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Elliott Wave Principle and Depth of Corrective Wav

Elliott Wave Principle and Depth of Corrective Waves
No market approach other than the Wave Principle gives a satisfactory answer to the question, "How far down can a bear market be expected to go?" The primary guideline is that corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.
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Example #1: The Protected content Market
Our analysis of the period from Protected content Protected content the chart of stock prices adjusted to constant dollars developed by Gertrude Shirk and presented in the January Protected content of Cycles magazine. Here we find that the Protected content low bottomed within the area of the previous fourth wave of Cycle degree, an expanding triangle spanning the period between Protected content 1921.(see Figure Protected content
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Figure 5-4
Example #2: The Protected content Market Low
In this case, the Cycle degree bear market from Protected content Protected content a zigzag that terminated within the area of the fourth Primary wave of the bull market from Protected content 1937. (see Figure Protected content

Figure 5-5
Example #3: The Protected content Market Low
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The wave ④ plunge in Protected content the averages down to just above the Protected content of the five-wave Primary sequence from Protected content 1959. Ordinarily, the bear would have reached into the zone of wave (4), the fourth wave correction within wave ③. This narrow miss nevertheless illustrates why this guideline is not a rule. The preceding strong third wave extension and the shallow A wave and strong B wave within Protected content strength in the wave structure, which carried over into the moderate net depth of the correction.(see Figure Protected content
Example #4: The Protected content Market Low
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The final decline into Protected content , ending the Protected content degree wave IV correction of the entire wave III rise from Protected content , brought the averages down to the area of the previous fourth wave of lesser degree (Primary wave ④).Again, Figure Protected content what happened.
Example #5: London Gold Bear Market, Protected content
Here we have an illustration from another market of the tendency for a correction to terminate in the area of travel of the preceding fourth wave of one lesser degree.(see figure Protected content
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Figure Protected content
Our analysis of small degree wave sequences over the last twenty years further validates the proposition that the usual limitation of any bear market is the travel area of the preceding fourth wave of one lesser degree, particularly when the bear market in question is itself a fourth wave. However, in a clearly reasonable modification of the guideline, it is often the case that if the first wave in a sequence extends, the correction following the fifth wave will have as a typical limit the bottom of the second wave of lesser degree. For example, the decline into March Protected content the DJIA bottomed exactly at the low of the second wave in March Protected content , which followed an extended first wave off the December Protected content .
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On occasion, a flat correction or triangle, particularly if it follows an extension, will fail, usually by a slim margin, to reach into the fourth wave area (see Example #3). A zigzag, on occasion, will cut deeply and move down into the area of the second wave of lesser degree, although this almost exclusively occurs when the zigzag is itself a second wave. "Double bottoms" are sometimes formed in this manner.

Behavior Following Fifth Wave Extensions
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Having cumulatively observed the hourly changes in the DJIA for over twenty years, the authors are convinced that Elliott imprecisely stated some of his findings with respect to both the occurrence of extensions and the market action following an extension. The most important empirically derived rule that can be distilled from our observations of market behavior is that when the fifth wave of an advance is an extension, the ensuing correction will be sharp and find support at the level of the low of wave two of the extension. Sometimes the correction ends there, as illustrated in Figure 2-6, and sometimes only wave A ends there. Although a limited number of real life examples exist, the precision with which A waves have reversed at this level is remarkable. Figure Protected content an illustration showing both a zigzag and an expanded flat correction. An example involving a zigzag can be found in Figure Protected content the low of wave Ⓐ of II and an example involving an expanded flat can be found in Figure Protected content the low of wave a of A of 4. As you may be able to discern in Figure 5-5, wave a of (IV) bottoms near wave Protected content ⑤, which is an extension within the wave V from Protected content 1929.
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Since the low of the second wave of an extension is commonly in or near the price territory of the immediately preceding fourth wave of one larger degree, this guideline implies behavior similar to th

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