Forecasting With The
Elliott Wave Principle
Elliott Wave International
Gilburt of ElliottWaveTrader.net conducted a thoughtful
with Bob Prechter recently. We thought you'd like to see it.
How did you come across Elliott wave analysis?
My dad subscribed to Richard Russell's Dow Theory Letters, and he would
occasionally forward his copies to me. In 1968, Russell began writing about
A.J. Frost's Elliott wave work. He published wave interpretations for the Dow
off and on through late 1974, when he called the end of the bear market.
During that time, I began charting gold and gold stocks, labeling the waves.
After I became a professional technician at Merrill Lynch in 1975, I went on
a search for Elliott's original books, which were published in ring binders.
The Library of Congress didn't have them. Finally I found copies on microfilm
in the New York Public Library. It was a thrill coming across those listings on
In 1980, I republished Elliott's original books and articles in what is now called
R.N. Elliott's Masterworks. Later I published all of Bolton's, Frost's and Russell's
Elliott wave writings along with bios and notes.
Waves, Fibonacci & More
DAX DYU17, Aug 16,2017
Correction Over -
Five Wave Up
Elliott Waves NOT the
DAX DYU17, Aug 08,2017
Prices & ML
Topix Index (TTU17), Daily August 9,2017
today, Aug 09,2017 >>>
// DAX Index -
'Catching' The Top In The German DAX
today, July 24,2017 >>>
// EURUSD - Is Longterm Forecasting
today, Aug 01,2015 >>>
August GCQ17 - New Bull Market ?
today,July 15,2017 >>>
SP500 Index - Elliott
Waves, TimeCycles & More
© ELLIOTT today,
DAX - Update:
Thunder On The Mountain (2)
today, August 11,2017 >>>
SP500 Index - Update:
Elliott Waves -- NOT The News
today, August 5,2017 >>>
Ralph Nelson Elliott >>>
The Socionomic Angle
By now you may have surmised that the findings relate
to socionomics. They provide one more example of
social mood’s impact on group behavior. Why would
financial reporters’ expressions resemble each other
more when positive mood was increasing and less
when negative mood was increasing? The Wave
Principle of Human Social Behavior (HSB) offers
a good place to start: “A waxing positive social
mood appears to correlate with a collective increase
in concord ... a desire for togetherness ... and feelings
of alignment with others. A waxing negative social
mood appears to correlate with a collective increase
in discord ... a desire to separate from others ... and
feelings of opposition to others” (p. 228). So, perhaps
in times of increasing social mood, the herd is happily
scribing together in many similar ways. When
negative mood is increasing, the herd is panicking
together in many diverse way.
[The Socionomist April 2012]
Sudden Wave of Violence
The Wave Principle
is unparalleled in providing an overall perspective on the position of the market most of the time. Most important to
individuals, portfolio managers
and investment corporations
is that the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or
Living in harmony with
those trends can make the difference between success and failure in financial affairs.
Despite the fact that many analysts do not treat it as such, the Wave Principle is by all means an objective study, or as Collins put it, "a disciplined form of technical analysis."
Bolton used to say that one of the hardest things he had to learn was to believe what he saw. If the analyst does not believe what he sees, he is likely to read into his analysis what he thinks
should be there for some other reason. At this point, his count becomes subjective. Subjective analysis is dangerous and destroys the value of any market approach. What the Wave Principle
provides is an objective means of assessing the relative probabilities of possible future paths for the market. At any time, two or more valid wave interpretations are usually acceptable by the
rules of the Wave Principle. The rules are highly specific and keep the number of valid alternatives to a minimum. Among the valid alternatives, the analyst will generally regard as preferred the
interpretation that satisfies the largest number of guidelines, and so on. As a result, competent analysts applying the rules and guidelines of the Wave Principle objectively should usually agree
on the order of probabilities for various possible outcomes at any particular time. That order can usually be stated with certainty. Let no one assume, however, that certainty about the order of
probabilities is the same as certainty about one specific outcome. Under only the rarest of circumstances does the analyst ever know exactly what the market is going to do.
One must understand and accept that even an approach that can identify high odds for a fairly specific outcome will be wrong some of the time. Of course, such a result is a far better performance
than any other approach to market forecasting provides. Using Elliott, it is often possible to make money even when you are in error. For instance, after a minor low that you erroneously consider
of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. A clear-cut three-wave rally following the minor low rather than the necessary five gives
the signal, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in
advance of danger.
Even if the market allows no such graceful exit, the Wave Principle still offers exceptional value. Most other approaches to market analysis, whether fundamental, technical or cyclical, have no
good way of forcing a change of opinion if you are wrong. The Wave Principle, in contrast, provides a built-in objective method for changing your mind. Since Elliott Wave analysis is based upon
price patterns, a pattern identified as having been completed is either over or it isn't. If the market changes direction, the analyst has caught the turn. If the market moves beyond what the
apparently completed pattern allows, the conclusion is wrong, and any funds at risk can be reclaimed immediately. Investors using the Wave Principle can prepare themselves psychologically
for such outcomes through the continual updating of the second best interpretation, sometimes called the "alternate count."
Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of investing with it. In the event that the market violates
the expected scenario, the alternate count immediately becomes the investor's new preferred count. If you're thrown by your horse, it's useful to land right atop another. Of course, there are often
times when, despite a rigorous analysis, the question may arise as to how a developing move is to be counted, or perhaps classified as to degree. When there is no clearly preferred interpretation,
the analyst must wait until the count resolves itself, in other words, to "sweep it under the rug until the air clears," as Bolton suggested. Almost always, subsequent moves will clarify the status of
previous waves by revealing their position in the pattern of the next higher degree. When subsequent waves clarify the picture, the probability that a turning point is at hand can suddenly and
excitingly rise to nearly 100%.
Renowned financier Bernard Baruch, who was as close to markets as anyone, saw a connection between economic trends and the herding impulse of animals.
He also understood the crucial importance of that knowledge to a correct social
All economic movements, by their very nature, are motivated by crowd psychology. Without due recognition of crowd thinking... our theories of economics leave much
to be desired... It has always seemed to me that the periodic madnesses which afflict
mankind must reflect some deeply rooted trait in human nature - a trait akin to the
force that motivates the migration of birds or the rush of lemmings to the
It is a force wholly impalpable.. yet, knowledge of it is necessary to right judgements
on passing events