Ratio analysis has value at smaller degrees as well.

In the summer of 1976, in a published report for

Merrill Lynch, Robert Prechter identified the fourth wave then in progress as a rare expanding triangle,
and in October used the 1.618 ratio to determine the maximum expected low for the eight month
pattern to be 922 on the Dow. The low occurred five weeks later at 920.63 at 11:00 on November 11,
launching the year-end fifth wave rally.
In October 1977, five months in advance, Mr. Prechter computed a probable level for the 1978 major
bottom as "744 or slightly lower." On March 1, 1978, at 11:00, the Dow registered its low at exactly
740.30. A follow-up report published two weeks after the bottom reaffirmed the importance of the 740
level, noting that:
...the 740 area marks the point at which the 1977-78 correction, in terms of Dow points, is exactly .618
times the length of the entire bull market rise from 1974 to 1976. Mathematically we can state that
1022 - (1022-572).618 = 744 (or using the orthodox high on December 31st, 1005 - (1005-572).618 =
737). Second, the 740 area marks the point at which the 1977-78 correction is exactly 2.618 times the
length of the preceding correction in 1975 from July to October, so that 1005 - (885-784)2.618 = 742.
Third, in relating the target to the internal components of the decline, we find that the length of wave C
= 2.618 times the length of wave A if wave C bottoms at 746. Even the wave factors as researched in
the April 1977 report mark 740 as a likely level for a turn. At this juncture then, the wave count is
compelling, the market appears to be stabilizing, and the last acceptable Fibonacci target level under
the Cycle dimension bull market thesis has been reached at 740.30 on March 1st. It is at such times
that the market, in Elliott terms, must "make it or break it."
The three charts from that report are reproduced here as Figures 4-12 (with a few extra markings to
condense comments from the text), 4-13 and 4-14. They illustrate the wave structure into the recent
low from Primary down to Minuette degree. Even at this early date, 740.30 seems to be firmly
established as the low of Primary wave [2] in Cycle wave V.

Figure 4-12