bondll and volume
ratio got mto gear JUDe 18, 1938. Only with. knowledge of the
W..ve Principle me,y theae phenomena be oboerved and followed.
16) Some itema appeu to have declined in five ...avea. In
.uch cuel, all. "irregulu" top oocurred and .....ve "C" thereof
...... oomposed offive wn"",,, ""plaine<! under the title "Cor-
rectiOIl.l.-
16) Ill. lOme CUM it ie impouible to obtain fii\l1'l!l rorchart.
ing, such .. rell.l eetate, for the reuon th.. t there ill. no oenl.l'1l
market; the itemt are not atandardized, and pricellepecified in
t....nafen are Oftell "nominal." The IOlution ia found in "for&-

•
 '"
clOfled mortgagM.~ Reliable fli\llU of the.e ant available. When
foreckwluree ..-e at .. bottom, real .... tate il at .. top, and vice
versa.
17) In other~, while reliable flgurea are available, it ia
difficult to define the millO!" degree_. An ezample il volume,
whieh fluctuate. in minor degree with the momentaty direction
of the market. The K11ution is found in prioea orNe... York Stock
EEhange _ta.'
18) Senonel tluctuatlOnli p"",aent difficulties which may be
overcome by cllarting a ten year averai!' of ween, mOlltm or
quartel'8, using ume IJ!I I. ratio buia. For eu.mple, weekly Ita-
tiBtka ofear loadinga are available, and the ratio of the current
week to the ten year average may be charted, \.1m. diacJo.i.nj:
the r.«II needed on whieh to bll.lle an interpretation under the
Wave Principle.
19) When twoitem8, which do notalwaya tl'avel in hannony,
unite oa:8lionally, unullUai diaturbanoe may take place, aueh 8.lI
that deeeribed under the title "Volume."
20) Not an ItoeD perform hannonioualy. While the princi-
pal averages topped on March 10, 1937, the _ral Standard
Stati8tica groupa commenced to top in November 1900, increued
to the maximum number in Marcil, then gradually decreased
until May. On the other hand, .toeo tend to bottom aimulta-
neoualy.

FOOTNCYl'E8
l Four. actually.
• I.•.• "Keep the channel li".. parallel.'
I Thia rather cryptic ueertion il better ltolted in obJIpter VI.
EV1In ..., lin"" ...t prieM .... not actively tnded -..ugh to regiater in
"minor degree," it ia difficult to _ h_ their ....",could h.lp clarify
the lbon tenl:t """lid.

,.
 VIII

APPLYING THE WAVE PRINOPLE

N.tate<! in a previOUll chapter, the inveator and .peculator
are gnatl,. coIlOllmed with the termination of a fIfth wave, for
this marb the point at which an entire movement i. to be cor-
rected by • revenal. Stock market move. of high degree, JNlf'"
ticularly intennediate movemente runnillll' over a number of
month. and primary movement. runninlover a numberofyean,
will witnelllll, at termination, coruriderable price correction, and
the tenninaJ pointe thus call for dWpolIition of lollll' poeitione. It
YlikewiN important that terminal pointe of correetiona be iden-
tified, .. there are price aretlll where long poeitionl can molt
profitably be re-e!ltabliflbed.
A lint evnsideration of an operator in ltach ia to deter-
mine over what type of movement be wi,he. to carry a 1001 p0-
sition in stoeb. Many invNtolli prefer to operate through a
Primary movement, and it i. thi.8 type of movement which will
be diKueeed here. although the same principle. that llpply to
W. movement will Iikewiee apply to • movement of lelJlleT de-
gree or greater degree.
Let us UlIurn.. that the investor hu OOITtICtly ""tablilhed.
Iollll' poeition in June 1921. From hit atlldy of the Grand Super
Cycle (_ f'iBure 12) he _ that the mar1r.etatarted u a Super
Cycle movement in 1867 and that Cycle movementll one, two,
three and four of the entire Super Cycle movement have been
completed, The fifth Cycle movement IJtuted in 1896 and ia
nearly completed, in that four Primary wavea have aIapeed from
1896 to 1921. Primary movement number five iajuat comment-
in,s. It wiD be made up offlve Intermediate movementll.lnter-
mediate movement number five will not only terminate the full
Prima.ry movement, but it willal.. tenninate a full Cycle and a
full Super Cycle. The period .head, in other WOI'da, promi8ea to
be quite intereatiq.
Baaed upon hi. atully ofPrimaJ:y movement. one and three
preceding the fifth one now getting under way, the invNtor baa
..me gauge .. to the anent ud length of the movement, al-
t.houih, .. previou.]y mentioned. theN are but rough guidf!ll
due to modifying eventl whieh If)rVe to differentiate one wllYe

,.
 '"
af • certain de(lTfl! from aoother wave of the ume degree. A
IIlOn! ""rta.in guide, however, can be derived from cllanneIliq.
The Super Cycle running from 1857 hu oompleted four wavell
ofleaer degree (Cycle movementa), and thua by connectq n-
~ eontaet.8 ofwave terminals two ud four of the Super Cycle
and drawilli • panlleJ line acrolIlI the terminal point of wave
Uuw, an upperpanllel i, Nt.abliehed, about which line the fifth
Cycle, or that running from 1896, ahould end, thWl completing
WIlve five of the Super Cycle movement. Similarly, the Cycle
movement from 1898 hu c:ompleted four wavn (Primary mov...
menta) lOG that, u for the Super Cycle, it can be given its final
upper channel line about which the fifth Primary movement
now under way ,boulcl terminate.
Attm.pointtheinvelltor, whoeeMtp~ia to hold.toeo
pun:hued in June 1921 until the Primary movement then start.-
illi hu terminated, obeervM thOlNl rules which will help him in
.elling out. Some of thClR ndell have been prevlowliy mted;
othen are fim preMot.ed at thi. time.
t) The Primary movement will be made up oftive Interme-
diate waVN. Selling is not to be colUlidered until four Inter-
mediate ...vee have been witneued, and the fifth ia under way.
2) Whom the fourth Intermediate "ave hH terminated. and
the rlfth illta under ..ay. it will be eom~ offiveleMerdegree
or Minor wavel, and lelling il not to be conaidered until the
fifth Minor wave i8 UDder wa,y.
3) When the fourth MinOf' wave of the fifth Intermediate
....ve hH tenninated, and the fifth Minor wave get. under way,
it will not terminate until five Minute wav"", have been wit..
neMed. and ...lIing ia not to be eol\.lidel'fll ahead of the fifth
Minute wave.
4) It i8 probable that the fifth Minute wave clthe fifth Mi·
I\Ol' wave of the filUl Intermediate wave will alao be made up.
hued upon hourly aver.e, of five Minuette ..avea. the fifth of
whi~h wavee will likewi... be compoeed of ftve Suh-Minuette
wavel. To reaeh the .nn.me top of the Primary wave R.arling
inJllDe 1921, therefore. it will not be neeeaaryto liquidate hold·
~ until the fifth Sub-Minuett.e "'ave of the filUl Minuettll "'ave,
of the Ofth Minute ..ave, of the fifth Minor wave, of the fifth
Intermediate .ave haa terminated.
5) The filUl "'avea of a Super Cycle movement, of a Cycle
movement and of. Primary movement generally penetrate or

,.
'"
"throw-over" the upper channel IiIHl utablisbed for the termi-
nation limit of each IUch movemenL Upper channel lin.... (_
earlier paragraphl) have been elltllblished for the termination
limit of the fifth Super Cycle wave and the fifth Cycle wave.
Sinoe the Primary movement ltarting in June 1921 will end a
Cycle u well u I Super Cycle movement (_ Figure 14), it may
be antidpated that auch Primary movement will not have "nded
until it hu aimed price. (on a logarithmic lCIIej above the up-
per chlnn"l lilHll of the Super Cycle and the Cycle. Likewiae,
the fifth Intermediate movement oftha wilting Primary -.n
Intermediate movement that is yet ahead - .h(M,l\d pelHlb'ate
or thro.....,..er the upper ehanneJlilHlutablished for iL
6) Terminal pointe of the fifth wave of Super Cycle, Cycle,
and Primary movemente are uaually aceompanied by he.vy vol-
ume of tnding relative to prior . .vea of each .uch movemenL
Intell8ll volume lhould therefore be witneued during Ind near
the peIIk of the fifth Intermediate wave of the Primary move-
ment now getting under . .y.
With the above general mIet! in mind, the invt'lltor leta the
market unfold, plotting ita weekly and monthly movement in
order to keep .b.......t of each Intennedi.te move . . it OOCW'I.
The weekly movement ia given in Figurea 57 through 61. Inter-
mediate wave one terminates in Man:h 1923. It il made up of
live Minor Iwinp, u a glance .t Figure 157 will indicate. There
followl Intennediate wave two made up, u .hould be the cue
for even numbered or corrective movementa, of three wav.,..
Intermediate wave three
DIIA ~e.l:1y Rono- l'llJUI toNovember 1921i.lt
loll... ".....Ie ,..,.1 ia R1ceeeded by the usual
A..og.I92' 1OM<:.d.1973 three wave OlH'n!Ction. '

,.
 Tlu W""" Principle ".
"'leo "...kile t.b.3
MJr)92~ 10 Nov.192S
,..
,"
i'"
.
"1' , " "
•• l

,.'I "
""I/'y!'
l
/
FlfJUre 59

lrWr"*'ate t.b.S
Mar 1926 10 Nov.19'28
f'.l<h lite e.<tended sdl_

FIgure 61

FOOTNOTES
le., Inl.umecliato! ..ave four. Tha abrupt to!rmlnal.ion of lJtia
1
diKunion leada me to belieya tlLat a page omiuecl fJoom the
lIIOIlocnpb .. pllbliohecl. In any cue, the laat t o ~ or <hapter IV
can M"'a \0 """'pi.... the diocuuion.

"
 IX

RARITIES IN mE 1937-1938 BEAR MARKET

M:rdI ma: 97.A6

II I I II
'"' f- -
""
""
00
no
11 0
III
.,.
90

The 1937-1938 Bear Market ( _ Figuru 62 I.I1d 63) pro-

vided .. Dumber ofnoveltiell, rOT example:
ParaUe10crlUll
AllgU8t", 1937,Ilt 187.31, Wall the·orthodox" topofa raUy.l
Then followed .. dip of three wave. and an advance of three .... v...
to 190.38, AIlgIl8t 14th. Between thNe two dates wa"elI A and B
of an irreguI~ c:orTeCtion were formed (_ Fiaure 64). Wave C
wu very rapid and IoJlf, down to 1115.82 on Oetober 18th, and
Conned .. perfect parallelogram. It hu DO particular significance
(or that reaeon. The lpeed and utent were ~euJu, and in-
dicated by the "irreguJIlI'" top, the ..me u that of 192&'1~
1932 (_ Fi&'unl66).

,.
 '"

-~ 10 t>oiI't 1IonIIo. 1937

-"•
"'~

\ .
M , '"
d> '"
163.31

Flgu~"
-"

,.
'"
Fifl'un 65 embodiH the greatellt llumber ofintereeting fea-
ture. known to the author. Note the paraUelogrUl pIlttern. Thco
"irregular" top, OT to B, (oreeutll • IeVlre decline. The Rten-
Ilion xa to lie forecutlan immediate retraeement in three wavee
to Dl and nentuall,y lower prieeB than n. The tint n!tl'acement
w.. f;OlI1~ oft.hree ...v". u Ilhown in Figure 66, which con-
firtu lower level•. Thepg·ugA·B-<: In FigI.In 64 indicatell that
the OOI'Ted.ion lublequent to C in Figure 65 will be. flat or tri-
angle. The triangle ehown in Figure 51 reconfirm,lowef level•
. . per Figun 66, February to Much 1938.

•
OJ
C

,.
 .,
2
HalfMoo..
'Thill. it II. name given to the pattern which developed be-
tween February 23 and March 31, 1938, 132 to 97. It curved
downward and at bottom WQJI almOllt perpendicu1u (lIN Figure.
66 and 67).
The eltteMion down to 115.62 (refer to Figure 65) foreeallt
thia lower level The lint advlI.nre, from 115.82. beillll'rompoeed
of three waves, confirmed. The triangle recoofumed.
The same pattern occWTed in April 1936, 163 to 141. Both
were ret.l'll.cementa of exteMlollll. On account of the high speed
it it necelll8ry to refer to the hourly nlC:Or'd, ....pecially during
the latt&r half.
From SeptembertoNovember 1929, wave 1 {rom38I to 195
wu extended and immediately retl'aced in 1930. No exteOaiOllll
appeared in waVIlfI 3 or 6 becalUM! one OCCUlTed in wave I ujU4t
deecribed (_ Figure 19, arithmetic _Ie). Hthe eItellllion had

DJIA 00iIy~, ~ So*

3

132.86
...."'"
,
Oc~ 1937
115.82

-"'"
,,,.

,
 R. N. Eu.JOJT's MASRI/WOlIn
'"

;
,
97.46 ~ •
F/gcJre 67

0CCUJ'Ted in wave IS inatead of wave 1 during 1932, the appear-

ance of the decline from September 1929 to July 1932 would
have been the ume u the "half moon~ ofFebroary-Man:h 1938.
Supple-.entuy Cycle.3
lMofar .. reronb dilfClote, 1938 witneMed the first Indua-
trial Supplemental')' Cycle (_ Figurn 66 and 67), February 23
to March 31, 1938, 132 to 98. Heretofore termination (If wave
"C" with five _vee h.. been the end of mljor correctiona, III in
1932!Thi, u.me phenomenon occurred in the Railll and Utili-
tiM between Detember 1934 and March 1935.
The movement from 97.46 to 121,5' (_ Figure 68) ie com-
PQIMld offive "Ivell and 11 the lint I.lpwud five "ave pattern of
thi8 degree ainu Marcil 1937 and ocmfirmll that 97.46 of March
31 w.. the bottom of.ave A of the bear markeL 6
11Iel06.44 level oeMay 27 ill the end ora typical f1atcotTeC-
tion from 121.54.

•
 '"

FOOTNOTES
1 Elliott lbouid baYe mtMpftted tin. entire pkwN ditrennUy.
The IUppoHd ...... A and B.t the upper nEbt ofFicur- 64 an w~
out orproportion to the bUl" C wt folio.... W... C .. be l.bel. iH.
IlCtually ""YI three artbe fi............ doclin. wt be label. "I'" (l in
Figure63. 1'lMorthoclOJ< toporwave twoi. Au«uaf. 14 at 190.88 and i.
folio..... by fi... _avlll doWll for wave three,,, it.bouId be. A 0ClI'TICC.
oount for Fi«ure 64 would. be AI foU.,..1: WM... Elliott bue@,putl;
..ben be bu b, put 2, completing an irTwllular C<II'TeCtion tbat .ubdi·
1'id. perfeciJ,y; wbere II. I....u. put 3; .. t.-n he lIN d. put.; ...here he
hu <». put S. Then an irregular ~on upwanl follow., ..here h.
baa@, put A; where b. b.M Q), put 8; then • C be pIKed .t lbo
A~ 14 h4lb on tho top or. d".... niJI........ .-I (Ii...........
with utenmn).
• Tb_ a>mmentA are important in predleUll1 tbe speed 0(
OOI'l'fICUOI\ll. Unfonun.t.IJ Elliott ........r expatldocl on the. uu)u.lb",
in Ietel' writinp.
• Elliott'. 11M of l.hi.o temI il confuting inil.ially. 1U doem't
define it and faila to iIlUltn.tA hi. thou«btA complet.e!;r. WhoIt he ;.

,.
". R. N. EUJorr':r MA8J'D'ItOIWJ

M)'ins;' tbIIt ....... he n~ "" A-B-C be... market, 1M flOC. five

....... doWII irYtMd. Hi. "rupplementaly oyde" Ie merely \.he lil\.h
wue of .. five-_uti """"l,
wbe..... at the t.ime of writine he felt that
it ..... _bo... an .dditioual decline followinl an A-B-C ~on .
• The 1937·111:18 declirJe r.......... el,..,. Ii_wave ""ttem ( _
~ 63), .hieh """"pl_ onlJ' wava® ortbe~bearmarket
of' lal17_1W'l. While thia £act ...... to .lud. Elliott In t.b_ para'

(the lim pap or \.be book, and u.. fiMl .,,1.&_

graph., other HlIt.en<:8 clurl,r indicaw oU>el'WiN. In two inII~

.hid ...en origittally p~ with F ~ 68), he mUM it dM>' that

in tm. chapter,

he ~ \he ccrreet i.n.terpreta.tio:n. It. appeal'll \hat be ill Dew_

ally «i""" two dilf_t incerpreta.tion.o ohhe Itl37-38 bear market
in thia book. Perna"" he recocniucl. the correct intel']>l'eUItioo all t.be
book .... JOins to preM a"d made ..,.,.. quick ... r....." ... to hit new
thouehtl 011 the fint and. final p..,... On the other hand, PM'hApe he
bad tho ccrreet inlolrpnltatlon at the time or -ritina' but inadvert-
ctilly included hi' pre";"",. iT>C>:ll'Tert n _ ... hen to. inRrted aMpler
IX, deteribilll dditional fonnatioM, into Collin.' "",,,UKl'ipt.
I In nearl)< the lut ""OnI& ofth. book, Elliou ~ eoneludea
that the Nard!. 31, UI38 low .... oll.\Jr wna A or el.aJp A_B-C bear
mAtkllt. Th.i.o interpret.aticm. ill tho COITOCl. __ and. r"....,..l.I u.. lower
low ill 1lN.2.

,.
 x
THE WAVE PRINCIPLE IN OTHER FIELDS
For yea", the word ·cycle" hM been in common uH, but
alway. in a rather IooIe manner implying mereJ,y a broe.d up-
ward IlDd downward movement, ThUll, as concerns the COline of
trade in the United StateB, 110m" eronomUta refer to the period
1921-1932 lUI a completed cycle; nthen say that the period COD-
tained three c:yc1N of 1.._ or greater inte.mty _ the mov.
ment from early 19'21 to mid-l924, from 1924 to lata 1927, and
from 1927 to mid-1932. In general, the cycle hu been l'llIXIg-
niz.ed in a rough way, largely for the rU80D that, in itll ertreme
upect8, it necMArily intrude. on our pl.... IlDd opinion.. but
the \Ulderlyilli law of the cyele has eluded the obeerver.
This tnt,tiR, u.ing the atock market lUI but one iIlWltl'a-
tinD, haa dealt with the law of the cycle, and in the dillClOllIIJ'e
baa mown bow one cycle becomea but the lltarting point of an-
other, or llU"J:el', movement that, itllelf, i •• part of and 1IUbject. to
the aame law WI the I_r movement. This il entirely conao-
nwt with every .tndy of Nature, for we Im",w that She h.. ever
unfolded in an upwani dire<:tion, but alway. in an orderly pro-
~ion. Underlying this prognuion, however, in whatever
field, ill a flIed lUId. rontrolling principle, or the muter rule un-
derwhich Nature worD. It hal been the purpoee ofth.ifl volume,
finIt to p........nt the law and then to IIhow it.ll praetical applica-
tion in one of the mOlJt baflling fielda of IInlllytical..-rch.
Merely aa C'Ul'IIOI')' uampl... of the operation of the Wave
Principle in other fieldIJ, we have pr1lIMOnted .,me grapha herein,
ehoeen at rand.om, which rudily ilIuatrate that the law ill at
work wherever motion emu (aile ehartl 69 through 78). It ill
reeommended that thie lIUbjeet be Iliven further attention by
atud.enu in fie1dIJ of activity outside the atoclr. market., .. it Ibould
lIimplify and clarify their particular work...

,.
 ,..

...
".
,~

'"
.. ,.
~

••
•
~

.
Gasoline con~ption .. II... U. S.

5
3

, •
0925 >937

SIM' ""tput
 '"

."

5
3
" •
•
o L- -----'

""
/'bpojoIioII dOC .., ...",

1200 "-::;C""C"C'C":':':;'' ':'·-- -,

800

"lO
3
•
10
J." ~-----_::!:!
1921 1932

,.
 R. N. ELU<TTT'. MMTUlffOItU
""
~_Iftc_~
,•
,., ,;,. ....... ,
s. ,
'" ""
j
•
,~ "'"
~ 125
• "'"
.,., m,
, 100

"" Fl(llJrfI 7'6 "'"

""
Fl(}CJrfI 75

.. r:-==-c--'h
US OeUcjh

• l..I\
:I H, .f
,
, ~,--------:::!
1931 1931
,L ---' FlrJUffI 78
1921 1937

,.
 '"
By no meaN do cyclee of dilTerent itemA top and bottom
~ther. Two or mOre may top together but bottom on widdy
dilfe",nt datell, or vice versa. A few iteD1ll are noted below:

S""..
Orthodmc Top.
1928 (not 1929) ,,,,-~
B<>m"
Produdion Activity '''''
'''0
>8"
>8"
CommoditiM
Real EAtate '''0 1932/33

Voh.une Ratio ''''' ''''

N.Y.S.E. Seats ''''
'''''
June 18. 1938
June 15, 1938

After bottoming in 1932, bonda made an orthodox top in

April 1934, at whkh time stocks would probably have topped
likewiH but for the N.R.A.' Following the orthodoJ;: lop in 1934,
boncb de.ecribed an immenae 'irregular" correction with wave
"B" topping in December 1936, then bottoming in wave "C" with
atocka in Marcil 1938.

::rr:;/''\::;:::::;:3tC~'''''''''''''''''O'''''''''''''''''''----;--l
• 'Jl
s @ "
~

"
~ ,
~
1\ •
~
~
,
~

FOOTNOTES
I N.R.A. refen to the Nationallndunrial Recovef)' Ad, ellActed
in 1933.

,.
Copyrighted ma~nal
THE FINANCIAL WORLD

ARTICLES

,.
 ANNOUNCING "THE WAVE PRINCIPLE"
A few months ago Mr. R.N. Elliott presented to us faroonsid-
e.-ation the results of his st\I~ whkh led to the discovery of a
phenomenon in human activity wltich may be ob5erved most
readily in stock market cycles. Believing tNt OUr reader5 ahould
be inlonneci of new d~elopments in the art of interpretation of
stock market movements, we hIove arranged with ltirn 10 prepare a
aeries of ~ on the prinrip~ whldt he hH discovered, the first
of whkh will appeu in the next ;,sue of Tht Filll/ltd,,1 World. Many
yt'anI of Mr. Elliott's career Wen! spent in Latin America, where he
lll'fVed as an acwunlimt ;and in other capadtil's in the rai!rwding
profnskln, ;and in 1927 he retired to La. Angeles, California. At
tNt time the stock market attracted his atknlion. He.h.>d>ed ec0-
nomics and many ·systems; charls and theories of market
interpretation and forecasting. Expressions CUITl'nt then as now,
such as ~resistanee levels,· Mdouble bottoms,~ '"head and shout-
den,~ ~trend lines; de., were examined, butlhe signifi<:u>ce of
their applications was found 10 be limited.. However, the possible
implications of the word -cycle,- which. was applied rather"va8U"ly
In stock market studies, o=!ted his curioIJity. In 1934, he began 10
I'lllIio> certain dupl>cations of patrerns whkh were similar in both
large and smaJ.I moveD'l<'nli. Th.is eventu.;Uiy re!lulted in his di&-
covt>ry, wltich h.e has named "'The Wave Principle. M

During the past seven or eight years, publishen of financial

rNIgatines and organizations in the investment advisory field have
been virtually flooded with "sYlItema for wltidl their proponents
M

have claimed great KCUracy in forecasting stock market move-

ments. Some of them appellred to work for a while. It was
imInediatelyobvlous tNt others had no VIIIIIe whlotever. All hIove
been looked upon by Tht FinDlrill World with great ~pticism. But
afteT investigation, we became convinced that a series of artldes
on this subjert would be interesting and instructive 10 our sub-
scribers. We IelIve 10 the individual reader a determination of the
value of Mr. ElIlott's principle lI!I a ~1s for market forecasting,
but believe tNt it is likely to prove atlell5t a useful dleck OIl con-
clusions based upon economic considerations.

- The Editors

,
 lj;""'!'!IH11!
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 PART I

INTRODUCING '7HE WAVE PRINCIPLE"

Sinoe \he beginning of time, rbythmie l'l!gU1arity bu been
the I.... of creation. Gnldually man baa ..cquired Imowledge ..nd
power from lJtudying the variou manuetitatiOIlA ofthiA I....... The
t!ffeo:tll of the 1.. '11' are eli_mible in the behavior of the tidee, the
heavenly bocIi".. c:ydonee. day and night, even life and death.
Thil rhythmi<: ",gularity il W1ed .. cyele.
IIiMorical Siplfteanee
The lim great ..dvance in the lcientulC .. ppli.clltion of the
law wu m..de in the time ofColwnb\LI by Leonardo cia Vinci in
hill iUumin.. ting etudy ofthe behavior of "'avee. Other great men
followed with lpecial appli.clltiolUl: Halley with hiA OXlmet, Bell
witb lOund wavee, &iiacm with electrical wavel. Marooni with
radio "'Ivee, and still otbera with w.. vee of payehology, COlmlie
.....Vell. teleriaion, etc. One thin,&: in common th.. t all th_ wavel
or form.l of energy have il their cydical behavior or .bility to
",peat them.aelvea indefinitely. Thill cyclical behavior ia charae--
terUed by t... o fol'Oll - one bu.ildilti up and the other tearing
down. Today Hitler ill aid to be timing hill OXlnqueat8 in _ .
dance with thill natural I... u interpreted in the movement8 of
the atan - but the deatroctive fol'Oll a", aa:umulating, and at
the proper time will t-mne dominant, completing the cyde.'
BecaIlH of thia phenomenon of repetition or rhythmic re-
curTence, it i.I polIIible to apply the leaaon lellmed from other
manifestationa of the lawin a very practical and profit8ble way.
The tn.de cycle and the bull and bear movement8 of the stock
market are alao pverned by the urne naturalla.... Some fifty
yeara ago Charlea Do", through h.iI obIervationa of the impor-
tant clIangea in the atoc:k market gr..dually built up the Do...
Theory, which now ill aoeepted in many quart.era u having lpe-
cial forecutilli" aignificance. Since Dow'a atudiee, the aton of
information "'llantinll market kanaactiolLl hu been greatly
multiplied, ..nd impon&nt and valuable new fore<:alltiDi infer·
encee can be dnIwn from cer1.ain behavior.
'I'lIroqh .. lone iUneee the writer had the opportunity to
lItudy the ..vailable information OXlnceming stock market behav.

,.
 '"
ior. Gradually the wild, HIlMI. . and apparently uneontrollable
eh.angeiI in pricea from year to year, from month to month, or
from day to day,linked themaelvel into ........biding rhythmiQ
pattern of "aves. 'nit. pattern .-rna to ~peat i!.H1( over and
over again. With knowledge of this law or phenomenon (that I
have called the Wave Principle), it ill PQIlIribl., to meuure and
rorecut the varioua trend. and ml'nletioIUI (Minor, Intermedi-
ate, ~ and even llIO'Iemente of.... till grellter degree) that go
to complete .. grut cycle.

5
3

2 •
Thi, phenomenon it di"doeed in Figure 1. The full_va or
progreAive phue of the qde colUriBtll of five impulaes: three
moving forward and two moving downward. Wavell 1, 3 and /)
are in the direction orthe main trend. Wave 2 co.. a.-tI "ave 1
and ..ave" colTed.l wave 3. Uaually the three forward move-
menu are in appromnately plU'aUel planes; thit may abo be
\.nle nfw.velI 2 and 4.

, 3
5

2 •

Eaeh nftbe three Primary waves that together make .. ann-

pleWd. movement ia di'fided Into flve ..avell otthe next lIIl&1ler
or Intermediate degree. 'nIit lubdivilion i. ahown in ~ 2.
Note carefully that then are five smaller or Intermediate _Yea'
making up the Primary wav" I, five in Primary wave 3, and five
in Primary "'ave 5. The Primary' .... ve 2 OOlTt'Cta the completed
Prim...,. ".ve 1 oolUlillting offive Intermediate wavea; w.ve 4
in tum 00ITecta the five Intermediate ......vea that make up Pri-
mary ....ve 3.

,
". R, N, ELUtTrr'. MMTUJroIfD

Each Intenned~teforwvd wave i, in t\1TJ1 divided into five

Minor wav. ushown in f'iglaA 8. When the fifth Minor wave
of the rlfth Intermediate ph_ of the fifth Primary mOYelllent
baa 'pent it. force,' ronnidable top bu been coM1Zucted. Upon
completion of a movement of trul magnitude, the deatructive
fo~ becomtl dominant; the Primary ~nd ~ downward and

..,
• bear market UI in progreu king Won the economic, political
01" (mandai......,,,,, for the chal1jfe in outlook an! clearly IIppar-

,
3

, •

FOOTNOTES
, ",. "d..tnu,ti.,.. r.........• ......\id....ced by l.hfl bear matUt,
whid> ,,"dM in 1~2 .nd .bkh coincided with the nadir in tbe
fOl'tuJMo; or the Allie. in World War II.

,
 PART II
In the preceding diAcuMion of the Wava Principle u ap-
plied to the foreculing of ltock price movemente, it was pointed
out that a completed movement COlllliJltl offiva waVII, and that
• set offive wavel ofone degree completetl the flrlt wave of the
I1lllI:t hi&'ber degree. When wava 5 of any degree bu been com-
pleted, there ahould occur a COll'edion that will be more severe
than any previOUll corredion in the cyclical movement.
Completed Movement
The rhythm of the corrective phlllel ~ different from that
of the waVelI moving in the direction of the main trend. Th_
correetive vibrations, or wavee 2 and ... are each made up of
th1'ft l _ r waVelI, whereu the pro(lrflllllive _vllll 0, 3 and 5)
lin'! eaclt compolleli of {ille Imaller impu1aell. In Fi&'ure .., the
completed movement is ehown, being identical to Figure 3
lIJ:cept that waves 2 and" of the ~ig·z.ag" pattern are shown in
greater detail. Th_ WaVeB 2 and .. are thus lhown to consist
each ofthreecomponent phlUlel. but u theae twowavelIlln'! aleo
·completed mov<mIente,· they are alao charact.eriDd by fille,wolle
impul_; that ~, the "a" and "c· phuell (the first and third move-
mente of the cornction) Iln'! a110 each comp<Med offive tunaller
waVeI, while"b" (the correction of the correet:ionlis compoeed of
three lesser wavea. This queetion of correctiollll will requ~ more
extended dilleUBlrion later on, as /lOme fOflllll and typell Iln'! 10
complicated in lItn1cture that their preeentation at this stege
mia:ht be conflUing.

3
,
1
b • ,
•
•
The Itudent using tha Wave Principle to forecast price
clulrtgee does not requ~ confirmation by a companion average,
inatunuch .. the Principle applieB to individual stocb, to van-
OUI groupl (steels, raile, utilitiel, coppen, oils, etc.) and a1lO to

,.
,m
commoditiM and the varioua "aver&iN,· web .. tbOH of Dow-
JOIlell, Standard St.atilltklJ, New York Timea, New York Herald
Tribune, the Financial Times of'London, etc. At IUlY given time
it will be fmmd that.mlll atoclul are advancing and othen are
declininl, but the gnat m-.iority ofindividuallrtocu will be fol-
lowing the ume pattern at the ume time. It ill for tha rn.an
that the wave pattern of the "averages" 'frill correctly reflect the
cyi:liCIIl poIIi~n of the JnllI'bt . . . wbolol. The larger the num-
ber of Roeb ioduded in an averap, the more abarply outlined
the ...ve imJl1'f!*&iOllll will be. 'I'Iu. meana Wt ifat.o'lUa are widely
diatributed amonil a large number ofindividualB, the relIpon&e
to o:yclical UtfI~ ...m be ~red ""'"' definitllly and rhyth-
micall, than nthe diatribution ill limited..
Price Rant- UHd
No reliance can be placed on ·cIo.inpt daily or weekly. It
it thll hiiheat and lowell range. thu ruide the lubaequent
t:Ourie of the e:yt;le. In rad, it .... only due to the NtlblWunent
and publication by Dow.JoneJI oftbe "daily range" in 1928 and
of the "hourly range" in 1932 that IlUfficient ....li.ble data. be-
earne available to eatabli.h thlll rhythmic rec\lrrtlnce of the
phenomenon that I have called the Wave Principle. It II
the leriel of actual "tl'avell" by the market, hourly, daily and
weekly, that reveal the rhythmic: ron:ee in their entirety. The
~clOlinp" do DOt dilclOM the fullltory, I.lld it ill ror thil reuon
Oaek or detailed datal thlt the phue-by·phue C'OU/'8ll or the
London ltock market ill mOf'e difficult to predict than the New
York market.
The complete meuurement or the length or I wave il there-
rOft its continuous trliIvel between two COI'nlCtioIll of the ume
Of' grelter degree. The length of a wave of the Iowellt degree ill
ita travel in one direction without any IIOrt ofcorrection even in
the hourly record.. l After two eorrectiolll have appeared in the
hourly reconI., the movement then enters iu fifth I.lld Jut ltage.
or thin:! impulH. S<KaIled "resiatancfl"levm and other techni·
c:aI eolllideratiOlll have but little vslue in rorec:uting or mes-
lUring the length or duntion ortheee Wives.
OuWde Inftue_
N the Wave Principle rorecuu the different phuu or Iei-
menu or a cycle, the ~rienoed IStudent will lind that curnmt

•
 Fj""rlCUJI World Article.
'"
........ or happeninp, or even decreee or act. ofi<fVernment, _m
to have but littl••freet, ifany, upon the coune ofth. cycle. It ia
t.rue that lIOmetimell unel<pect.ed new. or sudden event., p.....
ticularly thoee of a highly emotional nature, may enend or cur-
tail the length of travel bet.... een correctiona, but the number of
wavee or underlying rhythmic regularity of the market remain.e
conetant. It e",n aeeme to be more logical to conclude that the
cyclical derangement of trade, bri~ng wid.eepread lIOcial un-
reat, is the CRUH of wan, rather than that cyclea are produced
bywara.

FOOTNOTES
1 When minuta-by.mi11ut<l or tidl-by.ticlr.......,.... .... available,
....11 .meller .avee .... quit<l di....m.ibl..

,.
 PARTlIl
BecaWMl after the fifth wave ofan advaneina' movement has
t-n <;<>mpleted the COJTeCtion will be n>onI MveN! than any yet
uperienced in the cycle, it ill desirable to determine beforehand
where the top of thill wave will be. With Neb knowledge, the
investor can take the 0'" -a,.,
atepa to lllllIUlDf! a defenaive policy
and convert profit. into cuh under the uu:..t favorable OlllI'ket
conditione. He will 1110 be in a 1trOna: poeition to repurchase
with confidence wbeo the coiieetion baa run itll eourtNl.
The previoua article auted that '"!'he complete measure-
ment of the length of a wave il therefore ita continuOUA travel
between two eorreetiollll of the aame or greater de,ree.· By re-
peatedly measllrina: the le~ of th_ wa""" as th~ develop,
under a method known al ebanneling, it ill po8IIible to deter-
mine at the time of oompletion ol wave. approximately where
wave Ii loouid "top.~

Figure 6.howa a nonnal<;<>mpleted movement or ~c:ycle" in

which wav... 1, 3 and Ii each have appro:timately the IlIme
length.. I Forecalltina: the ultimate movement by the cbanneling
method mU5t wait until wavl!lll 1 and 2 have t-n completed. At
RlCh time it ia pouible to ucertain the "hue line" for the lower
limita of the channel by ""tending a
atraightline from the etarting point
olwave 1 through theltoppingpoint
of wave 2. Thil ill wwn in Figure
J ' ..••
.'
~~ .-
~~~~~

7. Wave 3, normaUy para1lel to wave

1, ahould end in the Ippro:timate
_!-~~::>f:-"-
2
vicinity of the tentative or duhed
upper line of the channel.
 '"
Thil tentadve upper line it drawn pIlr"l"l to the hue line
from t.be top of wne 1 and extended forward. But ",,,,d.itiona
m.,- be 110 l'avorable that wave 3 takes on temporary ~h
and e>tceed.t the nonnaI theoretical upe(:tation, .. ahown in
Figuno •

When wave 3 haa ended, the actual upper channel lin.. ia

drawn from the top o!wave 1 throllfh u.. top ofwave 3. And for
forecallting the bottom ofwave" reaction, a tentative or daahed
hue line ill drawn from the bottom of "ave 2 panllel to the
actual wave I-wave 3 upper channel line. In FiiUJ'll9, the tbeo-
retieal ""~nq'for tenni...t>on of wa"" <4 ill abown, lUI well u
the ae\"'] terrniMtion.

With the aeeond reaction. or wave 4, terminated. the final

and all-important channeling .tep can be tabo. The base line
of the channel ill extended acrollll the stopping point.. of the two
reactionary phuu (......velI2 and of), and a parallel upper line ia
drawn ~ the top oe...ve 3. Wave 1 ill diaregarded entirely,

,.
·..
\lnJ_ wavll 3 wu uoeptionally atroog.:1 When the hue and
upper parallel lin"...... drawn u augguted, the approJimate
tennination (If.ave (; will be foreeut, .. ahown in Figun 10.

F~'O

Thitcllanneling method it, ofcoune, lubordinate in impor-

tance to the rhythm of the varioua ph. . . that make up the
completed movement. Waves 1, 3 and 5 IhouJd each be com-
polled offive wavell of the nut lowerde,ree. Theoretieally, wave
5 .thould wind up at,bout the intel'NCtion with the upper parlIl_
lei line drawn .. above deecribed. Sometimes, however, wave IS
dev"l0~ eueuive Ib'ength. Patternll in. which this "throw~r"
ahould occur will be diaewMd in aubllequent articlM.

FOOTNOTES
1 B:r en'Orof omiuion, no chart l.ab.led "Firur- 15" appeared in
tho. anitl.., poHibb" due to ild.il.l... by t.he mac''; ...·
• Elliott _ tc> be "rerri. . tc> .. phenomenon I bave noticed
...........,. when an thrN il ab""",,oill;r strona••lm"'l1\ vertU:a1. the
CIDft"eI:t channel for marl<i.nc the end 0( ...... fl..... ia conll\lucted by
<in"",,, ... upper cbann.11ine that toucbeo l.be peat of ...va ona and

-
cut. IIorouBIt .... ve u..... Thil id.... i.I Uh••trawd in EUi""t W.....

,.
 PART IV
A completed price movement hu been lIhown to fIOrain of
five waves, with the entire movement teprellenting the firat wave
of the next larger dei"". By clllallifying the degree of the van-
oua phuea, it ill poaible to detennine the relative poIIition of
the market at all times .. wen .. the economic changea that
should follow. l
The longeat reliable record of Ameriean ltock prieM il the
Ax&-Houghton Index (published in 'I'M New Yor. TiMt. Annal·
ut) dating from 1854. Long nmge forecutintr u.nder the Wave
Principle m\llt therefore start with the _pletion of the bear
market that terminated in 1857. The great tidal movement that
commenced in 1857 and ended on November 28, 1928 (the or-
thodox top) reprelentl one wave of a cycle of the largelt
degree. Whether this utended movement wu the Firat, Tbif'd
or Fifth wave oCthe Grand Super Cycle neotll,rily depend. upon
what hlppened previoua to 1857. 8y breaking thil historic wave
down into ita component lI8ries offive..wave movementa, and by
breaking in tum the fifth "'ave of the next lIIJlaller degree into
ita five wavee, the .tudent will have actual exampllMl of the veri·
oua degreea that marketa traveree. To lvoid conflllion in claa8i-
fying the vanOU/ll degreee ofmarket movements, it is Suggl!llted
that the namell and .ymbole devilled below be uaed in their","
epective order (lee table, nen PI8").
The Iongeet of theee WIVf!ll luted for Over seventy yean
and included along lI8riee of "bull- end "bear" marketa. But it i.
the combination ofthesmaller hourly, dlUly and weekly rhythmll
that complete and mee.eure the important Intenned.iate and
Primaty cycllMl that are of great practical importance to every
invelltor.
When the Dow.Jonell lndu..etrial Average reached 295.62 on
November 28, 1928, the price movement completed the fifUl
Minuette impulee of the fifth Minute wave of tha fifth Minor
phaae of the fifth Intermediate movement oC the flfth Primary
trend In the rlfth Cycle of the fifth Super Cycle In WaVil 1, 3 or 5
of tile Grand Super Cycle. For that reaaon, Ilthough the actual
top of386.10 Will not reached u.ntil September3, 1929, the point
reached 00 November 28, 1928, ie designated III the "orthodon"
top. Tbia may .allDd confUfting to moetreadera, but the patterIUl
in which "irregular tope" higher than "orthodox tope" occur win
be ~d in due CO\ll'1Ie.

,.
'"

Duration

Grand super CycLe, 9"" I {?) ••••••••••.•• lB57_1928

1857-1864
lie 1. . . . . • . . . . . . . . . . . .
ae .1:1 ••••••••••••••••• 1864-1877
Super <:yet ••••••• se III. ••••••••••••••• IB77-1881
sc IV ••••••••••••••••• 1881- 1896
ae v .•..•.•...•..•.... 1896-1928

c 1 ••••••••••••••••••• 1896-1899
" II ..••.••••••...••• 1899-1907
Cycl••••••••••••• Q IlI ••••••••••••••••• 1907-1909
" rv 1909-1921
{ " v...•.........•..•.. 1921-1928
{(I) .•.•• Jun••
1921-Mar •• 1923
((I1)l •••• Kar •• 1923-101..1', 1924
primary.......... ((III) .•• Kay, 1924-Nov.• 1925
(Uvl) .... Nov .• 1925-M.. r .• 1926
{
(IV) 1 ••••• Mar.. L926-Nov.. 1928

Intu..-.:liau (I}_(V)} {price ,"",v_ot. illu8_

Minor
Minut 1-5
~inu.tt•......•.... A-E
I-V
.t.
trating the Int.rmedi-
.nd ll.r de-
gr••• will be di.cu •••d
Sub-Minu.tt•.......•-. in .ub.equent articl ••.

FOOTNOTI!S
1 Only • tn>1 technician would make thie COlDIDIM.

,.
 PART V
The IICOpe and duration of any price movement are influ-
enced by what happened in the PrevloUll cycle of .irnilar or larger
degree. The movement th.t .tarted in 1896 .. nd took 33 yee.n to
oomplete, culminating on September 3, 1929 ..t 386.10, "ae ItO
dynamic that the cor....ctive bear cycle wae corre.pondingly
.evere.
Orderly Decline
Within leu than three yean, pricee were reduced to 10.5
per cent of the peak level. Deapite its high lpeed, the downward
OOIll1l8 of the bear cycle followed a well-defined and rhythmic
pattern of .... v..... Furthennore, it kept within the limite of the
pre-meuured channel. It was, therefo...., pouihle to determine
beforehand ..pprorim..tely ..here the be.. r market would end
and the new bull market begin. Becauae of the amplitude of the
previoua qcl...., the new bull market would n«:eNtIrily be of a
large degree, luting for yean. When taking .. pomtiou for luch
a movement, the long term inveetor ..ould be warnnted in main-
taining hill investmente until the end of the fifth Ml,jor wave
wu in meuurable .ight. From that point he ahouid be extl'emely
careful.
Previo.... dillCu"ion. have dealt with the f...ndamental
theory of the Wave Principle. It ill now appropriate to ahow the
application of the th",,1)' to an ad...al market. In Figw"e 11, the
completed five-wave movement of the erlnlme monthly price
rangea of the Do.. ~on.... Industrial Average from July 8, 1932
to Man:b 10, 1937 ill charted arithmetically. The eeri.,. oCMin...-
ette, Min...te, Minor and Intennediate wav.,. all te80lved them·
....Ive. - in the monthly, weekly, daily and ho...rly record. - to
fonn and oomplete e.ch of the five Primary w.v.... W..v.... «I)),
«UI» end «(V) were each oompoeed of[fivediatinct phlllletl, and
wa""" «II» and «IV) ot]' three diatilKt phuea, as ehown by the
A_D-C patteme. The e:ltent and duration of each important phue
are ,ho.. n in the aa:ompanying table.
When wave «IV)) ia fini,hed and wave (M) ill under w.y,
mIlCh cloeer attention to the market i' required. Accordingly,
the ehannel wu carefully noted. A bus line was drawn from
the bottom ofwave «ll)) through the bottom of...ve «IV)), and
". R. N. Eu»n'1S MMTI'IIIJOllD1

~ oJ lhePr;mcryMovemenI 1932-/937
\fave (lIll f~"", 40.56 July 8, 1932 to e","pletion of
Wave (tV») at 195.59 on Ih.rch 10, 1937. (Dew Jone"
In~u.trial Monthly ~ver.geal.

~"
,.,.
•
ro
• • •
((I») •••.• 40.56 July
'.'. 1932- 8l.39 Sept.
•• 1932
«U)) ..•. 81.19 Sept.
A •••••• 81.39 Sept.
B•••••• 55.04 ~.
••
,.
1912_ 49.68
1932- 55. O.
1932- 65.28
~O.
","0.
Jan.
,U..
H. 19))
1932
1933
C •••••• 65.28 Jan. U. 1933- 49.66 Feb. H. 1933
«(III»). •• 49.68 Feb. H.
«(IV)) •.•. llO.53 July
".
1931-HO.53
1933- 84.58 July
".
July
".
1933
1934
1< •••••• 110.53 July
".
n.
19))_ 82.20 Oct. n.
,. 1933
B•••••• 82.20 Oct.
C•••••• 111.93 Feb. ,. 19n~1l1.93 F"b.
1934- 84.58 M, ".
1934
1934
«(V») ••••• 84.58 July
". 1934-195.59 Mar. >C. 1937

(WI)

FIgure 11
 '"
upper liM parallel thereto wu utended forward from the
I.ll
top of ...a". ((III». So. the aceom.,.nying tabla and chart.

Be.n..h lndleadon?
In November 1936, immediately an..r the President ......
reelected by an overwhelming m8jority vote, eJ:temal con-
ditione appeared to be IJO favorable for the bull market that it
wu Rtl'emely difficult even to think of being bearWt. Vet!ll:.
oordilli to the Wave Principle, the bull marlleteven then ...u in
i1.8 final atage. The Iona tenn movement that It.arted in 1932
bad by November 12, 1936 .-dled. 185.52, and the variola flv.
""VII .dvaneH of the prec:eding 53 Ill<lnthl were in the culmi-
nating stage of the Primary degree. Note how cl_ the priM
level Wall to the upper part of thto clannel ..t that time. Yet it
required another four month. to complete the pllttem.
The (mal and relatively in.ignificant "'ave, De<:ellUry to
contino that the end wu at hand, developed during the week
ended Wedneeday. Much 10, 1937. In that w.....k both the indWl-
triall.lld railaveragM moved forward on huge volume to. mod-
erately higher rec:overy level, and a<XlOrding to one of the moet
widely followed market theorie. therebr -reaffinned that the
nu,joT trend was upward:
The indU8triaJ. ruch«l 195.159 _ compared with the N...
.....m ...... l929 panic bottom of 195.$ and the February 1930 rally
top of 196.96.' ln that week the advancing pricea met the top of
the channel. The Pre.ident's remarks about pr1ce11 for copper
and steel beillll' too high did not take place until April. and by
that time the be... movement Willi well under way.

FOOTNOTES
1I added the words in bncl<.eta, .. tbey appeared to be miMing_
I I.•.• the Dcror 'I'heory.
I Elliott ......... iJ.ad thil ~ype of IUppoftlreoiatlLn.. 1eveJ. in the
............ ",. mart~ Olt.olll cho<-eo lovala an>Und which to turn
continuaU1 DC to break on!}' dramatically. Uouall1 the.. IeVeil have
1IO<lIMJU... to do witlo Fiborlacci I..tionahipo. Loot eloul,y .. t the 740
lavel, the 780 loYal, the 847 1 1 and ~h. 99& level on .. chart of th..
..-nt hiatocy of the Dow.

,.
 PART VI
In the 1932-1937 Primary bull movement (_ Figure II,
Part V), ",aVIM «Ill and «m)) ran at high speed. Natllrally they
terminated in a abort time. But wave (M) w.. .., gradual and
orderly that it t..ted longer than the time interval required ror
the previoua rour wave. combined. In the dilJcuaion ofthU: move-
ment, it ..... atated that by November 1936 it wu evident that
the bull merket wu in an e:rtl'emely advanced etage, but that it
required anotber rour montha to compillte thll pattern. Althongh
thlllargMt p~ of"the Fifth Primary went in the culminating
atap, the amalll!llt componllnt phaaee (Minuett.e, etc.) were atill
developing.

,
I
• .---- l<I>-

F/f1UrfI 12

Figure 12 iltua1ratM how the fifth wave of an important

dearee become. extended by the development of five wavee of
thll nut amaller degree, and five more of a "';\1 amaller dllgfM.
Tbua, an Intermediate trend will end on tha fifth SIlb-Minuatte
impulae or tha fifth Minuette wave of the fifth Minute phue of
the fifth MmOT movement of the fifth Intermediate awing. Note
that .. wave (V) advancea, the con aetiona tend to hec::ome amaIler
and ofahorterduntion. Compue with 1935-1937. The termina-
tion or a fifth wave mar" the poillt at which an entire mnve-
ment of the aamll degree ia to be lXln"ected by a ",,,,,rae lIlOVe.Dlent
of aimilar degree.

,.
 C<lnfwJion in the identification of the wavllll of the amaDer
degreell, developillJl' toward the end of the fifth wave of the im-
portant degree, itllOmetunel!l caueed by "throW.-;lYen." A throw-
over ill a pelliltration in an advancing IDOVllDlent of the upper
parallel line of the channel <see Part III), and in a declining
movement of the lower parallel line of the channel. Volume tends
to rUe on a throw-over, and ehould be very heavy .. applied to
the fifth Intermediate ....ve of a Primary movement. Failure of
the fifth wave of allJl degree to penetrate the cbannel line, ae-
c:ompanied by indicatiol1Jl ofa mmuned decline, ia a warning of
weakneaa. The IUtent of the wealmeaa dependa upon the degree
of the wave. Sometim...., auch ...eakDe" furniah... a new baae
for the reeommencement of the fifth wave. Throw-ovel'1l are alao
cau.aed by the _Ie of the chart atudy of the movement. They
are more likely to 0I;l:Ilr in an Ildvancing movement on arith-
metic acelea, and in declining movementaon losarithmic _I.....
Sometimea the fifth wave will "atretch· _ that it, deploy or
epread out. The fifth wave, instead ofproc:eeding in the nonnal
one-wave pattern of the aame degree aa the movement u a wbole,
aimply atretchea or aubdividea into five wavetl of lower degree.
In rhythmie fon>callting, thia atntching appli.... to the fifth wllve
itaelf, nther than to the terminating cycle of which it il a part.
Such apreading out ia a charaeterilltic of marketa that are un-
ueually atrong (or weak, if a down movement). An nample
of atretc:hing CIc:CUlTecI in the 1921-1928 upolwiq, repre...nting
the culmination of a 72-year advance.

,.
 PARTVll
The rhythm of eorreeti.ve movementa is the lDOlIt difficult
feature at the Wave Principle. Inten.ivtl st\ldy of the detail of
the col'nldion will lKNDetim" be neceuary in order to deter-
mine the poeition of the market and the outlook. Mutel)' of the
aIIbjed, however, mould prove utnomely profitable. All corree-
tiona uecharacterized by thrft broad ..avea, but the detail and
extent can vary conaiduably, and thua different pattema are
formed. Varioua facton (time, rate ofapeed, extent at previoua
movement, volume, ne""s itema, etc.) tend to influence and allape
the corrective pa.ttem. Baaed on the writer'a market research
and experience, there .ppear to be four main type. or pattema
ofcoutctiona. Th_ typea have been deaipated u ~-ug, fl.t,
irregular and triangle. DilJCUlllrion ofthe triangle, in ita vllrioua
forma, muat be Pl'l!lIeDted in. aeparate article. The other three
fonDll are diagrammed in Figunra 13, 14 and Hi.
Small cornction. that run their COIU'H in a comparatively
.bort time an enmplified in Figure 13. Correctiona of a larger
degree are dNCribed in FiIUf'll14. Figure 15 aJforda a diagram
atthe market action when the Primary Of' Intermediate b'anda
tum downward. Some of tb_ cornctiona, particularly thoee of
the irregular type, may extend over a period of yean and em-
brace movement.. that are commonly mistaken for "bull mar-
keta.~

The three-wave or A-B-C fonnationa th.t characterU.e the

zia-ug, O.t and irregular co...-ect.iana are clearly shown in the
.=panying diagralDa. The zig-ug type ..... diacuaaed briefly
in Part U (FiIUf'll 4). It ditr...... from other eorrtctiona in th.t
both the first and third ..avea (A Illd C) are eompoeed of five
amaller vibrations. The HCOnd (B) _ve of zig-ug corrtctiona i.
eompoeed of three imputae.. Sometimea, in high-apeed move-
lDaot, the Iirat leg W may .ppearconUnuoua, and reaort to the
amaller or hourly atudiea may be nec:eaauy to detecT. the Oow.
The firlIt and aecond wavea ofboth n.ta and ilngulara each
conaiK ol t1Ir« vibrationa of a degree amailer than that of the
previoua movemenL Of' the three movemen'" making up the
aecond or ·B~ phue of both 0.... and irregu.\ara, the tirst and
third (a and c) are each compoeed of /f.ue atill smailer impubea.
In • flat, .11 of the three w.vea have approximately the aame
length.

,.
 F ,

~~.
Yb ~
A J
, I
,,~,
~
.,
,.,.. " , ",
JS , •
1 r b '3)

An irTel(Ular c:ornction ill diAtinguiahed by the fact that the

_ d or "B" wave advarJ<lN to a lIeCOndary top hiiher tM.n \he
0fth0d0l< top uwliabed ill. the Primary movement. Liquidation
in the third or "C" wave ill therefore UlIually more int.eJaive than
in the fust ph.... Nornuilly C \ennimotell belo... the bottom of A.
although thertl are instancell of C, the third phue, bem, abbre-
viated. In the laTgtlt and important l;OIT'IlCtiollll, a".eh all Primary
I.lld Intermediate, the "C" or third pbue of the irreruJ.u correc-
tion maycoll5iet ofthrn .mol~rfiw'WG~"t8,D.howD in Fig-
ure Hi.
8y analyzing and placina' the type of c:ornction that ie b&-
ing uperienced, the lItUdent baa • buill for detennininlr both
the extent ortbe correction, and the utent nfttle followina: move-
ment. Clannelm, (tee Part Ill) ~ help in determininll the
extenL 1he applieatioll of tbe8e corrective pattern. to apecific
market. will be 'hown and di3eUlled in lublequent article-.
 PARTVlII
Triangular COlTllCtiOllll are protracted trend hee::itatio~The
main movement may have I'JDe too far and too fut in nllation
to the alower economic procnaee, and prices proceed to mark
time until the underlying fOreell catch up. Trianglea have laBted
u long u nine month. and have been u abort u _ n hoW'll.
There are two duaea oftrianglee, homontal and diagonal. Theae
are ahown in Fi&urea 16 and 17.

Dioponol Triogles

The four tyPM of horizontal trianglea are Aeeending, 0.

_ndina", Symmetrical and the rare Rave.... Symmetrical. In
the Jut named, the apex ill the beginning of the triangular cor-

•
redion. In the other fomul the ap« ill the end of the correction,
whieh, however, may terminate before the apez ia actually
reached.
All trianglell contain five wave. or lep, each of which ia
com~ ofnot more than t.hree l _ r .avell. Outli_ that do
not conf"orm to this definition fall outllide the law of the Wilve
Principle. All waves in a triangle muet be part ofa movemell.t in
one direction; otherwille, the "triangle· is only .. coincideooe.
The entire tnavel within the triangle repreBell.1.8 a wave of
the main movemenL The horizontal triangle occun .. wave 2
01' wave 4. Uit occure aa wave 2, the main movement will have
only three wavea. At the conclueion of a horizontal triangle, the
market wil\ reaume the trend that w.. interrupted by the trio
angle, and the diredion of that trend will be the aame u that of
triangular wave 2. The "hree.k-out" from the horizontal triangle
(in the direction of tnal1jf\llar .ave 2) will ueually be fut and
repreaent the finlli .ave of the main movement, and be followed
by revereal of the trend. The extent of the "hreak-out" will ueu-
ally approximate the distance between the wideat partlI of the
triangle. The diagrama in Figure 18 illuetnlte the "hreak-out"
from horizontal trianglee.
Diagonal trianglee 8ttl either upward or downward. They
can occur .. either wave 3 or wave 5 of the main movemenLI
Uaually they occur .. wave 5, and are preceded by four main
wavee. But the completion or the diagonal triangle repnllll!ntll
the end of the main movemenL The lIet'Ond wave within the di-
agonal triangle will be in the direction oppoaite to that of
the roain movement, and will indicate the direction of the re-
veraal to follow concluaion of the triangle. At the conclusion of
the filth wave in thisform of triangle, the rapid rtlveraal of trend
willu.ually return the market to about the level from which the
triangle atarted <aee Figure 17, third diagrlUD).
Trianglea llI'l!! not apparent ill. all atudiea. Sometimes they
will appear in the weekly &cale, but will not be viaible in the
daily. Sometimea they are present in, lIlY, The New York Times
average and not in another average. Thue, the broad and impor-
tant movement from October 1937 to Februa.ry 1938 formed a
triangle in the Standud StlItiatice weeldy range, but .aI. not
vilrible in other averl.gea; the aeoond wave of this triangle pointed
downward; the fifth ""ave culminated on February 23; the dra.
tic March break followed.

,
'"
FOOTNOTES
, B&Hd on tbe diKuuion of diqonal trianll... in TM WOlle
I'Iindpk, tliliI oo:m.mant;' aJmo.t UlIlJ"Idl, unintentional. Diqonal
trilll\lla. II....... ort;ur thrw. Third ".veI ..... Ch.aracl.erilti·
...u, ottoill'. whill flftb t.enninal tnOvetDenti. There ;1 ....".,
mile""" tn.t u..y aomM.imM .p~" tint ......., bu~ in that """
they aubdivida a bit di1l""",,,l.1J'. See EUi«r W",w Prilldph.

,
 PART IX
The "extellllion," though not frequent, ill one or the moet
important market phenomena meuurable by the Wave Prin.
ciple. In an extenaion the length (and degTe&)1 of' the _ve be-
cometl much larger than normal. It may occur u a part10fwave
1 or 3, but ie .anally a part of'wave 5 of the main movement. I
The erlended movement ia compoaecl or the normal fiv..-.....ve
phalM!, followed by a three-wave reb"acing colTflCtion, and then
by a HCOnd advancing movement in three ph.... or the nor-
ma! five "avetl, the fifth vibration ill .aually the laJ1r&llt and
most dynamic of the aeriea,4 thUll becoming, in e!Teet, an enen-
Ilion of the extension.
A warning of the approach ofthill dynamic phlllM! of wave 5
ia conveyed when wav'" 1 and 3 are abort and regular and con-
fined within the cllannel,6 and when the fint corrective vibra-
tion of'the erleDllion iB completed near the top of the cbennel.
The length of important extenBiona may be aeveral time. the
breBdth of the original channel.
Channelling ill a1BO UlM!ful in meuuring the tnvel of the
extel>llion. ThUll, in Fiprea 19 lind 20, the line "h-d" repreeenta
the baee line, and the dashed upper pareJlelline "c~" meuW'ell
the nonnal f1Xpectan<:y for the "tint top" of'the extension.
The completion of the normal 01" fint five wavu of an ex·
ten1Iion ia never the end of the cyclical movement but doH con-
atitute a diatinct warning that the bull cycle ie approaching an
end, U only two more broad waVetl (one down and one up) would
fully reflect the maximum fon:e of the bull market.
Aft.er the fint five wavee of the ext.enaion have been rom-
pleted, a aevere correction (thBt iB usually in three _vee, but
may be triangular) IM!te in. Thill correction beeomea wave A of
an irreiuJar cyclical correction. Wave A generally carri... the
market down (breaking the erlerurion channel) to about the be-
ginning of the exteMlon, a1thoUSh a protracted period ofbaek-
ing and filling may serve to mitigate the IM!verity oftb\$lXlI'!'eetive
pbaae. The duhed line marked "X" in Figure 20 indieatee the
average expectancy for the completion of wave A.
When wave A baa been completed, the main or cyclical move-
ment ill reumed in three broad phuee that carry the market
into new high ground - even though "e" in Figuree 19 and 20
may have been the "orthodw< top· or a MIjor or Primary bull

,.
 R. N. Eln<J'rT's MABnIlrtOiWl

movement. But \.hie new top, Of "'iJngular top,. is the final hiSh
point for the bull market. Thi. three-w.ve .dv.ncing pbue be--
cornea wave B or the irregular cyclical conation.

The completion orw.ve B marka the bellinoing ofw.ve C of

the ilTflgular cyclical correction, that in this phase ill a bear
market or major importance. W.ve C abould carTY the market
down in five fut waVIN to about the bottom of Primary wave IV
oftbe preceding bW.I movement. Enmple: follo1Vingtbe dynamic
enenaion in 1928; w.ve A, down from November to December,
1928; wave B, upward to September 1929; .... ve C, down...ard to
July 1932.
Enellllionlll .Jao oceur in bear marketa. ThUll, the five "'.ves
ofan utel1.lion ...ere completed Oetober 19, 1937, with the mar-
ket reachina 115.83, fonowell, in thia_, by. broad tri.ngular
correetion (instead of the irregular A-B-C pattern) covering a
period offollt monthB, eventually reaching 97.46 on March 31,
1938. W.ve 2 or thi. triangular correetion wu in the nme di-
rection u the downward cyclical trend.
A tremendoUll extenaion occurred in commodity price move-
mentl, particularly th.t of electrolytic copper, in the ~ring of
1937.
 ".
In individual .tocb, the ~OrthodOI top' of International
Harvelter wu reached at 111_112 in January, 1937; wave A, in
• baclring and .filling movement that reduced thlllMVerity of the
correction, carried the .welt to 109 in April: .ave B reached a
new cycliCJl1 top of 120 in August (the general market topped in
Marcil), and wave C brought the ,tocll down to about 53 in No-
vember.

FOOTNOTES
1 The liD of an ulended wave to \atgff, wI the dqroc (Minor,

........
Intermediate or Prim...,.) to the _II ... !.hal of l.be t1O<I non-enend.d

t H.... Elliott the term 'exten.ioD" 10 refer to ....... 3, ...

and II ofthe_ded v•.
• S. ~ 5 in. <hapWr V af :1M Wow PriN:ipJ. reprdinr ttu.
_tion. FifII:w can be, but third ...._ are _ qtm. tho "larp.t. and
..... ~afa.n...·
• Id.
, Since "" exte!wion pnerau,. OCC\U"II in 0 ... oft.l>e three impul..
_v., it (0"0_ tJult when wav.. 1 and :1 at<I .hart and limpb'
UI:Il.Itn1ctfI<I (u 10,,& 8. wave 3 ia longer than ....v. 1), ........ Ii will
likely be _ruled.

,.
 PART X
FolloMq the completion of the bull market fl'Ol11 1932 to
1937 {aN Figure 11, Pan. V>, a thne-phue cyclical correction
wu in order. The fU'St phue ahould and did 0Gn8istoffive large
_ .... The lint ph.... of thia COII ....t ion "'II the decli.... that
ran from 195.69 (Dow.Jo..... lndlWtrial Average) on Much 10,
1937, to97.(6oo Marcb 31, 1938. 1 The aoootllpanying FiiUl"e 21
abo. . the ",eekly range of the market dlU'ing this period, on an
aritlunetk Kale. neapite the higbly emotional nature that pre-
vaileclat certain 1tageI, the rhythmic forec:uting principle eon·
tinued to f'u.netion. 'The minute detaila ~lItered in the daily
and hourly pattern! are, or 00W'lIe, not entirely visihle in the
weekly range. For WI reaIOn, the eNelltial detaila of price and
time of the five big "'a... making up this fll'lt eyclieal pbaH are
given:
Cyclical Wave W - from 195.59 on Marcb 10, 1937,
to 163.31 on June 17, 1937.
Cydical Wive (8) - from 163.31 on June 17, 1937,
to 190.38 on Auguat 14, 1937.
Cyclical Wive (C) - from 190.38 on AquJlt 14, 1937,
to 115.83 OIl October 19, 1937.
Cyclical Wave (D) - fl'Ol11115.83 on October 19, 1937,
to 132.86 on February 23, 1938.
Cyclical Wave (E)- from 132.86 on February 23, 1938,
to97.(6ooMarcb31,l938.

Cyc1;cal ",ave (A) "'II compoaed offive Minor wavee, II fol-

lo",a:
1- 196.59 on Much 10 to 179.28 on March 22-
2 - 179.28 00 March 22 to 187.99 on Marcil 31.
3 -187.99 on Marcil 31 to 166.20 on May 18.
4 _ 166.2001'1 May 18 to 175.66 on June 5.
5 - 175.66 on June 5 to 163.31 on June 17.
Wave 3 in Cyclical Wave (A) ..... compoaed offive vibratloIll.

Cyclical "'ave (8) "'II compoeecl of three "'avel, and an "il"-

regular top·:
A - 163.31 on June 17 to 170.46 on JUDe 24.
8 _ 170.46 00 June 24 to 166.11 00 June 29.
C -166.11 on June 29 to 187.31 on Aug. 4.

,
 ".

F'fJUrtI 2'
The "imlgular top'" wae completed on AUguJlt 14, 1937, fo,..
cut.iq a Mvere cyclical decline.

Cyclical "ave (el wu compoeed of fiv" large _yea, with

an ~extension·developilli in the fifth ..ave. Had it not been for
thia: utenaion. the normal compllltion of the fint phue of the
cyclical iXHiec::Uon would probably have been in the neighbor-
hood of 135-140. Thtt analysi, of...ave (e) ill u follow":
1- 190.88 on Aug. 14 to 175.09 on Aug. 27.
2 - 175.09 on Aug. 27 to 179.10 on Aug. 81.
3 - 179.10 on AlIi. 31 to IM.IM on Sept. 13.
,,- 154.94 on SepL 18 to 157.12 OD Sept. 30.
5 -157.12 on Sept. 30 to 115.83 on Oct. 19.
In Cyclical ....ve(C). there were three~..,b1· nrftv" vib..tioD/l in
the downward trend, with the rn.t, t.hird and fifth Minor "IV"
each heiDi compooted or five impulae8. Wave" ..... fairly im-
portant upward correction, in th"fam.iliar A·B-C formulan. The
uteMion that developed in the fifth vibration of "ave 5 indi-
cated that the iJ'OWMI. thllA loet wouJd be immediately recov-
ered, !.hat the IIeCOnda.ry decline would carry the market into
ne.... low llnlund for the cyclical c:on-ection, that followil\i tbia
_clary decline, the nOl'1N1 protncted period of backilw and
filling might fonn. triana1e, with the final down thruAl com-
pletina the tint phase of the cyclical COl rection, and tha~ a very

,
''''
Ihlbatantial r&WVery would follow in at leut five large wavea,'
thu. forecasting the 1938 March-November "bullmuket."

Cyclical ",ave (0), . . indicated by the "exteMion" that oc-

cu.rred in wavo {Cl, 'Ii"compoHd or.huge triangle:
Triangle wave 1 _ in three vibratioll.l (A, B and C), from
116.83 on Oct. 19 to 141.22 on Oct. 29.
A· 115.83 on Oct. 19 to 137.8200 Oct. 21.
B - 137.82 on Oct. 21 to 12-(.56 on Oct. 25.
C - 124.56 on Oct. 25 to 141.22 on Oct. 29.
2· 141.22 on Oct 29 to 112.64 on Nov. 23.
3 - 112.54 on Nov. 23 to 134.95 on Jan. 12-
"-134.95 on Jan. 12 to 117.13 on Feb. <I.
S. 117.13 on Feb." to 132.86 on Feb. 23.
None of the "lep" in thil triangle wu compoHd of more than
three wav•. FoUowini the completion of the fifth ...aVOl in the
triangle, the downward movement of the cyclical corTeCtion wu
~"""'"
Cyclical .ave (E) ..... eompoHd offive leMer W1Ivea," fol·
Iowl:
1 _132.86 on Feb. 23 to 121.77 on March 12.
2 -121.77 on March 12 to 127.+4 on March 15.
a- 127.44 on Mareh 15 to 112.78 on March 23.
.. - 112.78 on Man:h 23 to 11....37 on March 25.
/) - 114.37 on March 25 to 97.46 011 March 31.

The fJnt laTgtI phue of the cyclical correction of the 1932-

1937 bu.ll market wu tho finally completed, and the market
wu tefldy for the IIeCOnd import.nt IIpWard phue ofthe eyclical
corTeCtion. Thia correction eninguilhed 63.3 peT cent of the
156.03 point. recovered in the 1932-1937 movement.

FOOTNOTES
I
._twoI }.,.
Here Elliott col'T«t!y foreelll~ wt tIM beaJ' ID&l'ket that
IIarttd in le37 . . . not ....81'". The
later iJI. 1942.
0CC\lJ'I'..t four)'1&1'1

'8M footnote 1 iJI. chapter [X of TM Walle Prineipk.

I 1.1., ...... (El.
• I think tbiJ abould read "tA,.. larp .nH."

,
 PART Xl
In UlIiDg the Wave Principle &I a medium for forecutin&"
price movementa, the etudent ahould recogniu that thenl uti
cyclell within cyelel, and that eacll web cycle or wb<ycle muat
be Itudied and eorrectl.y placed in reaped to the broad underly-
ing movement. Th...... wb-cyclieal or conective ph_ in I bull
market uti often importaot enoua:h to be m;'tal"m for "bear
marketa." The Itrolli but lub-cyelieal corTeCtion from MInh 31,
1938 to November 12, 1938 had a "bull pattern" offive impor-
tant WIVel mWIli up ita lint phue,1 and Will (and lltill is) re-
garded by many ... I rflal bull market. Broadly apeaking,
extended ralliee or eorrectiOIlll of bear eyel.. uti compooted of
three phaeee, and this ie .Ieo true of eneNliVfl beariIh 00n'eC-
tiona or bull movement&.
Wave Charactert.tic.
The eharaeter of the ....vea ma1l:illi up an enended mov&-
ment iI affected by a number of facton th.t may -.m irrel-
evant to the inuperienced. EIamin.tion of .ny completed
movement llHDllI to llUpport the fataliltie theory that the extent
or objective of the price movement ie fued or predetennined.
The time of the entire cycle il a1eo poelIibly fued, but the time of
the eomponent ph.... appeal'l to be variable.' The variatioWl in
the time cycle .ppear to be governed by the _peed or rate of the
price movement, and vice ve!'la. ThUl, if the marlult movement
baa been violent and r.pid in ooe phue, the next eorreeponding
phaee i_likely to.how. marked _lowing down in 1lpeed..1 EI_
ample: The lim Primary "ave or the 1932-1937 bull cycle ad-
van<:eG 40 pointa or 100 per cent in 9 ...eelui, aVeragllli 4.4 pointa
per ...eek. The HIOOnd hull phaee advanced 60 pointll or 120 per
cent in 2Oweeb, averaging3 pointe per ...eek. The third or final
phue erflpt fo.....ard 110 pointa or 130 per cent in 138 weeb,
averaginr 0.8 poiot per ...eek. High _peed at the tlod ollong
movementa usually genenlte. _imilar Ipeed in the lim wave of
the nlvt,"IlII: compare the March 1938 downward movement with
the following April reveraaL
At certain lIt.qee volumtl _m_ to play an important part
in the price IllOVemtlnt, and volumt! itaelf will eIpand or eon-
tnet to help eoot.rol and eomplete the price eyele. Study of the
time cyc:ltl .nd volume eyclea iI ..metimea distinctly helpful in

,
". R. N. EUJO'TT'II MtU1Uff'OJWl

clarifying the JX*il.ion of the prieto Ipiral.· Volwne tenda to in-

c:ruH in the third wave of the cydl, and to maintain about the
AIml activity in the rd\;.b _ve. N the bottom of the volume
cycle i, approached, emltic pm. eht.ngQ: in high priced .uJc:u,
OT inactivtllJtocb .nth thin merbta, can dimrt the amall waves
in thetl'end afUte Ivetll&" to Neb an enent u to create tem-
porary uneertai.ntiea. But !.heM ""aVH of volume are aWo W1eful
in determinina: the extent.nd tUne for _pletion ofprice phuN,
and aOO in determining the time and direction and even the
.peed of the followinr movemenL nu.. it _ped.n, tnIe in r....
.-i~ 1l:1Ilrk"tlI like u.o.e that chancterized 1938. The bellt
I'eIIIIlta tberd'ore will rouow from COmllation of the volume and
tim" cycle. with the component pbuet oftbe broad price move.-
ment, u the price pattern. and aU desr- ofvolume" are gov-
erned by preciaely the _ . WIve Principle phenomenon.
To maintain I proper penpective, the IJtudent ahould chut
at I,,&at two and preferably more broad averagu, W1iD.( tbe
weekly rance, the daily ~, and the hourly record, and ahow_
ina the aeeompanyina volume. The weeldy ruae ,hou.ld be auf.
ficient properly to evaluate the hru.d cllangu in trend, hut the
monthly I'lU1P IItudie. will II.> undoubtedly appeal to many
inVNton. The daily rail&", by atrQrdin( eIoIe observation of the
mna1lerehangu, ilI_ntial in correct interpretation orthe cy-
clical prollTe..ion, and ia quite nece..a..,. for determininK
the preci.M time ofimportant revenala in ~nd.
Critical Point.
The minute ch.anie- recorded in the hourly IJtudy not only
doni valuable and extell8ive material for practice in wave in-
terpretation, but are _pecially uaeful in timN when the mar-
ket ill movin&: at Nch high speed that the pattern ill not clearly
resinered in the lonpr-time c:hartll. Thua, the Iman triangle
that appeared in the hourly record of October 1937 aignalled an
immediate aocelention or extenIion oftbe downward movement;
the dynamic October 18-19 wpanic" followed.. At other critical
pointa the hourly Itudy baa allO proved valuable, .. in locating
the"ortbodos: topW before the final irregular top, thUilleleeting
the time for atrat.egic liquidation near the creaL A. the lint
hourly phue following the break in March 1938 developed in
five Minute _vea, it thua afforded a ItnIng confirmation that
the important trend had actually changed.

,.
 ."
FOOTNOTES
l Here Elliott ~ r"...,.,..1.1 tha~ OM mon new hiab will be
mad. (which it ...... in ].r,1.I 11l31i) t>.fon tIM lItW bMT m.ark," low
(which <>ecUnWl ill 1942).
I Thia ......... tio" illn"" "'nabl., Ii...,. ' .... ry wave ill itaolf both
an """tire cycl." and , "ocmponenL'
I Thia i. anottw Npect of r.h. RIll, of A1temalion.
• Hen Elliott 118M tM word ".piral,· ...nectin& tIM IUbjed.i".
f.-lm, on. pc.
Ipi.nlU. mod,l for
.hU.u.. tnc.k:inc "'''eI. The theory of tb. l"larithmic
WIve PrincipiI bad not occ:wTtHI to him.
• My muti.. do not IUpport c.m. UHr1oion.

,
 PART Xli
PreviouI articlea have diKuued the thlllQr)' of The Wave
Principle Illld ita application to brnlId market movementa. The
broader the (;8tegory, the more e1eu1.y the _ve impressiona are
outlined.. The ..ave pattern of the romprebenaive at.ock price
averapa auch u the DoW..!onelI, The New York Tlmell, or Stan-
d.ard StatilJtica averapa will correctly reflect the eyclical paoli·
tion of the market u a whole. Therefore, pun:hallell and ..lea of
a divenified liH of repnaentative Hoelu in accordance with the
movement. of the averagee will ...ult in profit.e, u their aggre-
pte market value will ewing in aympathy with the general
market. But for the _Iter of muimum proflt.e conaietent with
..fety, it ia not enough to buy or eell a lJnlUp ohtocb without
eeparate analyeie of each individual Hoek. TheIle individuailltud-
iea may ..-veal that IIOrne com~...... experiencing a cycle
differing ereatly from that of the market u a ..hole. A promi-
nent IlltlUllple ..u the cue of American Can in the epring of
1935.
The accompanying charta depict the lUUIlyaie of American
l
Can byThe Wave Principle. In Figure 22. the complete monthly
price I"llll(e hi.etory ;., ehoWD from June, 1932 - the beginning
oftbe bull movement - to JUDlI 1935, the time when the -ortbo-
do", top. ~ . The action or the Hoek from that point on to
completion ofUM cyclic:al correction in December 1937 ia ehown
in ~nd lin....• Th;., monthly rec:a;rd cond",_ th'" weekly IlIld
daily detail. into the five broad Primary W:IV" that complete a
cyclical movement. '111_ relatively broad charta allIO help ma-
terially in maintaininj' the proper perspective.
When the important fifth Primary _ve of the cycle com-
menced in M.,. 1934 - or in other warde, when the Primary
...ave@reaction ..ucompleted-it Warne neoellllaty to Hudy
the market action more clOllllIy. Hence FiiU"' 23, which ehowe
the ....,kly pri... record of the fifth Primary wave. After thia
Primary _ve bad prosreued througb Intermediate wave of, it
became important to follow the daily price rangee, u ehown in
Fii\lNl24. The fifth Intermediate _va ataned in March 1935,
and five Minor wavea we.... completed by June 1935. ~ lIig-
nailed the ·orthodox top" of the main bull movement in Ameri·
can Can at 1«.

,.
 Flgum22

Dow ""'"
/wtria' A~

Following the 'orthodox top· of the bull cycle in American

Can, there developed. reaction to 136-137 in August 1935, form-
ina" wave ®. Then • rally to 149-150 in October 1935 Corming
wave@, the irregular but final top. From thie point developed
the IOIli wave e, in five Intermediate movementll, terminating
at 69 in December 1937.
At the time Qithe ·orthodox top' in American (An, the in-
~tor would have oblIerved the etriking diffenmCll between the
cyclical """ltionA of thet .toe" and of the general market.. See
Figure 25, which outlinetl the trend linee of the important Pri-
mary ".veII of the Dow.Jonea Indumial Averages. In March
1935, American Can Willi in the final /It88f!tI of. bull cycle (FiM
Intennediete wave of the Fil\b Primary). On the other band the
i"nen1 market willi juat commencing the Fifth Primary ""a"e,

,
".
and mil ~d to uperience five upwlU'd Intermediate waVelI. By
June 1935, the long term invelJtor in American Can wO\I!d have
realised that any further appreciation in that Iltocl< would be
highly uncertain, and t.hat mueb greater profite Went avail.bl..
in the general market with minimum rillb. FnJm that point the
general market advaneed nearly 80 pointe or 65 per cent.

FOOTNOTES
, III FicuN 22, w --...et -'nl, avoidina; o"vl.pping and rul-
fillina Urird waV1l nquitalllllllUl, would be 10 place tbe@wbereElIiott
hu a, and (witbin ••".. @)lwherehehaab, 2 whe he h.. c. and 3
.boo... be hu 1. Wave 4 ofQJl then taIr... an .-h-e .1l U, and the rule
of aI_tion ill .till ..r.wied.
I In Fi«ur'e 24, ElIi,,"~ ... tbe _lappinJ and the iJauffi-
ci...1 tllird wna nahiol"" "e"). From the d......ption of the auppoHdGY
.nd@wa".. wtfollow,it_m'hl.rhlylikelyloh.tthethird ...near
the final "'ave 6 of ID limply Illlt<lond-.l. thuo eliminating the impe....
feet <»wIt. Elliott'•• and b an all ~bt, but bile _lei be .-.-.ed for
the Ikot peal< within IJM ruppoNd (]j.l (thereby compleu", an uten-
Iliott li-om tbe low at bl, the d for the lien omall.....uon (hi. b 0100).
Md the .. for the Ktual b.i(b. Ju pr8\'iouaIy di....'..ed. Elliott c:aI.I•
........J Io~ "irncular" tbtlt",;pt be beUer ,""plained by Lhinl-wue
ute!WioM.

,.
SELECTED ESSAYS

1940-1942

,.
 l
THE BASIS OF THE WAVE PRINCIPLE

OCTOBER 1, lHO
Civiliution nlsta upon ellanie. Thdi ellanie di cyclical in
origin and characterilltiCll. A rbythmic lIerielI of extreme cbangee
ODn-.titutel a cycle. When a cycle baA been completed, another
cycle illtarted. The rhythm of the new cycle will be the me u
that ofthe previous cycle, althouib the enent and duration roIlY
nry. Tbecycle progreuel in acoonIa.nce with the natunlllaw of
movemenL
The behavior of cydea b.. been Itudied eztensively by
puz%led economi.... banken and buainllSll men. In thil connee-
tion, the conaervltive London Eeonomul in a recent issue, com-
menlilli upon the reault. of along atudy of trade cyc:l.. made by
Sir William Beveridge, the noted Britiah economillt, &aid:

Sir Wiliiam'l reaearcbea hIVe emphuized once again that

the mOl'l the trade cycle illtudied, the more it _ou to foUow
the pr'INIUI't! of forcea which, if they '"' not wholly beyond the
felcb of human control, have at lent "1lOUlrh of the inoo--
rebl" in their n-.ture to make the polici'" of lfOYenUDeJlta .....
..mble the lJtruftlei or fi.b caUlht in the tideI. Sir William
pointed out that the trade cycle iinono. poIitia; he might ha"e
add.d. that it overridea .........me policle..

The calllN of theM cyclical chatli"1 _m clearly to have

their origin in tin immutable natural law that govema all thinga,
includilli the varioua mooda of human bebavior. Cauaea,l there-
fOnl, tend to become relltively unimportant in the kinK term
P"'lliell of the cycle. Thia fundementlilaw cannot be IUlwerted
or let aside by atatutes or reatrictiolU. Current newl and politi-
ca.I development. In! of only incidentel importance, lIOOn forant-
ten; their prew.med influence on market trende di not u weigbty
.. ia commonly believed.
Thia II. ofnatural cban,p di inevitable, Ind applin to the
IIlIIIODI and the mnvementa ofthe lidell and planetl. It hu truly
been &aid tbet change il the only "immutable thinr in life.~ Be-
ina a natural phenomenon, it neeeuarily goveme all bumln
eetivitiea, even the relatively Italic aciencel of biology Ind

,.
 ...
botany. Even time and mathematicll appear to be amenable to
the application of thiA law of rhythm, from the ..mall unit of
boura to the great intervalll of decades, centurietll.Ild millennia.
Meuuring the behavior of eyclell ahould therefore offer a reli-
abl.. meana of forecuting chl.DiN, regard.lesa of the cauae, I and
thua yield hand80me profit..
In an independent .tudy of the avail.ble data, extending
over a period of ml.llY yean, the writer hu obeerved certain
reeurring behavior of change in movement. Apparently th_
changes foUo" • natural law that inevitably influeftl)f)ll the mUll.
Finally there evolved certain principlell, which were eanfully
tel!Ited back over a long period of years.
By 1934, 1_&11 able to reaolve the varioua trende· of changell
in.tocl< priCllll \.(I. rhythmic lIeri" ofrompooomt _VelI, which l
I called. "cycle." Thill (yelieRl rhythm hu oecurred regularly
and repeatedly not only in the avail.bl., record. of the Vu1OW1
stock uehanges, but .1110 in oommoditiell, induatria' production,
temperature, mWlic, vari.tion in ""lOT, ellldrie output, popula-
tiOD movements to and from dtie., etc. In fact, it il manifHt Ml
widely, not onlJ in human activities but abo in the workinp of
nalureitBe1f, that I have termed this diseovery'"I'be Wave Prin-
ciple.»
Undentanding ofthia law enablea the clOlIe atudent to fore-
cut tlie terminatio~ of cycl" by mellllll of the market itllelf.
The Wave Principle;a not • -market" ayatem Ol' theory. The fore-
casting principle inyolYed iON far beyond the eooeept of any
known formul•.
The number of waYIlI .nd tile extent and d.....tion of move-
menl.llllf!eIll. clearly to be allied. with the principle ofmathemat-
ice and with the puaage of time, but the number of..ay" neyl.!r
yarie. except undl.!r certain rec:ognaable conditiona of a cyelieal
natun. The ullilth of. waye may poMibly be affected by emo-
tional newt, but the munbt'r of WaYe! la clearly not affected by
meh t.... n.ient developmentl. nu. Principle forec&lltl and at the
same time mea.8Ul'elll the extent, COrnctiOIlll and revenall of the
variowl trendlland C}'clell long bef,,", any IUpporting lltatistical
evidence is aYailable. A featun ofunusuaI merit is the faet that
the experienced ltudl!nt knoWI at all tim. the CUfTflnt poI!ition
of the market in e.ch cycle and therefo", ;1 forewarned of the
apprc.eh ofreYenall. By meanll ofthia rhytlun~ anal";". the

,
1" R. N. Eu.IfJn"tI MA..'I'/"UJfO/tu

end of a movement;' known all it approillehea, and the type of

the nm movement w.llIO known. It i. therefore pouible to pre-
dict with confidence when a bull market ill tenninating and a
bear market i. beginning, or viee vena.
The Wave Principle hu now been u.eed IlU'X'eMfully fOl'" 1IeV-
eral yean in the management of inveatment fllnd8, and in fon-
euting the import;ant m-Jor and intermediate trenda. A IIeriell
of utielM, revealing the broad workings of The Wave Principle,
W1UI publiahed in TM Finandol World during June, July and
AllgU8t 1939.

How 'Ibe Wave Principle Worb.

ud It. Corre'-Uon With MatheDUltical lAo_
~.. Fibonacci Summation Seri.. ill the bui, orThe Wave
Principle. The numben thereofare IIlI followl:

1- 2 - 3 - 5 - 8-13 -21-34 ·55-89 .1"", etc.

The IJUm of any two adjoining numben equal. the nellt

higher number. Forexarnple: 3 + 5.8. The wavello(every move-
!mnt coincide with the.e nwnben.
Any ODe of tb_ numben ia approllimately 61.8'10 of the
nen higher number. The ratio of one wave to it.. COfllpllnion i,
approximately 61.8'10.
F'ipnl 1 ahowl three gT_ph, of •• tock market cycle, in-
cluding the coll8tructive phueB of a bull market and the de-
8troctive phuetl of a bear market. The nwnber of wavy in a
cycle i8 abo CI'Impared with the IIl8thematical principle. laid
down centllriellll4rO by Pythagoru and Fibonaeei.
The graph .t the top outlinel the fundamental or larglllt
....Vllll ofa complete cycle. There are five "'aVei in the bull mar-
ket and three WUelI in the bear market.
In the middle graph, theM ellllle eiiht fundamental WaV"
are amplified to 8how their component W.VM, totaling 34. Note
the coll8tancy of the "five-three" rhythm. 1'bi8graph Ibow8 the
Intermediate 1!.ageI af a cycle.
The third graph i8 8imply a more detailed .n.\yaie ol the
..me 8 fundamental, or 34 intennediate, _VelI of a cycle, in-
cluding the 89 minor w.vel of a bull market and the 56 minor
W&YelI of a bear market. The total il 144. Again the "five-three"

,.
 '"

u
>
u
~ • •
w
~

~
'[
~~ .~
-. - :~
E
<
. •

• :} §
~

u
0
~
~

ret.tjonabip boI.&. b'-. A COt I«tif. pbaM 01 the cycle will_

IiM.lly '"V)' the rhythm IJ.i&btly for the mincw _ ..... and ill
-.eh. i"st,!M'N. the eou,nt will be '7 (/I' 11,' -.iiq: 10 the type
Dr ,.ttarn. wbich iDcIicats ... bat ia happeDinc.
 R. N. Elll<YfT'. MASTUrrollD
""
The !lui. of The Wave PriDciple ia very old. Pythagoras in
the airlh century B.C., Fibonacci in the thirteenth century and
many other Kientillt&, including Leonardo d. Vinci and Marconi.
have all.boWD that they were aware to IIIIlDe anent ofthi. phe-
nomenon. Fibonacci was an Italian mathematician, allJO known
8.1 Leonardo d. Pin.. Hi. "Summation Serle. of Dynamic Sym-
metry" qreelI in every rapect with the rhythmic count of the
Wave Principle, and the number of.IVlllI i8 the 8lllll1l.
Fibonacci apparently derived hi. Summation Series (rom
the £amoua Pythagorean d;agram of.. pyramid, ronaiJItina often
Wlita, beginning with one and ending with four.- Thill dia.iram.
Pythagoru &aid, wu the "Key ILl the Seeret of the U nive,...·
Notonly can thill diagram be applied to the MUOns oBbe year,
but ,I.. to the sreat inner cytlN of the well-known ten-yur
cycle.-
The .imilarity ofTha Wave Principle, the Fibonacci Slim-
malion Seri811 aDd the Pythaaorean diagram i. shown in the
tabl... on the nut page.
It should be noted that when I diaxlvered The Wave Prin-
ciple action of market t>:elldl, I had never bean! of either the
Fibonacci Sena 0<' ortbe Pythagorean Diagram. It it naturally
gratifyine to me that theae old mathematical principlee that were
laid down centuri... /ISO simply IJUbI;tantiate the validity of I
preeent dly IppliClltion ofbuic I8.w to pncticlll UlIe.
All to the eonfonnlnce of the time element, or duntion, of
marltet ~n~ with the rhythm of The Wive Principle, IDllll,)'
"ooincidenoee" Clln be cited.
lG
Duration en' 1'Ime ElelDent
In the analytiCllI diKUll8ion of the buill of the Wave Prin-
ciple, the oompollition of the .... v.... ofvaryiq dl(l'Mtl wu ehown
to be identieal with the numerical relation.ahips of the unita
malting up the Fiboneed Summation Seriu of Dynamic Sym-
metl'y. Thie eeriee ill repeated, u foliowl: 1, 2, 3, 6, 8, 13,21,34,
65,89, 144, etc. Th..., relationahipl are very uaeful in identify-
ing and meuuring every ....ve and the extent of eech move-
ment, and when UHd in eonjunetion with The Wave Principle
are aIao uaeful in fOl'eCUting the duration oftren~ in the van-
OWl perioda of time (day.. weeklI, montba or yean). The time
element .. en independent devioe, however, oontinulIlI to be baf-
fling when atte:mpta are made to apply any ltnown rule of_
quenee to ~nd duration.

,.
 '"
o "18
.... "'.... ,",!... e ... ~
~
0-
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--............ 0

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0 0

- .
0 0
0 0 0 n •

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0

0
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· -.. -. · .....• · ... - . · ........
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N
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•
n n

'i~ • ~ A t
jj: .. •.. .. . i i---...f• - {
• • •
• N

I.
• ••
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~ n
• • • ••
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t,
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• • ••
•

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...' '" :....... ., I - d8

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• ••
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n
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.. .. .. . .. .. .. . .. .. ..
0 _oN
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• 0 • • •• • • •
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•• • •• • ,
-
N- 0 N_ ; _
0 .....
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_.. _.. _a .
-.!, !.! •I
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F/(/Ure 2

,
 R. N. EUlWT'. MA.'I'T'P1I1OJIX1j
'" •

•
•
- - --
• •

- -
• • -
.-.. -
Flgum3

An MIImple of th.. uee of the time element in eorliunetion

with The Wive Principle i. given in the accompanying grlph of
TM Ntw YOf',4I~. averapof50Comhined Stocb, arithmetic
_Ie, from A~t 1921 to May 1941. The VarioWl wave rever-
aaI point.ll in this twenty-year period are listed in TlIbl.. A, while
the duration between revenal point. ilNt forth in Table B.
The time relationahip can aI.8o be applied, in conjunction
with wave anal711t., to otherindit:ell, lIUch as trends in eorponte
honda in the graph below. The numbera 13, 21 and 1I5 repreeent
the number of monUul duration of wave., .. indicated by ar·
rowlI. {'lbe fiV&-wlve bull marbt. in king-term government bondB
luted. 89 monUu:, m"Ul.lI'ed from January 1932 to JUDe 1939.l
]0 .tudyiOIl the time element, it .hould be noted that ..
movement may.tart IUld end near the begiDnine. middle or end
of .. month, and for that nllUlOD the actual time .,l_peed, when
llHluured by the d.,. or week equivalent to the aummalion lI&-
ria ofmonUul, can terminue in a month next higher or lower
than the aerie. of month. indicated.
 Sc' :r.d ENG,.. /r'om 1940-1942 ".
T.U' ·0'
....Ul P....... 1 POI"\.

_.,, ....
, h,. "" -.
!L. !!!m.Ill.!et. l!2....!!I>!U!!!l!t

"" ., ,,~

_.
~ 'pl. ~
h •. ~

•, ~
"" ""
J~I.
~,.

•• ....
~ ~

"
" _.
"I.
"" ",- ....
.~.

',I. " ~
h •. ~
" "
""" .,
U ~,. ~

":1 M.
h. "" 0.\.
J,". ~
~
.."" • P•••
J~I.
,~.
""" . •••
'.1.
"I:" ....
,_.
~
~

"
"" ....
•••
•••
',1. "" .:1 .... ..'" ~
~

":l"
,_.
•••
""
""
.,
J.".
T.'.
.,. .
'pl .
..
•"
h •.
P••• ~

tdb '1'

"'", .., .. "'"

. . . . . .t I ",-,••n
!tali.
,, • • '" .
" •
, "• • " '"'"'" ."" "",
••, • ,I:, " •
,
"
•
•• "'" ""
" "
";;" "" , ,
"'" "" "", ".." ,
"
'"'" "" , "" "
 ""
,
I ,
I
COpJTlt;hw(

,
@ J 19'\l I>y
~.ilf.
A1\
Ellion
rl,Mo
, I h .....<l-.

I
FOOTNOTES
1 Thil""'" includ..._tion. from. pajll iuued in Sept.embftr
or Cloe\oIIer 1938 alld from Ed.....tio... al Bulletin A, iuuecl in Iac.e
Decamber 1939 or .....lJ' January li40,
• H. mMn& PUle. that are Jllftumed 10 be CII"1ft.
• Id.
• Tbi.o would bet..". .....d, "JIIIW!ma."
• He...-, •...• compt.te up-and-down oeqUIDCe or ...him ....•
• Tbe tint thrH parqrapb& ofthi. euIIJ' are from Inl.erpretivl
LeWlr No. 26,"'The Ruli". Rae.;., ofWu.... d.ated J...,u"'Y 11, 11M3.
T All l\otoHi on tM i""'pb.
I 8M the "P)thqotu.n Oiacnm" on tIM ....:n pap and tbe
picture ofJ'rl.hqona In Nal"rc" Law, obapter XXV.
I H. ia prob.bl, referring to tbe Docennial Pattern. Tbi.o and
the nom parqrapb beg for e1ahorat.ion. See the ~on in Ellioct
We.... Pri.ncipl..
"'Thia oecUOft;1 from.lnterpretivi Leu.or No. 18,.tate<! AU«W't
27,1i41.

"
 MARKET APA1HY-
CAUSE AND TERMINATION'

AUGUST 11, 1941

The total yearly volume of atoe); tranuttiomo on the New

York Stocl< E:lchange bu been declining for five coneecutive
yean, and apatby hu been lllOfi pronClt1l\ClfJd .me. October 1939.
The l:aUllN of tm. apathy can be tneed to cyclical in1luencN
and meuured mathematieany. Suatained market activity

7 40 ~l

1lo• ...Ion••
ln~u ..... tol
··tC°"

,
upanda or conb'aetl with the Imgth of the price t.r1!nd. The
longer the trend, the greater the public interest and turnover in
stocb, and vice verN. During recent yean, the awinp in the
price t.r1!nd have become progreuively ahorter, IS iI charac·
terilItic at movement. within an orthodon- trillDl)e.
The awinill of the Dow Jonel Industrial l1lOnthly average,
I I ahown in the accompanying chart, afford a clear erplanation
for Walack of ronfIdenee and I'MU1ting apathy. The two d...hed
linea, Q - V (drawn a~ the falling tops al April 1930, March
1937, and September 1939) and R - V (drawn ICr08lI the riling
boUoma of July 1932 and March 1938), fonn a triangle ofgigan-
tic area. Each completed awing of the pendulum within thiI trio
angle baa become p~ively shorter in accordance with the
geometric ratio alO.618, I I regarda: bath extent and duration.
The triangular outline iI therefore a1ao a "ratio triangle'-
and .. auch, differa in important relIpectli from the .....ave tri-
angle· described in my Tl'eaUse, ~ Wow Principle.1 The ratio
of 0.618 and itll reciprocal, 1.618, Item directly from the ratio of
the circumference al a circle to the diameter, or 3.1416.1 Thil
ratio iI a1ao the buic characteristic alt.he Fibonacci Summation
Seri., which ia identical in numerical count with the etruc_
tura of The Wave Principle. Thia aimilarity ie dillCulled
fully in a circular, '"The Buil of The Wave Principle." The Fi·
bonacci SeJ'i1ll, the ratio of Il1lCh term to the next tenD, and the
reciprocal value, an revealed in the following:

Table of Relativity
First S«ood Ratio ReciprocII
T,m Term R.tio

,
2 plus J equala
• S •
S
8
0.60
0.625
1.67
1.60
S • •
8 •
•
8

""
•
•
"" 0.615
0.619
0.617
1.63
1.616
1.62
"" •
""
•
•
"" 0.618 1.618

""
•
• 89 • ,...
89 (1.618
0.618
1.618
1.618

,.
 &I«ud Buoy. from J94I).J942

'I'b_ ratiOll and IMlriell have been controlling and limiting

the extent and duration of price tnnda, irrelpective of w.....
politiCll. production indicetl, the .upply of money, general pur-
chuing power. and other generally accepted method. of de"".....
mining atock valu•. That thill .ta~l!U'nt ill trw ill veri{iM hy
the following t.,bulation of important movementll .inee April
193<>
11M C)'olbl RaWloily "' . . . . . . ,.....

Oat- P<>inla
To rr-. To a.anp
JIl111"2 2M.0 .0.5 260.5
Mud> 1t!1T 40.5 1911.0 1M-5 1106.51151.5 • IO.K
Jola«h 1938 1118.0 lt1.0 iII.0 iII.0/IM-I • 13.5
SepI. U3\! 117.0 15&.0 no 61.0/ no • 11.8
,~

u .•

Thil felture provu that current eventl and politiCi have DO in-
nuence on market movementl.
Since the ClUNe of this pheDOOlenai market. behavior origi-
nl"" in the ",lativity ofthecornponentcyclell cornpreeaed within
the triangular I",,, it il diltinctly encouraging to be able to
point out that the ... pidly approaching apex oftbe triangle .bould
mark the beginniq of a relatively long period of inaeaaing Be-
tivity in the atock market.
With the Wave Principle, the fact that all five meaaure.
(the ratio of cyclical tnnda. the relative time for the movement,
the mathematical nature of a trianale. and the Fibonacci Sum-
mation Seri.,. all .""mming from the common lIDuroe) point to
an approaching culmination of a tnmendOUll thirteen-year cy-
clical correction ia extnl.ordinary.

FOOTNOTES
1 This trealiM ia an uadlenl innovative analylia and I eorrec:t
COIleluaion.
1 The difJ"erenoe 8lliott pointll out ii, in fact, cn":isI. Appantnl.!y
• ratio triangle may appNJ' lpart rrom a wave triangle. ThUl. the 13
yeu triansJe ill not a 1'llq1tired intel'JlUtlltion deIIpite the FibanacQ
....l.oti"".hiPII.
I See dixuolion in ch.pter III of Elliotl Wave Principk.

,.
 lWO CYCLES OF AMERICAN HISTORY
AUGUST 25, 1941

1776 -1857, 81 yelll'll

1857 - 1!H1, 84 years

The earliest available !tock I'KOrd i! the Axe-Ho\li:hton

Index, dating from 1854. The _ntial-change" characteri!tiCll
of the long movement from IBM to September 1929 are .hown
in the accompanying graph. The W!"' from 1857 to 1929 may be
either Cycle wave I, m 01" V, depending upon the naturtl and
extent of development of the country befon! 18M. Then! i! tell·
ton to believe, however, that the period from 1857 to 1929 can
be regarded .. Cycle wavelIJ.Z In the rlnt place, the brotld peri-
odicity of approIimately eiahty yeata connect.e the Revolution.
ary Period, the Civil War Period ami World War II that hu been
in progrea durina the put dec.de. Secondly, the market .inee
1929 h.. outlined the pattern of a Jipnt.ie thirtftn-year tri-
anale oC .uch tnlmend.OWI .cope that the... defeatiJlt y...... may
well be erouped u Cycle wave IV. Thirdly, my oblIervation h..
been that ort.bodo:r trianglea appear only .. the fourth wave of a
cycle.
To appreciate the <:auae of triangular Cycle wa", IV, it ~
nec ury to review the previ0u8 yean, particularly the dynamic
!pan of 1921 to 1929. Attention ill thenlfore invited to compo-
nent wave 6, .hown in the llCClOl:llpaDying vrapb oftbe Au·Hough-
ton Index, with thi.. part.ieularwave running from 19063 to 1929.
The fIAh or-e- wave, runnilli from 1921 to the ortbodo:r -eIten-
!ion" top of November 1926, wall further ..ubdivided u ..hown
on ~ 88 of the Tre.. tile. Thill pattern i.. ref"eJnd to in my
TreatiM .. a "half· moon." Thi.. movement wu ertremely dy-
namic, accompanied by high .. peed, larp volume and wild specu·
lation. Furt.hflrmore, it",.u the culminatilli ph.... in the lona
..pan from 1857.
Acycle web .. that from 1857 to 1929 and containing .uch
a frem:ied movement u that from 1921 to 1929 necellarily re-
quire.. an utenaive correction, not only from the ltandpoint of
price change but al80 in breadth of area or duration. High !peed
movement- in one direction alway! gtlnef'ate proportionally high

,.
 ..
. ~

:~
.

,
I

.....'1....
•.tI .... ··" ..
. "".u
!lI !
•
",' ;
_- <il "I
-- i
0-
-
-
I --",1
~

I
•

•I
~,

•
F..".,
.peed in the enauilli movement in the oppoaite diftlc:tion. 4 The
momentum carnell over, in correctiOll8, Into the ~beequent
awinp. Similarly, the extent, duration lod yollU'tlll el1araeteria-
tica are relative, cycle by cycle. In lIUlIllIlAtion, the proportional
IUTIlngement of the neceeaarily 8Xtenaive corTeCtion orthe 1857-
1929 wave called for .honer and lhorter tJ)()Wnanw together
with dem!uinj: _peed and volume. Nature'. inuorable I.", of
proportion _unla for the recurrent 0.618 ratio of awing by
nring OOIllpariton. The whole movement(or all the movemenla)
lIince 1928 (and at.o from April 1930) form a uemendOUll tri-
angle, and thiJI triangle wregarded .. Cycle IV of an order dat-
Ina: back to .. early u 1776.1

,
..
• -
, •

"
• -~
. "
" .
I
•
"" _. , • • • •• •

-_-"".
'~

_..........,....
._,.-
.., ...." .... ,. t

Tri_DiII. ""ave <1l i8 well adv.. need, and ita termination,

within or witbout the area of the triangle, ,hould marl< the final
rorreetion of the IS-yeu pattern oftk{ftJtiam. This termination
will allIO mark the beginning of. new Cycle w ....e V (oompoeed
of a .eriu of cyelu of lefIfIer degree), oomparable in many re-
apecta with the long cycle from 1857 to 1929. Cycle V ia not elI-
pected to culminate Wltil about 2012.- (See duhed line in the
tirat graph.l

FOOTNOTES
1 TbiI....,.;1 from lnleJ'pnltiY<t Letter No. 17.
I A ........Uble ooncllWoD, fu1b" IUpported. ..,. the diacovery of
additional data. s... tbe prewn\.lltion in ElII<>I1 WallO Prl""lpk, all
w.tI .. u.. updated ebanol 011 the nut pap. TboI flnt obowa the e
count for the Or.nd Supen:ycle bull market from 17M in the Do...
J__ IndUitriai A.wq:e odjlUtd {M ill/latiM (i.e., uaing ......tant

"
<lollaro), which.bows a!ecitimata trianrlo in tM wov. (IV) poitll.ion
from 1929 to 1941hn<la Iypieally bri.rthru.teanyinrillto 1968. TIM
_<l.ho. . tM counl I" ~li"""lU <loU...., b,.- which ...... un tho bull
market baa lutad 62 ye.... frotll 1932, ju.ol8 y""" .", at Elliott'. 70-
,..,. ..timat.a (from 1942).

Two Grand Supercycles

(Y_ _ - . . . ....... _ _ ~

,""-'''''''
-~
p- "'" T."""'0 U.S._
p-
'00

1'1
X(yf/ .
_~
C ,m
__,__-I 1
._-
_,__-~_ _,__-C-;::·~·~·c:;;::·C·C·-,I.
._ "... '7'00 , , . 'toO 'Il1O ,~ ... ' . . 'toO ,.., ,~ ,~ ' . . ...,'

Two Grand Supercycles

(Y_ _ __
-'~, ~
...
-""'T """"'"
"""-"" ..
..... ..... U.S._
.
u
IV)
,.,
,
._-
~~t:::,!-I'~I~::::::__:':-__--,:=::-:~;.::.l"
_(Al -"--.... 0.'
, _ 1770 11<0 '7'00 ,,. '100 _ 'OCI 'NO _ _ I . '100 ,MIl 1110 ...,

,
 I H, meanll 1696.
• Whil, common in COlMlocllt, prieM. ouch beba...or i, oot aI-
w~ _ in lJ1e ,",,=k marke~ In (act, the OPPMite oRen nccun.
I Good..n. The....,....j lhowa the low in 1784.
1 Tbie ..um..te il baMcI l:J on , \.enctb equi.elent to tlM
l867-lns (GrthodGI top) ed'fance be ,talel in the nut _Y•
...". FuWTe P'ttem oftlM Muket."lrc>nicell:J, bownei'", thrult.o...
be poil1t1 out ,lMwben, ..... I1O<1Ile1l:J lhort and lharp, 10 thi, time
.tim.ote Ip,,"," too far into lJ1e futunlpYen hil tn'IIII, inteJ1>reta-
tion.. Eye... forpttina; thII triInIl., lifUl w......... u ~ .honer
than thirdo. H. Uw:o' pol .1eI t.hiI id.. irI the ot.horwiI<o id,"tleal
t......,..t in thII fillll1 ~ of NI1l~" L:w>, but luglltl I thnolt thot
io tGG briIt. N the ch.art in IOotD<Jta 2 .bow.. tlM lit\h ....... luted 17
,.... in _ t dollaB, from 1949 to 1966. Reprdl_ of thNI
tacbnic.! poi.nt.o, bio call for. mlllti-<lecode Id.'flllce irI tlM mid.t of
the plJ""ui... aI""'" of llU2 ie ot.unnillll irI;tI a<><Un<J' and roreoilht,
ODd pouibl:J onl:J bec:ouoe he iplored III the ne... t .nd eltC1uoi'fel:J
.... mined lb. PlUUI1·

,.
 THE FUTURE PATTERN OF THE MARKEl'
OCTOBER 26, 1942

The pattern of the palIt 21 yean (1921-1942) (umi.h811 a

ba3UI which may be used for forecasting that of the Dext 70 yeara,
811 well all estimating ..... hat the reeord may have been between
1776 and 1860.
Gnph 1 below eov"I1I the entire period from 1776 to 2012
and abo... five WIV. of large degree. A Wive Principle eyele ia
al......,. eompoeed of five WIVetl up and three .....Ivtli down, re-
gardlelIlI of the degree or aWo.

••••

I
;
, • .0
• • ,,
oi.. ,
, i ,t . ~

,,
I
•
I •
I I
I
•
•
,• I
• •
fJgo~8

,
'"
WaVN 2 and .. are I.IWayJI corrections. 1HD1Iil"' may op-
pmr Oil wow 4, Mvcr 0lI _ 2 iMofru OlIIlKJw obHrwd. TMre-
fon, the pattern ofUte period l'tom 1929 to 1942, being a triangle,
ia .Ive@of. Supercycl..1 W.v.~ ia .bout to lItllrt, and hued
on the duration ofwave@(l8ri7-1929),itll'louldtenninatclabout
theyear2012. 1
Having eetabli.bed that wave@ atarted in 1929, wave@
obvioualy ended in the IWlHl year.- Wave \Xl of Graph 1, from
1857 to 1929, ,. detailed in Graph 2, UlIing the Axe-Houghton
lod~
The 5th wave ofar.ph 21t.arted in 1896. It Ilubdivided into
five WIVN, and iullUbdivided 5th WIve, atnrting in 1921. u-
~n.ckd. &1,lUIioIu MWr opptal' twice in 0 eyek. Themono, no
uteIl8ion olt.hill deiI'M abould appear between 1942 and 2012. 6
Doubtle., neither did one appear in wave (!l. previoUll to 1850,
for ....hicb period I have no record. For thelle reaaona, the two
daahed lillell in Graph I,· previOUll to 1860 and following 1942,
are ,,",uod IXIncluaiolUl.T
Wave ® of Graph 1 will embrace three bull market. Ind
two intervening bear marketa. The amplitude Qf wavn
(poon:eotqewiH) and volume will ruemble th...... of the period
between 1857 I.lld 1909, u depieted in Graph 2. No one DOW
living will witnellll. "New Era" oftbe 1920s type,'

FOOTNOTES
, Elliott'. analywW ben (from "Edllutional Bulletin 0") Uo a
repeatoltha -.....J.yai.o ... tha p'O .. djnl_Y, upd.wd ata timo wben
be u..w W~ m. marlr.ot had pUMd ita SlIpenyd. w.y.
~ bottom.
Tho .... wa1l anal,-oUo ramai". a .........ubl. r..~ ud w.. ahown ttl be
IlllI'Tert with tho DOW availabill~,. ,,( put data, .. pnMnwd ill Elliot!
WCIl.. Pri'tCipU.
• !ih<:M>ld rud "Grand Suparqrcl•. •
I Sao r_6ofm. pnoedin,--.r.
• Thia ....t.a.... and tho nut three, .. woll .. Graph 2, !'eYIII
that on .~ 1 _ tbio oocaoion, Elliott illt.arprewd 1921-1929 AI •
atniahtforwotd "Ii...... ClInclllaon with which I antiroly . . . . 1929-
I~:l Uo then a otniabtforwotd A-B.C. Hio "irntcul... ttlp' tbeoio il
\lllDeceuory, AI b. himHll' reyea!o ill tbio paooqa. HWttIry oha....
tbo~ tho otoclf marlr.1t olmoot illvarilbly t ..... wt on. alDple pal-
!.ern aft.er .....c.her, deopit.a tbe reeliq onl pta ........won.ally ill real

,.
 &~ EUD.:p from 1940.1942

tim. tha~ lOme ne.. "trick" ia beitlll pLo.,od. N. a pa~tern ....... ita
end. miMina clarity al...,. retuma in anuh of real(Diuon.
• Elliott'. eumple ......... thaI oril.hin a li~. _". nruCl.UJ'a,
onI,. OM .ub-or will contain an en.mion in 0I>Il or ita impulM
...b......., .. he actually the lllIITKt lIUidew.. ia tha~ only on.
impulaa .. ava orit.hin a liva ..ava atnIetura oriU be an utanaion.
1'benl ia no reuon .. b, an .:rtenaion .bouId not appear . . . • "blDG'"
or eacb impulaa ...... in .liva "a~. "'lu....... In r.et, i~ DHTIy al...,..
doaa. N. biatory b.. born oul, the riM £rom 1942 t.o 1966 .... en
.nandad oritbin ...... @. Howe"..., if ...~........ itaelr an
-.ion ~ .. <D end ® .bould _ be.
• Elliou. aometime. earal_ oriOl bl.a dTawlnp. W ® in
....pb 1. ror inat.anoa, .... clearly int.andad to climb to hiP..
Neilher did the 1932 low rail below 01. peak or ...... (j).
1 Elliot~'a biatorical ... ~a MUll~ i. brillian~ and accurata. Hie
conduaion, owIa onI,. six monthe aftu the 1942 low, w.. entirely
c:ort'Kt tbat Ol.t kna orould not be ceed.... on the do..-id. prior t.o
• llIu1ti-dacade edn..... Hie 1 APtditJc the riM into the
beJinnini orhi. data in 1850 imilarlJ ta, .hbou,b .. a ...
<D becan in 17M ...d .nded in 1836 (tbe..........,uon a n.1, orith an
int.orvellitl& biab in 1862).
• TbalUtb wawe of Cycle delP"" thaI aa:el.ntad in 1982 and baa
earriad into the lQ90a baa been • 'New Era" ..." (i.•.• founded on
hope) and baa Men anaIOIOU' to ~he 192Oac.~ Supereyele (tbouP. not
Gnn.d Supercyde) doIp-ea.

,
 NATURE'S LAW
THE SECRET OF THE UNIVERSE

by
R. N. ELLIOTT

,
 REFERENCE INDICATIONS)

Referent:e to chapters, pagel, diagrll1ll, etc. will be indicated 1.1

folloW1l:

(Cl Chlpter. Forexample,"C 24· mUIll Chapter No. 24.

(O) Diagram. For eIample, "D of· meaml Diagram No. -t.

(FSS) Numbers of the Fibonlloci SUlllIllation Senel

(OT) Orthodox top.

(Ol Graph. For example, "'G X" meaml "GTaph X".

(P) Page. For example, "P 5· me.1lI Page 5.

(PD) "P2IU· me.1lI Page 2, Diagram of.

(PG) "P3 66" meaD.I Page 3, Graph 6.

(PPDl"Pof P6 08" me\l.M Page of, Puagraph 6, Diagram 8.

(R) Ruling ratio of the Fibonacci Summation Seriell, lIuch

u.62 or reciprocal 1.62.

Publiaber'. Not.: In lba origioal. mOD<lll"'pb, near'" every aentente

..... treated .. a aeparate ~ph and ownbered. We have taun
thaliberty or eondellliD( tbe atyle of arraneement for euler read-
ing. The referencea to ten antU by eodeo .. deacribed above have
been eliminated.

FOOTNOTES

,.
f.-:~;;' .... "- .. - - .r:: .-
"' '. ~" .

"-1'----------.. . •

r NATURE'S LltW
tHE SECREt OF tHE UWIVERSE

By R. N. ELLIOTT

,.
VJ.If, J...,-I"", /w .
T-.~_C ' -,10_ 0 •
__ _ Tact.' .. IIanUn" _ . . . . ..
F ".;r.-
•

•
'!,~...-
--
-- .
 INTRODUCTION

RHYTHM IN NATURE'

No truth meet. IllONl geo.~ aeceptanoll th.a.n that the urn-

venfl ill ruled by law. Without law it ill lIfIlf-flVidflDt thflf'fl would
be ehaoII, and wbe... ~h_ ill, llOthilli ill. Nari4ration, clIlIIIlilltry',
aennIautica, architecture, radio tranamiuion, aurgery, muei~ -
the pmut, indMd, of art and KiflDu - all work, in del.1ing
with thinga animate and thinp inanimate, uoder law because
natuTe berllfllf works in thiJI w~. Sinee the very clIan.eter of
law ill order, or COn8tancy, it rollowa that all that happen8 will
...peat and ean be pred.ictlld if we know the law.
Colwnbua, maintainilli that the world waa round, predicted
that a welltwllrd ooune from Europe mU8t eventually brilli hill
ahipe to land and deapita acolTera, even 8m01li hia Own ""'w,
aaw hia prediction realiHd. Halley, cakulating the orbit ofilie
1682 comet, predieted ita ...turn whicb W8ll atrilril1ily verified
in 1759. Muwni, after hill atudiu in elflCtrieal trammi.Mion,
pndieted that ItOUnd could be eonVflye<! without wiru, and to-
day we can ait in Ollt' homea and lilIten to muaica1 and othtlr
prograDUI rrom 8O'OU the ooean.. TheM mao, u havtl countl_
monl in other field., learned the law. After becoming thua poeted,
prediction wu e.., becaUllfl it became mathematical.
Even though we may not undtlrstand the cause undtlrlying
a particular pheoomenon, we ean, by obeervation, predict that
phenomenon" reeurrenee. The sun wu ezpected to recurnntly
riae at a fixed time tbo"Mod. ofyeara bero... the cause opent-
illi to prodUOll thill l'fIIUlt w... known. Indi&JlB fix their month
by eacb new moon, but even today cannot tell why regular in-
tervaIt ~haracterize thia huvenly ,~. Spring plantinp are
wi~ the world over because summer ill upeeted ... next in
order; yet how many plantera understand why they are afforded
thill corwtancy of the wuona? In N.Ch in8tanctl the rhythm of
the partkular phtlnomenon wu maatel'fld.
Man ill no 1_ a natural object than thtl aun or the moon,
and hill adiona, too, ~ their metrical occ:urnInce, are ,ubject to
anaty.ia. Human aetivitiea, while amuing in character', ir ap-
pl'Oll~hed £rom the rhythmical hi..., contain a preciae and natu-
 Na/lUY" Law ,\7

rall.lUlwer to IIOme of aur moet perplning problem.. Further-

mono, becaWle man i••ubjeet to rhythmical procedure, calcula-
UolUl haring to do with hir activitier can be projected far into
the future with a jU8tification and ~rtainty he..... tofore unat-
tainable,
Very enen.ive ......utCh in connection with what may be
tenned human activitier indicates that practically all develop-
mentr which .....Nlt from OW' lIOcial-«onomic praoe_, follow I
I,w thlt call1lell them to repeat themrelvea in similar and con-
stantly recurring Mlriall orwavetl or impulaea of definite num-
ber and pattern. It ir likewiae indicated that in their lntenaity,
th_ waver O!' impm- bear a conliltent relation to one an·
other and to the pusage or time. In order to beat ilIuWate and
expound thir phenomenon it il neceuary to take, in the field of
man'l activitiel, lOme example which fumirher an abundance
of reliable data and for luch pUl'pOM' the... ir nothinr better than
the stock exchange.
Particular attention hu been given to the stock market for
two J'N.IOM. In the fll"lt place, thenl ir no other field in which
prediction h.. been euayed with ruch great intenlity and with
110 little reault, EcollOmirtr, 8tati.ticiana, teehnicianr, burinelll
leaden, and hanken, all have had a try at fonlte1lingthe future
of pl"icft over the New York Stock Eschange. Indeed, there har
developed a defUlite prof_ion with market forecuting .. itr
objective. Yet 1929 came and went, and the turn from the great-
...t bull market on record to the greatellt bear market on record
caught almOllt P:v~ in....,.tor off guard. Laadill( investment in•
• titutioDll, spending hundredr oftbouranda of dollan yearly on
market reeearch, were caught hy surpriae and .uffered millioM
of dollars loer becallH of price Ihrinkage in atock boIdinp that
we..... carried too long.
A IflCOnd ""'lUIIIn for chOOlling the stock market all an iIllllJ-
tnltion of the wave impulre common to lIOcial..economic activity
i. the great "",wan:! attendant on .uall!Ufu.l .tack market pre-
diclion. Even accidental ~ in lJOIlle ringle market forecut
bar yielded richer little .bort of the fabuloua. In the market ad-
vance from July 1932 to March 1937, for iIIW1tn1tion, an aver-
age of thirty leading and representative .toeU advanced by
373'l1t. I>uri.ng the coune of thir five·year movement, howlIVer,
the"", were individual atocb whOlle per cent advanoe W&ll much

,
,,,
luger. Lutly, the broad .dvllllCll cited above.,... DOt in a atraight
up....,-d Une, but rather by • ..,riN of upward and downward
atepll, Dr zig-UK movemenu of a number of montha' duration.
Th_l"'lMer awinp afforded even lJnlater opportunity for profit.
Despite the attention given the IItoek market, lIllCX:flllll, both
In ~ aoeuraey of prediction and the bountiell attendant thereto,
hu nece5lW'il;r ~n h.phu..... beea"," thOM! who have at-
tempted to deal with the ITUlTket'. movemenu have r.iled to rec-
ognise the extent to whieh the market i •• paychological
phenomenon. They have not 1T1UIped the fact that there iA regu-
larity underlyiq the nuctu.tiolUl of the market, or, atated nth-
erwi..... that priCtl movemenu in stocb ant luhject to rhythm.,
or an ordered lleQuenee. Thua market pred.ictiona, lUI thOM who
have had any experience in the lubject _11 know. have lacked
O'!J'tainty or value orallY but an aa:idenbll kind.
But the market haa ita law, just lUI ia t.rufl of other thingll
t.hrougbout the univel'lle. Were there no law, then! COl.I1d be no
center about which pricell could revolve and. therefore, no mar-
ket. IIUltead, there would be .. daily -eri.,. of dillOllI'lUlized., con-
fUHd price nuctuatiorw without reason or order anywhere
appanont. A clOlie .tudy of the market, however, u will be RUb-
seqUllntly diaclOlled, proVII that thla ia DOt the eue. Rhythm, Dr
regular, measured, and harmonioll.l movement, ill to be dia-
cemed. Thi.law behind the market can be discovered only "hell.
the market ia viewed in ita proper light, Il.nd then Ia analyzed
from thi' approach. Simply put, the .tack market ia a CI'llal.ion
of man and therefore reOectll human idiOl)'ncruy. In the page.
which follow, the law, orrhythm, to which man l'l!lpond. will be
dillc:10lIed .. regiatered by market movement. that nuctuate in
accordance with a definite wave principle.
Nature', lAw hal alwaye functioned in every human activ-
ity. WaveR of different dflitMa occur whether or not ,.,,;ording
JU.chinery ia preeent. When the machinery dellClibed below ill
pruent, the pattemJI of _vllfl are ptrlected and become viaible
to the uperierw:ed flYe. Thil machinery i.;
A. E:rteMive commercial activity repreaented by rol'JlDra-
tiOILl whollOl owne...hip Ia widely distributed.
B. A general market-place wbere buyer and leller may con-
tact quickly through repreeentativee.
C. Reliable reoord and pubHcatioll.l oftnllUlaction••

,.
 '"
D. Adequate atatilltia available on ..n mauers relatilli to
corporations.
E. Daily high and low range charted in luch • manner aa
will diadOM the w&vu of all degrees u they occur.

The daily range of ltoek traneactioll8 wu inlugunlted in

1928 and the hourly record in 1932. TheIle aTe necelIHl)' in or-
der to obHrve the Minor and Minute 'Nun, upecially in rut
marlteta.
Conlnl)' to teaclUnp of the Do.. Theory, .. popular device
for purina .toek market mOVIBmenta, "Natun'. Law" dOH not
requiTe confirmation by two aveTap. Each Iverqe, group, lItoc:k
or any h\.llU.n act.ivity it interpreted by ite own wave•.

FOOTNOTES
I Exeept fOl' t1UMlI" revi.ionl, thi. Inln><luction ill c.b. _ ..
obaptet' I of TM W...,., Pri~.

,.
 CHAPTER I

mE GREAT PYRAMID GIZEH

MillY yean ago I endeavored to Ul:el'tain the meaning of
the word "cycle" but no one ODUid define it. Curillllity led to a
8tudy of iJ'llplw, and I cn.eovered rhythm in fluctuatioru: (u eli...
clOMd in my TnaU.. publiabed in 1938). Later I found th.t the
bui. of my elillCOVerin ..u .1... of Nature known to the de-
lIignen of the Great Pyramid Giuh, whith may have been eon-
Rrueted five tho<aand yean ago.
There are /IIlVeral pyramiu in Egypt and e"where, but
Giuh i, the orilinal, and the only one that diKloeee .ymbo18.
Other P}nIDilb were auJJ.equentJy built to aerve .. crypt. for
t~ bodiea ofkinp Illd their familiea. AJJ early u 820 B.C., AI
Mamoun, a Turki.h Caliph, elTOneou.1y suppoeed that Giuh
bouNd the bodin of former pharaoha and that hoarda of IfOld
might be found. Thi. prov.. that even at that early date the
aymbola ofGizeh were unknown. 'I'hfl period ofGiuh'a COllltru~
tion wu DOt only p ...... literary but ~hieroglyphic_Hieroglyph-
ice are preaent in othM" pynmid.a hut not in Gizeh.
Immenae auma ofmoney h...e been upended to learn the
aymho18 of Gizeh, e.pecially duriDj" the put. fifty yean. Their
definit>ooa are remarkably correct iJaofar III today'. knowledge
permitol an undentandiDj". Much ofthi.JI knowledge i. comp....·
tively recent and indicates th.t thellCientific lI)'Illbol. embodied
in Gizeh mUllt ha..e been supernatl.lnl or that previOUll civiliq.
tiona en.ted which equalled or exceeded todey'. development.
It ie pouibll! that • hia;h ~ of civiliz.tion previouab' es:iated
on the Weatem Hemillphere, eapecially from Melico to Arren-
tm.. 'I'hfl Bihle metltio!UI giant.. and qllit. recently j ..... of Ii-
lIDtoI have been found thlltmay ha..e .... eighed four or five hundred
pounda. 1
lnaof.r ... 1 have been .ble to learn, E,yptoIogiata overlooked
oertain import.ant aymhol8 contained in the Great Pyramid, such
u the r.tio of the e1.....tion to the bale of the pyramid which i.
61.8....Dd the numberoCinchea of the elevation which ie tI,813.
(Notethe numben tI, 8, and 13, mentioned below in theSumma-
tion Seriea.l 'I'hfl unit of meuurement in EllYPt Will, and ie, the
"inch" ... wtI know it today.

,.
 Nature', L4w ,,,
The outlines of a aide vieW' y that of a cycle, that y, 8 linK;
in a pyramid there ..... S .url'acetI, four above ground and oDe.t
the bottom; from the .pes 8 lines are villible; tot.alllUriaeea and
linea: 18.
Fibonacci, an Italian mathematician of the thirteenth cen-
tury, visited EII)'JIt and OD hi. retllm diaclOied a .sununation
aeriea .. folio...: 1 2 3 5 8 13 21 34 ISIS 89 1".... Any two
adjoining numbera equal the nut billher - for example, 5 • 8 •
13. The ratio of any number to the n'llt bia'her i. 61.8"'. (The
lower numben produee a r.tio alightly.t variance), Therefore
1M el.uatUm l<l 1M baM of 1M pyramid proouu. a rutio lhol
rcdu til.. tntin:'"..w•.
The lIMds of. /IUD tlower are located in curved roW" that
intened each other. Tbt highellt number of interaeetiorul i. 1".
Thill y alao the number of Minor w.vea in • complete cycle of
the atock market (bull and bear marketlll. Numben of the eeriea
are preeent in the human body, botany, production. animal.,
muaic aDd wavea of humaD activitiell inc1udiq the atoek mar-

"'" Pythagoru, Ii. Greek philOAOpher of the fifth century, B.C.,

vi&ted Egypt aDd on hi. return di .... \Med the diagram and title
Ihown in Ch.pter 2.

FOOTNOTES
1 SiDce proved to be otbltI'WiM, of CCW'MI

,
 CHAPTER 11

NA1URE'S LAW
Nature'l ~..... Dxnrn at Ieut 1'1"1 ''''11M yean 1&0-
EcYJll. wu "Ul no...- by at __ 1,500 B. C. and ia tbI okINt vi
toUTl tiatoCnltiml.lt ill DOt k-..n wben 1M Fc::fptian pyn-
midi: _ _ builL The at-t Pyramid. GiMh . . . eDMtr'IICUd It
Mut fi... ,.......- yean ICO- SomI.wdeati ad'l'UlCe..-idoerw:e
lhallt_..Wed bIf"on tblthtatvltloocll that p~pted Noah tAl

....
build tblark. OtJ..-ltudenti belieft lhal it IIl8J' be thirty 0..-
,..,.""-
In W. _ ....;... (December 3, 1lM51 thin a"..,s a "ely
Int.ereltinl artide eotoitW "Tbe BWldinc'vltbI at-t Pyramid.. ~
Mr. Bel 0eddeI ,",pared nxdell vi different ItqM of CIOIl#rUI>
t.ion and. pictureI of them. .... Ihown. The report .... prepared
for theE~C1BritcuuUca.lt ..,. that tha total_iJbt r:L
material UMd wu 3,217,000 toaI, wberal the mlterial UMCl In
tbI EIDpU1l State Buildilli, the tallm b...Udinr in the world.
weilhl onb' SOlI,OOO tAlll.l.
The mUWlIOUI I~nuit)', Ikill, timl and labor ulMnded by
the ckll1rners and builders of the PY"JDIdi tAl &reel I perpetual
zymbol demol\ltntel the lupnme import.anee ofthl me.1plI
they d.m.d to convey tAl poIIlerit)'. That ers ...11 pre-Iitenry
and pn-hieroctYPhlc, therefore Iymboll were the only mell\l vi
recordi...,.
For eenwnell the pyn.micla have been eahlUltively inv.ti-
pted, Mpecillly duri..., ~nt years. ln80far .. I have obIet wd.
£cptoIO(iItI o¥erlooked aD important, perll.IpI the mCMt im·
portant I)'Il1bol..1 ~ tAl the outer tme. atlhe pynmid (llieh.
~ . . . I reoo'l'FDlMl Gnlek phUo.opher of the fifth
ceDt"'"1, B. C. Tbeoldereydopediuri.... I..., c1etl.ileddeecrip-
tioD at m. 1diYitiee. The EJw:ydcj I W.
~ Ibowa a dieeram &D!I ~
tic title which ~ be the cmly..-d be
left. It . . . made &ft8r be reblmId tAl
Greece followiq I prvloapd. "riait tAl
Ec7Pt. The &.cnm and. title appear in
ncur-
I')tbqoru m.eram ref"en tAla pyramid.
_.
L It ia Wr tAl a_me lbIt the 1M Sluel 01 If. ..........
 No!ure'. Low

The original meuurement. of the

Great pynmid of Giaeh llnl estimated to
have been: bate 783.3 feet, elevation 484.•
feet, ratio 61.8'10. The elevation, 484.• feet,
equaL. 5,813 incllflll (5-8-13 FSS).
Looking at a pyramid from any OM of 3
the four aidflll, 3 linflll are vieible. The dia- Plf/lJre 2
llTam in Figure 2 ilia ellmplll.te cycle. Via...-
in&" the pyramid from any one of the four oome~ .. in Figure 3,
a linN llnl viaible. A pyramid hu a lIUtfacN - four above llJ'OUnd
and the bo«tom From the apex, a pyramid ,howI8Ii.-, u.oown
in Figure •.

F.,,,,,
Fibonacci wu an Italian mathematician of the thirteenth
century, A. D. He ... better known in hil day lUI Leonardo de
Pin. He vilit.ed EiYpt and Greec:e, Ind on hi. return to Italy
dilIclOllfld. what ia known u I 8I1mmation teriee. Thi.lI.wriee of
numbers followl: 1 2 3 5 8 13 21 34 55 89 144....
Any two alljoining numben equal the nut higher number,
for example, 5 + 8. 13. Any number divided by the nut higher
numberlivN a ratio of.618, ror ftXIl..lIlple, Bl13 • .618. Any num_
ber divided by the next lower number givee a reciprocal of 1.618.
In the lower numbera the ratiOil are not euet, but dOle enough
for practical purpo5flI. To aimplify reading, I will hereafter ...
fer to the fonner ...62 and the latter .. 1.62.
Note that the fU'llt fiYll numbera of the Summation Seriea,
1, 2, 3, 5, aru:I 8, aruOOwn in the complete diagram of a pyramid.

,
 The late Jay Hambidge, an American aniAt, viaited Egypt,
Grtlef:e and Italy and wrote eeveral vel)' important and intel'-
uting boon. By permiMion of Yale Univemty Pre.M, I qwte
pagN 27 and 28 of hill book entitled PnJctioo1 Appli«1tioM of
DytlGmi.: Symmetry:

Bot.nilJt.l u..ee the malt of the mnfIow.... as a ~ of general

illlWz'ation ofthalawon"ahlTangllment.lt,,:rhibita the ph....
DOmenon in nearly two--dimaul:iOllal fonn. 'I'be -u are dis-
tributed over the IUl\flower diak in rhomboidal,haped lOCkete
and the complex ofth... .ac:ketI fOl'1M a design ofintenect-
ina CUl'V1!lI, the pattern being ....,,,thing lik" the old.fashioned
c:huiq on wetebcll_. Thie pattern of c:urvee ill the interest-
ing £eat..... of ttla 'unflower' aeed an'llDlIt'ment.
Pint. The curve it.lelIilIa definite kind of c:urve. ,.. a mat-
ter olf.c:t it i. quite like the eurve of .bell fJ'Owth. It i. reiWar
and poIIelIIee certlin mathematicel propertie& TheM proper-
tiM Ire I _ ..ary c:oneequence of W1ifonn IU(lWth as will be
uplained pruently.
Second. When ~hue curvee are counted it will be r..... nd
that I lKImIal.unflow.... dilIlr. of6.e or m inch... in diameter
has 89. Windinc in one direction there are 55 and in the other
dinc:tion there are 34. Thlt i. to..", tbe nnrmal head exhibita
56 o:urvelI crouinl34. Tbe two nwnbel'll are written 34 + 5l!i.
Below the lpe" flower of the Aalk then are UBUlIlIy _Ddary
flowH'1l, emall.... in lize. The c:urve-aouing numbel'll for theM
.... pnerally21 + 34. Lowerofthe Ita1k maybe terti....,. flow.
en Orllte development. The NTYe-a"IlUin( numbera oftheae
are 13 + 21.
At Orlord, In Encland, sunflowera have been nowi,hed to
produce abnormal dilb and the CW"\'e Cl'OIiIill( nu.mben h.ve
increased from 34 + 55 to 55 + 89. ProIII!UOI" Arthur H. Church,
a l....nq modern authority on thilI fucinat\nf eubjeet, ten.
III of I Nantic dillt railed It Oxford whereon the CW'Ve-CI'llA-
inr nwnbel'll were 89 + loU.
Arour>d the aeed complu of the flower disk there i. III ar-
ranpment offlontl. Like the aeedI, theM exhibit NTYl!-Cl'OIiI-
ina numbel'll. They are 1.lI1.II11y 5 + 8.
U we beiln .t the bottom of th" plant Ital.. and COI1IIt the
ac:tuaJ number of leavee up to the flower dilk, we are likely to
lind, as we wind OUT JII'OI"'I' around the .t.I.li, thlt ..e pua a
certa.In number of lea'O. before we lind me impoeed direetly
over the one lint COWlted, and that thill number and the num_

,.
 Not"re'. Law

ber of nvolutiOIlll lbout the stalk, ..... conatant betweell each

leaf'impooition. n-e will re~t ~ number.
belonging to the laDle seriN of oumben exhibited by the -u
and Ooretll.
'The numben we have mentioued belong to whIt il called I
aummation Rriee, 80 eal.Ied beelWlll each number npreHnta
a aum ofprNMilli Ilumben of the Hriee, in un. cue 2. Thil
Hriea of Ilumben u: 1. 2. 3, 5. 8, 13, 21, 3', 55, 89, 14"', etc.
Each member of un. Rrietl ie obtained b,. addiq- topther the
two prec:ol<!ing numben.
11 we tab an,y two memben or thi. eeriee and divide one
into the other u, Nl,)' 3'" into 55, we obtain a ratio, and thu
ratio u ~t throughout the eeriee; that U to eay, any 1euer
number diTided into an,. ~ater numbet" whim immedialAlly
.ua:eed.I it produ""" the same ratio. Thia ratio U 1.818 phd, a
number with a never endine fraction. 11 we nverH the opera·
tion and divide 55 into 84, we obtain the number .618 pl\1ll, It
will be noticed that the differenee betw~ th... two rewltl u
I or tmit,..
It will abo be not.ic«I that wben we make theH two <livi·
AOOal operatiooa that tben u I eligbt ernlO". Thia U due to the
ract. that the seriee u not quilAl aoxuralAl when uprttred in
wbole numben. There ehould be a very lIlllall fraction. But u
the ern>r ie within that or observation in the ifOwinj; plut,
the whole number il ntained to flcilitalAl tbeckinr.
It U an ertn.ordinary coincidence that thu ratio of 1.618 or
.618 il a ratio whicb fucineted the ancient Greeka uceed-
ingl,.. ExtraOl'di!W'1, becaUMI the,. could beve had 110 mepi_
cion that it wu connected witb the architecture of plant.. It
.... called by them exl.teme and mean rltio.
Durilllf the middle agH it W1lI ';YIIl the oame Divine Sec.
tion and in flirly receot time, Golden Section.

From Nperienoe I have learned that 144 u thfl bigheat.oum-

ber of praetic.I val Uti. In 1 compltllAl cycle of the ltoclr. market,
the number 01 Minor wavea ia 1«, u shown ill the following

N._
tabltl and in Figure 7, Chapter 4:

qfWfa_ ,,-.,
B. .
,
...,
".....
....,
(c~f:7CW
Major 3 8
21
InlAlrmedialAl
Minor 89
13

" "
144

•
 R. N. EUJOT'T's MASRIIJfOIlD

All are Fibonacci llumben Illld the I!Iltire lIeriee ie employed.

The lengt.h of ..avee IIl&Y vuy, but nllt the numbllr. Nllte the
FSS numblll'l in the fllllowing:
- The bodieellfhumane fllllnw the numbenl 3 and II. From
the 1.01'80 there are l5 prnjectiOllll _ head, two anna and two lege.
Each leg and arm ;1 subdivided. into 3 eeetllllUl. Lege and IITlla
terminate in 6 toeelllld tingen. The toea and fiDgfln (except the
big tolt) are subdivided into 3 seetiOIlll. We have l5 eenses.
- The monkey ie the aame .. a human ueept that hie feet
are the same as hie handa, that ia, Ilia big tolt ia the urne as his
thumb. Mo* animale have l5 prnjectione from the tono _ head
and fO\lr lega, total 5. Birds have 5 projectiollll from the tono _
bead, two feet and t1li'O winge.
- Mueic: The beateu.mple ia the piaoo keyboard. "Octave·
.neana eight. Eath octave ie Cllmpoaed of 8 white keya and II
black keya, total 13. .
- Chemical elemelll.l: There are approJrimately 89 primary
element..
- Coilln: There are 3 primary colnra. Blendin( producea
all nther colnn.
MlPelJaneoua O*rvati_
- The Weatem Hemiephere ia COlll~ Ilf3 IUbdimions,
Nllrlh, Central and South America.
- In the We.tern Hemisphere there are 21 Republics, all
Ilf which IlA memhen of the Pan·American Union. North
America ill compoaed of 3 CllI.lntriee, Canada, Mexico lind the
United State-. South America ia composed. often Republies and
three EllI'I'Ipean coloniee, total 13. Centl'al America was, previ-
nua to the Panama Canal, compoaed of II Republica.
- The United Statel wu originally oompoaed nf 13 etat.el.
Today there are 55 R1bdivililllUlU follllWl: 4.8 ltatel, Districtof
Columbia, Pbilippinea., Panama Canal Zone, Puertll Rico, Alaaka,
Hawaiian IlIiandli and the Virgin blands.
- On the Declan.tion of Independence there are 56 ligna-
tures. The original nwnw ..as l5l5. The lut was added later.
- Main branchea nl the Federal Government: 3.
- Higheat ealute Ilfthe Army: 21 guM.
- Voting 1Igtl: 21 yean.
- The Bill oCRighta containa: 13 pointe.

,.
 Nature'. Law

- The colon of the national fla.a: are: 3.

_ The Wuhington Monument in Wuhington, D. C. (The
eomermone wu laid July 4, 1848.):
Total ca.t, $1,800,000. 13
Heiih~ of.haft, 500 feet. 6
Hei&bt of e.plItOne, 65 feet. 65
Bue of Ihaft, 65 feet equare. 65
Top rim of.haft, 34 feet. 34
Stepe of foundation (number): 8
Windowa {two 00 each eider. 8
The t:apJtone la in the form ofa pyramid with a baH 84 fee~
equare and a heiiht 55 feet (ratio .618),
- The All:ia wu oompoaed. of S partDera. ~rmany domi·
nated 13 cou.ntriea in rapid eucceAion but lJtaIled on the four-
teenth, Ruuia. MlI.-llini aerved u dictator for 21 yean.
-In 1852 Commodore Perry paid a courtesy viAit to Japan
and iovited the "Soo ofHeaveo" to abandoo abaolute iaolatioo·
~. 10 1907, 65 yeaf* later, Japan MriOUlly threatened the
United Statu. 10 1941, 34 yeare later, and 89 ye.... from 1852,
Japan attacked Pearl Harbor.

,
 CHAPTER III

HUMAN ACTIVITIES
TlwI expre"';on "human activitiel'" iociudelllueh iteml lIS
.well: priClll, bood prieea, patentll, price of sold, population, move.-
menl./l of citiUDII from citi.,. to f.1'IlIlI and vM:e vel'l8, COlllDlOd.i-
tiM pricea, government upenditUf1!ll, production. life i~,
electric power produced, guoline ooll5Ulllption, fin! 10000e, price
of • •1.8 on the IJtoek exchange, epidemicl, and real eatate. The
main item of intereat y the price of lJeCUritiell, which everyone
ehould undentand, at leut to lIODle de~.
It bebooVM ... to prepaN for the "rainy day.~ Penn.nent
improvementll, lIUch IllI for e:u.mple, the construction of build-
inp, oon.aervation projectll, roadl, bridgM, f.ctoriu, homea, etc:.
ehould ....ait cyclical low. for the double pllTpOlle of low eolIt to
the owner and employment of labor. F1uctuatio~ in economic
welfare .re lUI unfailing II the earth'. revolution.

FOOTNOTES

,.
 CHAPTER IV

DISTINCTIVE FUroRES
OF HUMAN ACTIVITIES
All human activitiea tt.ve three dilJtinetive (eaturM - pat-
tern. time and ratio _ all ofwhich obHrve the Fibonacci Sum-
mation Seriell. Once the wav,,", can be int.erprMed, the Itnowledge
m.,. be applied toany movement, u the urn.. rulN apply to the
price of llt.ocU, bond., jnina, cotton, coffee and all the other
activitiea previoWily mentioned.
The m.-t. important of the three (acton ia pattern. A pat-
tern ia alwaya in proceaa of formation. Uaually, but not invari-
ably, the ~udeDt ia able to viaualize in adunetl the type of
patlA!m. Thia facility ia fumiahed by the type of pattern that
preceded. See ChaplA!r 8, ~Altemation.-
A perl"ect diagram of a atock market cycle ia ahown in Fill"-
ure" 5, 6 and 7. It ill divided primarily into "bull market- and
"bear muket," Figure 5 aubdividea the bull market into five
Mejor l wavell and the bear market into three Maj/:lr wavea. The
diagram of the bull market in Figure 6 aubdivid. Maj/:lr _vea
<D, Q) and@intofivelntermedialA!wav... each, Figure 7 aubdi-
videe InlA!rmediate wavee 1, 3 and 5 into five Minor wavea eaeh.
In Figure 5, the bear macket ie aubdivided into three Mejor
_vea indicated by the letlA!n (,Y,@and©. In Figure 6, down-
ward wavea ® and iO are aubdivided into five InlA!nnedialA!
_v.... Wave@upwudiadividedintothreelnlA!rmedialA!_vea.
In Figure 7, the IntermedialA! wavea an eubdivided into five
Minor wavea.
In other worda, a bear market ie the revetH ala bull mar-
ket, e:w'lpt that a bear market hn three MajoT wavea down,
wheren in a bull market there an five Major wavee upward..
Correctiona m both bull and bear awiop an more diftkult to
learn.
AtI the dillCOVeriell diacloeed herein are original, new expree-
nona had to be coined. In order to explain the patterDa and their
COlTflllponding esprMBiona, perfect diagrama are .hown in '<lUi-
oua degr-. Tbe wonl"cIegree" ~ relative importance, an to

,
 J
,
2
ill
•
, A

,
 Natu",'. Law ,3>

1
• 2
(]) , ,0
~
, c ""'"o.g..
<2>
2

Figure 7

~ak. For example, -Miljar'" degree refen to thoee waVeI in fig-

ure 5. -Intennediate" degree refers to ..aVN in Figure 6. "Mi-
nw de~ refera to wavea .bown in Figure 7. See Chapter 2 for
numben of ..avea.

FOOTN<ml8
I The tenD. "Mitior" il uoed c.ltJoou«hout the nut _ a l ehapt«a
.. a lUt:.titule for the term "Primary: wbic:h .... ilttn>cl.u"""'- ilt the
tint mooocraph.
I Elliott hu improved tlwl ..avelalwllirtg lyatelD uoed ilt the tint
IJKIDCIil'I.ph.

•
 CHAPTER V

CORRECTIONS

Pattel'1lll of OOlTeCtiooa are the aame, ngardJeu of their di-

rection 01".u.e. In 1 bull 1Wing, f;Ol'Tlll'tiooa are downward or
lidew:ille. In 1 bear .win(. oorrectiooa are upward or lidewille.
Therefore, con'eCtiooa .... U be diagramed rOl" both bull Ind bear
awinga. The diagrama f1l'llt .bown apply to upward .winp. Dil-
gra.me underneatb apply to downewinp and will be "inverted..
Therefore, whenever the IXpl'ellllion "inverted" appean, it ap-
pliee to the dowDward main trend.
In Figl,ITelJ 5, 6 and 7 it wiU be DOted that there are three
degr-.of ..avee: Major, Intermediate and Minor. Liltewiee there
are three degreee of corred:iooa, u I. "-tl.lra1.
There are three typea of 001 .ec:tiooa: Zig-u" I Flat and Tri-

.......
alllie.

Figu..... 8. 9 and 10 are OOlTeCtionl ofan uptrend.

"..,

,.
 233

Fi&w- 11, 12, and 13 are inverted (001 I ectiOI18 of a down-

trend).

F/gvre II

,
Fl...
The nert ilIUl1tr1ltions are nata of Minor, Inten'tled.iate and
101.;0.- degree, both OO'dinar;y (FI(uru 1<1, HI and 16) and inverted
(F'ilrurN 17, 18 and 19), Th_ diagram. are given the name
"flat- for the reuon that thei!' UlIualappeuance ie nat. At times,
they ,Iant downW&t'd or upward.
~ IImatter off.at, th_ pIItterm might be called -3-3-5."
In the lut anal,..it. they are ~ wave pattema, i,e" It. B and
C, whenu II bull pattern iJla -5-U-3-&-for wav.... 1, 2, 3,'" and
•• 'nle pattern or. human being i8 -5-3-6-3.• The... are 5 pro-
jections from the tono <head, two anne and two lepl; the arm.
and leas are lJUbdivlded into 3 lMIdionl; the endll of arm. and
lega are lJUbdivided into 5 lillie", or 5 toN; each finger and toe ia
again lubdivided into 3 MCtioDll.
Whether or not wave C of an inverted nat il elolllated or
DOt it IJtiIl rem-.inll cornc:tive. It ia pDlllIible. bowlI!Ver, to know
wben an elongated wave C will occur by ....ding canlfully Chap-
ter 8, "Alternation."

,
 c

-"
 R. N. EU»fT''' MASTUJIOItU

•
FIf}UI'e 77

~ . .","",*

o b

Flflure 18

Flflure 18

,
 NatUM" Law 237

eo_pin: Cm.ectiOlU
A Minor lXJIT'fIl:tion would be oompaeed of three wlvea d01O'il,
aa in Figurea 20 and 21.
,,

,,
'\\
,.:' a
.,:'
"
,
,, ,
,,
,
''0...
,,

A double 8idewi8e OOlTection would be o;omJlOl'ed of lleven

wlvee aa in Figure 22. A triple 8idewille movement would have
eleven Wlvee 8idewiae aa in Figure 23.

. .: "'~./
,,

,:
, WY\
,,
I
,
,:13579"

,,,"""2
In other wOi"Cb, a lidewilte oolTeCtion to an up trend alway.
enda in a down wave', whether it i. oompcaed of one, three, aeven
or eleven WaVell. They are named U {ollo.....: three waves ill •
"llingle three,.
aeven WIVes ill I "double three" and eleven wavea
ill a "triple three.·
The aame number of wavea upward aTe oorrective, II in
Figuree 24, 25 and 26.
•

,\
\,J! ...'.
•
'.

...
FIfIIJrfI24

"
 R.N.EUKJJT'.MA8TUf#'ClUS

Oceuionally the. th.reeI are mixed in upward and .id&-

wile, or downward and IJide~, at in FigurelI27 .nd 28 (double
~ miIed),J and 29 and 30 (double t.hne. upward).

,,
,,
--- ..
"""""
,,,
,

FlgUl827

...... ""'" ,
,,
,,
• ,,
,,
,, ,,
,, ,
,
F/f1Ute 29

Tri·......
Triangle. are c:ompoeed of five _Vel, or better Mid, five
\ep.ln the larger typM, ucb Ietr will be compDHd of three waVeI
each ...hown in Figurell 31 and 32.

, -, ,,

~
, ", ,,
,,, ,' , ,,
,
,,
\,~f---"1 , ....,
,
'-

"
 '"
In medium .ised typee, the fourth
and fift.h lep may be compoeed of one
wive eacb," in Figure 33. In the very
small typea, the Iep are often composed
of jll*t one .....ve. The main ~d" to the
,
fonuation of a tri'Drle i. the outline,
that ii, the 8traight linea drawn Urolla
the tope and bottona. The Itudent cannot be OIirtain that. tri-
.n&!e wforming until the fifth wave hu .tarted.
There are three typell of triangle.,' .hown in Figunl 34.

Descend~ lop ond

flat bo#foom:

,.
 The fiM leg may terminate within or without the outline
of the triangle,I u in Figures 3ti and 36.

The l\f\;h wave lbould be compoeed of three waVell unlellll

the triangle ia ~ lniall. On or'\t! oa:uion I trilnille COlllUllled
only HI/iln houri. The larpst trianille occurred between Novem-
ber 1928 and April 1942, thirteen yean.' Thia latter movement
will be diKUMed in other chapten.
The movement IIUheequent to the fifth leg of a triangle ia
called I "tbn1.lIt." It will be compoeed of five wav. and in the
direction of lep 2 and 4, of the triangle.
Trianglea IInI infrequent. When they appear, their poeition
baa alway. been wan"" or a movement or any desree, up or
down, u lhown in FiIlUJ'U 37 and 38.T

FIgure 37

The fifth Wive, which (onowl a triangltl, iacalled a "t.hr'un"

and ia compoHd of6ve wavea lrimilar to thON ofwavea 1 and 3.
M .howD above, the Mh wive exceed. the top of'wavtl 3, u in
Figure 37, or thtl bottom of Wive 3," in Figure 38.

,
 Nature'. Law
'"
FOOTNOTES
• f'icuret 10 ....d 13 .... 1lC\Uall,J dr.winp or"dDllbloo Iiptp,"
..hich Elliott di.pltyt in cb.ptel" 6. Either Elliott mit..... hit ill...
tntiona Mn or be decided thtt doublt ~ipap WffII men common in
~ decn-l.ban ..,.w.... :ripap. For .... ill",tr.tion of. trua ~ipq:
of ~or dep'ee, rer.... to tbe ~ teetion of f'icure 7, ....ell ..
f'icure lIS in tht 1'itta1lCi<U World uticlea tJld Firun '¥1 in ~ W.....
l'rlIldpk.
• Elliott overlooked thi••tatemerat ..ban dn....m, tbe illultI.-
ti_ in FicurN 27 and 28. He i"'d'OerlenUy left out an additional
"thAoa" in NCb CGn'eCtlon, .. hicb ClUlI>lll. \.benrON Ie..... to rein.tete
tht ~ p.....oo....ly in motion.
, Id.
• n.. illuatr.tio... depict _nding, d_dinJ and aymmatri_
eaI (amtrKtinal trianclel. For......,.... not .tetecl., Elliott omit. dia-
c:uHiOll 01 W ..........ymmMcal (n~nding) typa.
• The fitUl triaJllll. w.va ~ terminate beyond the tl'ianJI.
bound....,., but nnt baYOlld tht level of termin.tion or tbe third tri_
tJlIl. w.v•.
• Sea f _ 1-8 in chepur XI.
• They .... abo fDllnd in tbe B wave poaitiOIl.

,
 CHAPTER VI

EX7ENSIONS
An nteneion may appear in any one of the thnle impm-,
i.e., ..av.. 1, 3 or 6, but never in MOI'O! than one, u .hOWD in
Figu.rea 39, 40 and 41 (upward) and Figw'N 42, 43 and .... (in_
verted).

FIfJI,JI'e 40

It win be noted that in each illlltance there are a total of

nine ...vee, counting the n:tended ..ave u five illlltead of one.
On rare oceuiona, an fIrlended movement will be eompoeed of
nine W.VN, all of equalllWl, u illl18trlted In Figurea 46 and 46.

,.
 Noturr', Low

EIun.iOllll oceur only in new territory ofthe CUlTt!nt eyele.

That i., they do not oceur .. col'nlCt;OM.
EsteIwIo_ of Ene!wlo_

• •
, ,

EJrteJWoa m Wave' tmd Double Ret.-.ee_t

Enenaion. are -double retcaced," that i., a cornction will
plWI over the _ gtO\lIld twice, down and up. It ~ DOt 0 _
lIaf)' to give any eonlide...tion to thl. featun when the e.ten.
lion oocun in the tint or third wave, bllt only when the nterwion
oocun in the fifth wave. If the aterwion oocun in the lim wave,
the double retracement will be taken cue of automaticallyl by
waves 2 and 3. If the utelUlion oocun in the third wave, double
retl'acement will be tHen care of by w.vee" IUld 5. See Figuno
48 for illu.tcation of.n enenlion in wave 5 IUld .ubiequent
double retrac:ement..
If an enenlion i.e of .mall degree, retrae:ement will ooeur
immediately. But jfit i. oflntermediateor Majordegnlo, double
retraoement m.,. not occur until the entire advance hu been
eompletecf.l When a movement oocun at high speed, the laDle
territory i.e retraced at almOllt the lIlLlDe.peed in reverae.

,
 R. N. EUXJT"f's MASRRIfOU1I

--.... -
ErroDeoUll CoWloUnt'
The three irnpw.e wavee, 1, 3 .nd IS, are ee1dom of the same
IeJl(th. One of the three i. Ulullly ooDlider.bly longer than ei-
therofthe other two. It ill imponantto note that w.ve 3 i. never
shorter than both l wavea 1 and 5. For eJt8.lllple, when w.ve 3 i.
shorter thin eithe........ve 1 or 5, II in Figure 49, the OOiled.
method of oountin& is u in Fi~ SO.

Foure49

Note that w.ve • overl.pped w.ve 1, which it ,bould not

do. Overlsppin( mea.na that the end ofw.ve' ..... lower than
the top of w.ve 1. Inverted, the eumple would Ippear .. in
Figuree 51 and 52.

•
 F(lUre51

Overlapping within -o:ornplez- waVllII menta carefulatudy.

Oecuionally oomple:t wavea develop into -doublll threea" or
~ple threeI," III diagrammed in Chapter 5.

En1.u'paleat of c:on--tiOD.ll
It Wimportant to graph a movement in the daily range in
order to kno... whether or not the lint upward movement it com-
pl*>d oftbree or fiYII way". 'nI1I wl!llkly lllfIill might not eli.
clOllll thia f&et.. For eumple, in Figu...... 53 and 54, an invllrted
flat wabown in both daily and weekly ranp,i Note that in the
...eekly ranae, the prectN WlIlpoIition of the firat ....ve up it not
di.d..ed. and the .tudent might IIJTOlIIIOUIIly IIUIImll th.t it was
compoBed of livlI W,VIII in the daily. The weekly range of an
inverted flat would appear'" being c:omp<.>lOll<l of ""nn wavlIII,

,
 R. N. EUIOJT's MA.nu1JORD

wbereu it would be an inverted flat, i.e., A, B, (1, 2, 3, 4, :5)C, U

shown in Figure 63.
Similar behavior nay ooo:ur in llig-up. A zia".zq doell not
eloogate, but it m.,- enl.... Or dou.ble, .. to speak, as iIlU8tl"sted
in Figures 156 and :57. Whether .. zia"-Ui islJirti\e or double. its
oorrective character r'em.sinll the urne.

o
FIgure 57

BidewiMo Move_DtII
N will have been noted, all oorreetive movements regard_
1. . of the degree are eom~ of three waves. Sidewille mov&-
ments follow the ...me behavior, and are of the aame character,

,.
 '"
QDrreo:tive. Figun 58 aboWI two typet; of IridewiM movementa'
followiq an advance. In Figl.lnI 59, the main trend i' down·
won!.

FOOTNOTES
, Cenainly pGI1 oran ute1I.IiOD in tboo firR or third ..."...-ill be
reulcecl. but it will not be ..,tn<:ed ill t.be ..",., manner u t.boH
within fIl\h ........ Only afI.eT lif'I.h WavN win t.be lint r.uac:ement
rel.unl . . far back AI the low of ... ve I"" of the utenlion.
• Depw doe. nol. alfflet pat.tenw. nu.. ....."-Plent i.o • reference
to an ifntlular top that i.o IUP~)' foUoundby double nllncema"t,
....d ...u1w from Elliott'. ocl<l in""lllrfiolt.ion of c.M 1l¥.!8-1930 period.
l H. meano. ".borI.er tbati wave I and 'hotter than "eve 6,"
• Id.
, n.- fitIw'- .... hardly n.u in .ppear....... 'I'boo oYlO1'all ou'"
Une "'iPN • double Iip,q. Tl\l.I diacuaaiCltl probI.W, rwullol from
Elli,,"', c.end.nq- to -.nt extended fifth ....ns .. holll in r..et
the third
i.o _ .. dM, thereby \uvUla It """pia of"utr." ........ at 10M ••ul that
be coutIted &I Ii. ....d B.
I The lint illu.otntion in ...,b or Figutel tl8 and Ml i' • full. Th'
oea>nd m.rel, .bow. the look of &D1 n.t ..ben tboo d..tIo Illter 10 no!.
omall ell. • to ,how it. aubdimiona.

•
 CHAPTER VII

IRREGULAR TOPS
A movement that e«ee<h the
top of. fifth wave (the orthodOJ: top)
, ill an "irTe(rulu" top ( _ Figun 60).1
/ SupJXllM'l that the five wavea up in
/,
,,
Figure 611ll"e of Major devee. The
top of the fifth w.ve would be the
,/ C -ortbodoz'" top ((YI'). The fuwt move-
/ Itlf!nt from point -5" down would be
oompoaed of three wavell and let-
tered. -A.» The Illmnd movement
would be upward and ezceed the top of IS. Tbia movement would
be letteted "B." Like •• ve A. it would be oampo.lf!d ofthrM ....vf!&.
The IH'xt movement would be compo.lf!d offive waVell down and
lettered "C.-

b ,

o
FlgUffJ 61

W.vea A, 8 and C all ooDlltitute OM correction, notwith-

standing the fact that the end of wave B may be IU,her th-.n
w.ve IS. Thill 0CCIlITf!d between November 1928 and July 1932.2
A perfect undemanding of thill fellt","" ill important.
If ....ve A ill • ample Irir-"!f, .... ve B will be an inverted
nat. Thill ill a cue ...here the law of Alternation givea a waming.
"Alternation» ill the aubjec:t olthe nut chapter.

,
FOOTNOTES
1 All "imtgular top";• .ur.ply lb_ hirw pri"....-wded by ....ve
B of an irTetluIar n..t COf1'8Ction.
I See roe>tn<M II ilo eb.pc.er N of:nu w..... Pri"dpU.

,.
 Clf.A.PITR VIII

ALTERNATION
Aoeording to the diettonary, alternation i8 "OCC1.UTence or
amon of two thinga or Hrilll!l ofthinga, in tum." Alternation it. a
la... ornature. For irm;ance, leave. or branchee u.mally appear
fir.t on One IJide of the main lJtem and then on the oppollitf! aide,
alternating their polIition. The COIIIpolIition of the human body
folloWll the &ame rule; 6-3-6-3. An endl.... li.t of example. could
be cited, but the object ofthi. dixuMion it. the habit of alterna-
tion in human activity.
Bull and bear marketa alternata. A bull market ia compollf!d
of five wave. and a bear market of three WlIvN. Thus, five and
three alternate. The ume rule governl in all degree•.
A bull movement i.e composed oCfive WlIvl!l. Wav... !, 3 and
5 are upward. Wav... 2 and'" are downward or lidewise. ThUl,
the odd numben alternate with even numben.
Wavel 2 and'" are corrective. Theae two wavee altematf! in
pattern. If wave 2 il "Iimple," wlva ... will be "complu," and viee
vtlrIa. A "lJimple" correction in the amaller degreea ia composed
ofone wave downward. The "campi"" ia oomposed oftllne WI_
downward or IJidewiae. See FiiUJ'H 62 and 63.

In the Ilrver degreea, luch as eomplete bull and bear mar-

kete, the eorrective wavea are ool'nl8pondingly larger. Prepar.-
tion for the final doWDllwina; i. often tediOUll. Firat theN! ia a
downward movement ofllOme importance, which l1etter with a

•
 Law
NCltUrtt',
'"
capital A Thia i. followed by an upward awinr.nd dellignated
u w.ve 8. The thin! and lut movement downward u. ..ave C.
Wave A may bea zig.ug pattern. In thiI event, wave B will be a
nat, inverted. Jrwave A i, a flat, wa.ve B will be a lig-ug, in-
verted. (In any event, wave C will be c:omposed of five wavee
down. It may be _re and approach ~e .tarting point of the
prevk>ua bull marl<et.) Thua, wav" A and B alternate.
The thirteen-year triangle furniah.. anotber eumple 0(
alternation. From November 1928 to March 31, 1938 i. a nat. I
FnimMarcli 31, 1938toOctober 1939iauig-zag, inverted. From
October 1939 to May 1942 ia. n.t.1
An irregular top i. one in which wave B exceeda the top of
~e fifth wave of~e previou bull market, U explained in Chap-
ter 7. Even thellll a1tern.te. The top 0(1916 wu irTegular, 1919
regular, 1929 irTefluIar, 1937 regular.
Up to 1906, the Rail.. led upward movemente. For 34 (FSS)
yeatlI, from 1906 to 1940, the IndUltriallled upward movements.
Since 1940, the Rail. have been leading.

ro<YrNOTES
I s... footnotea 4 and II i.e. eh.tpter XI of Nl1Iun', !Aw.
I ActuaIl,y, thi..o period ia either. "five: 01' eD11l..illl Uw IaIt part
of .. lriancl_ f".. """WI B, then.. fin·"".WI C. Either """-"t ccmp1_
tba A·B-C from 1937. See footnote 8 i.e. chapter XI or Tht w_ PriJI·
cipU.

,
 SCALES
To employ either IHlmi-logarithmic or arithmetic lICllie and
not the other aa a (1lneral prac:tice ia erJ'ODlIDU8 and deprivea the
student of their vallie and lltility. The arithDlfltiC Kale ahould
alwaya be employed wUellll and untiliog lleaIe ia demanded.
In a mllVflDlflntcifive wa... upward, a "b_line· ia drawn
againat the enda ofwavea 2 and 4, then a ·~llelline· against
the end orwave S. Figw'e 64 abowa the example.

F.... "
Usually wave (; will end approximately at the parallel line
when arithmetic _Ie ia UMd. However, if ..ave (; eJ:~ the
parallel line colllriderably, and the compc.-itioo of wave (; indi-
ClItes t1uIt it hu not completed ita pattern, then the entire mov......
Dlflnt from the beginning nfwave 1ahouid be graphed on NOli_log
lICllie. The end ofwave (; may reach, but not exceed the parallel
line. For narnple, if the aame figurH w"no grapbed on both
lleaIea, the pictlll'flll would appear .. in F'igurH 65 and 66.
Wben aemi-Iog acal" bfl(:omes necenary. innation ia
prellflnL I If aemi.loe acale ia uaed and inflation ia not preaent,
_ve (; will rail to reach the parallel line by a good margin...
ilhaull.ted in Figure 67.

,
_.. ......
,-
 R. N. EUJUn', MMTI"IlWU«D

FOOTNOTES
I "Infletioo" .. !aloer deflned by Elliou in ch.aploer 12 ill no\
monetary inflation ...... know l.he term <_ footnote 1 ;n cb.ploer
XII). The deciding rector in arithm.tic va. ...,,;-1"11" cbann.lil\l il
limpl,. u.. Ih.apee of the ...eva. Ir arilhm.t.ic oeeIe il COfTfIC~ then the
",ov. il d...-J.oping with ...,renonee to ~ .dvenoed. If ..."'i-I"I
ocaI. ill correc\, the move ill developing with ...,ferenoo l.o !Hl"OIIltl4(fl
adva:nced. Any""" can be pven thl &eJlle ltatting poin\ end ending
poin\ end e IP"cifie tim. rrenl. end <IT.... • pe:rl"1Cl. EUion wen on
botb arithlnetic end ..."';-1"1 eceif!.

,.
 CHAPTfRX

EXAMPLES
DemonstnltiolUlofNatuTe'. Law in preYiowJ ~ have been
made to facilitate an underetanding of tile graphl that follow. l

..
~r-----------

Figura 68

Figure 68 ia an outline of the Au.-Houghton-Burgeu Indez

from 1857 to 1932, drawn on lIllmi·logarithmic leale. Thia ia the
Iarre-t degree for which recorde are av.ilable. Note the live
...,.ves from 1857 to November 1928. Note the bIIIe line dnlwn
agaiJut .....ve. 2 and 4 and the parallel line drawn agaiMt w.ve
3. The end of wave 5 touches the parallel line in November 1928.
1be movement u • whole wu infI.tionary; therefore, Rmi-
log ia euential. However, arithmetic leale ie euenti.l when
graphing the lIllverai bull marketll individually.
Note that the decline to 1932 jll8t reached the beginning of
wave 5 in 1896. It wu at ttlie 1896 low point that the decline
from 1929 to 1932 atopped - in other .... 0"11, 0 IIOml4l oorrrt:.
tWn.. I.ck of kno_ledp of put biAtory ia the cauae ofth" erro-
neoull uae of the ezprnaion "The Great Depreuion: .nd
therefore emphuizu the vital importance ofhiatory in thia ...
well u .n other activitiH.
Figunl69 ia. detail of_ave 5 of~'igure 68, drawn on aemi-
log acaJ.e. It ia divided into five wavee of the next lower degree.

,
 .. ""
I
'"
m
'"

Figure 70 ill a iJ"lIph of the Dow.JollN Induatrialll for the

period 1921 to 1928, dr.wn on llemi-logKale. Note the hue line
drawn againat wavell 2 and f, the parallel line drawn agaiflllt
....ve 3. and that wave 6juat toucllM ..me.
The movement from 1857 to
November 1928 ill compoeed orrlve
...v...... .oown in Figure 68. The
fifth wave from 1896 ilIlubdivided
into five .avea, .lI .hown in Fig·
ure 69. The lil\h wave ofthill move-
ment. ltarting from 1921. i. again
auhdivided into five waVIII, ae
•
;
Ibown in FigUI'lll70. In other wordll,
the entire movement from 1857 ia
; lIUbdivided th...... tim....
In Figure 71, the Dow.,J"one.
Induetrial Average ill drawn on
arithmetic leale and .gain 2 the
amplitude of.avee land 3 ill 62%
ofwave 5.
From 1857 to 1928. there were
eeven bull marketa and ~ bear markete, total 18 (FSS).' All
bull marketa £rom 1857 to 1928 wl!t'l!nonnal in e:ltent. Remem-
ber that from 1921 to 1928 there were three hull marketa and
two bear rnarketa, not one bull merkeL The two bear marketa
were aub-lWI'77l4l.

,.
 '"
The time ractor iI important becaUlMl it uaually confl.l'lm
and oonfonmo to the patlAlrn. For example, from 1928 to 1942 it
13 (FSS)yeaJ'lI. From 1937 to 1942 ia 5{FSS) yean. Both periods
end .imultaneou.ely, The enti... mOVftIIlf!nt from 1928 to 1942 it
onll patkrn,. triangle. Each wave Dfthe triugle ilI6~ ofit.
pred_. All three facton - pattern, time and ... tio - are
perfect, and ;n aeaH'danefl with the Fibonacci Sumllllltion S&-
nell. See Figunt 71.
In the pnrviOUJl pa&t!., Nature'. Law hu ~n explained.
The number. of the FSS apply in three ways: number of ••vee,
time (number of da)'ll, weeD, montha or y"ara), and ratio of the
FSS numben, 6Z'l'.

FOOTNO'l'ES
, Por • 10011 at tbe Grand Supen:yde, _ FiIure 1 of-rbe
Futuro. P.tt.em of u.e Mat:tlOl." in the Sel~ Euays HCtion of thi.
boot, u well .. FiJure 98 in the ftnal papll of Nlllun', Lew.
I "Apin," meanin&"" in u.e 1896-192fl adVane<l ,1>0"", In Fil"
\lNI 61land the 1932·1937 advance IboWll.;1\ F;g.,r. 7:J. Thil recur-
renee i' remubble.
I Ap~ntly Elliott ill countinJ l.be n...t WUe up .. one bull
market and tM thinl and fifth "uee up u three bull market. each..

,.
•
1
•• ,
! , , ........m e

I
,•
~

"
 CHAPTfRXl

THE THIRTEEN YEAR TRIANGLE'

The orthodOJl top of November 1928 ~ 299; the bottom 0(
1932 ~40; net travel; 259 pointll. The travel from 1932 to 1937 ~
from 40 to 195, net 155 pointll. The ratio of 155 to 259 il 6O'i(,.
Fl'Om the ortbodoz top of November 1928 to JuI, 1932 ill
wlve(D of the thirteen-year triangle. From Jllly 1932 to March
1937 ~ _ve @ofthetriangle,almown in Figure 71. F1'Om
March 1937 to Man:h 1938 ~ wave Q) ofthelriangle.
Th.ilI indu moved to 195 in Man:h 1937 for fUlIOn& other
than pattern, ratio and tUne. The advlnce from 1921 to 1928
Wal an uteu.ion of the fifth wave ltamlli in 1896. lulhown in
Chapter 6, an ertenllion iII"doubly retraced." The decline to 195,
from Septembel' to Novembel', 1929 Wal pan of the Ii... t ftltl'1lc.
ment. The advance from (0 to 195 durilli 1932 to 1937 com-
pleted the double ftltraeemenL 2 Note the preciae meetilli at 195
of November 1929 and March 1937 in Figure 71.
It ahould be emphuized tbat the amplitude of tha move-
ment from 1932 to 1937 of 155 pointll il not that ofa typical bllli
market. I ttl! e:rtent ...81 fon:ed. by the fOOf po_rful technieal
fon:ea deecribed above, i.e.,
- The n-.aity offec:overing 6Z'll> of the down movement
from November 1928 at 299 to July 1932 at (0.
- To complete dDllble retracement of the 1921-1928 e:den-
eion.
- The time element, eizty montha or 5 yean.
- Pattern.
In faet, the movement c:omplied with four requieitea - wave
pattern, amplitude. double retracement and time - 111 of... hich
are hued IIOlely on FSS.
The ratio of amplitude of the 1921_1928 period ~ auch that
the advance of '>Vavee <D and Ql traveled 98 pointa, or 6~ of
,..ave <D, 160 poinca.
Note the horizontal Ii neB a~ the bottom of Figune 71
and 72;
-1921 (beginning of inflation) to 1942 (end ofdeflation);
21 yea....
-1921 to 1929; 8 ye.... (62'Jl> of 13 yean).

,
"'"
-JIIly 1921 to November 1928: 89 month8.
- September 1929 toJuly 1932: 3.f. montha.
-July 1932 to July 1933: 13 montha.
-July 1933 to July 1934: 13 montha.
-July 1934 to MlUCh 1937, 34 montlul.
_July 1932 to Man:h 1937: 5 yean.
- Marcil 1937 to ~ 1938: 13 months.
- March 1937 to April 1942: 5 yean.
-1929 to 1942: IS yean (62'10 0121 ye....).
The pattern and dMaiptiOIl oftriall(lellllNl ,howD in Chap-
ter 15. The triangle between November 1928 (the orthodox top)
and April 1942 ill thfll)'mDlfltrieal type. It diffel'8 &om the ordi-
muy type bocaUlNl it ill oompaeed of two pattemll, flit and zig_
zag. FinIt there .... a flat, then a zig-zag end apin a flat..' Thil
wu oee.aary becIouae of it. immen.e sUe, the alternation of
pattemll. the neceNity of advancin&: to 195 in 1937 in order to
eomplete a dou.ble rt!tn.cement oftbe inflationary enension from
1921 to 1928, the neceNityofeompletinai"" pIIttem by 1942 (21
}'UI'* from 1921), the necellllityofmaintain.ing the ratio of62%,
and the neceuity of retn.cin& the entire fifth ".ve from 1896 to
1928, all or"hic:h ill. very taree order.

flAT 'ififfio I RAT

, J' e', I
~........."I~I~~
C
A
, B I
'
A C

I
,,
I

I ,'
,*",192ll Jo Na: 1938l,...u..'38 JoOctJ9lOct'39 III Ap,;I ~2

F/g<No 73
 '"
The t.hirteen-yeartriangle from 1928 to 1942 wu composed
of three ~tterna, .. followa:
_ November 1928 to March 1938: a f1at l {triang!e wave.
@'<ll. and Q).
_ March 1938 to October 1939:. ,igzag. inverted (triangle
wave0l.
- October 1939 to April 1942:. fult (triangle wave (il).
Note the alternation of patterns: flat, zig-ug and flat. M.l.D.Y
other eu.mples of limilar na~ure could be cited. Both the flat
ami the inverted ui-r.ag are del'JCribed in Chapter 5. ~y and
the rorreaponding triangle wave are reproduced in Figure 73.
Figure 74 ~. graph on arithmetic -eale of the Dcn¥-JODeI
Ind"..trial Averare from November 1928 to April 19U. Each
vertical line repreeentli the monthly rlIngt!.
Triana"le ..ave CD from 1928 to 1932 i. composed of"lIvN
1iI.@and e. Wavtl <6l ill composed of three wavo down from
November to December, 1928. They wer'C! rut and thtlrefore vi._
ible only in the daily ranp. Wave@i,anirregulartopin the
form of an inverted flat. Wave~ is composed oCfive wavee down
from September 1929 to July 1932 (aee numbera on chart), and
COfUIUUled 84 month..
Trialli1e wave(1) from 1932 to 1937 ill. typical bull paU:em
becall8e it ill compoHd offive wavM.• However, due to itll .bMf'.
mal aize, it may be claaaed aa an inverted flat1 of very large
degree beeause it forme put ofa °COlTet"tive,- Wave <D conaumed

"- T riangle wavea> waa down in five wavell from 1937 1.0 1938
and luted 13 montha, Triangle wavea <D, (J). and a> therefore
colUltitute a flat, from November 1928 to March 1938.
Trianllle ... ve@, 1938 to 1939, ia an inverted zil-ag.
Trianale wave(j)from 1939toAprill942 ia a nat. l It~
and il very lOlli, Ita extreme length waa lUlCnllry in order to
coincide with the overall time period of 13 yeara from 1928 and
21 ~ from July 1921.
N lltated in Chapter li, the fifth ....ave of a triallile may or
may not be confined within the outline ora trianale. In thia cue
iteueeded the outline.' Nevertheleaa, it is a perfect. nat of three
wav"., marked ®. @. and \0. Wave @ ia 62'10 of wave ® and
62')1, of wavee. In other..-orda, wavea <0 and e are the llUIIe
len&tb,

,
,.
FOOTNOTES
1 Elliott'. tl'oubln witb int.erpAt.ation in thill yolUlDOl .... d...
woe, ftItinly to 1M ... ~pt Qr 10M r.birt.een-yeu t.riatIIJe. While
many orthe r......... in tlw 1928·11142 period f.uciMtinlI, and
wbile the CODCIIpt Mlped Elliott call • lD.8Jor I ill 1942, the thir-
wen-yea>' triangle co"""pl .. ouch iI invalid. The maitI. probl_ ....
thet the 1932·1i37 riM iI • "five" and \hI 1937_1938 d.clin. i I .
"li..... tbUi .liminetina' U>em u poaihle trianlle lego .i..... all tri_
ancle lep mu.t be "threM." The ..... t per1Iuuive &fllWDI'nt tlwt •
triangle had fOl'Dlfld "AI the aeriM of .618 A1or~mln~ all within
perfectl, conYerJinl trendlillN, an IlCCIll'Tl!nM WI ind"", quite
unca!lDJ'. ",,-Y«, thiI phenomenon CAn IloCC\1t " " diff"relll _
(u it did £rom 1976 to 1979), and ill"", .nourhjUltilicati...., by itHIf,
to claim that. ln1II trianJle i. being form...t Unrortwlately, El~
t...d mad. up hi. mind on an irrelevant point ""Llid_ the WIve
PriDciple, narnel, that 1929-1932 wu too ahott • eim. period to
~ \he p... YiOUI Supnqde. ThiI auumption led him to the
thitteen-ye... triangle interpnltation, wbiel! in tW'fl led him iDto
trouble with u.. ball,,,. ofWUI form ... be tried to fit the IUbw.....
in\O hi. pndltermined (:(>11Cept. ThiI Im>r of interproegtion .bouId
lICK detract from the reader'1 eJl,joymlllt of Ellioct'. faednatinl dill-
CO'I'en- and. anal,rli. wil.h reptd to the period af\.er the 1929 pealL
I Whil. t ..... lumina: point. .... no\ colndde...., tyiJ\« them 10
the'double ~ace:me.. t" rule. allean .. i\ ia lUted in theo<y, ......
to):,. ,tntchUta; the rule too f.,... The enollliOll .,.;thiQ!.he fltIh wa...
oftbe 19:11_1928 riM W<lI doubly rel.nl<ed .. n........,.. the top part.
by EllioU'l A ...d B....d the..-l by 1 orc and 2 orc. The noon tha~
the ."ti", 1921_1928 riM falled to doubly reto".... eMireb by multi of
an in'qu.1.,.. OlIITedion il tbaL, .. Froet and I have concluded, 19:11-

1929 _u.. . .
1929 w.. nol itaelf an ,""tended wave. The extended wue in the 1~7_
w. . ~be third, .. II normal. Therefore the lilUlwauld
haye no I"IUOQ to b. doubly retraced by ... ilTttttUl.,.. lop. Tho fKt thl~
the flnt I'ItnoImln~ eo'Iered more thIn tbe entire filUl WIYI iI
further evidence tho~ the wave w. . Qot In eEteltlion. Eyen if_we...
to CGIlIidu it In ut<>nalon. ~he enaui"l lifU> Su~ WlYI would
otmltitute the MCOnd retraoe:ment eventually. Still. the action of the
.......bt at\er tbe 1921l peak il intrilUina, ... d onl <:an _ why Elliott
eo... idered hia dOll!>!, retrIoomInt rule ..tWled.
I True. Thll ia ~be tnOIt dranlatic bull market. in U.s. hiatol")' in
_ of pft'Centlp I........... oYlr ti.ml.
• Elliot\ II deocribil\J &Il of the ftnt three WlYelI top1.heT .. ,
lla\ bee&uoe tbe third Waye of \.be triangle ill(> IUIdlniably a ·fhl.·

,.
 I Elliou. breaks b;., own ruI. in tbiI interpretation. If 1937_
11138 ill the"C" ler of'. flat, it mun 1». "Ii..... If it ill • I", of hil
trianlle, i~ mUl~ be • "tbree." Ha .bouIdn't be able to hava it both
wa,..
• Abaolutal1. v .... will noaee that in Fi(ureo 72 .nd 7</', Elliott'.
labale are not eon.o;"tent with bill Irian&!. thnia, but witb the eornct
interpretation.
• Ftwt and I dilCUu tbiI in ...... book. It ill ~ble to
ntinn.H... al\1 fI_....... _ "tbrw: but only .t the upe"",,, of
tha ul.ility of the Wue Principle and wb.t .... withe "rigbt look.'
Flato are 10 wled~.... they .... f/4I. The B w of. nat alw.,.
recedeo dNp into A-w.va lerritory. In. fiv..w _va, thare;" ""
ovarI.pping ot ... v.., by defrnitlon. Therefore the 1932-11137 adnnee
muat ba eluaifiad ·(i.e."
• AgaIn, nata n.t and lhould not "dn>op." Actually it ;" •
fi_w.... dlOdine, with no ovarI.pping, finiohine: 011" th. 1Iip,q that
bepn in 11137. To count it <>IlI'TeCtl,y, put 1 .. here Elliott bal a, 2
wbe,.. be baa b, 3 wh..... he baa(6l, </, .. her. b. baa@.ndtow,"-b.
baa e. Then ;" • Ili«btly better -.tilt involving. ~e. Bepn.
ninI.t the 11138 low, put@wheraEllioubaaeo@wbe.. habaathe
nut~ e ..b.... ba baa the nut@, (j) ... ba,.. he baa 1, and(j) ..be,..
be h.. 2. Thio triang1. ill ...... B of tballipoa trorn 11l37, with the
decline from ita IIlld tIMn bej". wue C hi<b lubdi"';<lea .. jOlly Into
• "fivI." Thio -.nt il illultTlltecl belo .
I It abo uceeded the low of tbrM oftbe trlangle, ..hicb it
ahould not do.

-
••
~
...
•• ..
••
~

•• •
••
••
...
•• •
• ®

"
 CHAPTER XII

INFLATION
The term "in1Iation" ia defined in the didionill")' u "uten-
aion beyond nat........ Iimita-" One bull market dON not e:n:eed
"n.turallimitll," A Rriee of bull market., one above the other,
would be "beyond n.turallimitll." One bull market would not be
"alxrve .nother" were it not for .1Ib-normai intel'Veninlil bear
markau.
Inflation I oecu.rred dllril1i the "l'wentiea beeau.ae ohub-oor-
mal bear muketa. Durine th~ period theA! were three normal
bull marketll and two .ub-normal bear marketll, toul five. Warn-
ioge of infl.tion oecu.rred in the following order. normal w....a 1,
.ub-oormal .......e2, DOrmai w....a 3, mb-nonnal ........a 4, and pen-
etnr.tion of the puallelline by .......a Ii on arithmetic: eeale (_
Chapter 9, Figure 66),
Fiauu 75 piet...... DOrmai bllil market and. normal be.r
ool'T1ldion(w....ea., b and c) which penetratell the bualina eub-
&tanti.a11y. FillU"l 76 pio:tw'M • eub-nonnal bear col'T1ldion that
bolrely penetratell the hue line.

F/{JUIW 75

Filr\ln 77 ehow. the Dow.Jonee industrial Average from

1921 to November 1928 on arithmetic .cala. W.va Ii penetr.te'
the paral1elline. Penetration of the parallel line demanca th.t
the entire pietl1nl froln 1921 .hollid be IilRphed on log -te.
Figunl78 pietllI'ell the ume .verage (monthly ranp) on log Kale.
W.ve Ii touches but doea not penetr.te the parallellina.

,
 R. N. EUKTIT's MASTU.J//ORDI

Tbe,.. are three me\.bod.ll of ucertainilljf in advance at ..hat

point, and at ..hat time inflation will terminate: that deacribed
above, ratio (ducribed ill Figure 71), and time (dllllCribed in Fig-
Uf'tI 71).

FOOTNOTES
I Ellloc.~
.. u.inr a certain dietionary definition 0( inflat.ion, noc.
tb. monetary ""e. B, hi. darlnit.i"", "iftflatioo" oeeura in a marltM
IJIat underp>el ......lera~ioo i" term. of po;nl.l I.d......... per unit of
tUn.. See f_ate 1 in cb.o.pter IX.

,
 CHAPTER XIIl

PRICE Of GOLD
Another e:u.mple of the importance or dilferentiatilli be-
tween the virtUeII of uithmetic and 10( a e J. the price ofgold.
Thegraph ofthiaitem coven one hull market from 125010 1939,
oearly_n eenturiell.In F~ 79, wave(l) illimple and wave
@ia(:(lOlplu. Note the letten ®. @and<Oofwave@.

~SooIo
MorW
(_ _ ..... PO'Mo 0 - . <J lIOl:!
.... 1:I1'I3l

,"
~
••
• •••
: ' /90

,
"'" ...
In Figure 79, plotted on arithmetic lICI.le, the priclllinll n-
ceeda thll paralllllline, therefore IMlmi·lotI' IICI.lll ia demanded u

"
 F..,.80

.hoWII in Figun 80. The parallelline on Iogarithmie Kale indi-

e.teII the final top ofinn.tion or any human activity, I WbM an
adv"""" offlva ...v... ia eomplfltolld ...W,;" the channel on anth·
nun.: -J.., inn.tion doe. not exiat.
Tbfl ,...dual rUe of .ave <D in FigI,ue 79 8UfillU1a that the
market price of gold during tbu period .... "free," that ill, not
fixed by IllJ' authority. Th-t\er .dvancu were abnlpt and
correctiON lJidewiAe. whidl indieatell that the price wu domi.
nated by IIOmllluthority, pruumably po:>Iitiul. Corrections may
DIOve aidewae, downward, or do.".nwaro I.Ild lIidewise u.OOwn
in ..ave ® ofFieure 19.
Under the la.. herein de.c:ribed, wben I pattern hu been
eompleted .. indic.ted in Figure 80 on 10K lICaie by the eontad.
of _VI! ® with the parallel line. no further .dy~ in price
will oeeur until afkr the price line hu pene..... teet the bue line
at MIlD.. point. Therefore, the probability ill that the preteDt price
of 101d, 168 ahiUinp, will remain lItatlonuy, at least until it
cont.act8 the baM lin.. about the y..- 2300, u indicated by the
junction of the duhed linee at the utreme right of the graph. z
FOOTNOTES
1 TN.. ir it \.0 dTa.... "'.... p...,.,rl7 oelected wa". te.....m..t.io..
point...
t Som. pcp. have made .. caner or deridins Elliott r... thi.
ooncluaion. Ptorhloptl he lhould ba nricHd c:ommelltin(!nlm web
Ilbtchy dolt.. CertaiDly be lbould ha been ' - dopattc and ...
KribK .. temati.... )lI'»SI1rili,,-" ~, tMn ia DO problem for
the WUI Prindp\ll or i~ practiee, riDoo \.1M pawtntio.. oftbe UJIPW
pu-a11elline ~teb' "UCP'''"all _de<! third w.... hi de'lel-
opment.

,
 CHAPTER XlV

PATENTS

The explQllion "human activities" indwlea every activity,

DOt ooly the IItoc:k m...ket, but production, life illllUl'1lllOl!, move-
men"" from ciliee to farma and vice vel'1l8, ete. all .boom in mi.·
""Uaneoua itema liated in Chapter 3.
Oocu:iona.lly lIOml! rather unlmlal itema present themaelves,
auch u for eu.mple patenta, ..hich ia a human activity but not
emotion.aJ.l FiiU"' 81 i. the record of application. for patenta
from 1860 to 1942. Note the fiv....av.... The fifth waveenended
from 1900 to 1929. The Indu.atrial Average fol1owed the lIaIlle
pattern during almOllt the lame period ( _ Figure 82). Note the
·correction· of patenta from 1929 to 1942 in three wave., A. B
and C. Stoeu followed the same pattern during the II8IIIt! pl:>-
riod, ""apt that from 1928 to 1942 the ·correction- wu a tri-
angle illlltead of three wave. A, Band C.
In early da)'ll, fanning wu the principal occupation. Here
and there a farmer mij'ht own a atore or manufa<tuno I0OIII.
thing .. a aideline. Manufacturing 'NU on a piece-work baai.
and perfonned in the borne. Natural reeouroea, dimate, genius
and democracy in the United State. required the formation of
COrporatiollll to finance individual initiative. Inventioc. and the
introduction of machinery gradually changed everything. The
Louiaiana Pun:hue, the conquest of California, the acquilition
of Teua and Oregon, together with HtUement of boundariu
with Mwco and Canada, added immeneely valuable territory.
Geniua Wall (and.uJ1 ill) the principal auet. Thill ill demon·
mated by the ,...ph ofpatent applieation. from 1850 to 1942.
Note that the pattern eoincidee with that of the .toek m.uket.
The United Statee il radically different from any other country
in one vitalupeet: OUT ancestol1I hail from all perla ofth.. world.
They were di..atilfied with tyranny and politiCll of their home-
landa and came here to enjoy liberty and develop their genius.

,.
 '"
""
Co'

• -•
•
~

1/
,s , ,

FOOTNOTES
I Tbt Wave Principle teach lDOA than emotional phenomena
bea.... it iI aloo • .....,..,j or tho prosr- or Man, .. bleb i. arcuabJ.r
paturned 'l\er hit colIec:I.i•• emotional lwinp. It can _ be PMtu-
iIle.d tbat tho lDOOC!I refllIICUId by \he av.....,... """" pi ogre..; p. .
aum.Ny Man will prod..... more and inv.n~ more wben th. dominant
~ u. "up' rather t""'" "down,"

,
 CHAPTER XV

TECHNICAL FEAmRES

The movement of one acti-.ity it lJeldom, ifever, a reliable

aruide for aDOth..r. Figure 83 .bo... graph. of three indi""" -
th.. London Induatriall, the Dow.Jone.lndlWtriala and produc-
tion in the United Btatell. All are plotted from 1928 to January
1943. Production figureI ..... from the C1llveJand Tn.uIt Company.
The Dow.JolMlllnduatriala (middle graph) regiete~ a fi .......
wave triangle from Novmnber 1928 (the orthodol: top) to April
1942. The amplitude ofead1 orth.. _ d , third and fourth wavea
of the triangle to ill pred_ ia approDmately 61.8$. Th..
esUtenoll of th.. triangl.. ia proved hy ita outline, the time ..I....
ment, the compollition of each wave, and the uniform ratio of
each wave to ill prad_ _. High ,peed inflation from 19'21 to
1929 (8 yeara) caUHd the rapid decline to 1932 (M montha).
Theee. in tum, cauaed the eynunetrical trianale, which aimu.
latee a pendulum comilli to ~
The trlanile dillJ'eill'ded the followilli eventa, which ~.
curnd dUTiIli ill 13-year period: ",veraa.! from Republican to
New Deal adminiatratlo..., devaluation of the dollar, repudia·
tion of the gold clau... in Government bonda, the ahattered two-
term precedent, the aecond World War which mned in 1939,
and the riae in production. theindu ofwhich atarted upward in
1938 and frniahed ill pattern aCfiv.. WlVN in June 1941.
The IAIndon Indu.atrialll (top graph) did not follow New York
.weka in 1929. Thia indu regiatered to~ in January 1929 at
140 and in DeoembeJ' 1936 at 143. The Iowa in 1932 and 1940
Wei'll the HIlle, 61. From 1940 to January 1943, thia indn: ad·
vanolld to lSI. &ltween January 26 and July 28 1939, the lAIn·
don lnduatrial Average formed. tr-mngle.
London.weu invadlld the WitOllpbe", in 1720, 1815 and
1899, appt'lnimately 89 yeva (FSS) apart. When and ifEngiith
atoc:ka abould inflate, it dON not follow ~t oun will do KI.
A production indu p",pared. by the Cleveland Tru.ft Co.
(bottom iI'Ipb) recistered. to~ in Jl1De 1929 at 116 and in 1936
at 112, and a low in 1938 at 63. From 63, a complete advance of
fiv.. _vea finiahed ita patten in June 1941, berlin! the D.J In.
dWltriala atarted up from the end of the triangle in April 1942.

,.
 •

During t.he period from 1857 Lo 1928, we participated in

three wan, Ci'ril, Spanillh and World Wu I. Neverthele.., the
pattern of the Supen:yele movement wu perfect, .. demon-
strated elMWhenl.
Stocke and commoditie. have never inn.ted in un~n.
TheNlfore, if oommoditiee explore the .tn.t<»phere, it dON not
£ollow that Itocb will do likewille at the eame time. Commodi-
ties inflated in 1864 and 1919, 55 yean apart.l
1'htl worLhleNnelllJ of new. ia demonstrated in the nut ~hap.
2
ter. A financial writer Kid:

'The fact that Hcurity pri<:eo blve been advancina" on the

Iood n-. from 8alemo and that tbey reacted in Aufruat on
"milar aood new. from Sicily ludlltudenta to conclude that
the Aquat reKlion .... due chiefly to I.flchnicaI ",,~tiorw
nther than to military happeninp."

,
".
One dll,)'. London experienced a 8eVeN! "blitz." London lItocb
,dv,need ud New York lJtocu declined. Flund.l ","ten in
both plaee. etreMed the blitl .. the cal1M'. At the time, London
. u in an uptrend and New York in a downtrend. Each followed
it.. ~ttern reprdJ_ of the blitl. The flame wave behavior oc:-
CWl'ed following MlIHOlini'. exit on July 25.
The above analym. prove. tluIt tec:hnical ractonlfOVern the
market at all time..

POOTN011!S
1 And &pin in 1974! r... term.II of'....., l.h. Fibonacci number /ill
ill ttl'length ohhe -Oed Kond...u.trWave of fIOOl1oOtIlic IlCtivity.
I Al:tu.all,y, chaptllr XVII.

,.
 CHAPTER XVI

DOW-JONES RAIL INDEX

An enmilUltion of the Rail indu. ia intereating, informa-

tive and profitable. Tranllportation is the moet important hu-
man fadoc in O\lrtl<:onomy beta.... of the greatdistanc:ee between
borde... ailll':fl the Lou.iaiana Purt:bue, the ftttiementofbound·
ari... with Mnioo and Canada, and the additiona ofTu.u and
California.

The bottom graph in Figure 84 i. the ratio of the Rail indea

totbe lndu.strial index from 1906 to January 19«.. This demon-
atra.t.- that, in relation to the Industrials, the Raila were per-
eistently weaker from 1906 to 1940 (34 yeara). The UIl8M of

,.
,."

t.hia behavior were the ezceuive fr"OIlOr1:ion of bon~ to common

iltOCu, th" P..,ama Canal wbleb opened for b\qil1Ull in 1914
(1906 + 8. 1914), and the automobile and the airplen•. '"'_
three fact.on resulted in ",,,elm_ ofboth rail bond. and .toelul
to Neb I.ll utent that in l!MO, one third ofrail miiflage WlUI in
reoei",nhip and enother third on the borderline.
The IteOOnd Wocld War temporarily removed Panama Ca-
nal competition end otberwiM inereued rail ",venue, both pas-
MII&"T and freight. The e:rtraordinuy revenue that the Rail.
ellioyed lIinoe 1940, lllIpecil.11y after Pe...1 Harbor, enabled the
railroad companietl to reduce their bonded indebtedDellll, and in
wnaequenee, find ehargn. Thil benefit ie permanent. SOl.
Figure 85.
OJ Ibl
Price hIo.x
40

35
100

75
25
50
2OLo........""n>,,~
25 Flgud'

o ., The Rail, regiatered their

rotiD low pointin 1940,and from
then to July 1943 advanced lUI
lbown in Fieure 86. The IndUll-
trim bottomed two )'eaJ'lI later
in April 1942, at the end oCthe thirteen·year triangle.
During the 34 (FSSl year period between 1906 and 1940,
the RIll" revened downward bef,,", the IndUlltriI.1ll and revened
upward afterth" lnduatri.la. 8ino::&I940, thu practice revened;
that ii, the Rai.. have been first to revenre upward and Iut to
revenre downward. Thill practiOll may continue for IIOme years.

,.
 CHAPTER XVII

mE VALUE OF NEWS
Wall Street hlUI an .dage that "newalit. the market.." ThiA
meana that, inltead of the neWI "trulkina the market.," the mar-
ket foreaeea and .ppraiaea the importance of the underlying
foreea that l.ter may become neWI. At beat, ne.... ia the tardy
recognition of forcea th.t h.ve ll1ready been at work for aome
time and ia atartling only to tholle \1D&ware of the trend.
The fOl'CN th.t C8uae market tund.a have thlrir origin In
nature and buman behavior and can be measured in varioua
wayl. Fon:ea travel in _veil, u demonatrated by GalilllO, Ne....
ton and other acientillta. The... fOrce8 can be computed and fore-
ca.at with eonaiderlble accuracy by eomparina the atrueture and
extent of the wavee.
The futility in relyiOi on anyone'l .bility to int.rp""t the
value of any linrle newa item in terlm of" the atock market bu
IOIli been recognWld by uperieneed and auocesaful traden. No
alOile neWI item or aeriea of development. c.n be regarded ..
the underlying cauae of.ny auatalned trend. In fact, over a lolli
period of time the earne eventa have h.d widely different ef·
fecta, becauee trend conditiona were dilIaimilar.
Thia at.,tement can be verified by • <:UUalatudy of the forty.
live year record of the Dow.Jonea lndUAtrial Average. During
that ptIriod kiop have been nluain.ted, there h.ve heen wan,
rumon of wan, boorna, p.nicl, bankniptciea, New Era, New
Deal, "trust huating," and .n lION of hiatoric and emotional de-
velopIDI!nta. Yet all bun m...keta acted in the aame way, and
likewilll! .11 be... m...keta evinced aimil... cb....rten.tica that
controlled and meuured the ""lpolUe of the market to any type
of DeWI .. well .. the extent and proportionl of the eom.ponent
aegmenta of the trend II • whole. Th_ ch....eteriatiea can be
appm-l and u.aed to forecaat future action of the market, re-
gardleu of the newa.
There are tim.... when IIOmething totally une:o;peeted hap-
penl, auch .. an earthquake. Nevertbeleu, regardleu of the
degree of aurprl.ae, it _rna we to conclude that any lucb de-
velopment ia dWcounted very quickly and without ffWrflfll tM
iM~ tfTM un.ckr way Ixton the rumt.

,
'" R. N. EUKITT's MASTD100IIU

One of the aafe,uanh in this retlpeet il the willingneu of

ezperienoed tradera to "Mil on good ne... and buy on bad new."
elOpedally when such newe nnw COUflterto the prevailing t.nmd.
Thi. factor tendll to uplIllt the expectancy of the publit for the
market to read; directly and in the Nme manner to limilar newe
at different timell.
Thoee who nlgard DeWllll8 the C8UH ofmarket uend. would
pl'l.llably have better luck gambling at noCCl tnlcb than in rel,.-
ing on their ,bility to gueu comlCtly the lignificanee of out-
.tandini: neWI ilemll. Mr. X. W. Loeft1ermWestwood, New JM'lIl!)',
puhliehee a V-ph of the Oo.. ~onea Averagee listing the impor-
tant neWll event. in ehronologieal order (pri... $1). Enmination
of thu graph .howlI clearly that tM muket hu advanoed and
declined on the &am" kind at De..... Therefo..... the only ...y to
~_ the forest clearly" il to take a pomtion above the lIUlTOUnd-
in« treee.
War ,!.arb! worldwide foreN .. pDwerl'u.l that they would
eeemiqly dOlIlinate all othereontideratioM and drivtl the mu-
ket farther and farther in the AJne direction. At ...arioua tim"
war incident. """"ive front page dilplay. Sharp breau in the
marl".t dlll'ing AlllfWIt aDd s..p~mbu, 1937, again;n Man:h,
Augu.et, and September, 1938, and in Man:h-ApriI1939 aU coin-
cided with Waf' developmenta. Yet when war wu actually de-
clared on September 1, 1939, the market advanced riolently on
t.l'emendoua volume. The only Mb.factory nplalUltion for thi.
curio... beh.viM ia derived frvm the techniall poeltion or the
market cycle at th_ tim.,
In 1937, 1938 and early 1939, the market had completed
import.ant ralliea and wu reauming the downward t.l'eod at the
time of the war Incidenta. Collllequently. theae "war lICarelI" were
coostn.led bearillhly and lIeJ"Ved limply to aceelerate the down-
ward t.l'end. On the otm.r hand, the market wu in an entirely
diffennt poeition in September 1939 ."heo the ."ar It.arted.
ChartII.h01i' that a do"'nward phue Btarted in the latter part of
July 1939, u a correction of the upward movement from mid·
April of that year. Thie downward phue wae fully compkted a
..-Ac bqorI &ptemMr 1, ud in fact the market advaneed briakly
during thia lhort period about ten pointa from the wave bottom
of AugueL
 On the I.etuall.nnouncement of the war, the market fell
ehl.rply durilli the day to I. level fractionally below the August
bottom and then bounded upWllTd with amuing apeed. TbOlMl
..ho bought lIelected 8t<x:U at the bottom in Auguat and on the
eecondary war-1JeaI'"' bottom reaped large profitl.com~with
~ who tried to buy atoe"" in the wild lICJ'amble that followed.
'!be late comeri' in mllllt eaaee wert! lIOn)' they had bought, be-
cauae they paid top priCllll and IIOld out at subetantial 1oue8.
Ju:tually, the peak of the market for the 8!eel. and other pri-
mary war at<x:u .... reached in leu than two weeu after the
lJtI.rt of war. Sinoe then, the muket haa more coDBimntl,y placed
a bearish coll8truction upon the outlook for wu etocb and war
profitll becl.l1H of the broad bear cycle, which .... reaumed. in
the fall of 1939. In contrut, the effect of World War I (1914-
1918) w.. primarily bulli8h due to the type of price cycle from
mid.1913.
When Franoecollapeed early in June 1940, mOlit people felt
that the war would be very abort and Hitler would inevitably
oyeITUn England. Wavee, however, had indicated in Mo.y, when
the Do....JonN IndUlltrial Average reaehed.ll0.61, that the wont
of the phaae wu over and that atocb ahould be bought for a
eulntantial intennediate recovery. Even in the mid..ot of the
highly llJIKItional newa from Europe during the fint half of June,
the Average reacted only to 110.41.
At the time of the November HMO eilldion, lMlDll8.tional newe
announcementl. were publillbed regardilli huge expendituua to
be made for defenM and to aid England. MOilt eCXlDomista and
obeervera reaaoned tNe would eet inflationary forc:ea in motion,
and bought al.ocD. At the l&lIle time, however, _vee indicated
tlat the inflation would not benefit 8too"" from I. price atand-
point, and the upward movement aince June baving heen com-
pleted, much lowtlr lItock prices would develop. Subeequently,
the market declined. nearly fifty pointa.
'!be seneral belief that current DeWe affecta the market ill
wideepread and even n:ploited. If current DeWll were reepon-
aible for f1uctuatiolUl, cyclee would not occur. Whenever one La
inclined to believe in "DeWll," I recommend careful ",view of the
pattern and wave ratiOli in Figure 71, then recall the eventl. and
opinione e:rpreued at numeroua timllll during that twenty-one
year period.

,.
 CHAPTER XVlll

CHARTING

Stud~nta mij:ht benefit by detailed luggNtiona which I have

found _ntial. Mod~l chlTtl anllbown in Figure 87.
Aceutately ot.erving the lower deer- of .av.,. of a move-
ment requinMl the daily range of price f1uctuationa. Thia higb-
10. ra.nge Will inaugu:rated by Dow.Jonell in 1928.
The ehut apacinga reoommended for the pl,ll'P(Wlf! of em-
phaaizinr price f1l1CtllatiOOl ani a vertical quartet' inch for on~
point ottb~ Ind\ll\rial Averq<l, a vertical halfinch for one point
of the Rail Average, and a vertical halfineh for on~ point oftb~
Utility Average. Sl,Ich lpacinga on a chart facilitate ae<:...... te
interpretation. Tha qlW'ter inch aea1e ia II1bdivided into flfthl,
tblll ~liminltinrany ru._worlr. III to tb~ enet apot .t which to
locate the daily range and hourly record.
Ulr.ewille it iB important to apace the diBt.a.nee betwlIen dayl
III ahown on the model chlTtl. When each vertical line of the
chan ia employed, inatead ofevery other line, the rell,Ilt il that
li"". of the price range ani too cramped f.... lXlmfortable rea.d.ina:.
Do not leave any lpace f.... boli~ or SllDdaya.
~ the aame _le and fOl'na ani reeomm~nded for
the hourly record - one qIlIrter of an inch bori&Ontally for a
MelIion of five hours, .... one of the amalh..t "'I1l&I'M for each
hour. Do not leave any apace followina: a two hour MAion on
Saturday. Do not ahow the opening figure. The high_low range
for the day lbould be abown at the end of thelaat hour of each
aeaion. AU ofthelll! teeOlDlllendationa are portrayed in Figure.
87.
Never economize in chut paper at the expeDlll of clarity.
When a movement begina on one Iheet and terminatea on an-
other, clarity iljeopardi&ed. The laDle il tn1e wben a movem~nt
ia diacontinl,led at the top of the aheet and IItarted apin at the
""u,"".
Chut paper which will properly clarify interpretatiOOl of
Wlvel ia manufactured by Kel,lfTel &: &Mer, and iB fw .-Ie by
them and by ll¥ IItationery Itorea. It ia available in tbeae ~a:
by the yard 20" wide, in Iheeta 8 1/2" x 11: and in Iheet.l10" x
16: Two weights ofpaper in all three aizeB are offenod.

•
 '"
It it NiPlIted that charu 10· J: 15" be UMCl, and tht.t not.
rmn than two.~be ehaned on _1IbMt.. For uampte,
on one &beet 10' I 15" the daily ranp of the 1DcIuatria1ll and
daily YOlWDe .bouId be ahowD, and on anot,-".beet 10· II: 15:
tbedaib' ranpoltbe RailiI &Dd lnduatrialL u.. two ott- u-c.
10· J: 15: _ for the howiy record at the I.nd1.lltriall and the
bowi,r yolWlMI ohhe whole market, azwI .......... roc- the hourly
r-v. 01 the Ran. and Utilia-•• total 01 (our .heet.I for the
entin pnIJl'am.
 For individual a!.oeu and eommoditiea, the same general
reeommendatio,,- apply e.cept that the chart. paper ahould be
subdivided by fO\U'thll instead otr1fUla.'
The weekly nlnge ahoold be chaned on forma of the largHt
aiu charta available in order to cover a long period, one for an
entire cycle. The monthly range, eapec:ially of the average. and
groupA, is important for obBervina eomplete cycle..
Fiprea 53 and 54 in Chapter 6 demonatl'ate the value or
the daily range in order to eatabliah beforehand the extent and
pattern of the weekly range. In like manner, th" weekly ranKe
U/liAta in flltIbliahini the e:dent and pattern of th" monthly
range. Th" monthly range alllIista in eatablillhina th" ezt.ent of
eyclea. LikewilJe, the monthly range facilitatea ot..ervaneea of
monthly tim" pericxb and ratio otwav"e.
In Figure 87, the vertical alloWanoll for th" IndulJt.riaI. ;.
one point per quarter inch. The Raila and Utilitil!l are allowed
on" point per half inch. Th" weekly range may be redueed to two
pointa per quarter inch for the Induatriala and one point per
quarter inch for th" Raila and Utilitiea. The monthly range may
be reduced Itill furthI!\'".
On the actual chart paper the en- ruled linea a .... pale green
in eolor, and it will be noted that the chart patt.ena, which are
drawn in black ink, are acx:entuat.ed agaill8t the pale green back·
ground, which il highly advantageoua in ......dina wava.

FOOTNOTES

~ ...
1 For pricea uptelIMd illllligbtlu Ill" quarteR rat.her tban decl.

•
 CHAPTER XIX

INVESTMENT TIMING
TUning ill one oftheehiefelementll in the lIDiverwe. Wellflpa·
rate the time. of the year into aeuona: aprilli, awnmer, fall and
winter. We rec:ogniz.e thedaylightllll the time ofaetivity and the
ni&ht time for reluation and rest.
In the matter of invlllItment, timing ill the mOllt ellllential
element.. What to buy ill imp3rtant, but wMn to buy ill more
important.. lnveetment markete themse!vee progrellllively fore-
tell their own future. Wavflll ind~te the nen movement of the
market by their pattert1ll, whoee beginninp and enwnp are
.mxeptible to definite and oonclUllive analysis.
Nature'a Law embraces the mom important of all elementll,
timi1l6. Nature'a Law ill not a ayfJtem or method of pllYini the
market but a pheoomenon which appeanl to mark the proflJ'el&
of all human aetivitiea. lUI applif:ation to foreeuting ill revolll-
tionary.
Ifone had invllllted $1,000 in long-term Government bond.
in January 1932 and enld in Jllne 1939, a total profit of $5000
(including intereat and appnldation) wOllld have n!lJll1ted in the
89-mooth period. In January 1932, the yield on market value of
Govemmenta wu 4,... In June 1939, it W1UI only K. loa for the
lJtoek market, an inveetment of$I,OOO in July 1932 would have
been iDa"elllled by March 1937 to approximately $5,000 without
takilli wvidanda into aCIXIllnt.. Thill atatement ill baaed on the
per oent cbange in the popll1ar averli"a.
The importanoe of &«\lrat.e fo.--.tilli hu resulted in an
immense increue in the uae ohtatilltica. A oompariaon offiJee
of newapapenl of fifty ye.... ago with thoee of today will be a
revelation in thia reeped.. MiIlioDll are being lIpent to lind a aa1-
isfactory forecutilli device, bllt tbe aeareh will be fruitl_ with.
out recognition of the fact that the habit of the market ill to
OJItkipou, not to follow.

,.
 CHAPTER XX

SELEcnON OF TRADING MEDIA

Chapter 19 demoNtn.ted that Ute Cactor oCfint importance
in Btnck tn.ding ia tim.ina:. that ia, ....ben to bu.)' and ...11. The
Cactor oCnut importance ia what atoclui to trade. To iWde you
in &electing lIeCwitiell (either lItocb or bonds) in which trading
ill rontemplated. ynu ahoo.ld keep uppermOllt in mind all of the
Collowina fundamentals.

FluctlllAltiona and lDoome

Fluctuations in market value oC any aecurity are much
er-ter than ita income yield, the",C,,", the paramount Cactor is
the preaervation and appreciation of principal all a reeult ofprice
fluetuatiOlUI.

Bull Market TolM

In bull marketa, each group of the ISIS Standard StatilltiCl'
Iiat abowa topa mad.. at di1f.. ~t tim..., like a Can. Bull marketa
are thoae which develop five Primary waVl!ll during a period of
about two yean. 1 Durina auch a period, the.everal groupa tend
to mo"'e raUter uniCormly, beini propelled by the powerful COIU!
of the cycle.
Bear Marlulta
UN&l.ly the d......tion of a bear market ia longer than the
previoua bull MarkeL 2 During the ..... ere and ",l.lively short
duration of the decline fMm 1929 to 1932, the very best atocka
and bonds, .. well u the lower grad.. ofboth, had to be liqui-
dated regardl_ oC their ",al value. Many tradl!l1l pined the
emmeoua impreaeion that the bottoma of all bear markets abould
",peat that performance.' Ruean:h indicates many yeare will
el.p.. beCo", auch a drastic decline may be upected.
The final bottoo\ll of bear marketa are colUlpicuou.a by bot-
toma oC nearly all groupa being made aimultan80UAly. Thia
ia juet the revel'llfl oftopa in bull mlll'kete. Durilli bear mlll'kets,
poweriul leadership is 1_ pl'ODOllllC8d, and this is eepecially
true during rallies. Durilli bear .awlllgll, the market IU a whole
and the lIe'VeraJ groupll become more ...naili...e to cun-ent eventa
and ertranl!OU8 Cacton.

,
 NO/lire'. Low

Previou ~ _ l n TradiIlf
Many tradenJ acquire prejudicu agaillllt certain stoeka be-
caUR of previou unfortunate e;qlerien<:eli. To punue such a
CO\lI'llC!, the trader would evsntually find. no group free from ob-
jection.
hulctive &ocb
A .toek that i. frequently nr oc:cuionally inactive .hould be
avoided for tn.dilli, tha re8llOn being that wavea are not regia-
tered. Inactivity clearly indicate. that the.toek doea not eJl,joy

......
thoroullb distribution, or else it haa re.ched the fully-developed

IDaiden~
UIJU.llIy inaide tips from well-intentioned. frienda refer to
inactive and low priced. .toeb. It ia preferable to conrme one'.
tl'ading to .toeb tha~ are alwaya active.
The Ap of &ocb
The life of a .tack UI\lally hall three~. The Ii... t ia the
youthful or uperiment.al.tage, during which .w:h.toe'" ahould
be avoided. u they have DOt been properly aeaaoned. The aecond
ia the (:feative atage. Stoeb tha~ fall within thi. category have
re.ched bulthy development, thua makinll them. d..irable
medium for trading, provided they are thorotlihly aeaaoned. Ths
t.hinI or grown-up stage repre8llnu the period offul1llllt develop-
menl Dividenda may be uniformly reliable and. nuctuationa
n8lT(lw. For thelfe reaaons, the certificate. become lodpd in
port!oliol and tharefore the atock i. 1_ attn.ctivs for trading
"""""'•.
lD summary, when the pattern of a reliable average ia fa-
vor.ble, follow theM recommend.tiona:
1) Select the IffO\Ipe whicb perform in harmony with the
average.
2) Then select theatoeb that move in .ymp.thy with tbese
",,"po.
3) Al_ye chOOllll.stocb that are constantly active, medium
priced and 8lluoned leade....
4) Divenify funde, i.e., employ more or 1_ an equal num-
ber of doll.... in from live to ten .toe"', not more than one

"
 atock of a group (for example: General Moton, United Air·
craft, U.S. Rubber, U.S. Steel, New York Centcal, and Con·
aolidated Ediaon).

FOOTNOTES
1 A bll1lllluket ill any ad'fance that IlOlItaina t.he 1Ieceaa&ry five
wave,. Defining tha tenn "bull market" or"bear market" by duration
or per<>enLap price chanp ill arbitrary.
• I think W, ill an WlinlentiOflal miaatlltement. Bear marlr.el.a
are alm...t ,1.."Y' ,bOnM than buI1lllarketa, and over the long rull
lend to rull ,bout 81.8110 of the time nquinHl. for buI1lllulr.eta (_
chapter 4. 0( ElliDU W.."" P,;.... ipl~ .
• Tba _ . upectati<m ill pnlvalent today. With th...... bea of
1969-1970 and 1973-1974. babind ua, m..t ..... curre.. tl)' lookinr for
an "iMtaI1t ...pla)'" at t.h. next four·,.... ""de I..... F_ can envi'ion
th. poaaibilit,' of, lea "ovanold" bottom, .... pile \he ract that \he
wa... porition IlUII"l.a that, .. Blli..tt pule it, .....",. )'''''' will
.lap" bar.........h a drutic d-:li,,. ....., ba qpada<i."

•
 CHAPTERXXl

P¥RAMIDIC SYMBOLS
AND HOW mEY ARE DISCOVERED

By penniMion of the Landone Foundation, I quote three

parallJ'llpha from pagea 134 and 135 of Mr. Landone', book,
Proph«i.fa 0{ M~ldli·~iJI:

The total diatanu around th~ bue of the Pyramid ia

36,624.22 Pyramid ineb~a. Thia iI euctly 100 Urnea 365.2422,
the IIU111ber of da}'ll in OUT lIOl.ar year.
TIle hei(ht ofthl! deeigned Pyramid. illI,813.02 inch•.
TheM mynic wiN mell formulated ayNtm of Il\eU\lNlI of
quantity, time, wei(bt and length, and aquaru and CUbel of
the lengtha. Since all of thelll are baaed on the length of the
Bide of the ~,and lince that length waa derived from the
circle ........ circumference.aa equal to the da,. of the ..,tar
year, and since the time of ...volutioll of earth around the aWl
ia eternal, thelll myatiCll created the only 1 ) ' _ of meuur&-
ment forever exact and eternally the ..me.'

Having ucertained the circumference of the Great Pyra-

mid Giuh at iUl bll5e, the invNtiga.ton cut about for lIOQle known
fact that would torreapond. in thil inetance, it.u the number
ofdaya in a year, down to the l.ut fraction. In other worda, two
facts are lllWIciated, and thus utabliAh the purpllllllof the aym·
hoI from which fon<:alJt,$ may be made.
I diKovered rhythm in human activiti. and later learned
that it ia aymholized. in the GNlat Pynomid. EgyptologUit.a failed
to recogni.... thUlaymhol becaWlfl they were not aware of rhythm
in nature and human activitiea. Thia eymholillDl iI dncribed in
Chaptera 1 and 2, and demon&tn.ted in Chaptera 8 throua'h 14.
My contribution to pyramidic .ymbolilm follo.a. in the
order named:
1) Diacovery ofpattema, degree" and numbera ofwavu.
2) AIuociation of the Fibonacci number Hriell, Hambidge'a
dillOOVeriN in ita application to art and botany, and Pythap
ru and hil cryptic diagram.

,.
 R. N. EUJUrr'tI M.uTDlWIWI

3) Di~ of the GreatPyRmid from all angle..

..) Correlation at the Fibonacci n1tio and the elevation at
the pynmid -5,813 inchell (which ill compllHd by the three
hui.:: numben aBbe FibotwX::i SummAtioo Series: 5, 8 and
13) - to the bue of the pyramid.
5) Application of the Summation SeriN to human activi-
tiN in many field..
a.UoRuler
Draughtsmen UIIe an inAt:rument ealled I "proportionll1 di·
vider." The fulcnun il movable in order that any ratio may be
obtained. Theee instrumentl are "",pensive and IlO1Il' practieally
unohtainable. I hIve therefore devUed a handy IUNtitute for
ucertaining, without mathematieal calculationl, when the ra·
tio between any two movementl, in either amplitude or time, ill
61.8\11.. I will Mnd one on receipt of 25 oentl in check, money
order, coin or ~tage lItampl.

R. N. Elliott
No. 63 Wll1l Street
NewV....k (6), N. V.

FOOTNOTES
1For more 011 tbillubjert, read PeterTbompkinl' S«~U o{fM
Gmll PyNJIIlid (Harper I: Row, lint).

,
 CHAPTER XXII

mE LAW OF MOTION
Dictiooary definitiooa of the word ·cycle" are .vera!: ".
period of time," ".n entire turn or circle," ". epiral leaf Rrue-
tunl,""• .erie. that repeate itself," Attention baa been maim,.
directed to cyclical rhythme in the IItocl< market whe.... they are
very pronounced, Every movement, from wheela to planeta. ill
cyelicaL All C)'l:IN have eubdiviaiona or degreea wbid! facilitate
the meuurement of their progre.ee.

.. ,,
,, ,
"" \ /
'" <»\
, .
,
...
II " ...
.,,
,,,
,
,, ,
,
 P1anetll travel in orbitll and at 1peed8 peculi.ar to each. The
Earth revolvell on itll own wa and onee in every twenty-four
houn divide. nilfht from day. It encirclN the gun onee a year
and thua provide. the fO\U" IIeQO}n&. The meehllnillm of plan-
etllriulIUl may be turned hackward or forward to ahow the I'flla-
live poaitiona and movementa of planeta and their ntelliteillt
any time, put, preaent or future.
Some elementll never change their patterns. For example,
water conatantly obaervetl complete eydell. The lun'l taya on
the ocean'a IUtface cause water to evaporate. Air currentl move
the vapor until it enco\Ultenl cooler atmoolphere over hilill and
mountaina, whieh in turn condellSflll the vapor. Gravity draWl
the water back to earth. where it againjoina the eea.
Nationa experience political. cultural and emnomic eydea,
both If"!at and amaU. Pattenul of human life are obeerved in
JnU8 movementlluch 81 milfl'1ltion to and from citiell, average
1lIf1l. birth tate, etc:.
Figure 88 demolllt.ratel that one human activity cannot be
depended upon to forecaat another. TherefOl'e, the pattern of
each factor must beanalyud by itlown wavelland not by extra-
neoua facto.... Duril\ll the period from 1939 to April 1~2, the
lag in the ltack market compared to that of bulineea produced
mucll diacullion but DO uplanation. The anawer il that eight
yelltll of inflation during the Twentiee created a thirteen-year
triangle to 1942.
The graph of temperature lhown
in Figure 89 iJI important. Tempera_
ture ia not _iated with human
-
aetivitiea; nevertheleaa eyclieal wave&,
over a period of one hundred ten
year&, formed a perfect. pattern offive
wav... upward.
Periodicitiel between peaka and
"
valleyl of many iteltUl, euch III epi-
demica, production oflynx pelta, tent
eaterpillan, lalmon runl, etc:. atil
fairly eommOli. In human aetiviliel, F9Jre89
eytIea are not llil uniformly apaced. They follow wave patterns
in aeoordanoe with the Fibonac:ci Summation Serin.

,.
 Nat",.,', Law
'"
Dynamic lI)'DlIDetl'y ill a law of natuTe and therefore the buia
of all fol'1lUl of Ktirity.
Since the diaoovllry that the earth il round, the cycle haa
been the tnlbjeet. of much reaearch. There are three clUllllI of
cydes. FirlIt are uniform perioclicitilll between peab Illd be-
tween nadira, luch all day and night, 1Ie8llODI of the year. tidea,
epidemic.. weather. Iwarml of i~. ete. (\ recommend an
artide by Donald G. Cooley entitled "Cycllll Predict the Future-
in Mtcht:uli.% rulUtraud, February, 19«). Second are periodical
fluctuatioDl cauaed., in lIOIIIlI iDlltaDClIlI. by aatronomical aapecta.
Third are patterna. time and "'tio, in accordance with a .wm.
matioD Mriea ddclOlled by the mathematicilll Fibonacci.
A pamphlet entitled ~e Relation ofPh,yllotuill to Mechani-
cal LaWll" by Profll"""r A.H. Chun:h ofOdord ill very interut-
ing. Phyllotuil ia the leaf arrangement of planta. Mr. Jay
Hambidge .pent many yean relllarcbilli recorda, and ia the
author of a book entitledPmcti.cnl Applit::t:dw.u 0(Dy1ltWlic 8ym·
"",Iry. One chapter ill entitled '"I'he Law of Ph,yllotam.- A copy
of pages 27 and 28 thereofi. repeated in Chapter 2 ofthi. trea-
tille.
Dr. William F. Petel'llen, ProfelSOrofPathology at the Uni.
veraity of nlinoia, ill the al,ltbor of a very important and inter-
esting book entit.led T1l.e Poti#:ni oAd tlu Wrothu. Therein are
graphed the p ~ of dilleue. The patte"", are precillllly the
ume .. any other activity. includilli the ltock market.

FIfIlJI'fI 91

,
 CHAPTER XXIII

THE GREAT DEPRESSION

Thil common expreuion ilia nUloomer iflllOfar u the Itocl<
marbt il concerned. The decline of ltocb from 1929 to 1932
WII I correction of the previDl,lA advuee, U mown in FigureI
68 Ind 82. The dictionary deflnN "deprellion" .. "below the
general 1Ul'fac:e." The Grand Canyon of Colorado ill • "deprea-
a1on" becaUIIfl it ill far "below the generallurfa<:e- for many mi181
on eithn- aide. From the top or the RoekiM to the Pacific Ocean
ill a "correction: 10 to lpeak, oot a "depreuion," notwithlltand·
inK the fact that the Pacific Caut ill much lower than the b0t-
tom of the Colorado Canyon. TheA il no luch thing al a
"depreaaion" in the llock market. If there were, it would he cor-
rect to IIY that from the Rockiee to the Pacific ill a "depreeaion."
There are nwneroua reaIOlUI for thil en'OnflOWl expl1lllion.
The genenol public, which haa DO intereet in llocb, may
have enJoyed and become I«UItOmed to continuOUI employment
In the period from 1921 to 1929. Naturally, they Illumed it to
he a normal condition. When the 1929-1932 decline occ:urred,
many people found it difficult to make both enda meet. Natu-
noIly, it eeemed to them to be a "depre:lllion."
During the advanee in the ltack market from 1921 to 1929,
tn.de... in atocb wen told that _ Wen! in a "New Era," "never
would decline," "juat k~p on guil1i: etc:. Many common prac-
tiCflll were "awful but lawful"
Many politiclana are relponalble for the ernmeOWI ule or
the word "depreuion." DuriIli the early part of the 1929-1932
decline in ItOClta, when Mr. Hoover wlI PrMident, lOme gid
that proIperity w.. "juat around the corner." Duri"lf the prmi.
dential campaiiJI in 1932, the Democrata blamed the Republi-
CUll aod Mr. Hoover for the "depreasion." The re.wl.l ofelect:iolUl
in 1932, 1936 and HMO dmnollftrl\.ed that mOlt vote... believed
the New Deale.... The Republicane blamed the New Deale... for
the decline from 1937 to 1942. The falaity ofthil political clap-
tn.p, whether IPOlUlOred by Democratl or Republif;lU\ll, ill demo
onstrated graphicaUy in Chaptetll 10 and 11.

,
 The lltock market never ball. -depreuion;" it only correctll
• previOUll .dvance. A cycle is action and reaction.
Many tetViua and rlJla.Dcial commentaton in newllpapers
penist in diKuuing I:\U'TeIlt eYflntll all caUllN of advancell and
declinell. They have available tbedaily neW8 and market behav-
ior. It ill therefore alrimple matter to fit One to the otber. When
news ill abient and the market Duetu.ltee, they aay itll behavior
is "technical.~1 Thill feature is di8C\lllHd in Chllpter 17.
Every now and then, ...me important event ooeun. If Lon-
don decline. and New York advancetl, or vice Yflrsa, the com-
mentaton are befuddled. Mr. Bernard Barucb recently Aid that
p~peli~ will he with us for IIlIverai ye&1'1l ~.. of whet
U OOM 0#' IIOC deM. - Think that over.
In the -clark ages" the world Wall SIlPJ)Ulled to be flat. We
persillt in pellllltuating lIi.milar delUlliolUl.

FOOTNOTES
I 8ouJI.d fllJl:li\iar1 DoK:.del l.ter, c.m. pnc1ice ill AI prnelent ..
~,.

•
 CHAPTER XXIV

EMOTIONAL CYCLES OF INDIVIDUALS

Cyclu of mlUlll plIycbology in human activities are demon-

atrated by grapha on other pagea. A ~ntiBt now di8c:IOllH hia
Btudiea in the emotional cyclea ofindividuala. In th.. November
1945 iMue of the IUd BooJI appean an articl.. written hy Mr.
Myron Steam. in which he reportl the reaulta of Btudiea. over a
period of' aev.. n'-n y......, made by Dr. ReJd'ord B. Heney, 1Id-
entaL The McCall Puhliahing Coqlortltion hu given me per-
mlseion to quote from th.. article. I have underlined certain
numben and ",fer to them in th.. lut paragTaph.

Dr. Heney ia a Rbodea .cbotar. a graduate of the Uoiver-

alty orWeit V"ll'llioia and the Univenity of Berlin.... Dr. Her-
My..-rote a booIr. 00 m. findinp called "Workera' Emotionaliam
in Shop and Home,' which waa publiabed by the University of
Pennaylvania in 1932. Far.qhted officiala ofth.. Pennaylva-
nia Railroad bave supported Henley'a wtII"lr..... Dr. H..,...". ....
invited to I" to Germany. He found that worIr...... there react
the 1NIm.. U Americ:aN.
The periodic riM and faU of buman emotiona are vouched
for by Dr. Heney...ho baa been "'-"inj' and stIldyioj' them
for more than lIt!Venteen yean. Hia ..-eareheo indicate that
with all of UI. high apirita and low apirita foUow each other
with a rej'Ularit1 aim. . u dependabl.. u the tidetl. He fO\Uld
that all the cheeb he made on each man, over a period of
......u. fen into a fairly regular pattero. Dr. Heney'. chart
.bo..ed that about ..very 5th ..eek be became more critical.
You tau it for granted that a run orbad luck, in time, j'eta
you down uol.... you exert etron& will power. That good newa.
on the othe!' hand. raiHlI )'0\1 to the top of the world. No..
llCience aaya you are wrong. If you are full of enel'J'Y and en-
thuaiaam, good n..... will lift. you higher .till. Or if you are
pluggi"i'dolefully ~ "Blue Monday." good newa may help
temporarily. but that ia about all.
Human emotiona ordioaril:r riM and fall at rej'Ular inter-
valt of from J3 to 36 day.. The u~ and dowllll of theae facton
ruemble atocIr. marllet charta.

,
 The blood cholesterol aeema to bve a cycle of about 56
~..... 'I1te thyroid output, .. hich determillM th. total .. mo-
tional "Ycll'!, UIUI1ly makel a round trip from low to hii;b and
back in from 4 to 5 ......1<.1•••• III hypertbyn>id C_, eyel... may
be .. abort II 3 ..eekI.
There MemI to be DO dilferente in cycle \enith betw""'D
men and women.

Th.. Fibonaeci Summation Seriea includ811 the nwnbera 3,

5,34 and 55. Time cyclea an! not alwaya uaeL Therefore wh.. n
a period ia given Ie "33 to 36," the baeie period ia 34, more or
lell. The buic period of 55 includes "56."
When members of your family, friends, employees, employ-
era, euatomera, etc. annoy you, I recommend a revi.... of this
chapter. Other people have their cycles the same Ie you do. Do
not allow your cycle to tangle with another.

,.
PYTHAGORAS
 CHAPTER XXV

PYTHAGORAS
Pythagoru, liJ'ut man, lived in the fifth centUl)' B.C. and
made III impression on history that is seldom approached. The
raader il urged to review a report on m. activitiN in the Ency-
clopedia Brit4ntUco. He wu a perai5tent invetltiptor of the dia-
coveriet! of othen and vililed Egypt., which ia often mentioned
all "The Cradic of Civiliution."
Pythagoru is prominently known for hia atudiN in math-
em.Uca. InsoCar u 1 have _n, the molt import.llnt of hit dia-
coveriea hu been OYlIrloDked. He drew • triangle I.lld placed
thereunder the cryptic title "Tbe Secret of the Univene." 11Ii.
feature is deecribed e:rterWvely in Chapter 2.
In 1945, Mr. John H. Manu, Ph.D., PTe.idenl of the
Pyt.haaorun Society, wrote. book entitled ~'. Riddh So/.ved,
in whieh he di.elOlJed. pie:t\ll'e of Pythagoru, and I have pe....
miuion from Mr. Manly P. Han, head of The Philoeophical Soci-
ety ofLo. Angelell, California, to reproduce it <- op'-;te ~).
There ue many -rmboI. in t.h.ifI pieture, but we will f0C'U8
our attMtioD on two itelllll, the pyramid which Pythl.iOru bold.
in m. right hand. and the three ~uare. in the IOWilr right hand
earner of the pieture.
The pyramid repre_ot. the Great Pyramid of Gizeh, pre-
Nmably built about lOCK) B.C., although 110m" atudenta 8fi\le
that it ill much older. Tha Pyramid di dUlled. u one ofthe-Senn
Wonders oft.he World.- The preciaion of meuunment and plao>
inr in poeition of the immenH marble slonee employed are nl'-
marbble. However, thdifeature di insignificant when compared
to the Imowledge I)'ID.bolized. It may be that a paragraph in the
Bible (l..iah 19:19) refef'll to it. It react., "In that day ahall there
be an altar to the Lord in the midat oftbe land of EiYPt. and a
pillar at the border thereof to the Lord.-
In Chapter 2 are graphed different viilWII ot'thi. pyramid.
For convenient reference, the view of one lide il repelted in
Figure 92.
The baH of one side 11 9,181 inehel. The hue of the four
lidel meuutlll 86,524.22 inchell. Thill)'lllbolizetl the oumber of

,.
'"
daY' in O\lJ'.mar year, 3&1' daya.
Our calendar yearie S65 d~ but
every fourth year an extra day
mWlt be added (February 29th).
nul i' "leap year.· The totaJ clap
u.
in four yean 1,.(61.
The elevation from hue to
topia5,813iDChel.ThebueoCone - -
aidlll ill 9,131 ineh". The ratio of
the elevation totbe buei.63.6....
The pyramid hu five .urf.~ and eiaht liDM. 5 pilla 8 equal.
13. Note the elevation, 5,813 inehN- 5, 8 and 13. 5 U. 62.5'10 of
8. 8 i' 61.5'" of 13. Note the application ofthia ratio in Figure
7l.
In human ad.ivitiH. all. advancing movement is composed
oCfive ...va, three up and two interVening eorreetiOlUl. A eyele
it compoeed offive _yea lip and three w.vea down, total eight.
Thi. ia tnle of all dap'llU, Minor, Intermediate.nd~. Set!
Chapter 4.
The diagram ahown in the lower
rii:ht hand of the Pythqonuo pict.ure i'
l'epJ'Oduced u Figure 93. I have num-
bered th. MjWlrea which are ,haded in
the picture. The upper right IIqILUfl bu
five ,haded equare•. The upper \,,1\

.•• , •• . -.:ju.&nl baa eight 'haded IICI.Ual'M. The

lower equare hu thirteen ,haded
equarN. Thue numbeT1l eolT1!llpond to
• • • the number at inches elevation of the
Pyramid.

The aame three equaru are ahown

in Figure 94. 1'be amaIler aquarell are
now numbered in a different manner,
that i"
_ 1,2 and 8, when! the aquare of
8 equab 9,
- 1,2, 31lDd 4, when! the aqu.aTe
of 4 equla 16, &lid
- 1,2, 3,41lDd 5, when!t.heaquare
of 5 elj\lala 25.
 The theorem ie that tM.qllAn ofth, hypoteDUM of, right
triangle ie equal to the INrD ofthellQuaree ofth, other two aid...
The diAcovery of thilI IIOlutiOD ia the beat known of P]tbagoraa'
worb.
Now return to the FiboDacci Seri.., 1 to 1«. TheM Dum-
ben fann the "Secret of the Univeree- to which Pythqoru re-
ferred. Th, beat ,:tample in botany ie the aunflower, deatribed
by Mr. Jay Hambidge in Chapter 2. In bodi.. of humane and
animell, the numben S lind 5 apply. There ere many other eym.
bole in the picture of Pythagoru, I which ia an idealilltic concep-
tion.

FOOTNOTES
I Elliott t.rimmed tbe pidure to a 6" I 8" GoIden~. in bie
reprodudoion.

•
 CHAPTER XXVI

MISCELLANEOUS'

Vol....." ofWaVM
In aD adVaDee, the volume of ....ve I> dOlll. Dot ""ceed the
volume of wave S; oecuioJlaIly it i8 Ita. So loq I.JI vollllDfl in-
ere-... n.other ..dvl.Il<:e iI. due, until a ntl.. hiib regil.ttln with-
OIIt aD mere... in vollllllfl. See Figure 95. Note ..1$0 that the
volwntl of..avtl2 i,1Na than the volwntl ofwaVtl 1. It i8, favor-
.ble indication.1

J,-_ ~
--'~'-o'-I"...Jme - - - - l
""'" ..
c.....
The word ·cycle- meaD. circle. Oceuionally tbi. featllre
'ppean in gr.pha of .tocka. Tbtl cin:le in Fiill"fl 96 i8 dividtld
into four aegRlflnta, A, B, C aDd D. When a graph i, I'OIlIlding
downward, I.JI in aegment C, and thtl downward patttlm hl.Jl btltln
eompleted inaofar I.JI thtl number ofwavlIlI. i. eollOllmtld, it may
be e:rpected that .t the bottom, one or more IIflriea of "three-
W,Vtl movementa" may develop.nd then be followed by an ae-
QIller,ted I.dv&nQll U per aegment D. The entire pictllnl down
and up will then reaembltl lIflllltlenta C and D combilltld, or in
other wonIa, the lower half of the circle.
 NlJlu~·. Law ...
The flood of .trike. around the
end of 1946 i.llimply the lwina: of the
pendulum !'rom left. to riaht. 1 to 2 A
then to 8, .. in ~ 96. Before la. 1 3
bor ...... Ol'p.IliUld (previoue to 1906),
many. if not ma.t I!mployen, were
alitocRtic, ruthlellll and hevtl_ to
employ_. compet.iton and the pub-
lic. The behavior of.ome .triUn to- 2
day ill not worM than the behlviot' of
manaa:ement in early dlYI. Every FIflIJf896
natulD. human aetirity and iDdivid..... bu it. own cycle-.ame
Iona:. otben lbort, dependina: on the c1ull and eItent of each.
The "A·8 Sue"
The A·B b~, I!hown in FilfW'll! 58, Chapter 6, i. _ion.
ally compoeed ofdouble t.hrM. oreven triple threu, .. de8c:ribed
in Chapter 5. Thil i. Npecially true when a rollndina: bottom i.
made, .. diacuued in the tint pllnif"*ph under "Circle.•• above.

FOOTNOTES
I 1'b;' c:haptft" oripnally contained .....en1 paracrlplw that III
dinctly into eam.r MetioM o( tha hook. Apparently Elliot~ t.bouch~
or 1OIlD. additional poin" Il1tIr the bulk of the manUlCrip~ .....
completed and ~fl*I.1 he•• ....,...111 tb-. par..... pbe to u..lppropri·
1101 arear in the pt"PiouI tert.
• Th-.t ii, indiao\.i" that ...... 2 ia indMd in Pf'OITeM and t.be~
w... S will follow.
I The "A-B baH" SMmI !ina u -. dMCrip\.ion for tbI fll'lt ~wo
w• • • of an A·B-C irncular ooo,eaion. Elliou'l ..f _ to Firur-
53 ......... ~ fim to indiaolol tha~ t.bet ill whet hi meant. Hown ill
tbI diaalMion of tbI IH:l-li46 bull tat tha~ fol1ow•• be tbI
A·B bull eotlOIpt I I an atUlirumlli w p h _..OD whi.h c:aa ooau"
between the end of -. correcU.. WI.e and thl beeinnilll oC I cardinal,
or Lmpu1M w...... The addi\.ion of tbiI id.. il " .... " • •.,.. aineI.
eoDItnlotion with that look baa been. in our ""perle_, .......IJ put
oltha pre,,;OWl correcti•• WI.I or c.he next irnpul. WI". Appven~
~ or III "A·B baH" a1W-'J1I ba.... another UlIIuo-.tion. onl
more <:omillt.ent wiUl Ull WUI Principle.

,.
 CHAPTER XXVII

mE 1942-1945 BULL MARKET

The thirteen-year triangle in the Dow-Jones Industrial
Average from 1928 to April 1942 ia graphed in Figure 71. Aa
dncribed in FiiU",S 31, 82, 87 and 88 in Chapter 5, thrust
follows a triangle.
In Figure 97, the Dow-Joneslndu.trial AYffage iagraphed.
Each verticaJ.lioe repreflenta the rang<! at one month. Major wave
<D ia ahort. M.,;or wave{j}ialonger, and ita Intennediate wavea
are indicated by smaillettera a, b, c, d and e. Note the inner baM
line at wave. band d. Major wave@ilIcompolledofthreeInter-
mediate "avea indicated by the amall lettera a, b and c from
July to N\lVember, 1948. Major wave Q> runa from N\lVember
1943 to December 10, 1945. Wavea A and B cona1,Ulled five
monthll.' In the daily and weekly range for thia period, all wavell
were compoeed of three ..avell each (_ Figure 53).
From letter B to the n1,Ullher 1 ia Intermediate wave 1, all it
ill compolled offive WaV" of the daily range. Intermediate wave
8 ia compoeed of five ..aveS indicated by amaillettera a, b, c, d
and a (extended). ExtenaiOIUl never appear in monl than one of
three impul.ae wavea 1, 8 and 5 (_ Figurea 89 throll(h «).
Intermediate wave 4 is the aame all Intennediate wave 2. Inter-
mediate wave 5 ill com~ at five wavea of the weekly range
and reached 196.590n December 10, 1945. The parallel line was
aliahtlyexceeded. Subeequent to December 10, 1945, an irngu-
lar topS reached 20'1.49 011 Febnw-y 4, 1946.
The pattern of Major wave <V from November 1943 to De-
Ollmber 1945 ia unlLBUal in one reapect. It hugged tbe baae line
from N\lVember 1948 to Auguat 1945, inatead ofbeading atraight
for the perallelline. The C&\IIIC! of thia abnormality waa a ne"
erop of I'flclcl_ apeculatora with mon money than eIperienr:e
who favored low-priced atocka inatead ofeeaaoned iallUelI of the
type nlpreeented by the popular averagea. In onier to \IVerrome
thill abnormality, I deviaed a Special Index that behaved nor-
mally, aa will be ~ in the 1ow8l' chart of Figure 97. Nota that
Major ..aveQ) doea not bUll" the bale line, but inatead followa a
ab"aight line from beginning to end.
 I
I
00
120
110
100
90

F/fIUre 97

Nok: In the upper Il"lPh in Figure 97, the IndWltrial Aver-

R&l' ~red it. "OT"'{ortbodo.>: wp)at 196.590n December 10,
1945. On aoin, to p...,.,.. an irregular top, ....ve B, i. in PI'Ol:NS
of fonnatioo. This should be followed by wave C (_ Chapter
7).3
I eJ<pect. lIUb-normal bear market .. illuatrated in Figure
76, Chapter 12.•

,
 ,
"6,s -P"I.' fS-51!l
:1
~::l!i
'I]'
,!dl-!lb
". -I ,,:.1
il!t IJ)j
1 ~.~. -~J. I,ll'
ii ."1 ·.1' -ijJ!
I •
!J;: ~!~] !ll.!!'
~,i ~~~~
o. 1·t~5!~. ~" J~ "''Ii ,-.
""~ ... : : . , ~ .... ji;l~.1> ....
! ~1 jli~~t!li ~l~!ji
'!f'- -h,.,
•~
!, ·.1
;. 1.~:~.i:g~ t-.i'.f~!
.1 l' -!i'·-' -f ,to •
•" !i jlj]~if~j .~ji1i
~i; fjh'1~ ,;'1 H1.fj
~ e~ ~!~~~tli~;i;~~ll~~~
Ii f.ih ~m Id1.
 REVIEW AND CONCLUSION

Figure 71 depicted a thirteen-year triangle from 1928 to

1942. By l'W!ference to Chapter 5, it will be noted that triangle.
have alway. appeared u wave 4 and that wave 5 eueedI the
topofwave3.

,,,
,
1800
,, "" '
,
•1i'090'
r-- ~I

Figure 98 i. a graph of the market from 1800 to December

1946. 1 Wave@from 1800 to 1857 i. bued on bUllineu hi.tory,
u.tack market rea:lrda are not available previo\u to 1857. No-
vember 1928 i. the orthodo.r; top of wave 0'> from which the tri-
angle (wave @) lItarted. The triangle ended, and the "thrust"
(waveiJ»)aL&rted, in April 1942. A "throat" baa alwaya exceeded
the top of .... ve Q), whi~h in thia <:aM! i. November 1928.
The movement from 1921 to November 1928 ...u compoaed
of three bull marll.eta and two intervening aub-normll bear mar-
keta. ThUll far, in December 1945, one bull market hu regi..
teredo It would therefore appear loi'icII that the pattern and
eItent above 1942 would reeemble the movement from 1921 to
1928, i.e., th~ bull marketa and two interYenilli, sub-nonnal
bear marketol.
The DoW-JOllH IndWltriai Aver~ started in 1921 at Sf,
and ended in November 1928 at 299, for a 23l>-point advance.
The thrwlt fiarted April 1942 at 93. 93 pll1ll 285 equal. 328, or
29 pointllabove November 1928, the end ofwaveQ).2The thruat
IDaJ' I'ONumeeightyelll'll, endilli in 1950, aimilar to 1921·1929.
The imme~ amount of currency in the handa of the publi~ due
to fina.nciDi of the aeeond World War would Hem to confum
thia indication.

"
 There i. a different HqU8II<:e of prooedUrtl now u compared
to 1921-1928. During 1921,1928, the flm wave'wu a nonnal
bull marlr.et without inflatiolllll)' BYJD.ptome. The fifth Wllve end·
ingin Navember 1928 W1lII dec:idediy inflationary. Now, thetint
wave, from 1942 to 1945, dillClOl!illd inflaliolllll)' thatacterirrtiu.
Low·priced IItol:k.e of quelJtionable value eurged ahelld at the
upenae of the "blue chipa.~ ~ New Yor.ll Su" IIllected ninety-
aiJI: .toeo that advanced phenomenally. Every .toek etaTted at
lOme fiiun below $2 per .hare. The highllllt rate of advlIJ>(:II WIUI
IS.S~. The lowest rate ofadvance wu .33.... The average for
the group wu 2.776....
The pattema ofgTaphi ehown on pRVioua pagea fumieh a
hiatoric outline of the United States. Ito! development ill marvel-
DU.I for many reaaona:
- Geographic Pl"ilioo. eh,pe and boundariell: A .-quare,
bounded on two aidllll by laTlfll OCIIIIIUI. and on two eidea by
friendly ne;'hbon.
_ Latitude and climate: Semi-tropical, thua facilitating
agrieultUrtl.
- Natural rlllOurce.: Gold, iron, coal, oil, timber and wa-
ter._ya.
- ~niua and individual initiative: The number and value
ofpatentll from 1850 to 1929 ill m.arve10U1. Attention ill in-
vited to Chapter 14. Note that the graph of patent applica-
tione (Figurtl8l) coincide. with waVIlll of the .toek market,
both in time and pattern, which in turn reflec:tll bUlineu
Ilctivity and maae paycbology.
_ Democ:n.tic idelllA: The form of government lltimulate.
individual initiative. Thia doea notimply that perfection hu
been achieved, but it does ellgKelt that we may be on the
right road.

FOOTNOTES
1 Onu q:llill, with ulnmely limi\lld dAta, Elliott outlin........
reetly tba e"tire Grand Supercyell rrom tba lata 1700., jun II ha did
in hi. IIIII.YI of 1941 and 1942 (_ Stl«ud Eua:!. oedioD.). Hi.o
prodi..c.iOll of I 11_ high above 1929 Will 11111 """""''' However, in thia
depl..c.ion ha .bowa II ahort time rnm. ending in 11160, whloh II .u out
or p>oportiOll 10 tile other rOUt _ye.. It _ _ that eVIll • ouraory

,.
 Nolure', Low

",min,t.>o", olu.. chart would tllU"t.l.op much.l'uttber out \ban

11150, """ m.... b biliMr tb.l1 S:l8 "" tl.. Dow. Tho. problem apin ..
Elliou'. I3-year triaqle, Iinal thruou roll....u.,: trilUl(leo are PM""
all)' IW'if'L and lbort. n.. chtrt thtt EUi,," produced in bit lntilll>r&-
tin Letter dAted AU£'I'I. 1941 and 'Pill in bit Edllutio",tJ BlI1l.tin
ol Oetol>« 11U~ ,bowed. men 'CNl'1ltil' be«iMin.l dAtil' ol1776 and
• more auilahl. pi'<Ijeet.ecl 'lleli"" Utii' ol2012, .. IIhown to.low.

.--
• This oomputil'tiOll '" buecI "'" the telI.et tbe.t u.. t.hrutt, or fiI\b
w..... r"ll"willl' bori..... tI.1 tri....'-. il.-.raU1 ebcMlt u""" u the
widMt. patt or Ihe tri..,p..

,.
.. R. N. EUJmT's MASTUJf0U3

REFERENCES I

- P'ythqoru (Greek philcwopber, 600 B. C.l. See EncyclopNUJ

Brjwn/ai.t:a.

- Fibonacci (Italian mathematician of the thirteenth centwy.

Better known .. Leonardo of Pin). Hi. worn were publiahed
by Count B. Boncompagni, 1857-1862.

-DyllGmic Symnwtry ("The Greek Vue"), by Jay Hambidge.

Note appendix, p.,.,. 146-159.

- Practical ApplicatitJ,.. of Dy....mic Symmdry M'he L.w of

Pbyllotuia"l, by Jay Hambidge. See pql"I27-29.

-NatlU'f'. Harmonic Unity, by Samuel Colman and C. Arthur

eo.n.
-Propol'ti.oltGl Form, by Samuel Colman and C. Arthur Coan.
See papII U-35, 149-155.

- CIuw. 0( Li~, by Theodore A Cook.

- '11l4 HunumSituotion, by WiUiam Ma<:niele Dili:on. See pagelI

129-131.

- Prop~. of Melclti.7AdiJI in The Greet Pyramid, by Brown

Landone.

FOOTNOTES
l'I'M oriIinal pap tont.ained .... era! mi...,.. ..,..,.. of ....Uing
and tiu., which ha... bHn CCJn'eCted (or thil ?OIUfM.
 When is it right to judge an
investment book a "classic"?
ilhlecn ~ •.,. i, 100, enouplO
E jlldxe whether invalOrS deem I
book obou'ltl ;n"51"""" method ..
"dassie." and .....11' 1lle iutY is in ""
,hi. 0'."H/JhJtI 1Ilo... I'riIIcIph has
bon fJUbli~ in "ftD lan~.
and <ontin.... to ..Il lhou»,,'h or
ropiesc>'U)' yur.

If 1"" dorI"1"' _ . I oopy of ,Ilis

perennial besl ..ll« _ or if 1"'" own
an ... lin cdiu"" _ 1\,,,,
io,t!< ,ime
10 read the book dw rei nuoduccd the
Wave P,;rociplc '0 ,be "OI'ld.

1M FiN Edition d EIIIoff_1'rIIJciI* (1978)"- It.- case

lot 11»""",""" grHl_ mattlN. In It»
_d _ _ £_ _ ~ult_~Ily __
s._
£dilion.,....,
p,..,.'Q.Ih""'f1h"._t_...._, Ti'w_~1>tin!P
J"'U <9'" up"'dO" _" __ pto;.t:ljot, lot ffWrlinallJigtL
Of ~ )'<1<11''''' _ 200fWIU ~ """'"""Jo: _
~_clMifiM1~flJ'/IlninQl1»_ptO~
..... _puidltlN>uot ..... ~

There Ire mllly boob _ "we<:csJiful invalin,:" Y., none of (hem_

no, .... ~ offers you. melhood moore SlICCUSfullhan wllal l'OII"II"am
r""" Eur.tJ lIir... f'rinriplt - X" Ii> M.rlr.tt S."""",,
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DAlLY AND INTRADAY MARKET ANALYSIS
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W< wiU .................. Owloob IOJ'O'I_yl!woolgll Friday. andouppla,,,,(
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THE GLOBAL INTERESTRATE ounQQK

Detailed commenwy on ;nle~ rate mart~1O """'00 1I>e W{lI"Id,

THE INTEBNAUONAL CUBBENcyounooK

Analy.i. of ~ sp>l "".nncy Ind "mu rate rellliOllOhips
mE WQBLDSTOCKMARKETS OUTLOOK
Cammenlll)' on a1ll1\1jor 'lOCk nwkelllfOOnd!he globe.

THE GLQB4L ENERGY OUTLQQK

Analy.is ohnajor Ne... YorIr.. L<>ndon and SinllflOn' .""rIY mOlhll.

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Analy.i. of preciolll IlId ind,,'tri.1 melll! on III ","jot "fl"l>Oid uchanl",

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THE NORTH AMERICAN BNANCIAL OUTLQQK

Offe.. commentary on tile ll\ljor financial in.oumenlS in tile U.s. and
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•
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Flobert A. Prtdller, Jr. ~ at«! WII""
Pr*qM - K-r 10 St:d' ~ PraIb .., 1IPS,
n In 181'9 ~ putIbtq 11111 EIk1ll waw
TMorl.f, I 1IIIIneili loreclltlrl(l publication
ooveltng the atodl rMrbt, II ,...... mil. ~
matlll, till economy Ind locIll trelldl. Mr.
Piec:tl1el nu beer'l,*,* "onI 01 the p'. . . .r!lm-
_ In Itodt rM/ket history" by nn- ~ "IhI
~ , marlf8tforecert Aby FOIfune rnagazr.,
"IhI world IMdef In EllloIt WI"" ~ . by
The Sec:urIIiM 1nrtiIlM.1nd "!he l'lI:tIon'IIoi.,lOIIl
P'090'.-nl oIthI EIIoll W_lTlI'lhodol '-at.
Ing" by T1III ~ yet*" n...

TQy Mr. pred1tef Ia pllrlde.1t of EIiOIl W_

il'lwmItIoIlIl. thllaIvMt mMIeI-'Y* ftrm In
the wodd. EWI .".. Indtutlonal cliIfltt In _ -
Iyzlng II "..pr globaIlIodl. bond, lI"fM1 rQI
and ~ ~ , .. well .. meIaIs and In-
ergy markMl. 24 houR I day. In that capec:Ity,
Mr. p,«J.... wrtMlorEWr. GIot¥J~PfJr·
1p«INe, I lnOloCh:y 100 ~ booklet of Ellolt
WI"" IrIIlyli. on worldwide flnanclll trend•.

Mr. PrWltilr II.. od«I Yale um.. 1Ity on I lull

ICtloIIl'IhIp and g ~ In 1871 with I de-
gree In psychology. HI. atudln of the WI""
P,iolCipll deMIloped 110m I dMp IIIclMtIon with
the atodl. ITIaIket and lUI lntlmallo reIIection 01
the humlrl ••""I'lenca. Mr. Prec:hter'. 1II!1'II
~ II an .xpoaltiorl of I Mw theofy of
I~<* •• ~ bIMd upon the ""....,.ofhu-
Ir*l 1I"""Pe!.... ~, ....
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R.N. ELLIOTT~s
MASTERWORKS
The Denoltl"e £ollootloo
"An Impressi'o'll volume from coVllr to cover. Prechter's knowIedll& of the subject
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·Mr. Preochter has perlormed an OIIIstandlng MMee to the Investment community In

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_/)()""IJ J. Hop" ~A ....ly,1l

"Prechl&f's elaborate lOOIOOIlng, clarifying stetements end croa-relerences are

absolutely necessary 10 understand fully what EIIioII ha<110 say.·
- Ro~" J, Nurotll.lIo 8Qr,.", ~

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and early evolution, something any espiring Etliottician should read.·
_ Joh Swu".y, T.d,,1aI1 ""aly,1l olStDC" d c>",,,,t>diJi~,

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