Since I have used the Elliott Wave, I have found it to be a wonderful forecaster of events as well as of prices. Many people watch the financial news everyday trying to figure out what is going to be hot tomorrow or next week. Or maybe you want to know what Alan Greenspan and his crew of mischief makers is going to do. What about the CPI or the PPI numbers before they are released to the public. These are all things it would really nice to know ahead of time.
With the Elliott Wave I can sometimes forecast what these numbers will be or at least how the markets will react to whatever is released. The result of this has been that I don't watch or read the news anymore. I don't need to know what the consensus is or what this or that commentator thinks this or that will be and what will ensue afterward. Many times, I can tell with the Elliott Wave how the markets will react, so I don't need all that extra effort and time to watch those things anymore. It allows me more time to concentrate on getting the wave counting right which is where the real money is made anyway.
Well, back to the Elliott Wave. The Elliott Wave forms patterns or progressions that unfold in certain ways and at certain relative times. The waves repeat themselves over and over and it is just a matter of getting accustomed to looking for them. Before long the patterns will seem to leap off of the graphs at you as you begin to see them without even trying.
There are mainly two different patterns of wave counts; the first is the five wave impulse pattern that was displayed last week. When you see a five wave pattern it means the wave of the next higher degree is in the same direction as that five wave pattern.
The other main pattern is the corrective pattern. It is a 3 wave corrective pattern and usually denotes the wave to the next higher degree is in the opposite direction as this 3 wave pattern. Last weeks drawing denoted both of these primary wave patterns.
Now I am going to get complicated a little bit with this. So far we have a 5 wave pattern to the upside and a 3 wave corrective wave after it. Pretty simple. The first wave of the 5 wave pattern is labelled as 1. Now, if this wave 1, was also subdivided, it would also form a 5 wave pattern within it. Think of it as zooming in on the wave 1 and showing more detail than was originally visible. Now you can see the subdivisions within the wave.
The next wave after the wave 1 is the corrective wave 2. This wave 2 could also subdivide into an ABC correction which when finished would be labelled as wave 2.
This pattern continues throughout the 5 wave pattern and then through the entire 3 wave correction after it. The 5 wave and then 3 wave corrective pattern is consistent throughout any degree you can find to look at it. Data can be used from the smallest you can get to the largest as well. It works on yearly or monthly data.
It also works down to the smallest degree that you can imagine. If you can find data for tick by tick you will find these Elliott Wave patterns in evidence. You will find waves within waves within waves within waves. Some are flowing in the same direction while others are moving in corrective patterns.
The basic structure of the pattern replicates itself in infinite degrees both larger and smaller.
The wave labelling of the Elliott Wave is of the utmost importance when using it to forecast stock prices and markets. It is not as important to know the name of which degree wave you are in as it is to understand that you are counting a particular size degree of wave. You must never confuse the degree counting.
The following are the degree names which were used by Ralph Elliott:
- Grand Supercycle
- Supercycle
- Cycle
- Primary
- Intermediate
- Minor
- Minute
- Minuette
- Subminuette
The way the Elliott Wave is counted, at least by me, is from the largest degree visible to the smallest. I start out on a chart and try to find the biggest waves. Then I work down in size to the smaller waves. As I approach the last few days of the chart, it is necessary to take it down as far as possible to obtain the best wave reading and therefore forecast.