Glenn Neely had written a massive book titled "Mastering Elliott Wave" .EXHAUSTIVELY HE HAD COVERED ALL SHORT OF SITUATIONS, with difference retracements like 38.2%, 61.8%, 1.618, 2.618 etc and created lots of rules/guidances for subsequent WAVE Movements................. hundreds of diagrams ….....hundreds of cases.......
His views are a bit ‘hatke’ in the sense that he is dealing with “Monowave” ; ‘ A monowave is the movement of a market starting from a change in price direction until the next change in price direction occurs , even if price action does slow down temporarily and then speeds up again , the entire advance or decline should be considered one “wave” (a monowave).
Each time one force overpowers another, even for the shortest period of time, a change in price direction occurs which starts a new wave.
Impulsions (trending & terminal patterns) occur in the direction of the trend and will be composed of 5 (Five) segments. The five segments in an Impulse are labeled as such : “1,2,3,4,5”.combined to complete a larger Elliott formation.
Corrections (non-trending patterns) occur against the trend and are usually composed of 3 (Three) segments, are given the first three or more of the following letters : “a,b,c,d,e,x”.
All Elliott patterns depend on combining like with like. Waves that are not “similar” can not be combined.
When comparing adjacent waves within an Impulsion pattern, similarities of time are more common than price; in Corrective patterns, similarities of price are more common than time.
Impulsive behavior in the market action must adhere to the following :
1. Five adjacent segments must be present which meet the structure series requirements of a Trending or Terminal pattern.
2. Three of these five segments must “thrust” in the same upward or downward directions.
3. Immediately after the first segment , a minor wave in the opposite direction take place; this second segment can never retrace all of the first.
4. The third segment must be longer than the second.
5. Immediately after the third segment, a minor move in the opposite direction of the third (but the same direction as the second) takes place, this fourth segment must never retrace all of the third.
6. The fifth segment will almost always be longer than the fourth, but only has to be 38.2% of the fourth segment (price wise). When the fifth segment is shorter than the fourth, the fifth segment is termed a “ failure”.
7. When the vertical price distances covered by the first, third , and fifth segments are measured and compared, the third does not have to be longest, but it can never be the shortest of the three segments.
If a single one of the above Rules is not adhered to , the market action must be, by default, corrective in nature otherwise wave group is incorrectly combined.
One wave should be noticeably longer in price than all other, the longest one should be at least 161.8% of the next longest wave (price-wise). The two unextended waves should tend toward equality in price and/or time or relate by a Fibonacci ratio (usually 61.8%) under either parameter or both.
Rule of alternation states that when adjacent or alternate waves of the same degree are compared, they should be distinctive and unique in as many ways as possible. Alternation must be present between waves 2 & 4 in at least one of the following ways:
A. Price (the distance covered in verticle units).
B. Time (the distance covered in horizontal units).
C. Severity (the percentage retracement of the preceding wave).
D. Intricacy (the number of subdivisions present in a pattern).
E. Construction (one patern may be flat, the other a Zigzag, etc.).
I am closing my note with these interesting extracts:
Believe it or not, most large Elliott patterns do not finish at the highest or lowest price on a chart. Often, with Elliott , points below the high or above the low are more important for specific calculations than actual high or low.
At the end of a major trend , the market begins to lose momentum. It is this loss of momentum which sometimes prevents the market from making a new high or low at the end of a pattern.
Loss of momentum generally manifests itself in one of four forms:
a. An Impulse pattern will contain a 5th- wave Failure
b. A Flat pattern will finish with a C-wave Failure
c. A complex or rare formation will end with a Contracting , Non-Limiting Triangle &
d. An impulsion will conclude with a Terminal pattern.
Three of the four situations (a, b & c) always create a situation where the highest or lowest price on the chart is not the end of the Elliott patern. The Terminal pattern, if its 5th wave subdivides, can also conclude below the highest high or above the lowest low if wave -5 exhibits a loss of momentum in one of the three circumstances as listed above.
Always be on the lookout for a secondary spike or trough following an important high or low.It may be warning that an Elliott pattern terminated after the top or bottom . Also, watch for a significance amount of consolidation near, but after, an important high or low. The consolidation may be Non-Limiting Triangle which terminates the trend after the high or low.
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