re Cr oe ee ising ELLIOTT WAVE MASTERING ELLIOTT WAVE Deena aA The First Scientific, Objective Moca aguanece d YT eo eo by Glenn Neely with Eric Hall Z a is 6 oy = ae 3 : Ee es Aq ae io true wher the theory) is proper oped.” fat Sok ‘er yeh Mies Pe WVAUIEyE vant See tn ‘eeMASTERING AOD WI it possible to AW ANY ict the future? ms Noted oe ide tires nme” Sore of be bc od Showed ae Tow ye eid frokcieg ch fe tare Serangoon og of he xs ron cred in lows predelondescin He ‘Send bere Tete targa recor ci (ig Beseckmale dwt bandh 0 Fay inca eicogy Wheto Showy blebs acest Respenonlnysty Thepralalsfomorst ‘icp inadchon poles elond be Sapermgmiamrepmer elie Bong ‘dinggonds deers on conmos podtareptonoearancderlopnrthh Paden nenpspocogy. Naeem pia Cag bo at ot Shotmober The pepecsaraks ores tral acen treing mown he gph ‘Shoda fas ep “elo Wve oye by RN Elon nh soy 19377 Sls, conte ond Satie be eryenon len fytlogrmereto) ion pena Sie NY thor deed prog to cry crn chek or conn nobel eee egerson ‘SSjug rd eho ott pct on onal engsherenfo cre soon Pann py edad resend re eect Vifornou,moorgelenn my eonaot co aoe rotring sane apcoen fh Tt Woe Thay wre baal coer, Mero dalek esheuve mea cl time tring ond teaching, Mr. Neely hos greatly ex fre te endl hs coc da Hone ean Nee anes SxTnclyel mpbpabhor steed et odin clipe dot on ssh cl ges woke acid wi ee re el yoo orm ro yet udesoding othe spree rr pt ton yes rl he ite pred he hrrer pf eb Keekihop you ace ta ul ero cher. Mastering Elliott Wave Version 2.0 Written, ited and Illustrated by Glenn Neely ‘Adttional Editing, Poduction and Computerized Rendering by Eric Hall by Evans Design Associates Published by Windsor Books for the Elliott Wave InstituteMastering Elliott Wave esion 20 Copigh © 198 Gen Ney ‘is iar eft fa wok ogi ublished ‘dete fou Waves a Mate? Copyright © 18 by Glen Ney Alligns reserved eligi of epics im ol vin pat any far yay tent out permis oe he ihe For information comact: ‘Winesor Books | P.O Box 280 Brightwaters, NY, 11718 Manufactured inthe United States of America ISBN 0.930233-441 For information on related product ad serves, write cal: Elliott Wave Institute 1278 Glemeyre - Suite 283 Laguna Beach, Califia (CA) 92651 Offve: (714) 497-0945. # TeleFax: (714) 497-0883 Disclaimer Nasting ca Wa" inependenty prods presto in Wave nse. very eon ase to ppl complts ed acute infamation. Howeve, ner Be are iow Pave Is, ox mone ee ‘Sse wiht pation sale ale fan ahi bs, danageiect ort cased oalepo a ‘Casey hisbook, ll dens an mati presented areal ths of tien not cess ree sof ‘Go publiir or becker, "Warning allconmesiy es pte chars sytem, ee. dcased nhs hook ferlasraie pposaly sndaenutbeconstutes ssa) recmmentasons Nometot trating riesingsfolrot wba {ty Thctorealvsy poss with avon elo vesting andrei an pas peformane ot aiagsyte or tebmigus i ano of fe vest sures. Acknowledgments ‘Thisbook hasbeen early adecade inthe making, Daring tha peri of tims. a multe of firs, ties and associates ave provided me with supp: helped me sly my ideas regarding the Wive “Theory and have indict assned mein creating te knowledge whichis peed in "Masteing Ellin Wave” Some fisted may not have realized er, throgh ime, my have frgovten thereon ‘my work. Here, I word like remember them fr tit consibutiors. Fit the curentaadpast“Elion Wave Telephone Course” clients to numer allberentiored, boutwho were insrumestal inthe culmination ofthis weatise. A few shouldbe singled out det their support beyond nommal expectations: Join Lux (ry very fist Cours client ~- you probly thought | forgot you; Coton, who gave me the encouragement andasistanceo write my fst ok (olonge available): George Limberg (gest te); John Porer hanks foal he help durin he carly newslter days, Jo Robens (oral the valable satiscs she provided); Percy Stokes (orks eterou suppor ay Walman hanks forleting mon yourshow and forbing a fiend); Robert B (aime teliever); Bob Stark (who hasbeen my fiend longer than canremembyr and has always ren ‘hee when T needed 3m; Mark Bante (one of Fe most devoted ad hepfl sudents Ihave ever worked wth; ike Waker who was notonly actin butaclose, pron ead from my hometown, Lafiete, La. and whe wil never forge thanks feral he fee corpus time, chars and supper Walter Koval (who, fr personal reasons, gives me the greatest sen of accomplishment for having taught; Donald Anderson (who curently holds te record for the hest amber of retakes of my ‘Telsphene course (s-times) and finaly and espesally Jack Suns (much more han acoure cit, hisbellet and support ave ben inaleulbte). Nes the close asiocits I would ike wo thankar: Davi Rif (ho provided ine wih some ofthe ‘most vlable knowledge Ihave ever eamed abut arkt behavior; Gerald risiman (thas bezo a plessure working with yu}: Jeanine Heery (hope ou relationship cortinuesforaengtime; im Bah (he best broker have ever known} Jeff Bower of Finacial News Network fr allowing me 1 bon 1isprogram an forbrng the ist one to exablish my Garu” stats; Richard Mogey of the "Foundation forthe Study of Cele fr maintaining te integiy ofthat orgaizaton and fr allowing me to beone oftciroccasional grt speaker; Larry Jcobs formtng me wo partpate in is annual Confereces; Irwin Mint frhisineestinexpandng the Institue’ shorzons:Phylis Kabn (of Gann Word forbing such caring tnd genous ren nda te lady; etn Gower ors romosionl plugs” ardent ter writing and simolatng conversation; Reber Debnam my best conse with Europe: Walter Murphy (Merri Lynchis resident Eliot Wave analy) Michel Jachschts for his valuable assistance and ‘fort above ad Beyer he cal of duty), Evans Design Astocaes fer rating the powerful grapes nie front coveran finally, Steve Sci of Windsor Books for hisinterestia pushing "Masting Eliot Wave" and for eting me doit my way. ‘A this point wea ike to thank a pecial grou offends who were invaluable in finalizing the nance of Chapter 3 (which Wok eight monhs), Teall hem my bea testers: Gary Long Calong-tie devote ofthe lion Wave lta hea for Caper were pirat design Jon Koons (he most enbosasic tester of Chapter 3 sho had some great des of his own), Ricard Slmolle (hanks forall hime you sent erorchecking ny rough dais), Joha Lomas (hanks for your ieas), Bill Wilsa (the most energetic Telephone Course client Thave eve taught thanks fr your inp) and to Bil Abas (that towering icon ofthe cast coast who beevoentl hel the "Big Ale in be palm of his hand).‘This nextperson hasbeen such abeiever and promeser of my spproach Eliott Wave analysis you ‘would think herana PR. fim end waschargingme forthe exposte. He his done o much tokelp me ‘overthe years andias never iskedforanyting in return (buy rendship) fat fel tony propriate ‘odevote an entire pragraphto giving him alongover de heart -ek" thank eu.” This wonerfl fl ‘ame is Tim West. Thanks, Tm, for you assistance at ry talks in New York City and Chicagoin 1989, "hanks for proof-reading so many of my manuscripts over the las ree yeas and forgiving ne your ‘opinions on prometionaliteretere and thanks feral your terrific Hess regarding Chapter 3, Tim West ‘is everthing you could expect ftom friend ani more. Even theugh we lire on opposite costs and I ‘virally never se him in perscn feel Tim poseses ll the quaities mos: people could oniyhope have. Tim, youra great frewl hope his makesup for any occasion nthe pat [andre] when have not remembered t thank You for Your help). Furthermore te fellowing personal frends who have never tpped believing nme: annie Bishop (shohias meant more tome hax se wll ever know) all the Avcoins (where saa begin Mrs Aucoin Yourean inspiration o sal, Cara «Ilineverforget you, youarethe best fiend lhaveeverhas, Kevin « the mos creative person Iinow, Kim and Doug, Keith and Mr. Aucoin; Ese Hall (without wim his bok could no have been done; Billy Leblane thank for beng fiend Claude -a terrific and long term frend, Kip-thanks forheing me get stared; Travis, Chueh, Hanna and Wright ~ the people to ‘esow in New Orleans; Myrle Blanchet, 2 reakor and an inspiration - she was things he way and ‘veryone steps ase to let hr have it Renee’ Havg, the most eninine and well adjusted Chinpractor ‘7 the west cust in to my wenderfl brothers and sister (Bobb, Brent, Karen and Ma), Finally, standing ovation o my mother, Doris Neel, who provide the most deal upinging {maginable, who his been an incredible pillar of strength (moaly financial and psychologically) ll these years, and vho has unccnsciously implanted the drive for perfection and the confidence that ‘enabled me to creat this book end wio I miss very much adda, whois the best proof eader ix ‘te state of Loulslan, helping tw mate “Mastrig Ellon Wave” a: error freeas possible ary errors sill remaining are exclusively of my own maki) Glenn Neely - 1989 (revised April 1990) Table of Contents eos Discos ate tne ene iSiesoeer vost tne ine ee eee togreeeetaces ee ii smyaetereea oe eRe Fe ‘Sees 5 soy Crt i rr sane Sr ed ae seer Eo savoir aie vara rec Sonics iS tsos Seteedtiaeate man cone senate ami SPS et a sigan orgs si pes Moet it may ‘ony senGeneral Concepts Whatie atone"? Wy Do Wives Occ? Winy Are Maes Important? eect Pca Patens owe You Categorbe Waves? Deve How Do ou abel Wives? Orono Prorat ‘Wha Daa old eed To Ante Wat How De Yer Plot Date? ow Compa Do Waves Get How 1s Ths Kaowiede Used To Analyse? Preliminary Analysis ‘Chart repraton ane Dats Management ‘teen torner Irn ‘af Nobn Gctigy Ralf Oharion Inpenenson Peston rs Pn init Did epee Splmsie Synopsis Chapter 3 2 eben 3 a a a am se sal Intermediary Observations Monowave Grape Rule o Simriy and Balance Rounds igh 3) “igang "DETOCR™ Test Contral Considerations Construction 3 Polyaves Ba Comers cmaualsacint geri eo og Trg tare ein tu on ‘Sahaine SW Bein acetone onstans arse ge ti eWay a Swoebme Daas Loney 2 si si se 0 raSire on UNeoLiniing Pot Tame ews ‘rea in Romig win dt Comrie Cot Seb cod Chapters 6 through 12 are almost exclusively the Neely Extensions of Eliott Wave Theory Post-Constructive Rules cf Logic Impubions TroSapee Pate Coimatin a VaneBcen Sinan Enero SaReneFaier Corrections Roginnens Pacem Caiman 30 53 3 So S36 o e Conclusions ‘Compaction Prederes Icgrn Progra Reset Complexity Ra nate Ware Rosia ‘Flow Carta rire Nely Method itt Wars Anais Construction of Complex Polywaves, Multiwaves ete. ‘Contruction of Complex Palyaves “Stan pe Nonidet “Sic Rance Cones Crt wi Sal We) Sem Corona rH) ‘Construction of fiaves npn ofan Whisk Wa xd Knowing Where Start Count Hs ft 49 rs a wrBasic Neely Extenslens: ‘Trendline Tout ois Time Rule Independent Rae SimtanenssOvcarrnce Escepton Fae “ae ‘tees Necesly of Maintining “Strate Integrity ocking i tractre laa "Progr Libs expansion a ates) Advanced Lopic Rules ‘astern Ilicatons -AutCarectns cept Tris) Treat Tretia ‘lngnigae ‘tng Tim, eet Noeceqe ‘reer Ieee alae Tagen ‘DokeArec amin Corecon Tap ier ene Corn Tene 4 a 105 ms 06 Ii Advanced Progress Label Application ‘mouse Pat-ns re) Moe dN Ene “hae SNe Ede Termin Niessen Nee SN Brendes Correstve Paterns Fs iene Serta Reig 13 a M6 aeTrnges oom, Advanced Neely Extensions Channing oie tien) Deacon fav, De The Weed gry Input lettin its Chanting Doe tsenn Correstions dentin ith Chanting eee Troe ete coe 2 ua ua 126 P10 mp Comptatatene Dest Tze Dante leone ha i me Danica ripe han Danie Tongro enttyng th Completion of Waves ‘Advanced Fines Relates Inge Pats Scan Comets Sechtece act mie Dad Tigran oe asta pera cee Mion een dtr? owt ey sca Wyse? Whicker pie? Elaon Danie Tp cies InWoebacson SiktneBaenn pansion of Fonitis Localized Progress Label Changes Appendix Forecast to tke Year 2060 na a tas 33 aedleation ‘This book is dedicated to Richard J, Teweles, Charles V, Hislow and Herbert L, Stone. None of these people have I met ortalked with, but they ae the authors ofthe back "The Camm Futures Game." Te was while reading hat book that If et my eyes en the phrase “Elion Wave Theory.” Forme, thats where it all began, his book was written withthe intent ofsgificanly advancing the viability of Elie: Wave ‘Theory by introducing a scientifi,objestive approech to market analysis. Tis innovative apprach, kw as the Neely Wethod of Elliot Wave analy, ithe result ofa decade of rang, eaching and— ‘exensiveresearchb he author. Inreading this book, you wil quick realize itslike no other you ave ‘ever found on market analysis. Preserted herein isthe fst step-ty-step agproich to Elion Wave analysis ever devised No aspect ofthe Theory i left for you to pender. Every detail i thoroghly expltined and inthe nord of Bruce Babcock (Commodity Traders Ccasumer Reports), "every senence Is devoted to something important ‘The concept ofthe Wave Theory was original presented tothe investment world by R.N. Eliott in te early 1930's. Going well beyond the original discoveries of. Elliot, this book reveals new techniques, rules andrarke price pater never tefore disclosed to fhe public ‘These new discowres will dramatically increase your market forecasting cocuracy and your confidence in trading, “Mastering Elion Wave” deals in get detail or the subject and aplication ofthe Neely Melo. In suppor of sch dtl the acuratepresiction ad orofitable wading ofa mirtetcn continuous basis requires a complex understanding of economic and financial price activity, nether reason fo this ‘eensive deals tensure the book serves as a valuable guide and reference for yest o come, Ifyoudesirethe lity to forecast ane profit fethe complex undlatons economic activty.his ‘bok wil help you achieve that gol keno other. Tn addition, ever effort as been made to cree in "Mastesing Eliot Wave" a wulyinteracive learning envionment wich willallw yout fell» the ‘book’nstuctions wal simultaneously analyzing real-time market tion, You wil definitly findthe [Neely Method tobe challenging and am confidert you wil find reading this book tbe ine wel sent. [Now tum the page and prepare yourslffora newacventure; yourentrace int the world fhighsech market analysis Glenn Neciy - December 1987 (revised Aprit 1390)Natwatnon rec Aedes ct ‘dtc Wey Lear ict Wave Theory? Mitts Maiterestetatn ewe eine near, Mephindtoner Cec Wy neon nei Pricing Sq Years Mater eines Poet Dacian et Simp sean nde ow Sou Yen Lente Ther? Wi Asher Bok on Ws Nea Adilind Techie gaeg NEY Spey Pcetn acta er ny Where the They Appia caer ow Shute tras wii A Werk wih andere? Oren dy nats What is the Elliott Wave Theory? AAAI Ee Price Patterns of Psychology From an Eliot Wave perspective, the plot price aciviy ofa markets the graphical epesen- {ation of erowd psychology. The Wave Theory describes how local plated data relates to surounding da, how data shoud behave under «multitude of circumstances, ven and bow psychological tends begin and end, how ane psyehological environment mandatesthe unfolding ofanther and what general — shapethe price atioshouexhibitupencompleicn.Inather words the Eliot Wave Theory orgies {he sosmingly random flow of market price action int identifiable, predicts ates bse nthe natural progression af crowd psychology. Individuals beheve in certain ways depending on theircuret opinions al feelings. When eed, that individuals actos wil invariably be distin different fom he seme nviduals ations when ‘kpressed. Just the way one person can feel exced or concerned about his cher personal utr, he same felings ean permeate and be manifested by society. When a majority of people have sind fesings (favorable, unfavorable, indffren) about thei, or society’, prospects forthe future, thet ‘mulitive ation ufos in predictable patems. Ha adition, the sme way an individ can hange ‘sor ker mind overtme (occasionally in an instant, scan the crowd. The Cash of 1987 was a ‘exinple of nalmos.anivers, instant” change inthe crowelsopinion ofthe sick narketandthefiare ‘ofthe United States economy. Once acerainpsyshologca mood asrunits course, people tendo get bored with anideaor concept (sometimes financial ruined by them),sothey gabontonew ideas, Ii this charging from one nood tothe next that ermeates one psychological tend price pattern) ard begins nother Natural, Non-Periodic Phenomeron ‘Theamountof i consumed by aspecificpar-soietal mood apears to have noshsolute nin ‘or axcmum ime retirement, but there are gene Kms. By analyzing previously completed pateros and applying cain rincples of ime behavior, is possible to approximate ‘he Best ime pci for ‘completion of formation. These techniques, many of which Ihave developed over the las ten yeas, will be discussed in hter chapter, Sorry Desa rr‘The “structure” of market movement shoul almost always supersede time observations. Some people consider is an annoying apect ofthe Tacory since they want to krow "when? to make rade, ‘naatvance! Elie virally proves tat absolute anticipation of market movement is impossible, Tae _reatest degree of predictability occurs immediately after a move hs teminated. Tn other words, you wait fora patero compete, then you take action, AUnique Anaiytical Toot Unlike most forms of ectical analysis, the Wave Theory was developed sity from « price tchavior standpoint. The Theory helps the analyst realize that wiatever the maket does, it des for & ‘asoa, There iso “chance” in market activi, a0 aberrations and no unkasifabe price betavior. A arge portion of market technicians spend ther ime trying to manipdlae price dat ond tht “magica key indicator. How eanairansformatonof peice dat be better thnthe original data Inher ‘words price shou be considered theultimate indicator. Is the only inator of market action tht «canbe absoltely dependsion and te only onethat directly affects your becom ln. Itdoes ot make {ny ference what Someone thinks or what an indicator signal, he bottom ines, what il the market ‘db? If prices are going up fand you are log), you make money, If prices r= ing down (you ae long) you lose meney, al oer indicators notwithstanding, ‘Some ofthe remarkable aspects ofthe Ellit Wave Theory ae: 1. Its adaptability to new technological developments and unexpected fundamental news; 2 Its thoroughness in describing ALL posible market behavior; ané 3. Ils progressive and dynamic characteristics, ‘The Theory inkerently indicates man and his markets, continually char new teitory andtypesof behavior. I stpuates that at no point in hstary js a markets ation or psychological environment ‘ential to any otter period. Skilartes are allowed, but at exact duplication. This canbe aoblem fortaders, and especially “stem developers, who endeavor wo formulate steps based on historic pice action and behavior. Unike most systems and forms of atayss, te Wave Theory warns the 'tnalystto look for shang ad warns him when and whee a mick will ot behave ait has in he past. ‘The “Elin” print of view, that "istry does nt repeat exactly,” sthe perfect explanation of why ‘cost mechanical ystems (and the forms of analysis based onthe expctatom of exact repetition fail Thisis particularly evident when amarketchang’s roma bullish bearish environment orice verst ‘Tre compute sge has dramatically and probly permanently’ altered certain aspect ofthe ading =nvironment ands markeibeavior. Thisisarexample of why working wit historical data way back 'a “who knows when” will nct necessarily make a mechanical system function any better. Ever ‘xpanding technology coniuousl transforms the decision element of the market, people. The way ope eat to, use ad lean from new technology cannot be decided by histrial study, A form of alysis which explains categorizes and stuctus progress, not repetition, is needed, Thats what the itt Wave Theory is capase of doing. Additional Examples “The 1987 crash vas. perfectilusrtion of hw a study of history could not have prepared ore for ‘whathappened Oct 19,1987, Even he args decining day during the rsh cf 1929 was only ball as detrimental (perc=stage-wis) asthe one experienced in 1987. Anyone ving the 1929 crash asa tcom:er may havecccided to buy the market aferithad fallen 10% So the Say of Octobe 19,1987, ‘expecting no day tobe worse than that experienced 1929, Of cour, anyonetaking such an apposeh ‘would have bea infra very unpleasant surprise Ding the 1987 advance, remembe: continually hearing people tk about (and secingadsespse) the exteme similares between 1982-1987 and 1920-1929. They assumed everything would corinue concou'se exactly (sme ime and percenage advance), with he 80 bull market eating he nine year ‘boom a if it were arcther 1920-1928. Unfortunatly, those who believed such ar easy comparison of Iistory was their oad to sches may now be doing something besides iavestirg ir the stock mare. Why Learn Elliott Wave Theory? mena TILT TLE ‘To the beginning student, the Theo's complet, multiple pater variations, alternate cunt” possibilities and appwent subjectivity stem almos-nsurmountabe tnd appear to uli the Thar’ validity. Thisis de tthe extreme demandof specifies required ofthe Elion Waveanalyst.Allgexeral ppatemcategores, arceachof its variatien,reqiresiferentrelaoaships, channeling, pice befuvie sl tecnica characterises, This creates the isin that the Theory is purely subjective and cin be ‘molded ofitanyone's opinion. While here may have been some jastication this tance in the past, before the publication ofthis book, thissimpy isnt true anymore. The Pre-Constructive and Post- Constructive Rules of Logie (Chapters 3 & 6, respectively), n elabortca with mamerous, om pletely new technics developed by the autho ver many years, wil greatly enkance you abil 10 ive ata single wave pattem conclusion. Caveat” These techniqnes, andthe specifies involved in plying them, ares numerous an vied that hei proper application can tke years of practice and real-time trading. Asareslt until you boroughs understand the concepts presented inthis book your conclusions may freyaemly be incomec, Multiple Benefits ‘Thelong-temn bereits of" Mastering Elio Wave" are numerous. Asa businessperson or investor, you can frequently amcipate major changes in the economic environment allowing you to sidestep aster or even prot fom the winds of change. Proper understnding of erowd psychology (he fundamental basis of te Theory) ean help you ave financially dangerous business dealings athe end of an exonomic eye Multi-area application ‘The Wave Theory can be applied to virally all areas of mass human endeavor: the stock market, conmedites, real eine, peoduction of godsand services, et; allthis required isaccuateconstent ‘dea. The beneis of the Theory’s moltarea application are obviows. il‘Numerous TechniquesUnnecessary When incorporating Eliot's orignal ulesand observations withthe Neely Method andthe new ‘techniques revealed inthis 200k, you have at your disposal virally ll esompassing description of ‘market behaviorandhow todecipherit. Tisallows yootokaow,undermos.sreumstances a ret deal stout the current position ofa market withoutany infomation other thin price action. You willnot need ‘w keep tack of namerous time consuming (and sometimes subjective) ndiators, Remember, no matter how good a mechanical system or indicator works during a particulr period ‘in history, the mime the pte (which was urfolding during the formatienof the system) completes, ‘hat sytem or indicator wil usually not work anymore, The envronmentin which it was designed 0 perform so perfely no longerexiss and (accardng othe Wave Theory) wll never exist agin. Helpful in Indicator Clarification you decide w use othe indicators (outside of Eliot) to “clrify" wave counts, the Wave Theory ‘is actually instrucive in qualifying where and when a particular indicator does and doesnot work. xanpl: Readings of invesorseatirent normally indicate a signiicart market ting point only when in ‘overbought or oversold teitery (usually considered to be around 75% and 35%, respectively). A ‘compreteasive understanding of Eli patems allowed me 1» recogni in 1986 and 1987 that sentiment could osilate areun neural readingsevenifamaor mikettuming pint was forming. This ‘yasa logical dedction based onan understanding of Hoszootal Tangles and Terminal pts (€, Gold Janne 1986 and $ & P00 Jan, - Sept. 1987), When mos were conéused by the ack of public ‘excitement generated during the 1987 stock market advance, conta warned clients that was sign Terminal Impulse wave (agonal triangle) staredinthelstquarer of 1986and would portendacrash, ‘in three months ot ss, back 0 1900 on the DOW and 230 on the S&P SO)Cash Index. Signals Infrequent, but Reliable Only after an ideniabe pater s complet ist safer desirable to enter amacke. Tis helps avoid ‘overtrading and prevents entering the market when there i litle potenisl. On the oer hand, ‘romotes dng when the probabilities are realy in your favor and ik saa minimum. The Theory ‘soallows forthe placemestf very objecive saps enabling yos ta know wien in ime and wherein rice your interpretation is wreng. ‘What else ould a tader ask for? Why the Controversy? MEMRAM Complexity ‘The Wave Theory is proba the most complexand all encompassing form of market analysis ever devised. I requires lot oftime and practice tomaster, Asa est most people donot havethe time ‘norinclinaion wo properly eamor apply it.The Theory takes mare ime wo Ferfect than most people ae willing to commit_In addon the idea ofan analytical technique allowing someone to ea. market ‘uring poins tothe day, even th hour, isconsidere by most tobe riiculous ar atleast suspect. When ‘amajocity of invests have trouble beitgon the right side ofa market, atermpting o pick te highest ‘orlowestickofa endisnoceven considered serioisposibiky. A Theory whichprofessestoproduce astounding resis willalways create Contversy and be eated wth skepicism bythe uninitited Public Mind Set Profitable application ofthe Wave Theory quires @ mentliy divergent Som the norm, To ural cll marke: tuning points demands Yoa Buc the crowd precisely tthe time the majoty is ‘mosteonvinced an event will occur {youmay poss yevenberdiuled for your beliefs one of thems ‘elable signs youranclysis score’), Extreme slconfidence isa mst conzol cf gree, sit money ‘management (whichincluesriskeonto), an opr mind and theabiiy change yourentr perspective (Grom bllish wo betas or vice versa the blink ofan eye ae all nscessary triutes and ables of the socessal anal: andor wader. Most ofthese characteristics are otal present n one person, mikngiifiul ote aprognosticatorand poftabe investor. Mary peoplecan predict ure market acion when no money oftheir own is ask. Waen trading becomes personal, everything changes, Years to Mester ‘Even if you hadal ofthe qualities mentioned above it could take years of practice confidently and accurately apply he Theory o realtime. Since mos people will ot spend the time necessary 10 ‘per lar the Theory, they misappyitand ove money inthe market. Thserestesdigriledex: sens who, of curse, blame their misforune on the Theory, ths contin ng he controversy Application Requires Time Evenifyouhavetse mentality andthe years ofezperizace and knowledge, u sill mis spendtine analyzing everyday oso stay in practice and keer up withthe current positon ofa marke. I yousre folowing numerousmurkes, this alone can ake several or more has every ‘Onmany ocasces, Ihave spentan entire weekend looking at one markt, tometimesjustone shar, ‘ying figure away ofall be imporuntelemertsof good count it the price patterns, Most pop want making moneyin the market (andallotherendcavrs) tobe easy. They work all day at anthrjob, 00u text, go1o the movies, then ight before going to bed inthe evening, pen Sor 1 ina on ther chars to decide” what the markets going todo the next dy. “This is jst one of many reason meat people ever make money tang. If you are in the ove smeticned category youare competing ais bar fof devoted, fl-ime professionals whoderive ther sustenance fron profitable wading orinvesing. The chances ofa par-siner voasistenly wining ‘guns this group arsenal. Ifyou ar ot abl w spend th ime required to follow markets progr, itisrecommended yo find a professional who can avse you on your investment, Endless Array of Specifics ‘Toppy Elion Wave properly underall circumstances requires te applicator of analmost endless amy of specific crierafiting pancuar situations, Relationships, channeling the sigifieanse of ‘certain taming points tothe overall cture, Srucure (Impulsive or Corective and what type of Tnpulsion and Correction) all need tobe considered when piecing together patten's coutMemorization From the statements on te previous pages, it shouldbe obvious that large amount of information needs tbe memorized onéer thasten the appication of importa Eilon Wave and Neely technigoes taprice series. This memorization is one ofthe msjor obstacles most students encounter to successful application of the Wave Theory oral time action. Frequent Indeterminacy The prior tne termination area of trend isnot predictable, wth ahighcegreeofconfden:e uni :mElliot Wave paterson he verge of complet on, Sometimes confidences notobiainabie uni act ' pater has competed. Ths fact keeps most ofthe public suspicious about the They. Why? Ifyou 'sk an Eliotician for his prdition of farure met sctvity Before a pate is near completion, the pobabies are high his ancl willbe wrong at leastin detail. As the market approaches te end of 2 move, the pater in progres segins to become clear AS it moves away rom the identified turning >ointofapreviouspattem an moves toward the middle of new patern, the nmberof possible pattems smprogressuguin creases. This isthe reason e»peienced Eliot analyte disigret onthe position ofa market during cerain time periods; each s choosing whathe ose considers toe the best oenario ofthe interpretation posible. ‘When persia th same field continuously disagre on the same subject has the very foundation ofconroversy. Ina ater chapter, a whole new concept develope bythe ator, wll be introduced to ene these areas af "uncerasty (se Expansion of Possibilities - Page 12-43) Dipfcuty The extreme complexity. subey, and demanding mtr ofthe Wave Thar prevents mostpeople from parsing his nea of aralys Also, mot ofthe ean ined thoughout Chapter! prevent the ‘Theory om beingcompleely computed. A>picaion of the They soni demands ms of ast thought, not aspect of te computer eaim. Fo exal, appiaton of al the ls under ‘erin czeumstanesmaylerveno obvious posses. These stations reir personal rainstorm ing sessions to “untck the count, smctime, merely pence walt fra count revel ise. Masry oftisormof alysis wilbeapliaefortberest of orl, Tere smo eed concern cust withthe possibility of heavy public pacpation, most wil pps i wrong. As Eliot has ‘evomeineresingy poplar the wae patterns smal maes compen, hve Begun tevelop on an ever more complex eve preventing amateur Eliticins from corey deciphering market ‘havior. Ain ts esto perpetuate the coaroversy in favor ct the Toys inadeguncy at the very les, ts supped subject. Why This Book May Create More Controversy LAMAR TEE “The degree of del coved inthis book wil sgifianyineease he amber of important aes ‘nd guidelines that have tobe remorized to properly apply the Theory. Most people fel there are aca too many rales associated with Elio Wave. Many experienced pracioners willdisagree vith some ofthe fincngsinths book proclaiming"my wave tehavior rita isin specific or demanding tobe applied to real-time market ton.” Tiss sloluely not tue. Its understandable though, acw these feelings might have come about in overs. “Many practitioners ve, for years, used cata toplo:theirchars which sinaccuntecrimpropedy pleted {forcing them ntoinvaid conclusions. Thisobviousy would affect ther percepion of te Wave Theory ‘Wen sia is inconssient (which it willbe when cllected and pled incorrect), its impossible © amilyzeamarker'sucionwithexactind, [For amore detailed description of what const: gooddata ant how to plot, see“How Do You Pot Data To Analyze Waves,” in Chapter 2] What Makes Elliott Wave Theory Unique? AKA HAHAH LTTE EL Complete Perspeuive ‘alike most al mechanical systems and many snalyticaltechnigus, the Elio Wave Tory allows theaalystto stody anytime frame: hourly, daly, weekly, monthly, yearly, etc. Even more intereging, ‘theanalstcan sty rItime frames simultaneousl, allowing adecsin tober an whichtime fame ‘curently provides he greatest rading environmen: and how all the long an sher-iem movements inexpay with one anther Quantification of Mass Psychology ‘Bvenifa sytemor technique tes you what tod inthe marke, rely wilt give you afeclag for the ecenomic outlook of a society or ofthe psyctology overshadowing all market action, Due tthe ‘Theory's muthematcel quantification of mass psychology, it allows you to experience the economic Phenomenon wit grester intrest and understanding Detailed Categorization Almost ina clas: by isl, Eliot allows forthe categorization of moves which cover just few seconds in length up chundredsof years Every move on2 price charthaits efecto thelarger pares that are evolving andeach an be labeled based onts specific mpact. Ifyou kxow what ype of pater isunfolding, you havea beter ida of what expect rom that movein the aca of speed, complexity, breadth, volume et many of these ares wil be covered Inte) Grand Simplification “The whole Elon Wave analysis process involesthe dexiphesingot smal ricepatters combining ‘hose with mumerouscthersintolarger pce pares and thn edn those cemplx pater bo ino simple: paters again This what aks the Theory so unique; evlopmentisthe sae on al ees. Clear Delineation of Price Behavior [Nematerhow smal orlarge tend ums oat be, youcancesl label themovementasanupvand ccoveetion ina dowtrend a downward corection in an uptrend, et Bana Dene 17How Should You Learn the Theory? Sma KHALAF PE Reading this took sa good start! "Mastering Elion Wave” the book nd the process) requires & !xofrea-time pretce. Inialy your chars shouldbe constracteton short erm basis until ou grasp "pebesicconcepts, Memorization ofumerous-uesis required along with understanding of general stapes and chanreting. Its recommended you fllow no mire than ene market anal you have ‘memorized the bs les and can quickly appy them toa market a it unfokds in eal-ime ‘Why Another Book on Elliott Wave was Necessary ATMA Additional Techniques Required “The purpose of this books io provide new, inrodoctory methods to ass objective aplication of the Theory and inlter chapters, ciscuss more sible qualifying techniques, These wl be required by the experienced aalyst io eakance the wave wackng process. These techniques canbe employed even ‘shen the market isdeveloping on avery complied bass, eliminating the need to resort oot types ‘less reliable indicators or techniques, Specific Procedures Described Despite the peponderarce of information row availabe on Eli, most people intrest in the subject donot know where w begin when tying wo apply itt re-time. The approach in his book is 'cogically progres from the simplest concep (many of which were deveoped forte benefit of my 2ourse clin’), othe morecomplexas cach stageot wave aalysisisundersocd, Inaditon ext star sap procedures aed dats-ploting methods willbe expine in del. Realistic Diagrams Previausly Non-Existent Even in Ellon’ original works, diagrams ofmarket behavior were very poor and unrepresenative frealetime mavketaction. Inrry early day of fighting with the Theory those diagrams were song ‘nflvenceonmy thinking, Tk icealizedpaters resented never reflected actual market behavior. Any student familiar with Eliot s original works wil greatly apprecinte the ation to “real-life” etal resent inthe cars of this took, Tn the erty seis ofthe book the typical” diagrams ae used to ins the genera shape ofeach Elliot paner, bt they ae quick discard later for mee acura Disclosure of Advanced Concepts Eventhough general descriptions of Eli’ stenes canbe found nll wrkins on the sujet, ery Jide is available onadvanced techniques and apglcations. Is in fat are tht this book really excels nme Deans Original Presentation Sequence ‘The difficulty mos students hae in the early stages of learning Elliot Wave is mosly duet the stendard method of presentation. A kt of impartance is placed on what I call “Progress Labels” (12,3445) toocaly in most publications. That area ofknowledg> soft i-portanc in theraly lexming stages it attends to confuse if aiscussed 0 000. Also,firtoo much sgnifienoe paced ‘onDegree in Eiot’s work anditsspinols Ifthe is any spect ofthe Wave Thecry that subjective, Degree is it For the above reasons, bo concepts are presented after more basic ideas are cover. New Terminology ‘The dicuty of discussing the Wave Theory over the phone olin an in book form reared ‘heereation of new tminology in rderto convey precise meanings. Some cained words tnd phases ‘ware ako needed to describe new discoveries and techniques covete in this took, In adiion afew oldternshave been: aed forclarity, Many “Sunlard and Non- Standard” Elio patterns have teen ‘broken down intomore specifi sub-catepries. This'4s done oath application of ‘patter spe fe” in guidelines hich will enhance you forecasting accuracy ad patter interpretation, New Discoveries, The Neely Extensions Rm HALLETT Inically, Tintended include a separate section on all he new discoveries (chennelng, Fibonsci, rz, time, sirvture, paterns, degre, relativity, mcmenum) Thad nade over the years. This prved twodiffeult. Forte cempletenes ofeach section, he presentation of enyoldiformation rt and hen ‘new information late would have equi itrodacing al the same categories twice. For ressos of coxtnuty and space aesevation, each new technige, concept or dicovery has bee nieve is rope place with the assumption that the reader will leary detect the presence of “never before resented” information, The vale of these Extensions to Eliot’s work wil be proven to anyone who ‘spies them proper. For those new techniques, orcepts nd discoveries which could not be incl.ded in the rormal flow of the text, there are several sections toward the end of the Book which present information that has cher never been presented before (1, Rule of Similarity and Balance, The Neely Exensions, Complexity Rule, Power Rains, Logic Rules, mulation, Reverse Logic Rule, Mising Waves, et) orhave ony been impli butnever explsinedin detail. Structie Series, the dominence of Strctre over Progress Labels, Compaction, Progress Label Application, the importance of Channeling, the diference benveen Extensions aud Subdivisions, How I Discovered these New Concepts and Techniques Ac HH HHT EEE ed The Telephone Course ‘When [stated my studies ofthe Wav: Theory, tran things appezed tobe msssng from avaible literature onthe subjec. Questions lik; "where do yu star a char, how do you organize chan, tow4o you plot price ection, how do you analyze and weat near vertical advance or decline ona pice chart ‘hatexibissno upand down price ston?” cam: tomind, This alng wth te rustationLexgerenced when wrong abou the direction ofamatket'smove, keptme searching for answers, Refusing believe ‘amarket could outwit me, believed with encagh time and wok the Thoory could be rediced to & ‘Sientfic approach where all market action could be explained and most future action sould be ‘mtcipated, My purpose was wo eliminate any subjectivity inthe analysis proces, therefore llowing ‘tional, logical ding decisions to preva Inanattemptto explain marketactin which not fiat the Wave Theory asR.N. Elion esribed .Tset out to quantify ever unquantfed facet As prof hissy, eight years of notes were Kepton all manner of market behavior in an attempt ro classify and reginent marks action above and beyond Eliot orignal discoveries. ‘Most of what Ihave distovered has come fom teaching “one of akind” Telephone Course onthe ‘Theory since 1988. Due 0 ths delle teaching proces, new ways of presenting the Theory 10 tegiones,imponant wave behavior discoveries (Sometimes very suble ind specific, Channeling ‘echniques,Flbomecirelaionships and charting approtches emerged. Theough constant application nd research, believe Ihave quantified alma’ every, up il now, unquant fied aspect ofthe Theory. Long Hours of Work Since I generlly work seven days a week, ten to fifeen hour a day ed have been staying this sabject since 198, Lestimte Ihave logged mene than 30,00 housinthe sty of Eliot Wave Theory. This alone was a good breeding ground for new ideas. Where is the Theory Applicable? HTT AAT LAT EPL ‘The Wave Theory manifests itself in maikets that have bad public sppeal and invclvement. Markets that are nore susceptible to weather and other natural events re les reliable followers of he ‘Wave Theory since the weathers nt dependert on human though or ations. Many indivisal stock issues are not broadly based enough ost nto notion ths natural of ras human psychology and ‘© may not yield consistent results. On the aber hand, markets such a8 gold, broadly based stock averages realestate eventtoughrelabe dala isharder'o obtain for realestate), work wel since litle ‘an happen to change the valu of the commit or index except human ation, Virwallyeny mass truman endeavor will exhib predictable progres as long as theres consistent, reliable data avaiable How Should You Work with and Perceive Elliott? EAE EEE ed Meticulously All market acon need t be accounted for and clasifed so produce bankable interpretations. Counts should be ui fro the ground upon a'moleculse" basis, Do nt sar the analysis process by ‘ying to imerpretalong.team rice chart fst. The long-term count is theby-produt of alle shot termstuties, Keep you short-tzm analysisacerae and the long-erm pss ilies wil usually become evident as they unfold. ‘Once chars are ganized on a dally, weekly en monthly basi, the analyst stould patiently wok wi the short-term cta uni clearly definable pater appesr. Lae it willbe ciscussed what 40 wi the completed fetter and what pat ofthe whelethe pattern becomes. ‘TheBiliwt Wave Theory the graph representation ofa natural aw whic scontinuousl work inal aeas of mass human activity. As n analyst working withthe Theory, done ry to crete coo seenarisr force the market into a pattem which vould favor your cure opiion of where the rsket should seheaed. Leeach patemevole, then obevelydedacehow thatputr,basedonthe highest cb ites, fis int grander Scheme, lot frequen allows you the pare (nelecually and financially) ofelling major tring points tothe day or even the hour, Ar these junctres you wil be “lone voice inthe wos” Hyou >have the courage to xt on your convictions, the Eliott Wave Theor will proce result for yo. Open-Mindealy ‘Topropery apply the Theory requires an open ind taal posites. Never begin the analy of ‘market with precor:eived scenario and then attempt tomoldan Elin count which would verily our opiniors. Your gonclsion shouldbe the by-procuct ofa caefllyconstuctel wave count. Als ty ‘ovoid l optimistic or pessimistic impulses. Whe ll techniques ee followed correctly yo dn eed tomake gues, che completed wave count wll wiualy el you what rice level the market shuld reach avin what ine fame tht shoulé happen. What's Next? RRR LETT UL ‘The next chapter of this book, General Concepa,is designed toanswer basic questions you may ‘have abou the Wave Theory but- ntl now ~hav> gone unanswered. The thin chapter, Preliminary Analysis, describes haw to prepare and maintin chat dua, how to enti waves, propery observe ware interaction and-nch more. Chapter3 contains the most complete and methodical explanation of Price analysis available, These techniques will allow the novice to accurately decipher even the most. ‘complex marketcondtions. The fourth taper. mmermediary Observations, discusses how tocomsine {nividual waves into acceptable groups to form "sandard” Eliot formatirs, Chapter 5, Cenral (Considerations advances further into the construction of peific Eliot patterns with numerous les explained to eliminate unsatisfactory wave development. Chapter 6 introduces the Post-Constracive ‘les of Lagi discovered by the author. These nes will describe how to con the authenticity of Patterns you have deified. Chapter7, Conclusions, wllhelp you soli your wave ptters sri ‘hel Strctre and prepare them for futureuse. Chaptrs9-12 contain vasarray of mostly new pers foraulsion, testing sv verification techniques, onary Di 138General Concepts Woatientaet Way Do Ware ecw Woy Ave Waves nortan How De You Label Wares? ‘Sree Orontin PopestLade What Dats Should Usd To As How Do You Pot Data? in Man Chi Are cy ow Compated Ds Wares Ge os Tas Knowle led To Analyae? u a 2 “ayer? What is a 2 ALARM {tssems quit renuiabl thatthe basis ofthe Wave Theory, wars," hasnever-tomy knowlege been cefined in any literature ever available on th subject. To make sense and beof use wave mast ‘bedeseibed in speci tems with absolte limits. A more general definition wll x offered ltr thee you have been introduced t some additonal concepts. ‘The obvious place to start with the definition of “wave” isin its simplest fore. Since waves fer ‘o bemovement ofa markt, and marketsare measured in pie, the definition wil depend on efereaces ‘orice action, Clea, the simplest price movement on a chart would be comprised of a staght line of any length movingin any direction excep parle! to the y-axis onan xy pane (see igure 2-1 oa the nexa page),Figure 2-1 - iS Tae Tae Tae Te Alictbesedagansremesen abo ftsnexceptt bot hi Tomar. fae pce actin resi tine flap Cant” dsb nr ns ftp. Ther sell, vet ce movenen impose Lo 4 ‘Todeseribe this type ofaction (which s parmount to our diseussions throughout this bok) it was necessary to coin new tem: Monowave see Fig. 2-2). A Monowaveis tre movement of amarket starting from actangein price direction unt the next changein price direction occurs andi the ‘Simplest type of “ave” InFigure 22a he stating point“ is wher the ce changed dectonfrom itspreviou course, The pont labeled nis were the next change in price action oecured, Between ‘ny “mn” and “n” you usualy witness a sraigh line. Except when the Rie of Neutrality i applied ‘explained in detain Chapter 3), even ifprice ction does slow down temoaraiy and then speeds up agai, (see Figure2-3b) theme advance or decline shouldbe cansidered one “wave” (a monowave) ‘ntl price actually changescrstio; when it oes, the "Wave" is ove. “Monowaves are the mic components (the aiding blocks) ofall wave ater. Learing how to Aecipher monowaves is you fist step toward understanding Eliott Wave Theory. Remember, all ‘market patterns and trends (no -nater how larg), begin witha sirgle move. Unfortunately, stlyeing {very move a market make is tedious, but usally necessary to comet interpre the large picture accurately ona cosistent bass Figure 2-2 Amonowar cnet ay ried ne don Asin 8 ceconsnaly novergpordout nth etter ton Bite oppose deci) he movement olde cons red |< monowave. The ms imports fea aan 7 [Wave analysis cemeaty inept moowaves Teenie her isd on th roped ison af masowares. eat cons Figure 230 ceagetaPse Diem Figure 2-3 (Chnge'n Pree Dieeton pot sgh Bat Tinie eR Cngelnrie tecnico! te Samoa Sietaneowe angen oe Why Do Waves Occur? RENAL “Waves” are the result imbalances which occur between the numberof by and sel orders an ‘exchange floor or in he open market, for whateverreason. When demand for pred, in relation to its appl, increasing (or inthe case wit commmotites, the tua numberof “buy” orders exceedsthe total nmber of sll” onders) the price goes up this vent could beclledan“up-wave.” When demnd for a prcduct, relative tits supply, i decreasing (n commie, te sll orders overpower the buy comers), he pice fallscreating a "down-wave.” Eachtime one force cverpowersarather, even forthe shortest pri of ime a change in price direction ocours which starts anew wave. These suply and ‘demand forces are cominuouslfllinginto and outof balance onsale of varying mmgitide (Deg) Why are Waves Important? RRNA Finances Market movements composed of waves which cortinually combine to form ger waves withlarer reacions. Accurate analysis of a markers wave paternscan give you m overview of curent economic conditions. Asa businessman, invesororspeculato an understanding ofthese ceadonscould dirty fect your financial sus and standard fiving by lowing you to profi fromeicumstances few ie expecting Psychology ‘When a market moves ina paniculardzecton for long prio of ie, it tends to tract the media “whothenaletthe pblc (the crowd), Thelongera met moves inn: direction, the easirtbecomes{Gre coud otlive the tend willnever sop or believe the ted wl continue much far han ‘zettlnels Ths fesingssffethowpeoplecondct basins epecilyiitisinaramtotreee ay and ca wl afet ho they invest. Sank, eterain consume, eHow mach many poopie pen kon wa they send it affects a whole list of ether prope sndiadusoien, Even peee ‘mvoledinspeculatng aivesng, heanbeafctedby leevensintesiackandcommnativinnien, Patterns {oreccminnionsofiativdl moowaves crear copie pes Eli dc ‘ered that certain types of action can be depended ‘upon wien specific. alters cur ‘Through much rte ard writs ps rach a aint whe eu a pr near sccuncy he pie and ine exten of amare move. Of outer dps cat ee ‘sch sil an pre pea felon, How Do You Categorize Waves? ‘memeeurtnN WT Classes Allmarket movenert under Elio flls nto two logical Clases pulsens (vending & emia pars) Tes ae he pater which occarinthedectioncf he {Fed Whee analy sont term marke movement, Inpulsionscan be monowaves ihe Inpss 'smore complex thana monowave, it wil be composed of five (Spremene Carrectons (non adng pastes): Tes atthe paters which ccur aginst the rend. Core Hons cit aio be mouonaves but, if ore complex, wll generally appear a sideways ronsliloheg (on price ctr and we usualy compose of tre (3) segments, ‘These concepts wil be covered in nceasngly reser ei as you progres througout this bok “Rule of Simirty and Balance,” Chapter 4) along with specific quantification mes Once youchooses aDezre Ibe and symbol fora partir move Degree akesona roe concste ‘meaning, Why? A frame of refeeace is created allowing comparisons tobe made stron al cies 24ers ‘moves, This frame cefeence will provide you with enough information to begin sling certain moves, ty ceaiain names. The names wil imply how & rove relates to another, not how Big o smal i's inherently. Duetote esoteric nature ofthe Degree concepts advised if yeu ars beginning sider {0 not spend much time or pay much attention to this area of the Wave ‘Theory uns peer ‘understanding of more important basics is achieved, How Do You Label Waves? SATOH Once individual mnowaves have been identified they will have tbe lasifed. This involves the application of srctae labels Structure Labels As mentioned in he las section, all market con is paced ino one of twe categories. Out of nesessiy, each ategery must be given symbol foruse in marking pice action This wil enable you to guieely note into which “Cas” pacular mov fall, Deciding on the symbols need to present wave Sucre was notlffcult As indicated inthe {aa section, impulsive pastes should alaays be coryprsedof-or though to be camprised of he 3) inividual segments, Comection are usually comrizedof three (3) inividul segments. Therefore the symbol to represent Impulsive ation iste numbesfive (5) preceded ty acolon(ue,"5"), Toreprsent coect.ve action, the symbol "suse. The colon before each mune is theres prevent ans dees, ‘souneeion to aden forms ofabelicg which you wil implemen later in he enalyos process, Serctre labels ar critical nal evel of epplcation tthe Wave Theory. TEey must be apd {0 waves of all shape, sizesand complexities, Stneme label info you whe hera movement ith or gaistthe trend “fone larger degree.” Prope tention to stact labels wll =i yo in answering ‘ha: ubiquitous market question, “which way i the market going?” Organization “fcr having designated numerous monowaveson shart with "3" 25," you wil be ableto {oll tae market's dvelopmentinto more advanesd stages, To achive this te spe setializron of those":3's" ands" ino groups willte necessary The groups created from te stslizaionpoe willbe gvendifferentrames (another fom of categorization beyond Sructre ib) which ntealy nate their CLASS impulsive or Cctv), but ther general appearance hae), Progress Labels ‘sou become mare profcientatthe tas labeling concepts presented inthis bok, more advanced fonts of labeling wll eventually need tobe mastered. Progress Labels a Gramati p forte beginner, The compleity ofthis subjectis such hata whole Chapter is deveted tit ater, A bet introduc follows to familiarize you wih the coccept, but complete coverage is scheduled fr ler, Progress Labels ar an essential and erticalpartoftesting a group waves fer proper development. The direct the analyst“down a narrow pa,” guiding though cerain condos and observations hich ars relevant tote cument environment, Progress Labels provide onder and Fmt to 2 marker’‘movement, allowing the sled technician to finalize his opinions and prepae strategies to ake advantage of» move which “shoul” take plein the fur, Unlike Stractre labels ('sand:55), which represent the inherent number of segments ia patter, Progress Labelsideniy the position ofeach segment within sandardizd pater. The five segmens inn Impulse rater ae labeled 25 such: “12.348.” Eventhough tere are generally only thre: segments toacoection exceptions dooecur For ths reason, more than te labels are needed, times, todescribe allsypesof Coretive behavior. The various segmerts of Coretive market ation are give) the fit tree or more ofthe folowing eter: “a,heden.” ‘When refering to marke action with the ae of a Progress libel use ike word “wave” infront of For example, ifyou are ciscasing a move which meets ll the criteria and inherent characteristics rogres label I,” you stould refer o that move as “wave |.” This may seem mundane to experience} Elioticians, bu it may’ not Be obvious to the beinner, sis included far completenes. Tn ation, to mike things perfectly clear each Progress Ibe i placa next to the termination ‘hemarketactio itrepeent. The labels are placed inorder Fomleftoright as each segment unol nether words wave-?cinnot be marked unl wave- is completed. Finally keepin ind that Progres labels thou note implemented until you become fair with numerous preliminary and secondary procedsres covered inthis book. Fer this reason, the discussion and application of Progress Labels is reserved for Chapter. What Data Should be Used to Analyze Waves? HTT TEEPE EE Closing Price Data ‘The use of losing prices ona monthly, weekly, daily, orheurly basis is thesmostuneiale way teack development of aurket fom an Elliot Wave standpoint. The closing price of amarkethasTite todo with the ation whieh t20k place itra-ronhly, weekly, aly, or holy. Iwi not give you any idea of how highorlow he market waded ding a particular pecod (Figures 24a. 2-dbillusrate why thiss the cas) hus making virualy impossible o apply thewide ange of pater spect" cetera presented inthis book. Fore«ample a marke could lly 10points during ‘he rst hou ofthe day clwe ea the low ofthat hour, drop 20 points thenent hou, recover and close where it closed the previows hour. Under tinge circumstances, the pling of closing data would ot accurately represent reli Therefore, closing Figures -over ay tine rae - should never be used unless nothingelse is available Ifyou want to employ hourly data, the correc way of collecting datas revealed on page 2-9 (se C Data, #2). Proverplotg of data, colecedover any time fame, i dicussed on page 21 Bar Charts Barchars reveal whata market has done inthe pasty showing the wading range whichexsted over ‘standardized sortion of tre ploted ona single, vertical line (Figure 2 e). The problem with br ‘hart, roman lot perspectives they do nt posses the necessary qualities toallow fr he analysis cof waves in absolutes. Hyou were to daw a line across only the higtsorlows of some rie action, you would have a band c price action similar to Figure 2-44. This produces the right idea, bu is stl ‘not the best representation ofthe entire day's price action. The motion important, but io correctly merpret marke action requies data be of «singular nature. The price aston ona bar chatconsists of ‘ual price factrs occurring simultaneavsl, the high and low. Only one figure pr time period should Figure 2a Intra-Day activity separated by the hour Day's Open } Day's Clase sch nv distil pric cach bourne hoagie?) The ext same chan do werepded tel, mins be te-hoar ales gure 2), Ech ony doing mas comneced ‘wha ie Theron mt even repent eon ca Seep Aotaevelpena gece schedule, titel ak ds ch on cond ur gang occur phe ess meester ibe gal tehgh ro. ‘usedon oats, te uly dose wil ely rosa fe rope omen oer te ges andes pice of the da. In fate apes, when relabontips awel o veay wave ers erica bestal gh an low eeore ora eke epson of os high {ons Isboulbe clear hisesample arbour css eno be wy pape tn Figure 2-40 Day's Open — forced bee previa d's et Day's Chose ach @ epee tect of ack oar err Gove 27— | Fue 244 T 1 I It fe oh we CT oe feeeeeen ee ee foveemesaan Only one figure pe sime period shouldbe employed otis posible to deide how each figure changes (fatal) the current expectsions and possiblities ofthe male. This does not mean ony oe igure day should be used fer your analysis, imply tha single igure prime uni (whatever ta ine wit is-one day, wek, hour, et optimal. Ths allows you w are ate definitive conclsion on caren ‘market conditions and fue expectations. & price band (he brine on ba chart) oes no: erable you ‘to make an absolute, immeciate decision on current and future market posibiles (ee Figure 2-5) Figure25 | Depeing on wie the ih row nhs oy came a cone change De poets fe ati eshte ow cane fine igh hee wesc» th wane extn ip om Ieipaetrthe previo op mone fay) mak be carci (3p) andthe down move ld be te wt oft new die. This I exam tse bow porn ow ' whether the high othe low came Fs, inforing r hr the coxcepr tat fat needs wo be ana on 8 siguirbssohae eal ne” autre For this example, lets assume the mart experiences a violent day. When ooking at char you notice the price action fer one day is above ind below te previous ay’ high and low. This creates Ailemma. Proper analysis requires you know which ofthe two(the highor the low) came frst to mae «decision on whether qrioe action is continuing a it should or devin from the assumed pat, indicating changes in opinion are necessary. Therefore, bar hts shouldbe avoided whenemploying Eliott Wave Theory. Reasons fr this will become clearer as you progyess through the bok Futures Charts FFutares chars present a unique problem the application ofthe Wave Theory. They contin én ‘lementof“derioration” When dealing wih distant Futures contrat ir most commodities the Cash rarketraes well elowrheFurures price. Asexpration ofthe Futures contact rs ea, the Fares ‘ce wil approach te cash and for os: markets will be equal at expiration, Occesonlly, supply and ‘demand factors in sone ofthe agricultural eommodiies can ereate severe imbaances which revel he Fares from equaling the cash at expiration. AScarrying charges and ater costs are subtracted rom the Fuires contract on dil basis a continuous an raual price eosionacurs during the life the (Over period oftime, the inherent price distonion in a Futures ark can wreak havoc with Ing: tem wave analysis In addon, some Futures markets (due to limited fuble participation’ aze susepibe to intentional or accidental manipulator by “strong hand” (wel capitalized individu or groups). Again, hiscan create great diol in deciphering an Eliot Wave ptr, Cash Data (the proper daa forthe sein of wave chs) Manipulation of raecash marketsarmore cult thana Fuuses markelan¢ requires muchore capital @ue toa Iackof leverage) and tine to inte. Therefore, theetumn on investment i less when atzmpting to manipulate aCash market. Additionally, a Cash postion is nat as liquid as & Fes Postion The resol, manipulation ofa Cash marie is seldom atlerpted or sccessfl ‘The Wave Theory requires a large degree of public involvement (which gexerally precludes or _ealy hinders any nanipulaton potential) tomarifet tel Since Cash markets always involve more peticipationby the pablc (through direc buyingandconsumption, sisthecas withcommositesthan Futures markets, ware formats alvays tend o he more standardized and pedicle when cashdala isused. In constructing your dat series use cas data whenever posible. Now, we ned o deal with another matter whch as tobe broken ap into the diferent discussons. ‘Asmentoned ear, proper analysis requires only one price data point occur per predetenined time ‘erod. How is this data obtained or decided upon? The nest thre numerical dvisons discus that problem: 1. For most Cash mets, there is no decision o be made; only singe price quote per day is swilate. When ony ane data point per day is availa, you simply plotthat daa vera predetermined, consistent horizonaldstane Case tne uni which represent oe fll wading day. Fach new data ‘ont will beploted an equal distance fom the next (his aways applies no matter what ime face is covered on the chart, 2. Itbecomes more difficult wo deal with a Cash market which has data valebe continuous all day (such asthe SRF 500, NYSE, MAXI, Value Line et). First you need todecide which minima time freme you lance following. The shorter the reframe the more sophisicaedtheequipmentand ‘or software necessary to track the data and the mae chars wich wil need piting and deciphering. Following shorter asd shorer time frames for wading requires you have a progressively grater understanding ofthe Wave Theor and warehouse” of memorized information a your disposal, The shorter the time fam: fllowed, the greaerthelikliiood one of the maay important, bat subtle ators necessary for proper Wave analysis willbe overocked inthe ruth and xcitemeat ofthe ading day. We ‘conical histhe Eliot time crunch” everyone issubject ni, somemorethan other. Guard youself ‘guns the danger of trying tote wit the Theery over shoes pesiodsof tne than can possibly be handled. If you do mt, adverse and unexpected market ation wil cure you cf the habit ‘The greatest beni of following a market on shor-term ine fame (you ae holding postions Sane nape