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Pub - RN Elliotts Masterworks The Definitive Collection PDF
Pub - RN Elliotts Masterworks The Definitive Collection PDF
Edited by
ROBERT R. PRECHTER, JR.
INCLUDES:
The Story of R.N. Elliott
The Wave Principle (1938)
The Financial World Articles (1939)
Selected Essays - 1940-1942
Nature's Law - The Secret of the Universe (1946)
...... Ne.... DI....
11'1 '-:to !he Wave P110 ~ ill far ITIOIe lhan Ii use-
fullll'llllyticell mettlOd. <Mr!he years, • has had Ii
pn;lb.i1d eIJea on lhoM .too not ony have !he
llblIily to ,eoogou. .Iheoly of 1o'.'llllll8 pnIdicaI
\IlIk.e, but who can apprec:liilii !he • I ltiillc beau-
ty 01 !he hI.man ellpIIrieolCe n!he iIbBlJiLl Thll
WI.,. Pt. lCiple has rucinliliid philolophers,
0'I'IllIhemllli, 1*fd')Io ....", lheobgIa. . and
INnciers aIikii. Now. IIfIef being out 01 pm lor
"'" , lhe CIIigO'\aI worQ 01 R.N. EIiolI havii
bMn i'llhil DOli ...... , .. hl.lItIbne.
R.N. ELLIOTT'S
MASTERWORKS
The Definitive Collection
Th1_ One
IllllllllllllllllllllltI~
EVHH-LAR-eKZS
R.N. ELL/07T'S MASTERWORKS
Copyright C 1994 by
Robert Rougelot Prechter, Jr.
ISBN: 0-932760-37-0
,.
The Foreword and about half orthe biography were initially
publilhed in TM Major Wor" of R.N. Elliott (New Clauics
Library, 1980), which il now out of print. ThiIJ volume feature.
a greatly expanded biography, uPftaded footnotea. and the
Selected Euay8 lIllCtion, makini R.N. Elliotf. Maa~rwor.b a
truly comprehellllive anthology of the author'. important
writinp. Compl"tiJlta ma,y wUlh to obtain R.N. Elliotf. Momt
fAtt",. 1938-1946 (N"w Cl...ics Library, 1993), which oontaill.l
all orhia additional publicationa.
,
•
ACKNOWLEDGMENTS
.
13
M
... BIOGRAPHY OF R41" NEI.SON £Ilion
,
DIE WAVE PBJNCIPLI UlWl)
II
Rhythm in Nat"""
Stock Merkel W._
"" m Identi/)'iDI tho W....
T ;......
'"lOll
1 08
"
v vi!!;;;;.".,;......
Fi8.b W.""
112 Cgrredjon.
114 Knepp",..
III ExkmmO' Of EltcooilKl'
no Boha. . . of MatkeI. Fonowinr EntnIioo...
lmcWar
'"
no
120
CorNo""",
&toq Correeliom
hUu...
121 WMn tho SlUMP' ja;o Doubt
'" TrianIl-
...
,,,
'"
14.0
1M
"'"
"'"
IX
Sp!!d, Volume and. Chamn,
MiKooIl...- N_: Cbartinr
AwlItIlllIho W.... PrInciple
Rori.... in the 1937.1R38 Beer M.rb,
HeIr MOO!!
'" x
Su.pp!.olDOlO!arY CrciN
",. W.... Prindp!ol in Oth« FWlela
'"
1M THE FINANCIAL WORlD ARTICI r 8 11m)
'M
11\6
AnDow>cinc tho w.... PriDcipl.
p"rt I
~
"" n
'" ""m
'"
'" """
"" v
no
'" ""
"" "
'"IX
'"
In "" "n
Par!.
110 Part!
1M p"rtn
1M p""m
SEI FcrKD gUrU ltfO,IH2
,,,
191
on.. Bam. of the Wn.. PrincipII
Hoor Iho W~ Principle Woob. and.1~ eon.leCion Wit.b
'"
196 nuratjM AI' Tim. E'.m""t
•
201 Market AP'll!u' _ Co.... and 1WmiJla_
204 ~ Crcl. <L Amenc.n Hi,IO!'T
209 ",. .....tUN Patt.rn '" 1.1>0 M...... 1Ot
213 NmJRm lAW _ THE SECRET or THE uNJYERBJ: UHf)
216 I"trod""""", Rhythm in Na1.Ure
220 I Tho G.-t Pyrunid GiselI
222 n NatUN" (.aw
m MiMlaMouIOlwtryation,
m m Hnmn Ad.jYitje,
229 [V DiAtU>c:live Feu\InlII of H........, AdiYltiM
'!I!2 Y CornrtiQ!!1
232 ZipAp
234 nato
237 C<mple2 ~
238 Tri.aocl..
242 III EllenMon'
:ua EJum'igu, ofE.......1jpn1
:ua ExwwioNI in Wave Ii wi Pre*'" iIak • I
U4 E............. Coun1.inl
~ Enlargemenl of Correcl>onl
2fll 5idnrj. Moyrmenl.l
us vn Itrecu!ar Top.
2110 vm A11en1.tioto.
21\2 IX S..I"
2M X E:aomplH (Au.Hollihton A'1IJ
269 XI The 'I'hir\ftfl Y.ar TrianI!'
2M XII lttfl.lI'an
267 XW I'rit!I of GoIcl
270 XIV Patenl.l
2'12 xv T..JIDig,J Futuru
2'15 XVI Dow Joan &oj! IMtq
277 xvn Tho YoJlleot'NmI
280 XVIU Cbminc
283 XIX ltt_unant Timing
284 xx Selaetian oITn.diq Madia
287 XXI I'Yratrjdio SymhoIa and K>w Thq .... Dio<o¥erod
:l88 Ilat.io Rultr
289 XXU The I.w <If MQljon
292 XXIII '"'" Gteo.t o..p..-
294 XXIV Erno/>ono.J. C)'clM of Individual.
'" XXV ..........
300 XXVI Mj_J1,ofQUl
300 \lq!p!DllofW._
30lI CirrlM
301 A.B B_
302 XXVII The 1!l.42.JlWj Bull M.Get
30ll R«rlow ,pc! Cqncluoion
3lIlI Bcferu_
,
Copyrighted material
,
FOREWORD
•
ti"". My goal with thit book, however, is Dot oeeeMarily to con-
vince reade... that "EllioU ia the ~," but merely to lIlllke aVllil-
lIble knowledge oCthe WlIve Principle to those who have enough
lIel\Ml lind energy to WIe it.
Aa for the lleCOnd category, I find that among thOle people
who understend the theory's immeDlle value and apply it eue-
eeufully, lDOllt have done their bellt to keep it Heret. I have
been IUlked lIeveral times by Itudentll of the Wave Principle to
refrain from pubJilhing any matenalat all on Ellilltt'l great in-
novative work for fear that "tou many" people would etart using
the Wave Principle in their inveetmeot timing, thua diluting
the utility of the theory.
I must lay that at times I have had lIeCOnd thoughta. The
WlIve Principle frequently can call turnlI and projec:t. tergeta with
IUcll incredible accuracy that I mil find my....1f amazed. As II
tool for eIplaining the otherwise surprilling and indecipherable
w~ ofthe market, it hae no &qUill.
However, the relIder mUlt realize thllt, dl!llpite the buic
IJimplicity of the concept iteelf, "Elliott" analysis is not that euy
to do if your goal it to do it ..ell. On the other hand, it is very
l8IUIy to do haphuardly, and mOlJt pou1.--time practitionere do ""'_
aeU)' that. Even if the Wave Principle were to become popular,
there would be 10 many opportunittie haelu Doating about their
ill-considered opiniona that the l.l'Ilth probahly would be 10IIt to
the investment majority in the elUJuing babble. The degree of
uncertainty in wave pattern rKOiIlition, moreover, enauru
enough forecasting erron that the averagt! penon will dismillll
it after dillCOYering the imperl"ection of ita application. For moo
people, the best approaeh, even by far the beat approach, is not
enough, ... they demand the Holy Grail of perfection.
In Ilddition, let me say thllt even among devotees, it is one
thing to recogniu that the Wave Principle aovems stocl< pri""s
while it is quit.e another to predict the nm wave and still an-
other to profit from the ue.rciee, ae anyone ..ho ever hu at-
tempted to turn a good market forecasting Ipproach into money
knowll rull well. None of us can eecape our human nature, a
natunl that involvea us in the univenal deaign whether we wish
it to or not. I have met few men who invest or trade with a eom-
pletely rational Pl'Olll"aDl baaed 00 re8llOnable probabilities with-
out allowing greed, fear, erlraneous opinions or irrelevant
n
•
Copyngnted matanal
A BIOGRAPHY OF
by
•
Copyrighted material
AUTIlOR'S NOTE
Until now, nothing ..hll.tIlOever had appeared in print per-
tainina'to Elliott'a per1lOna11ife nr hiA activitiea prinr to di!lCOV-
erina the Wave Principle. The facta I WIl.8 able to put toeetber
WeN! gleaned partly by atudying hill. boob and market letwnl,
c:orTeapnnding with the Library of Cnngreaa, and talking with
fnnner uaociatea. Howard Fay and BN!nda Taylor wera helpful
in providing biographical information. Journalillt fetu Kendall
followed eevera11eada to ~lIent reaull. Uk" • determined pri-
vawlnvntigator, Market TflChniciana Aeaociation member
George A. Schade, Jr. in over two yean of re&earch "Y.temati-
cally uncovered a wealth ofinfonnation on Elliott'alineage, fam-
ily and geographical locationa. Elliott Wave International'e
Michael Buettnere:lplored the U.S. State Department'. archivee
to come up with atartling informetion on Elliott'a role with the
Coolidge Admlniatr&tion. Marie Eliadea took the photo ofEliiou'.
houae in Loa Angelea. and Paul Brodtkorh took the photo nf
Elliott'.......idential hotel in Bro<Iklyn. My deepetlt gratitude,
however, goea to Chari.,., J. CnlIine, who Hnt me the entire file
of early letwra between Elliott and himaelf. Not only wu that
6le one of the moet exciting coUeetiona of material 1 have ever
read, hut the lette.. told more tlan any other lIO\Irte about the
story nfEliiott and hill. diAc:overy nftlle nature nfmarket behav-
ior.
Significant information Wll.ll nbtained from the following
lIOurcea; U.S. National Archivea; U.S. ~partment of Staw;
Church of JflIIuA ChriAt nf Latter-Day Sainta Family Hiatory
eentu {AZl and Library (UT); Fairchild Sona Funeral Home,
Inc., Garden City, NY; Kinga Park Paychiatric Center (NY);
Little, Brown'" Company; Mra. R. M. MacLaury: FelTOClUTiIea
de Guatemala: Pottawatomie County Regiater of Deeda (KS):
Loa Angelea Cnunty RegiAtnlr-Reconler (CAl: Lexington Genea-
logical and Hiatorical Society, Inc. (IL); Grac:eland Cemetery
Aaaociation (ILl; Livingaton County Circuit Clerk (lL); Mont-
clair Public Library (NJ); CaliforniA Department of Health Ser-
vicea; Inglewood Park Cemetery (CAl: City of New York
Department of Health; Arizona State Reeearcb Library: Arizona
State Univeraity Librarillll (including Hayden): Pboeniz Public
Libnuy (AZ); Dominy Memorial Library (ILl; MaryeviUe Public
"
Libnlry (KS); Oregon State Univenity Library (OR); Brenau
Univenity Library (GA); Georgia State Univel'llity Library;
ChNtatee Regional Library (GA) and GeineMlJe College Library
(GA).
A. you read the atory ofRalpb N,,\..,n Elliott, you m-.y be
as intrigl.led .. I am t.h.lt. theory lJ(I remarkably unique, when
compared to other methods ofmarltet analylria U that time and
IIlVell tboae of today, could have ~n developed.., late in lif.. by
• man not of Wall Street baekground. Bolton uc=ate!y de.cribed
thfleDOnnity of Elliott'. feat when he Hid that "he developed
m. principle into a rational method or-toea market analysia on
• /ICl.1e never heron attempted.-
A BIOGRAPHY OF RALPH NELSON ELLIOTT
,.
" R. N. EuK)tT'$ MAlITDfIOUS
,.
BWgraphy
"
The bome of the ptJOII ia tdU&11y a mere .bacl< whoee walla
and roof are olleave. and p-aa. The noori. bare earth; furni·
ture, if any, and cooking utenail. are of the _ primitive
kirK! imqinable. Animall of all ~ript.ion•• bare the d_ll·
ill(place. Dop atld pip [proYidel wannth. Thefllth and ~ua
lor ia beyond deecriptiOil. They are ignorant ... atld ridden with
aupentitiOll, land have] little deIIino for improvement. When
drunk, ... a thougbtleu word, alligbt differeme ol opinion, an
acc:ideDtal puab. fW a quan-d over women ia .uffic:ient to pr0-
voke a bloody pit.<hed battle with maehetea, .... u1tint in faa....
ful. guheo atld not intn.qu~tly daath.
,.
'"
mercy, can vouch for the di..,.,mrortll of the journey, and aleo
for the utter lKk of fl'atitude dilplayed by the unfortunate
euffenr, who proved to be menoly Wider the innuence of an
overdoN 01 alcohol.
,
BiOflraph,
,
R. N. EUJOJT's MAlI1V.f/fOIWI
,
Bict1mphy
(R,tJp/l(pn:IbMNy
Nfison E/liolt
prior
SBVtmJJ
to -'--'I)' 1918 )
y8BfS flltrli"'J
BiotJraphy
"
It is fortunate for biographel'll that Elliott traveled 110 much
and that upon the advent of World War I in 1914, pulIporW
wete required of U.S. citizeDll for the flf'St time. Hill vanoUi paas.
pori; applicatioDll, beld by the National Archives, contain a good
deal ofinfonnation. They reveal, for instance, that he we. 5'8"
tall, had blue eyell, brown bair, a rompleIion described alterna-
tively .. "ruddy" and "fair,- and wore eYeelUMB. Photoe taken
in hla mid-to-Iate fortiell ahow a IOU with a aturdy frame, a
hardy appearan"" and an air of aelf-llMUI'llfICe, all of which well
aervecl Elliott'. active life.
Eniott'a main pia during thia time were to perform the
type of work that he eqjoyecl and to return to the region where
he had lived mo.ot of rna adult life. He obviously found hia em-
ployment durill( thi. time unfulfillill(, possibly becauae he we.
doing buainelll development work or simple a_ntill( illlltead
of the Itruetural O!pnWng that he eqjoyed.. Hia low opinion of
.tandard accounting we. expreaaed unequivocaUy In a 1924
magaxine article:
That last. aentenoe certainly reveaila drive that would later make
atock market foreeuting an aUractive vocation for R.N. Elliot1-
For now, bowever, that wea the furtheat thing from hia mind ..
he lIearched for IIOmethini that would challenge hi. orraniu-
tion.altalenu.
Elliott returned to La. Angelea briefly in December 1919
(perhaP'!' to be with hillliater for the Chriatmaa bolidayal, then
paeked up immediately and moved to Ridgewood, New Jeraey.
He Bta.yed there a ahort time befonl obtaining a reaidenee at 142
,
"
Weet82nd Street in New York City, where be waaliving in early
Man:h. 1920. He may have moved there becallH of a corporate
traMfer or perhapl to p l _ hi. New YOf"k-bonl wife, WhOM
mter, Mrs. Milton T.11lompeon,lived in Upper Montclair, New
Jel'HY, an affluent luburban town near the city of Newark.
Whatever the reuoo, it was oot becaU8ll he had seeured a highly
desired profeMionai po$ition, .inee he aggreuively continued
hill quest to fllKl.uilable employment in lAtin America, where
he obvioully preferred to reIIide.
In M~ Elliott apin applied for a passport, thia time to
travel to Muioo City and Tampico "to attend to IIOme property
acquired durilli a Ion, retlidenee in MeDc:o." Th1e viAit w. . to
have been folloWllll. by tnlvel to Cuba. thi. time to invmipte"
pGIIition with the C\lh. Railroad Company. Elliott'a ahilitiN ob-
vioualy WeTe widely known and highly regarded in Latin
America, lince he ..... offered tIli. pooIitiOll dNpite the fact that
it already had been accepted by IIOmllOne elae. All the company'.
vice pn"ident and pneral manager wrote to Elliott, "If we
thought you would come, we would notifY thia party that the
offer to him W1lI withdrlwn." Such energetic IOlicitatioll8 for
Elliott'allerVi.,.". ........ not unUltai. The ~it.ion he n.d coMid-
ered accePtin&' in Cuba ~hree yean before had been offered to
him in an urgent cable that read in part, "Your aerviCf!ll badly
needed." Appanntly, he wu the most talented bilingual 8CC01lD-
tant and COll'Orite reorganiler available to theN Latin Ameri-
can companiea.
Then came an abrupt change in Elliott'alife. For whatever
reaaon, be suddenly called off hi. trip and ceaMd hiI effortl to
find employment and relideooe in Latin America. Perhape the
relllOn wu aimply that in hia fortuitoUl move to New York City
he had found another place that auited hia adventuroua nature.
Wave 'I'brer. ProductlvUy and p,~ a
Elliott, now in hill early fl1\;j. . and with a new base of op-
eratione in New York City, maintained a remarkably bUly lIthed-
ule over the nen IevenYeanl. Later lettel'l to CharleliJ. Collilll
reveal that he traveled to Canada, Germany, England and
France, though for what reaeon (perlODal or buaiDeII) iI un-
known. Hillargeat company reorganization out.l:ide the railroad
field wu Amlinck "Company, an eJfport.-import hOUlle of five
hundred employeea.
BiOfJmplly
GuS' SHOD
.......
......,..
~-~ ---- ~'
"
... _"""-
-'c_ _
-- ..... _ 4 .•
-- ....
..,._
--_ ..
"
-
Mr. EJliott's Column
... _-_
.-.... 01 _ _ .. __ ..
....----_
_,,_. _
..........
.. ___
_ -
.. -
-_. _rw-_._-. . --.
.
- .. i • .. _
_ _ "_"1Io1"-'
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ot_
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.....
._
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_
.
...... _ _
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1,004_
.. .:r• .. -_.
~
_
.... 004_~"_",,_
"" ...
_
.- • h
, r.,.. _ _
__
L~"'iDliAL _~_
..._._004 •• _ .,._
...........' t _
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. , . - .. _ _ • 1 _ _ ...... -
_ .. _
_01_ ...-.-... 004 .. .-.........·__ . . _
_ _ .. . -
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.. -. . .............-_ ..... _-
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........ 10_- --"1;---..-. ..
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... ..... ...
....-=-_..-
---- --_ .....
;.,:;~;-" - .............. _ .. _""_fw ~---_
.. _ .
'"
Elliott'. monthly eontribution wu entitled limply, "Mr.
Elliott'. Column," and generally ran ,bout two pagelI. Each one
wu announoed on the front toYer and ._~niedby hiJI photo,
one ofonly two writelll' photoe in the publication. Elliott'. first
artiele, which IPpeared in tile Septemberiuue. preaent.ed ~me
bamc idelJl lod ...,licited quMtiolUl from the buaineu people who
read the maguine. SubMquent columf18 anaw"red the question.
IlUbmitted. EllioU practiced wha~ • Department of Commerce
bulletin from the time ClIlle<!. "eeientific manllgOlment," and ....
gued that aeeollnting wu "j\llt comi", into itll own" and hewm-
iog rar more than juat bookkeeping, .1 he hime"lf had
d"molUltrated during hi.JI many y"..... of company """lIuir.a·
tiOD. Hia attitude toward the food Mrvice buaineu, and to bu.i-
OeM in &enenl, i• ...,...,nably wen exp.--ed in the following
collection olcommenta eulled from hie MY"n articln:
Hia advice waa not merely technical but came from e:tperi-
ence. FOl'" inatanee, he urged hopeful nDTieea tint to obtain em_
ployment at a auc:ceuful elJtahliahment at any wage offered,
,
Bictlrcphy
"
_ume u many duties u poll8ible over a period of time, and
learn the buain. . from the bottom up, a path that he billUelf
had taken in developing hia railroad ao;:l;OUll!ing apecialty. He
further adviHd that people not "follow a buaineu that dDl!tl not
appeal to them'- regardleu of the applll"ent linanciaI benefita,
an adage that be certainly lived by. Hia waminp apilUlt bor-
rowing to atart a bulinea reflected numeroua aperiencea with
companiell burdened with debt, whicb he considered one offour
primary reuona for buaineu failure (the other three bema in-
experience, inaufflCient capital end inadequete reeonIa).
Otber commentll from hie columna renected ideas thst
eerved him well in the futUTe. For inatance, hill admonition that
"indeciaion ia frequently more harmful than a wrona dec:iaion"
later directed hie unhedied calla on the market. Hia idea that
reeonl keeping ia primarily 'a guide for future action" WlUl di-
rectly applicable to hie approach in atudying the atock market,
and hia penchant for 'graphic explanation" helped him aceom-
pliab it. Hia general obeervation that -every buaineu that ie
newny fuhionablel ia liable to be overdone periodically" hinted
at hia experience with buain_ eyelee and know1«lge of boom-
and-buat fade. He even dillCUlllled the peyc:hology ofaatiafied cue-
tomen and explained where to find boneat opiniona about a
buaineu' lhorteominp, directiona that renected a healthy .,If-
..teem that later allowed bim, when he WIJl unknown among
market profeuionlle, to .alicit the opinion of the nationally fa-
IllOUS Charlea Collins oonoeming hia Wave Principle diecovery.
Then, .. today, the reetllW'8nt buaineaa presented a etrong
attraction for many proapective entrepreneun, relIulting in sub-
atantial competition .. well .. a high failure rate. M a result of
both facton, the indWltry WI\.I hungry for adviee. Elliott'e com-
mentary wa.a populu, and the opening letter addrueed to him
in the November ielme began, "Your oolumn ia moet inte...,.tjng
and I can plainly _ that n. Ram md Gil 3lt:p will have to
be enlarged to accommodate your oolTMpondence." The eateem
with which hie oolumn was held in the restaurant aceounting
and management field ia renected by the fact that in late 1924,
Columbia Univenrity invited him to apeak on the subject. Possi·
bly beclluee of tile very renown be wu eaming, Elliott wu foned.
to decline the invitation, ae he wu once again on hie way out of
New York on buaioeM from hiJI then-",aidence at216 Weal 79th
S....C
" R. N. ElliOTTs MA!1T'u~
,
.
the High Commiuion ofNiean.gua. In 1912, the !oog-atanding
liberal guv"rnmentofNQnguA '"'" overthrown by. ""'-'p. The
U.S. MarillH entered the COWlUy to effect a turnover ofadmin-
istrative control to the U.S. government for the .tIlted purpoee
of protec:ting American intere.ta in Nicaragua. Aftolr a dozen
yean, the U.S. State Department tired ofit.8 role and appointed
the High Commi.uion to advi.e it On bo'/ll' to help atabilize the
NiCllrllgUan government enough to allow the U.S. Marinea to
withdraw. The Commi.uion rapidly INlt up national electiona,
which were held in November 1924. The newly "l..eted c:oalition
government in Nicangua then eontr&<:t6d with Dr. JeDb, aa
reported by The Nl!w Yori 7'imt'" "to reviM! the bankina and
financial lawl of Nicaragua" and "to eatablilh a new banking
aywtem in the /:IOUD.Uy." U.s. banking interelltll apparently wanted
to finanee and modernize the Nicaraguan raill'Olld aylJtem. an
effort which would have interested both Jew and Elliott. One
ofJenb'fint actione wu toaet up the Nattonal Bank ofNieara-
gua and tterve as a direclor.
At JenD' recommendation, Ralph NelllOn Elliott wu cho-
lieD by the U.S. Department of State to MIlum" the poet orChief
Accountant for Nicaragua. On o..c:..mber 18, 1924, Elliott met
with Sec:retary of State Charles Evana Hughe.l in Wuhington,
D.C. to receive hie formal appointment and ilUlb'uctiolUl. The
following week he applied for hia paallport, and in January 1925
!let nil for Nicaragua, ac:<:ompanied by hia wife.
The State Department invitation and aceept.ance were ef-
fected. 110 lIWif\ly that .. hile Elliott wu mWDg plana to leave
New York, an advertiMrnllnt for hia oonauitillll" ...rvices, as well
u hia column, ran in the January isaue ofwhat wu now called
&,WUJ'O/l./ and Tto Room Jmt.r1101. Hia last column, ..hich had
been aubmitted in December to meet the publiahing deadline,
ran in the Febl'Wll')" illllue, at which time ElUatt wu on the high
aeu to Central America.
The ahip arrived in Managua in February, and Elliott im_
mediately belld to apply rna extenaive ezperieooe in corporate
reorganization to reorganilillll" the financea of an entire coun-
try. The Jenb millllion arrived ahortly thereafter, on March 24,
1925, and began advialng the newly elected. coalition govern-
ment in what waa probably a joint effort with the State
Department'a appllintf!ea.
•
HI
_.".n. bl_
~eelor~ 1M. 15,24
Dr. 'r.... l .. IIIII~e.
L.\la . . . .tr.lre.
--
----
-,- TELfGR ...... S~T.
-
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•
BiOflN!phy
Elliott may have written thia paragraph fO!' the benefit ofthOlMl
who miiht otherwilll have taken a courae at the Lewil Hotel
TrainingSchool ofWaahington, D.C., which Elliott noted in cor·
~pondence was "in the habit of trying to penuade people that
a tea room can be atarted with $50.-
Several Jllll'1lgI'lpha in the book reveal Elliott'a Interelt In
hulinl'll cyclll. Hia profeuioll would have brought luch cycllll
powerfully to hil attention, and hill internt in them Wall obvi·
DUlly keen. In a chapter entitled -Fluctuationl," be commented:
..., .....
CUlIlI the C8W111 of theIe cyc1l1; mfliee it to lIy that they an!
,
40 R. N. EWOTT's MASTli/!YICJIIK1
Biogmp!ly
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Bi"llruphy
,
R. N. EUJOJT's MAn"UWO#lU
<:<IU1d p<M&ibly ~ve had IIny part in the dituter. The tame
ide. is renlll:ted in matte... of ...,Iatively ,...,at importance.
Notbinr ill ever motU to hppen. ItjUllt "happen.o," .. hether it
be .n epidemic or • revolution. There appears little dlllire or
e1rort to proboo the ca..... oldiKomfort ord.iauter. Thia "don't
care" Rpirit is to be met with in all countriet ofSpani,h America.
,
Biography ..
gin ofwhich. he pointed out, wll8leu noble than commonly be-
lieved. -AJJ far .. the writer can _ : aid Elliott, "there h..
never been any attempt to outline a eonstnlctive foreign policy
along pl'8.ctiCllllines:
To achieve that end. Elliott outlined II plan to be imple-
mented., not unilaterally but by mutual agreement, "whenever
a Latin AmeriClln country approac:hee the United. Statea with a
request for financial or politiClll aid, ...Iwhen it;'J:in luch dire
financialllb'aita that ita very national exiatence il threatened."
The plan required the hoet country to a110.. unobl".r'uftive yet thor-
oughly inteerated. U.S. developmental adminiltration in ex-
change for a number of reform•• including ...lriatanee in the
iafluanoe of natiooal debt payment bonda guaranteed by the U.S.
government, the retirement of old debt to European O'l'lditora,
full payment ofintemal debt, to. reform, the reviaion orall tar-
iffl. civil aerrica reform, and thfI chutering of an American bank
to handle the financeaofthe rl,!jfi0D. Money raiaed from the U.S.
guaranteed bond &alea would then finance development of the
country'l infraatnlctuno in the form ofrailmada...uerwaya and
porta, all to the ultimate end ofbuilding a lItrong ellOUll"h economy
to payoff the bonda. The bolIt country would gain the Itnlctural
ba.ae for economie growth and atability, and the U.S. WOIlld gain
-new outleta for IUTplua production and capital" through in-
creaaed invelltment and trade. Neighboring countries. he pre-
aumed, would recognize the benefita reaped by the first nation
to adopt the plan, and followlluit. He advocated. a corTfl8ponding
public information campaign in both Latin America and the
United Statea, designed to overcome the Spanilh Americans'
jWJtifiable averaion to foreign preaenoe .. well ....hat Elliott
..w aa the U.S.'I provincial attitude in not involving itaelfmore
.ubetantially in -promoting good will [and] mutual proaperity
and advancem"nt" overae.... and in "initiatillB Latin America
into the secreta oftbe proaperity of the United Statea," which he
....... a .....oral obligation to mankind.' That duty, moreover,
involved -ab80lutely no right or juatifiClltion in attempting to
influence national thought [or culture] in any way whataoever:
Given thO' mutual benefit Elliott envaioned, he concluded. "it;'
simply a buainell/l propoaition:
It il not \llU'eaaonable to aMume that Elliott'. m"moran·
dum and manuacript bad a role in Ihaping later U.S. policy to-
ward Latin America. In many way. hi. propoaed program
,
. R. N. ElUOrf'l MMnJlWORQ
'!'be prec:eding ehapten m.,. bave led the "'~ to the eoD-
elUlion that the problema of the United St.ItM and of lAtin
America lend themMlveo to mutu.a.l ...Iution. By .. ~ming
coiNeKk_. but wh41 mGJ' -U N /I prooisil>n 0( ""t"... ...."...
'''Ii i" <>ea>nfon« with 1<J.w. not ~ properly WIlkr.tood, all
Uloae thinp which Ule United StaW laeu ..... to be fDUDd in
profumDII in Latin America, and the neecb of Latin America
are IUeh u the United Sta""" i.I beIIt fitted to provide for.IEm-
phui, added.1
~-
.-
~.
R.N. EWoU
May be "oppd to
Report on IOeAtiona, ...piuJ and reHrYe,
Report on p......,.,t .u.tua of. buain....
Keep boob on a boil that pr<mdea a guide ror action,
Take care of intome tn.,
Comult on all matt.enl pertaining to tea l'OOIIl.I, cafeteriu, ete.
-,....--
833 Bn ... A~, LO$ AngNs, ElIiolt's home frDm 1927/0 1938
. R. N. EUJOTT's MASURWOIlKS
",. """""'"
o.pite being phyJlieally debilitllted by hie malady, Elliott
needed IIOmethina: to occupy hi' acute mind while recuperating
between ita wont attacD. All cin:umAtanee. would have it, he
wu living then through the IOOllt eJtcitine period in U.S. IJtoo:k
market hilltory: the peak yean of the """;ng bull market of the
1920lJ and immediately thereafter the _ t dramatic bear mar_
ket amuh on record. Th""" event.. IJl'll"lcing hill interest, he read
Robert. Rho'. 1932 book, Dow Th«>ty, and became one of the
firat IUbKribe... to Rhea'. atock market lIeni.... Dow ~
Commt'ol 0932-19371. It ... around 1932, then, that Elliott
began turning m. full attention to Itudyin& the behavior of the
ltoek market. He began punuing a miMion that he had enunci-
.ted for all ~lpoMible men in his man~pton Latin America.
'"!'here ia. reuon for everythiq,~ he Hid then, -and it ialone'sl
duty to try to diacover it. ~
Not unlike the Dow Theory geniua Robert Rhea, who luf-
fered from tuben:uloail and WlUl bedridden It the time, Ralph
ElHou, who lpent long boun On hia front porch I'flCUperIlting
and atudying, began to make lOme fllllcinatini obael'Vlltionl con-
cemiq the movement of prieea on Wall Street. Hia -..till
path ofiDQUily,I.e., loolrlng for paltema in ~te ltoek price
movement, WlUI undoubtedly direeted initially hy expofUnl to
the tenetll ofDowTheory. However, EllioU'1 ultimate dillCOVery
Will all hia own, lUI over. period of MVenl yeaD he pailllltak-
ingly UllCOYered the Wave Principle of market. behavior by Itudy-
ina empirieal tnridenoe. '"!'he mono desirable the goal,· Elliott
had Hid once before, "the greater the triall which have to be
met and conquered. for itll uhievement." In invlllltipting the
poaaibility offonn in the mlrketplace, Elliott eumined yearly,
•
Biography
"
monthly, _kly, daily, hourly and even hair-hourly chart,., of
the variOUll induell covering .eventy·five yean ofstock market
behavior. He constructed the hourlyehartll from a data seriN
that began for the Do. Jon.... lndWltrial Average on October 5,
1932 and the half-hourly ehartlI from fIgUl1ltl be collected off the
tape in the tnlding room of a brokerage house.
Around May 1934, jWlt two monthB alter h~ final bl'Qh
with death, Elliott'. miMion began to be fulfilled, H~ numeroua
oblIe"ations of generalatock market behavior began f.lling 10-
gether into a general eetofprinciplea that applied to all degrees
of .ave movement in the stock price averages. Toda,y'a scien-
tific term for a large part ofEliiott'a obeervation about markete
ia that they are "fractal: thereby coming under the umbrella of
what is today called chsne l!ICience, althouah he went far further
than moat .tudie. today in actually dellCribing the component
pattema and bow they link together. The former "EIperl Orga.
nner" of busineuee, through a meticuJoWl .tudy of detail, had
uncovered the organizational principle behind the movement of
markete. When he started applying th~ principle over the nut
seve",1 months to eJ<pec:tationa for the future path of the .tock
market, he felt, as he later put it, ·""mething like the inventor
.ho ie Uying to become prnficient 811 an operator of a machine of
hia own deaign." Aa he got mDnl proficient in the application of
his newly diac>em.ed ruIllI and guidelines ofwave formation and
coJ'TeCted initial errol'l in their formulation, they began to amue
him with their accuracy.
Thouah Elliott never enjoyed full recovery from hia illnllM,
hill health improved after these IlOveral Uyingyean, and hill old
energy began to return. However, after yean of abeence from
hie lifelong profeesion, h~ previoua aucceas and renown were no
longer a ticket to further advancement in hi. fanner field.
At thia point in his life, Elliott'. financea were at a precari-
oua 10..... HUllI8.vinp, which had appeared more than adequate
nearly .even ye&l'I earlier, were aIm""t entirely m-ipated due
to the npenRl of h~ illneaa, the impolll!libility of punuing hia
counaeling bwrineaa, a dependent wife and several _mingly
aafe investments that had suffered tremendOWlly in the 1929-
1932 bear market 1ID8IIh. Hi. depleted financial condition, hia
developing faacination with the atock market, and hi. undeni·
ably important dixoveries combined to prompt Elliott'. deci·
lion to undertake a new profl!l..!lion. He decided to "begin all over
"
again," as he put it, "e.peciaUy in work that I like, whieh i. half
the battle." So, at the age of64, Elliott launched a neweareer
and IJtarted what he later referred 10 u -Wave number five of
my own life.'
•
.
himllelf, and a rec:ognition at the harm of government regula-
tion of blllinesa. One letter referred to the "unprecedented un·
l:OlUItituuona! meddling in economics by politics.· (Significantly,
there ia 00 record or Elliott or hi. wife ever haYini obtained a
Social Security number.) In another letter, he dillCUned the
plight of the raill'Ollca, with which he "as familiar from long
es:perienee:
•
B'Oflraphy
advance, and aftu the cloee he wrote to all'y, "the pittl>re i.$ bear-
iAh asain.· The rally peaked two trading boun later. He then
forecut that the Induatriala would llip below 99 to 96, and the
Ra.ile would crack 33, ularger WIVell 3, 4 and 5 downward un-
folded.
Moat of the predictions that Elliott made in hil barrage of
lenera (even thoH that took yelltl to praveJ were correct, many
to perfection. However, in the approach to the actu.al bottom,
which was made at 96 as Elliott had fltllt fllnlCll.!!t, he changed
his mind IIeveral times in an attempt to call the low euctly to
the hour. Elliott'l changes of mind, newly dilJl:'OVeted tenetl and
occuional wave relabeling bothered Collina, who wnKe Elliotta
long and courteaua letter on February 15 pointing out weak-
n _ in Elliott'a methodil and end""ing IIIme ofhia own work
on a five wave theory I.lI applied to long.term price movernentB.
He auggeated that in order to remedy hia financial aituation,
Elliott manage aome rilIk capital and begin a letter ..,rviee to be
cireulated to a ""lett group while he developed hiA theoriea to
completion. Even at thia Itlge, however, Conina obvioualy rec::.
ognised the ....Iue of Elliott'a work, u he offered to introduce
him to the day'aleading t.ec:hnical anal""t, Robert Rhea.
Elliott countered Collina' grounds for delay by listing the
varioua imperfectiol13 in Collina' own market letter'a invel!ltment
decilliona of the previoua two years. He strongly rellflinned hil
wish to become\l.8lOtiated with Collina, whoee lettere, he atated,
were 110 well dona that there wu"no comparillOn between your
letten and thole of any other service that I have aver _n."
On February 19, 1935, Elliott mailed CoIlina lIeVenteen j'I8gflI
of. haatily organised yet metituloualy detailed treatille entitled
"The Wave Principle.· He lent twelve more pagea and five addi·
tional charta over the next two months along with his regular
colTellpondence. The fltllt page of the treatille containa Elliott'.
statement of the utility of the Wave Principle:
,.
"
Colline aceepted Emott'. t.enna and invited Elliott to Michi-
gan to be hi.8 boWIe llUest for three d-.ya over a weekend in the
INtllmu of 1935. Elliott went over h~ theory in depth and thor-
oughly familiamed Collins with the worlring details of the Wave
Principle.
For the next two yelU'll, punuant to their agreement., Col-
liM received and monitored Elliott'. call. on the market. Hia
a=aq remained true, and at the end of the lM!ClOnd year, in
March 1937, Collina began working on Elliott's fiJ'IIt monograph,
TM WlIl't Princip~. which WQ ba-.l on Elliott'. originalt.rea-
tiee.
ThroUihout this time, Elliott had maintained contact with
IIIlveralaequamtanee. &am hie _11Il.ting ...~, notably George
P. RobillJllln. RobillJllln had. financial con.wting firm in New
York City that Hl"Yed corporate clienta. While commWlicating
with Collina, Elliott had .. lao prellented the theory of the Wave
Principle to Robineon, who had become i~uingiy intel'l'llted
in the lIt.oclt market aa a tool for corporate financial inveltment.
Miele £rom Collins and Elliott, Robill8On ia the only penon known
tol have Wled the WI"'" Principle prior to the publication of
Elliott'. book.. Robi...,n and hi• .-aciate Todd II B..c:ker (later
an invntment ItlalUllfel' for a IlTOUP of ore e;q>IOllltion oompa-
niea in Toronto) took EllioU'. work lIerioualy and apent time
atudying it. In MarclII937, .. Collina began work on The Wa~
Principk, Robinaoon and Beckel', probably while co,,",sponding
with Elliott, pN!ciaely caUed the 1937 top UJling Elliott'. new
diacovery. ,.. Becker recalled in a telephone conversation, "It
..... 1IO clearly the fifth oft.he fifth wave up."
The Rood to Wall Street
By 1938, Elliott WIllI eo involved with the Wave Principle
that he inafated that ifhe wen! to be taken into Collina' organi-
zation, Investment CounBeI'. atocli: marUt. Hrvice would have
to UJIe bia ap~h en:IUllively, a propoul that Collina could
DOl. aealpt.. However, in appreciation of Elliott'. deciaion to con-
fide to him the detaila ofhia dillCOVeT)', and in fulfillment of their
qreement, Collina completed The Wa~ Principle, which wu
publiMled on August 81, 1938. The 8 1/2" .. II" monograph wee
coPyrillhted by Elliott and printed in dark blue lIOfteover with
no cover markinga. An estimated five hundred copies were
printed.
•
Bi<lf1raph;y .
The tint chapter of The WalH! Pri=ip~ makell the follow-
illlJ .tatementa:
•
60 R. N. ELLKnTS MABTUWOIlD
-'.....--
nom.
E/Iioo'. from ISI38IO IP47
. ..,.'.....
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•
Bfugrnphy .
R. N. ELLIOTT, 1939
....,*" .... _ -
,
Biography
"
Bran.ching QuI
Elliott'l lubHquent Educational Bulletillll eltPl'nded fur-
ther upon hill theaia .. he came acrnaa new observationa and
ideo. Titlea included '"I'echnical Featurea," MAiternation," "TIle
Buill of the Wave Principle," "Duration or Time Element," "In-
flation," MDynamic Symmetry," "Two Cyclea of AoHrican Hi..
tory," "TIle Law of Motion Mand "Nature'a Law" (I. p ~ to
hie IIeCOnd monograph).
Elliott'a other ael"'ticell included:
- Forecut Let.ter8 marked "Confidential,Mwhich were .,ld
at Mconventional feea." Tbeae one paK1l bulletina provided inveat-
ment timing recommendatioD8 "for thGlMl who deaire prompt
advice when important reve....a1.a are due in averaj;l!II and indi-
viduallJtocb.~
- Special reporta for "bueineae e:teCUtivea" deaigned to .....
aiat in detectiq "peUI and IllIWn ofproduetion."
- A "",rvice called MInformation" wherehy nOllllubacribera
were allowed to !lind I atamped aelf-lddreMed envelope and uk
Elliottanyqueation about the Wave Principle. Elliott .....ponded
with a quotation of the fee he required for hill reeponae and,
upon payment, the an_ft". "'Iltil novel aervice," Aid Elliott, "fill.
a long felt need."
- A 61.8'11ruler, which Elliott probahly created IJ5ing a drat\-
illlil: inlltrnment called a "proportional divider," the fulcrum of
which can be moved to obtain different ratiOll of meuuremenL
Elliott'a ruler enabled the u!IIr to ucert.ain without the bother
of cakulation when the ratio between two lengtha wll 61.8'11.
Elliott offered it for nle at 25 centa.
ElIioU Mid in 1935 that ·wa~ do not make eITOn. but lIlY
vereion may be defective. The neaN!r one approacheB the pri-
mary law. the leaa I!JT<lf'lI will occur.~ By virtue of all hie paina-
taking atudy, Elliott rightly conaidered himHlfthe aole authority
on triA diacovery. Toward the l!ltahliahment of that polIition, he
delivered the following warning on the front page of TM Wot>t'
Primiple:
" ,
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proc:eu of fomultion..•. No intel'pretation of the Wave Prin-
ciple .hould be _ptfId u valid unl..... IIl8de by me or by •
Irtw.\ent directly lieenBed by me.
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_ _ .. ,.-..: r.'. I,a , "'"" n 50 1.. .. :0.-.
published and updated every two month&. ObviOUBIy hil Itu-
dentl needed ch........, Ind F.W. StepheDJI, the diJItributor, felt
that Elliou c:ould luppl;r him -.e buaineIa by recommendina
them .. ideal fur illWl1rllting the principlea IIf wave muvement..
AnnuallUboo::riptioDJI""d fur 160.
How ironic it _ml tbat the owner lIfa challengina market
analylil buaineea and I man of inere&$ingly expanlJive philo-
IIOphical thOughtl would take the time to write I dry practicll
booklet, billed on hia earlier career .. an ac:oountant, entitled
"Farm Tax Aecountina M. You Go'-publilhed in January 1945.
It ia aa if, with only a few yearaleft to live, Elliott w.. not only
br&JKhing out in lIeVeral avenUN ofinvestiption and thought
but alao flniJIhiq project.a klnll planned yet previowIly left un-
done.
The Fin.ol Ytora
Durilll the IlUIt three yean of hiJIlife, Elliott'a clientl ron-
tinued to call him, ~y for advice on the very abort term lDlIV""
in the market.. However, he celllll'lli to IIOlicit new bU8ineu. El-
liott wrote the I..t a hia Inter'pn!ti..e {.etten m Augun 1945
and apent the reat otthe year and th. flnt five muntho of 1946
puttilll to(rether what he obvioll8ly coDJIidered hil definitive
work, No/u.n'. Law - TM &em of/M U,.illflrw. No.tu.n'. Law
incorpDrstn part of The WON Princip~ and indudn the addi-
tiWlal...u-veriea and obIoervatiOIlll that in the intervenilll yelll'B
had been detailed in hiJI Educational and Interpretive Letten.
Thia final monograph irn:ludea almoat every thought Elliott ever
had mnceminlil the theory of the Wave Principle.
The reader of that volwne ahould keep in mind that Elliott
w.. a pioneer. Much of hia diacovery ..... ream:led .. it ....
formulated, and little time w... available to .pend on CC>lIllMltic
ed.itilli. At 75 yelll'B or.,. and &till aufI'erinll; from anemia, El-
liott undoubtedly felt a aenae ofurgent)' about liletUng hiJI final
thouahta on the Wave Principle into print, an urpnty that took
precedence over a well orpni.zed terl. In an effort to pt the
book out bef",", age and ill health finally cauaht up with him,
Elliott opted for apeed and irn:lusiven_ over the metieuloua
orpnization evident in hia previ0'U8 ..-tic1ea and boob. Indeed,
many of the ~ were iIllleJ'ted direct1y from hia Educational
Letten. Deapite the lack of cohea:ion that more time for plan-
nina would have allowed, the book ia neverthel.... a ml,jor con-
tribution to market literatuno.
BinlJrnphy n
,.
"
One (onnu tnder claimed that Elliott'. fiiendll took up.
m1Jectioa (I common pn.ctice.beP. ~..., Ietl. no immedi-
a\e re\ativM) (or Ilia awDatioll,.hidl tool< pa- two days later
at the ..... b PoacI. Crematory ill Middle Village. New York.
Reconb olF.irchi16 SoN ~ Home indicate that arra.np.
men\e (or tht' cremation 1l'l!ft made b)' the Eliiou.' m-. Mar-
c.Ua M.kjneon, .bD teOI!iYed ElliaU'1 am.. .. ,be had Mrs.
EUiou'.lUyean~.lnie.ie.iDatbe"-'lII1 file at the
liuMnl boclot. • I ept ntati.... I"BDal'ked that in all her yean
at the (Killt)', abe bad hal'd1y..en I 'btdlier..-d, the (_
detail. ~ by IllS. N,nnllML A death DOticIlPpeared in
1'IIc N_ Yori 7tma 1111 JllDuary17. INS.
UUOTT_ . . . . '-.J-.1J.l ..
.
.. ,....,.r_r_ .... OI . . r-wdF....
~.
~
8._11' I PM So'_y. lu U. 1,••. -..
,.
" R. N. Eworr'tI MASTUlWO«U
bull market. ThUll, jWlt u one Dow Theorist (Robert Rhea) bad
iMpired Elliott, woo began publiahing the year after Rhea died,
Ml Elliott may have provided ilI8piration to &:haefer, in effeet
returning the favor. In .. Dearly perfect loong-tenn performance,
Schaefer turned bulliAh on atoda in 1949, e.tehing the entire
postwar bull market rliht up to the orthodOll top in 1966. He
turned beariah and Rayed that way throughout the Cycle ..ave
IV bear market Wlttl be died in the Bummer of 1974. Hia t ..o
long-term lignala were thUll identie..l to <on'. (_ d~ion
below), The influence olthe Waye Principle upon DowTheori.tlI
eamed through more explicitly to Richard RUlIHIl, who while
c:onfening with AJ. FI'OIIt publW1ed • number of remarkable
Elliott Wave foreeut.8 in hiADow TMoty utknduring the bear
market yellnI o:>f Cycle ....ve IV.
Though Elliott'. concept. powerfully lhaped the work of
IIeVera1 of thia century's IlXWt IUcceuful market forecuten, it
Wall A. Hamilton Bolton, the brilliant ana1".t ofBolton-Trem-
blay, Ltd. of Montrql, who tnI1y kept Elliott', name and the
Wave Principle alive. BoJton, who w. . a.tock brobrat thetime,
l'M.d Elliott', FiIUJllcial World articl". in the apring and NtI1-
mftr mont.h.o of 1939. He mad. a point of contectinlJ Elliott on
one or two oceuiona on hia triJlll to New York and cornlllponded
eontinually with him until Elliott'a death. In 1946, the year
Natun'. Low wall publiahed, Hamilton Bolton and MauriC4l
TTemb'-,y formed a mooey management fum and began pub-
lWrlng 1'M BaIl4 Crfliit Alwly.l, a monthly market analyli.
hued upon Bolton'a pioneering reeea.n:b on the I'l!latiol1lbip b&-
tween bank credit atatilltics and trends in the etock markeL M
a retlult ofhie conailtent auccese in fonlCUtinlJ with thia method
of"fundamental~ana!yllil, Bolton eommanded lJI'tlat and ever-
increlUling respect within the investment community, particu-
larly among illltitutional inveeto....
While bank credit ltatiaticl wel'l! Bolton'a bl'l!ad and but.-
ter, the pilei of corrupondence to Collinl, FroIt and othen ehow
thlt he.1UI eaptiVflted by the Wave Principle. Five yeara after
lJtaI'ting hia monthly publication, Bolton decided to lllIIUJne the
task or publicly analyzing the market in terme of what wae by
then ref'ened to .. the ~Elliott- Wave Principle. Hil firat "polIi-
tion Oil. the IUbject appeared in a 1953 "'aupplement- to 'I'M BanJe
CnditAnaly.l. The long-term bulliah forecut it preeented, at a
time when to molIt analyatll the market appeared "bijh" WlllI
•
BU!tlraphy
,.
mind on the 21·year triaDile, ~ with Collila tha~ 1932
marked the ort1'Kldo.I: low. SubMquent market action confirmed
thia wave labelillg to be correct.
On Fehruary 11, 1966, two dey. after ~hat decade'. hillh
and the peak of Cycle Wave III, Bolton wrote to CoIIiIa, whom
he had met twice before, and uked him to contribute to TM
1IanJI Cndit NIaly.t'a 1966 Supplement, which "1IlI published
in April. Therein Conine gave h.iI t.IJouihtl on the market and.
explained thelltoryofhill relation.hip with R.N. Eniott. He then
outlined the Intermediate, Primary, Cycle, Superqcle and Grand
Supereyele wave ODuntl for the .toek market and enrreet1y iden-
tified the top of the Cycle wave advaDOlll'rom 1942. At the QIIle
time, he f;A1led for an enauing fourth wave to be made up of a
large A·B-C formation carrying ultimateb' to about the 525 level
on thfl Dow IndWitria1&. Collllidering that thfl Dow at that timll
.... cl.- to 1000 and bellrl ..ere eearce, Collilll' prediction wu
tnl.Iy remarkable, not only becaWle it forecut thll W1thinkable,
hut becauee it came tnle. The end of the 1966_1974 c:orrec:tion
envillaged by Collina came a~ 570 (intraday reading) on the Dow,
jun 411 pointll from the prqjllCtion made eight ylllrI earlier. In..
CompUu ElIwl W...... Writing. ofA HomiltOit Bolll>lt (New CI. .
.Ice Library, 1993) preBentl both hia and Colline' entire pub-
liahed c:ommentaty.l
AJ. Froat, .. vice prelident in charge of adminilb'ation a~
Bolton.Trembl~,'11''' abuRney uaociate of Bolton'. from 1960
to 1962. He became and remained one of Bolton'. cl..-stfrienda.
TIley c:otrelIponded frequently and dilc:uQed in detail the mar·
ket and the Wave Principle on many oc:euionl. A1I:er Bolton'.
deflth on April 5, 1967, Fn:.t .... choeen to Ull\lme the tuk of
writinll the Elliott Wave Supplementl. Froat wrote the 1967
Supplement and conaborated with Ruaell L. Hall on the 1968
Supplement. The JlIlIt Elliott Wave publication iaaued by TM
1IanJI C,..,dit Analyll, which had been purchued by Stotey,
a.-kh" Aaaociatu foUowitl&' Bolton'. death, Willi Fn:.t'.1970
Supplement, which inclwled hi. flllDllUB cakulation Wlill( houtly
figureI that the bear market then in Pl"O(lreM ..ould bottom at
572. 'fbe hourly low four yean later w. . 572.20.ITlle Compk~
EUWJ4t Wauc Writin,r. u{AJ. Froot(to be publiahed by New CI..·
triae Library in late 1996) prellenta both hie and Richard Ruaeell'.
entire puhliahed CODlIDMtaty.l
•
BWgraphy
"
The Wave Principle m:eded from public view In the 1970..
Aaide £rom briehllmmari. oCthe theory in a few book chapten
and uticlee, the aforementioned diecuse:iolUl by Richard RUAell
and Robert C. Beckman's The Elliott WallO! PrindpU4I AppliN.
to t~ Lon.dJ:m. Stooll Marut (1976) were the moet ambittou. writ-
inp on the subject durina' this period.
The Wave Principle ReDewed
The reoeeaelon of Elliott Wave eommenttlry ended with the
rel_ of Froolt and P'reehter's 1978 book, Elliott WallO! Prin·
ciple -1CQ to Stooll MarUI Profit., the first book toarnnp all
mown IUlpect.lI of the Wave Principle in lagieal sequeoce and
add points ofmblt.lu,e to the llte...ture.
In late 1976, while I wu a teehnlcal analYllt with Merrill
LYl>Ch in New York, I bepn correepondilllf with A.J. Flwt. I
had been publiahinK reports aince April on the stat..... of the
market in tenna of the Wave Principle and WIUI betPnnillll' re-
Han:h fOT a new book on Elliott. The Market Teehnici&nll AlIllO-
cl.tion contacted me in early 1977 and wed if I would al'T1lJlge
for Fl'OlIt to llpealr. at its annual conferellCll in Pl!llIUIylvani. that
May.
When Fl'OlIt and I met at the conferenee, we enjoyed ..ch
ather'a company immeneely and became fut menda. Frost eJ..
plained that he a11JO Wall in the proceaa ofwritilli a book on EI·
liott, which Wall to he a collaborative elfort with laD M.T. MeAvity
of DelibcrotiolU (for artwork) and Richard RUSIlllIl. Froet added
that he would lilte to include tIOme of my recent analytical ....ork
III a chapter. I IIl:I'"d and began work on the chapter while con·
tinuing reeearch on my own book.
Frost spent mOlt of 1977 writing a draft summary of the
Wave Principle for his book. Then latll in that year, MeAvity
and R...-n contacted Froat and explained that their b\IIIy Kbed·
u1H precluded their Involvement with the book. Frost wrote and
wggeated we coIlabontll on the volume and in December in_
vited me fOT a weekend to hie home in Manotiek, Ontario, to go
over our pllDII. lepent the Dm IIllVlln mQntha IlUbltantiaUy u·
pandillll' on A.J.'s drat\, interrupted only by a deliKhtful week-
end viait with Frostand CollilUlat Cc>UllUI' retreat in F"orida. By
July the book ..... <»mpleted. The neIt several weeu were de.
voted to produetiQD detalll IUch II drawilllf the iIluatratiOllll,
,.
"
photorrlPhilli them and developina the photoll in the buement
darkroom at the home of 1t.ati8tical market analyst. pioneer
Arthur A Merrill. By Augu.st the rnanu.eript _ at the printer,
and in November it wu releued.
In April 1979, lien my pHilion .. Market Specieliat with
Merrill Lynch and began publishing 'I'M EUio« W(J~ '!'MrNUt,
which I hope will track the fifth wave in the e:tlf'n'nt Supercycle
.. well all Elliott tnlcked the tint and IJllCOnd, Bolton tracked
the third and Fro8t the fourth (and .. CoUina baa tracked them
all).
In 1979, I began uaembling Elliott', original writings for
publication. The ruult i. this volume, which I hope huleft. DO
IJI.mUl untumed in helpine make Ivailable to R.N. Elliott the
wide audience tu. pioneerilli ide.. .cl richly deHrve.
•
tuations, which he considel'llotherwiee unpattemed, are euetly
.. compln as the \argt!r one., ju.t on different _IN. Elliott
oriIfimikd that same idea, in the IIOCial realm, and then went
far flll"ther in di$overing that there are actually potU,.... to the
nuetUlltions. Thia idea h.. not been recognised in natural phyai·
ali phenomena by chaoe theoreticiana, but given that III pro-
C8Il8N are governed by naturallawa, it ilIlibly tbat it will be. It
ia only a matter of time.
TocIay, tbouaandB ofinatitutional portfolio managei'll, trad-
en and private inveltol'll employ the Wave Principle in their
inve.t.ment deciaion making. Ralph Elliott undoubtedly would
have been gratified to aee it. Even now, however, Elliott'alepcy
haa only begun to manifNt itlelf. Hia contribution to knowledi:e
ill far greater than limply a useful method of m...1uIt analY"a,
.. graat .. that ill.. Elliott'a di.lIcovery pertains not only to mar-
ket movements, but to the dynamiCl of alllOcial mood chanp.
In thia biosrapher'a opinion, it will lOme day be recognised that
Elliott'a contribution to lOciology ia a breakthrough equivalent
to thole that oocurred in the 16001 and 1700a in the phyaiea.l
lciencel. BecaUlle he .... both meticulOWl and principled, El-
liott may bava been the fil'llt aociallcienwt. in the Met eel1llf!
of the tenn. Given time and attention, the Wave Principle will
ultimately live lIOciology frum the realm of meandering apecu-
lation and place it flTlllly in the aphere ofacienee. AJJ a bonua, it
affonh a rare opportunity to appreciate the aesthetic beauty of
the human erperience in the abetract. Surely, few contributiolll
to our knowledge have been greater.
In 1987, A. Hamilton Bolton became only the eighth penlOn
ever to be awarded the FAF'a higheat honor, the Nicholu
MoladOVllky Award, which ia -preeented. periodically only to thole
individualt who have made outstanding contributions of aucb
liillifieance as to change the direction of the profeuion and to
raiee it to higher atandanh ofaccompliahment.· Simply for ap-
plying the Wave Principle 10 ..uctellfully, Bolton ia parha"" the
only man who allO deeervf!ll the Market Technicians AlIIaociation'a
higheat awan:!.
Thi.. month, on May 18, 1996, the Market Technicillll AJJ..
lOciation honond Ralph NellOn Elliott, the man who diacerned
the Wave Principle in the firllt place, with ita award for ·out-
&tandingeontribution to the field oftechnicalanalyma.· The MTA
preeented ita firat lIUch Innuallwatd in 1974, the year the Dow
JOntltl IndUlitrial Average fell to i~ Io r clumnelline..,d Ucl<ed
olfth.. great bull marketofour tim It hu pre...nted itl award
to R.N. Elliott in the year that the Do... hu finally, 22 yl!al1l
later, reached itl upper ehannel lin... That Ii.... datee bad. to
1937, the year Elliott began writing hi. fin~ book, 'I'M Wow
Principk. There o:ould be no better time to honor R.N. Elliott
~han when the IlllllHt version ever recorded of hi. five-wave
pattern i. up on the wall for all of UI to_.
'"I'be 8llsiA of the Wave Principle" and "How the Wave Prin_
ciple Worb, and ita CarTel.tion with Mathematical La....• an . .
printed in the &l«t«l E....y. eection of tbi. book.
,.
If a nladerp<l""_ Elliott memorabilia, or has any addi-
tional knowledge, no matter 00.... trivial, about the life of R.N.
Ell>ott, plene ronte.ct the publiaher. The neIl two JNI8N have
been left blank to accommodate any information obtained in the
futunl.
•
Copyrighted material
Copyngnted matanal
THE WAVE PRINCIPLE
by
R.N. Elliott
,
. R. N, EUIOTT's M~
'0 •. .,,,.tt
_.....,....
n _ ...
""" ....... or _
..........'
..... -n.-<
. _ _...., ..1001
R. II. Illiott.
....tod.", 110. _n
to •• prod.uro '~100 pupar"
V"'- tlw
1>7'
."tho.
I. I. ""• • 00.,
SI.O.I>dU' St.o.U.tln Co. In.>,
~. r.... k Stoalt Ia....... ,
hr."".,
Ilo.-J
t'ho II.U-t P1B&... ld _11.17.
00., lno.
_'oorl"ll 1.U.... lnc of . . . . . . . . d _
b,. tho .,,\/>or ,Dol 10 prot..ot..d "" ooP7"IIM.
R. II. 'IUet.t.
1\0>. lork •
• WhoIt Elliott meant .... tluot 1>0 .aUieo in thoI few , ...... follo.._
mil publieetion In Ins would devalop into fiv v. bull market.,
since II bear market oCCycI. degreot ....... till in P from 1937.
......
He wu abtolutel,. correct. N. "bull market" oceunw:I until IlM2-
,.
I
RHYIllM IN NATIIRE
No truth meetl more ~neral aeoeptanee than that the uni-
verse it ruled by law. Without law it i8 Mlf-evident there w0\I1d
be chaOll, and where ch_;", nothing ill. Navigation, chemiatry,
aeronautiC3, IU'Chitecture, radiotnnmnillaion, aurgel)', mWlic-
the gamut, indeed. of an and lIcie~ _ .11 work., in dealil1lJ
."..jth tbinp an.hnate and tbingJI inallimate, under law becauee
nature henelf worlu iJ:l thi, w-.y. SinCf! the very character of
law ill order, or c:onBt.ancy, it foUOWJI that all that happen. will
repeat and can be predicted IfW1l know the law.
Columbua, maintaininB that the world ..... round, predicted
that a weetwatd OI)une from Europe rnu.tt eventually bring hit
ahipe to land and despite KOlfen, even 1lm000g hill own crew,
AW m. prediction rNliud. Halley, calculatillll' the orbit ofilie
1682 comet, predicted its return which Wall atrilringly verified
in 1759. Man::oni, after hi. d\1diu in electrical kuwni..ion.
predicted that eound could be conveyed without wi..., and to-
day we can oIit in our homee and listen to musical and other
p ~ from acrou the ocean. TbMe men, u have counlJeu
more in other fieldll, learned tbe law. After bef;,omi.., thUll potted,
prediction wu euy bealuee it became mathematical
Even though we may not undent.and the cauae underlying
a particular phenomenon, we can, by obeervation, predict. that
pheoomenon'. recwTeOO8. The sun wu erpeeted to reeurrently
riee at a fixed time tbouaanda ofYIlllra before the callH operat-
ing to pMduce t.hi.t reeult wu known. Indi.arul fix their month
by each new moon, but even today cannot tell why regular In.
tervall chanlcteriu thia heavenl,. eign. Spring plantinga are
witneMed the world over hecallH summer ia expected u next in
order; yet how many plantera uooeratand why they are afforded
thia cormancy of the Huon&? In each instance the rhythm of
the particular phenomenon wee muteTed.
Man ill no I... a natural object than the sun or the moon,
and hiJ actiona, too, in their metrical O«IlITenc:e, are eubject to
analy.ie. Human ectivitiee, while amazing in character, if
approached from the rhythmical biu, cont.in a preciee and
natural answer to some of our moat perplexing probleml.
•
.
Furthermore, becau.ee man i. aubject to rhythmical procedure.
cakulationa havm, to do with hi. activiti... can be projected rar
into the future with a juatification and certainty heretofore
unattainable.
Very utenaive reaearch in connection with what may be
termed human activitiea indicate. that praetieally all develop-
~"" which result from our lIOcial-eeonomic p.oce...ea follow.
la. that call8e8 them to repeat the"""]""", in .unilu and COD-
aLanOy TeWl'Ting lIerial, ofwave. or impuIeM ol definite num-
ber and pattern. It ilIlikawi8e indicated that in their intenaity,
theee wavee or impu\eell bear • conai.tent relation to Doe an-
other and to the passage oltime. In order to beet illu.trate and
expound thill phenomenon it i. neceuary to take, in the field of
man', activities, .arne uample which fumishell an abundance
ofreliable data and for such PurpoBe there i. nothina better than
the stock escltange.
Partieular attention has been given to the stock market for
two rellBOllII. In the first place, there if! no other field in which
prediction hu been "geyed with Ineh gnllt intenllity and with
10 little reIIult. EcollOmiata, statisticiana, technicians, ~ineell
leaden, and hanken, all have had a try at f......telling the futunl
ofpriCl!ll over the New York Stock Exchange. Indeed, there hall
developed a defu\ite profeuion with market forecaating .. ita
objective. Yet 1929 came and went, and the tum from the great-
eat bull market on record to the greatellt bear market On re<::ord
",light almOllt every invutor offguard. Leading inveatment in-
Aitutiona, epending hundre<l.t ofthounnds of dolla... yearly on
market ruean:h, were taUiht by a\lrPriae and auffenod milliollll
ofdollanlOll8 becaUlle of price ehrinkage in lJtoek holdinp that
were carried too long.
A lIeOOnd rU80n for ch_ing the etock market .. an iIlll.l-
tra.tion oftbe wave impulae common to llOcial-e<:onomic activity
i. the great reward attendant on auc:cenful .tock market II"-
diction. Even ac:cidental e~H in lIOIlle eingle market foreeaat
hu yielded richetllittle ahorl of the fabuloll.l. In the market ad_
vance from July 1932 to Marth 1937, for iIIll.1tral.ion, an aver-
agt! of thirty leading and representative IJtoeb advanced by
373'110. During the lIIlU1'tIe of thia five-year movement, however,
there were individual .toto WbOM per cent advance wu much
larger. Laetly, the broad advance cited .bovtl wu not in a straight
upward. line, but rather by a .eeriea of upward. and downward
,.
90 R. N. Eworr'IJ M~B1!'/tCIWI
•
Tiu W...... Principk
"
E. Daily high and low raD&" cbar1.lld in IUl:h a manner .. will
diKIOft the wave- ..fall degreea aa they occur.
FOOTNOTES
I Hen. Elliott luggeota. a>rTlIrt1y I Utinlr., that Oil.. Olle lrnowa
the PrincipIa, it is ....y to l'WCOlPlize and foUo.., but it tak. pnctioI
to be abla to forecaat the m.artat frolll it. On tbe other band. it is I>Ot
nec:eaaary to fOl'flCUt in order to trade aucaufully. As Elliott oaid in
a 1eI.ter to CoUi.na,"' ~_ that it ill far more important to .." ......
..hen the terrnilla\.l .... aetuall1 reached than to rorecaat a 'guHI'"
,
II
,
"
ment than the onejult ilIulItnted. it will be _n that the move-
ment from M to N ia but one _VII of the five-wave movement M
to R. The movement M to R, in turn, becomes but the first wave
of « movement of.till hiaber degree.
',,1<1 .
N nlO¥Wl"
R
M ~01
,.
III
•
"
N
,.
.
....... (01" wave b), which iA again8t
the direction of the movement 1 to
2 and thWl ia a correction in luch
movement, .hould be made up of
three wave.. If we now pte8llDt the
movement 1 to 2 in terms of itl
lower "'IlYN, it will appeu ... in
Fipre 5.
For puI'Jl<l8elI of convenience, •
let WI designate the odd numbered
waves of. movement ... cardinali
.... ve. and the even numbered
_vell .. corrective WaYN. Let WI
aI/IoO remember that the cardinal
waves will <:ontain five _vee of a
lower degree, whereat the COI'Tective w ........ will oontain three
wavee of. lower degree. Other rule. and pnintR ofintere.t with
I'Npect to wavee follow.
The wave movement appliH to atocll.veragel, lJUeh u the
Dow..Jones, Standud Statisties, New York Timn; to groupll of
Aocb, auch .. the ateela, the COppeR. the telltilell: and indi_
vidual ata<:b. 2 When individual atocb are Iwdied, it will be
found that /100m" an advancing while othen are declining or
IlDdl!l'iOiDa • <Xlilective movtlment. The great mDjority of indi-
vidual iMu. will, at any lfiven time, be (ollowinll the "me pat-
tern, however, with the relIult that the averagu, 01" general
market, will break down into the wave phenomenon. It follows
that the greater the number of .tol:k. in. market .verap, the
more perfect will be the wave pattern.·
W.vea are not of unifonn leDith or duration. 4 An entire
movement, colIJI.U;Ung of five w.ve., is .lw.Y' due to some one
or more controlling influeocel, but the three upward .... v...
(wavel one, three, .nd five) which, with their two corrective
W.veI (W'veII two and four), go to make up the entire m0ve-
ment, may lCCODl.lll.od.te themJllllvell aomewb.t to curreot de-
velopmenu.1 The fundamental ClWNl behind .ueb movement is
generally not recogniud until.ner the effect haa played out in
the fonn ofttle complete movement, where.., durinr the coune
of the movement, current ne..... i••vail.ble to every one and
thua modifilll, both III to uumt and duration, each of the five
w.vea going to make up the completed move.
"
M a gllneral rule. it may be UlJumed that wave three will
reach a mlher level than wave one, and that ....... five will IfO
higher than wave three. Likewise, wave fout ahould nol. carry to
u low. level u ill attained by ..ave two.' Wave two rarely can·
cela all of the ground gained by "ave one, and "ave fQW" rarely
cancew.ll ofthe vound gained by ..ave th~.' The completed
fivlI>-wave movement, in other words, ill normally diagonal in
W...acter, u ill....tr.ted III Fiaunl 6.
M M
•
"
FltJUrB 10
,.
'00
neled are DOw renumbered u "ave number one of the nen higher
order. Channelling on • highl!r -e:ale QUI be lItarted at the tel'-
miNtion of .... ve number two under the same principle. u laid
down in Figure 11.
FOOTNOTES
I "Cardinal" iI u.. origin.aI ~rm. l.n. the Fi""""itJ W<ll'ld ......
tiel.., he .... l.he term "pt'ogr-.ive" ".YeI, d laW>" in N<>tww·.
Low, "impulae" ...y . . . Elliell W...,. l'ri"",pk gi th_ c.enna dif_
ferent, tpecific: mean.lnp.
• Un or t.M Wave Principle with individual otoc:k. ill_ reli-
able than with averagft.ince the pben""",non ... nec\.l mau poychol.
"81. or u Elliott put it, "eztenai.a public participation in price
moyement.o••
• &ridJ,}' apeaki"l. thU atat<oment il l>OI. tn1lI. An uerag. made
up of IBM and G.neraI Moton alone mi,ht better rebet the Wn.
Principle than an u."'p of ten t.hinl,r traded two-doll a\OCb.
Moreover. I am oonYineed Wt tile publie vmbility of_ m bt index
IDoIJ enhance itolutllit1 with reprd. to the Waye Principle. 'I'bua the
Dow, which iI m.de up of only ~ 'loch, .....' boo .. m~ ...J'lril.iVtl
•
'"
......,....jQt or til_ Wave than u.)', tM Value Un. Compao;it<o
Principl~
inde~ lOin.,. invuton luIy•• ~)'CbolotPcaI un.radian with the Dow
lnduatrial A,erage that they do nol.nperience with other inclexu.
• u. Me<ruoril,. of uniform lang\1I or duration. Tbey
e.,rtllholy tw, and .~ tim" are.
• Thi. a niOfl eannOl be IN., moe any °enlU'e movement" L.
","rely one ohhe wavs of. moYemenl. of larger degrM. What IWi..e.t.
""'.... il simply thlot " .... appeara to atre« the dl.~ of ......... of
Sub-Minor detree_
• Loowr Elliou. "',,\.ended that W . .I ' .bould not """p be!Mf tIM
peak of ....... 1•• ..u. tbat experien"" ...eril'ift.
• If the W...... Pri"cipl.;' to have • ..,. "'IWmtenoy or value, tIM
"'<lni "rarely" .bauld read """ver."
,.
IV
TERMINOLOGY
In dallllifying the wave movement .. applied to the awek
market (or as diKerned in any otherfillid ofhuman activity, for
that matter), it ia nllcelllary to dll~ .ame n(lUlllnc:l.ture by
whith the WIVY of any OM delllW will be distinguished from
the waY""" of. greater or lower degree. For all p...ctieal pur-
plIfIfl& the following degrees of movement will COVel" Illch atudiell
of the ,tocl< market &II are herein preaentecl, or lUI the student of
IIlIlrket trenda will need in hit own rneanh work in the phe-
nomellOn, The followina' order ia from the lower to higher de-
greea, five wavy OrOM deiJ"H aoing to make up th. tint Wlvt!
of the nut higher d"!l""'. Five S\lb.Minuette W.VetI, for eu.mple,
eompollll wave number one ora Minuette movement, five Minu-
att......ve. equal WIve number one ofa Minute movement, and
110 on. The order folio. .:
Sub-Minuette
Minuette
Minute
Millor
Intermediate
Primuy
Cyele
Sllpe. Cycle
Grand Super Cycle
__
D<g~
Sub-Minuette
Minute
....
NUm«r
,. ,
A.. E
Dtu:riptwn
SmaIlletten
Capitalized
Arabic NumeraiJI
'"_
Intermediate
, .. V
®"0
Roman Numeral'
Romans rit<:Ied
•
Tiu Wa~ PrifICipk
'"
""_
Cycle t'fi::c~ Double cif'ded
Preceded by ~c~
Pr..ceded by ~K"
Super Cycle KltoKV
Gt"and Super Cycle pel to pc: V Preceded by 'pc"
The reader need not pay too much attention, at the mo-
ment, to the above nomenclatUrtl and itll nurnl!rical designation,
but will rmd itnfincreuing u.efulneAlUI hiJI8tudie8 into 8tock
prir:e mov",m",nt8 P1'Olll'M8.
A Grand Super Cycl", in 8tock prices got under way in the
United Stat...s in 18ll7. The tint wav'" of thi8 d"'llJ'M of move-
ment ran from 1857 to 1928. The 8flOI)nd wave_ repreaentiDi a
correction of the first wave- ran from November 1928 to 1932.
The third wave in the Grand Super Cycle atarted in 1932 and
baa many y"'lU'II to run.
The Grand Super Cycle wave from 1857 to 1928 ia refel'1'1!d
to lUI ~No. I~, but it may have been No.3 or No. 5.~ A lIeVere
depreeaion oamrred from 1864 to 1857 similar in duration to
that of 1929-1932.
Wave nwnber one 3 or the Grand Super Cycle, the upward
wav", that ran from 1857 to 1928, WIUI made up of five wavetl
whicb, together, may be deeignated IU one complete Super Cyl:le.
Thi8 Super Cyl:le may be 8ubdivided .. follow8 C_ Figure 12):
...,
.
OM
., -
••
""
• lLw ... 1 Co. ...)
F"ogurs 12
,.
".
1867-186<1_ Super Cycle waYe number one
186+-1877 - Super Cycle correction (wave two)
1877-1881 _ Super Cycle wave nurnbet- three
1881-1896 - Super Cyol" <:orTeetion (wave four)
1896-1928 - Super Cycle ",ave number fiVft.
-- ~""""'~"e""-'"~~~'l"'e<,·!"CI~,~w~-"'l·""'''''k",.I
.
;'l
- "
•• - - - - - -,."" - - - - - - - - - - '
,
TM Well,. Principl.
""
DJIA Monthly Range
.........,""
Pi.OUt: Auguol 1921
,4
I
,
·'" R. N. EUXJJT's M,..,.;n1tJfO/Wl
,
'"
The same irregular pattern occurred at the top of A\lilUIt
1937.I Thi. in'egular pattern is detoeribed in detail uDder the
caption "ColTectioJa"
FOOTNOTES
I Fro.t and I prefer. labelittJl; .yo...... iJI. .hiob latun ....
I'MaT'ftlCl only for OOl'TeI:tive "'IV,"" . . bile numbllln ..... uoed for all
impulo.e WUK.
• Elliott', lIM of 18117 . . . Supercycla wave \ow i. aboolut..ly
~ but at!bi. time, be lac:ked!.be data \0 be",,", ... bieb Dwnbet'
it .... u• ....". firml1 to the oo....... t """,cl""ion that 1857 .... the low
of 1.aIlld .... ve of Supercycle de/ll'M in l.be lnterp'etiVI LetteJ' dated
Au(IUt 26, 1941 (_ F'igIuio 98 in NlIlure'. Lawl.
I ThTee, aetually.
• FI'OIII. and I pref.... the count ~ted in EUi«t W..... Pri,,·
r:iph, although we UN' difl'erent data to arri.... at.ourmnd\Wione..
• I prefer the interprelatioo that 1929 marked the onhodo:z top,
alabelina that EllioU in fart..- once, in 'Tbe Fut,,", P1Itlarn .fthe
Market" £rom 19-12, .hich is reprinted in the Selected Ena,1 oection
at tlu. book.
• Qu_tionable. See footnote 3 in eh.o.pW> XX of Ntl.IW"". Low.
,.
v
WAVE CHARACTERISTICS
In the preoedioS diacuaaiona an attempt baa been made to
.tate, u lIimply as pouible, the live-wave phenomenon. In the
present diaeuaBion attention will be devoted more to detail, in
ordw that the .tuden~ of the wave movement can fully maater
the trubject, and thllA be prepared to develop hill own studies of
price and other movements ofhwnan orieill. and influence.
Invelltora and apeeulal.or1; in .toeb are partieular!y eon-
cemed with the tenn.ination point of a fifth wave, as thiB event
marb the point at which all. entire movement i. to be 00lTIlcted
by • reverse movement of .imilar degrM. Stock market move-
mente of important dimelUlio..... Ineh all Intermediate .winga
l'\lIU\ing over a number of montbll, and Primary awinga nmning
over a number ofyeara, will witneu, at termi~tion, a eoneider-
able price cornetion, and 8uch terminal pointll call for diBJX*i-
tion of atock holdinp. It ie Iilr.ewille important that terminal
correction. be identified, u th_ points l"I!p..-ot price areaA
where long polIitioDll in .toeb are to be ....tabliJIhed. In the foJ-
10'lring paragraphs the fifth ~ve, lUI well u the correetive wave,
aN! d....elt upon rather fully. Other Cattors bearing on terminal
pointll are alllO d~.
The Fifth Wave
In fuingtheend o(a movement in Itock priCflfl, it Ihould be
borne in mind tIult before the movement hal terminated there
mUlt be five waves of the Den I_r degree ofmovernent, that
the fifth wave of luch next I_r degree will also require five
waVllll ofa atill next I_r d"'flI'Ole, and 1IO on. For illustration, an
Intermediate movement will end on the liI\h Sub-Minuette wave
of the fifth Minuette wave of tile fifth Minute wave of the fifth
Minor wave of auch Intermediate movement. In Figure 16, the
fifth Minor Wive baa been broken down into itll five Minuette
wav"",, and the fifth Minuette ...ve baa been broken down into
ita five Sub-Minuette wavee to iUuatrate the foregoing principle. 1
The fifth _ve ofa movement, particularly the larger luch
all the Intennediate and above, jenerally penetl'atea or "throwa
over" the upper puallel line formed by channelling the tenni-
,
The Well,.. Prinripk
""
~,
•
,
•
. ,
, 'Y
,
FIgUre 16
F/g(Jre 17
FIgure 18
m
,.
c........~
While the wave principle is very limple and uceedingly
ueeful in (orecut.ing, neverthel.."" there are refinementa within
the priDciple that may baffle the lItudent, llIIpecially when wave
movementll are in p ~ offonnation. The betlt ....y to IlIplain
what ill meant by refinement.- ill to chlU't them all shown below.
The e:u.mplllll are theoretically perfect apecimellll; the student
will fmd the actual developmentoftheee pIltterm not eoaimple,
in all cuetI. 2
Com!cliOJlll alWI,)'.have three waver which fall into fOUf
areneral typee, but while in formation it ilIllOmetimell diffieult to
rorec:ut the end pattern and extent.. 4 Once completed the pat-
tam indieatAlll the strength of the ensuine move. The typea shown
in Figunol 20 through 28 are thoee of very amall eolftdiollll.
The general outlinee ofpatteme an the aame in an degrees.
",,'"
V\ A C
rl(/lXfl21
, ,
~C A
•
TM Wa~ Pri...,ipk
The n.me typeeu above, but for larger degreetl, are ahown
in F'igu.rell 24 through 26.
•,
c
VA c
FI""02'
"""'•"
,
...
c
"""27
---•
E:l:telYio...
Enenaiolla may appear in any one of the three impulau,
.ave. 1, 8 or Ii, but ranI!Y in IlXIO'e thaD 0lWl. U....-II, they occur
in _ve5. I Eumpl. anowwn in ~ 80.
w."" WSlI8 3 , ,
,
,
"""30
The nme ruIn lJOVerTI both exteWlioWl Ind uteWlionll of
ertelllriOlUl. In Figure 31 will be found three typea of e:rtenaiollll
of utellllioni Ind the atandard type.
Extension of
Standard 1s1 wave
Extension of Extension of
3rdwsve 5th wave
,.
n. R. N. EUJOfT's MMrDft(}M;3
•
m
11t'lII'!IH+'MJ
Figure 32
1rTeJU,lu CoJTeCtiolY
EI&Illplf!fl of COrTeetiODB have alneely been shown but not
as a part of the waves of the previOUll movement being COrTeCted.
S....:h exunpleallre ahown in FiIJl.U"" 33 and 3<1. The letten -A,"
"B" and .C" indicate wavl!8 one, two and three of the corrective
mov"ment, il'Telf\llar pattern. Note that the second wave "8"
ueeede the orthodolt top (5) ofth. previoUll movement.
Figu~33
,.
'"
8tl"onf Coliectioru
CotTectiOll8can prove UlIeful u warningll of !Jtrnng mov....
menu. Figure 35 i, angular zig-zll& pattern, whith indiClll.e8
ordinary lItrength of lIUt.equent movement. Figuno 36 it a flat,
indicating strong lub.equent movement (Me wave" Primary,
July 1933 to July 1934).
/Jf'<Jinory
,
Figure 87 .hoW.I pattern where the end of the correction
at "2" i. higher than the end of_ve -A" ofthl! eorTeCtion, indio
cating unuaualltrength of the lubBequent movement. (The_
and eonection shown in FiIP'"' 37 la weaker.)
Correctione of bear trends, that it, correetionl following
downW1lN movementll, _VII! the aame characteriMtia all thoMl
of advl.llcing movementll, but in revene (_ FiIJUl'U 38 through
40).
•
no
3 c
A
""
IlTellUlar c:orT'lldiOIUI in bear t.".ncb aNI alIlo _n, but very
nrely. Note that af\er I five-wave down trend, an irreguIu eor-
reetion wo"ud appear .. in Figure ""1.
Foll_
in the pattern .hown in Figure 42, the fifth wave failed to
naterialiu, and stock ahould be IJOld at "B." Note th.t there are
five ..avell down from the top It -3; whereu .. corred.ion should
be c:om~ ofth.- w.v.... n... ~l!r i. that "8- ill the noll
top from whic:h only three wav. downwanl.-..e repnered. That
ill, the decline IItole two ....vetI from the advance. Put in another
_y, the regulu number upward ia five plus the regular number
down ill three, total eight.. In lhia cue then! were three upward
and fivedoW!1ward, aame total eight.. Such pattemll art! rue but
are • Mri0u8 warning and abould be acted upon immediately.
,
".
When the Student b In Doubt
In the po*tion shown in Figure 43, the trader m~ not know
which of the following patterns will develop, i,e" an uteMion
or an irregular CO!T'llCtion. Volume may fumiah the IMWer. EJ.ee.
where it ia .tated that volume diminiah" during the varioue
W8ve11 of correction (zig-zap, nata. triangle.), therefore if vol-
ume ill extnlmely light in the lut wave .hown, then it ill wave B
of an irreiWar oorreetion. If relatively heavy, aD extenaion ia
generating,l2
,
Trion,...
Wave ~mentll oceuionally taper off to • point or broeden
out from a point in the form ofa triangle. Theile trian(lll1ar for.
matiorw au important ainee they indicate the direction the
market will take at the conchUlion Ill" apPl"O';'mate ape,; of the
triangle.
Triangle. ..... of two daues - horiUlntal and diagolUl.
HoriUlntal triangle. repreMnt hesitation on the part ofpriceB.
At the conclu.ion of. borUontal triangle the market will ...
Iwne the urne ~nd _ upward or downwanl- which it wu
pursuing previ(lUJI to triangular heeitation. Horizontal trianglea
a.re limply hellitationa and have the lJaIlle significance u f1atL
,
".
Ir. dB-zag appelll'a lUI wave 2, a nat or tn_llile will appear as
wav.. " (_ Figure 44lY' u.
nat or triangle lICC'\ll'1IlIJI wa...e 2, a
:ug_ug will appear ....ave" (Me Fiiure <1.5).1<
Ascending: Descending:
lOP liar. IJoItom ~ng borrom liar, lOP descendng
•
T1ul Wa"" Pri"",pk
'"
Eumpleaaf diagonal triangle. are ah<>wn in Figure 47. 11ley
are af twa typea.
Flgvre 47
Figure 48
,
,,.
In Filr\ll"l49, the reo:ord oCthe five triangular wave. iI liP-
ward. The rnulr.et bottomed at M and ill heaitating after the
Ilpward movement M·N, prior to relIumilll the advance.
In Figure 50, wave two of the upward diagonal triangle ia
downward. The market will AVenMI its direction at the end of
trn. diagoMJ (that U1, ..hen the fifth triangular ......ve has termi-
.......
nated) and will return to about the baH of the triangle, lUI illul-
•
February 1938, one ClC:-
turred of lufficiently
large proportionR to
demonRtrate that all
five waves should be
compoeed of three Mi·
no.... Each ofthelle five
wavell formed a diffe....
ent pattern, I?
The Do....Jollellln-
duatrial Average doeR
not Ihow WI period ..
a triangle, but the Stan-
dard Statilticl, 348
ltoclul, ...eekly range,
makeR a perfect picture
.. shown in Figure 51,
a perfecl; triangle and
the lugtllt on .....,.,n1.
Being a weekly range,
the chart d~ not show
."
the oompollition ofeach FIgu,. 51
of the five wavea, but
another average daily range displaYI them all lhown in Figure
66, chapter IX.
FOOTNOTES
I EllioU adopt.ed I 1 _ form of Wullntion in order 10 make
more eoonomical UN ot.erticaI .pace in hil boob. I h..... chllllled
p~onR _ionally to adhere more cIOH]y to oormal wave ch.....
aeteriBtica. EueptioNl are the figureR in tba Fjlt<tIlei4l World .....
tid-, whicb lien. in\.lo<:t .. Elliott had them_
• Thi. type or a>mmen~ belJII mocl..... te chll1'iW or Elliott'. doc·
matilm.
~ UnI_ they are triangI... Later Elliott dixovered double thJ'MtI
and triple tbtees. TheM letter variation•• along with double ~g-up,
were later added in NtJlunt'. Law.
• See fOO\.nOte 2 8bo't'•.
• ONpite Elliott', tontentioo, eKperience lbo.... that wave lhr-ee
ill m..t ofWn ~be extended e. Elliott'. ezperieoee wi~h tbe le'll_
1929 and 1932·1937 bull m ket&. both of ..hich oontained elttended
fittll w....... rurely inlIuenoed hil thinking on \hil point.
"
I Tru., .. fer .. I can WI. 'f'heN .... 10m. JUid,elineo, .. Fro.t
and I point ""t in O\U' book, but flO rull1. See rClOtilOte IS itI ehapIM IX
of tho FiNutci4l World Ntida and the <On'eIIpondinJ lut.
T Ert.o""iono .... I"ItnIoIol twice on1J' ir the ute........ """""' in
the fifth irapulM "UI. Elliou e1ati~ thil point in ehlpw VI or
Hallin" Low.
I U.ually, Illtbou.rb nOl. n.........uy. An ~Ar ..,..,...,uoo will
lOIl1atimN bold tho boplllling of tho rlftb primary or t.ba pre-
cecIing bull mart 8M EUion W..... l'I"iMipk.
I Thia eumpll io """ a partieularl)- po<l """. The l:nanaiOll in
t.ba fiftb ...... or the 1921_1ll2ll riM .... lIOt ",tI'aeed tbe firot tim.
(that ie, to tha "bopnni", of the utenBioo") by ...... A .. Elliott
"""",to it, linc:e ..U. A .... utnmely lbart. W.... C II Elliou countl
i~ dU tet:reee m....:b orthe fifUl ...... twioe, once itI tho October 1929
.....b and apin in the 1930 rally. A ....,.. It.'aigblIOI'Ward count
labeli.... the bottom or the 0d0beT 19251 .....b .. "A" {an irTeruJAr
•• ~ fr<ml tha ortbodo. top] and tb. 1~ rally .. 'B" (an itI¥1T'l1<t
ri....l, .......td bot_ Uti-ltY the dOl,li)la retreC>elunt rul•.
10 Tha orthocioJ: .nd al. """"'emell~" ill the diTec:ti altho maill
U'lnd ie the termiIIlll poitlt ohbe fif\.b "ev. of. five- ""'I.........
What Ililiotl 'PPM" to be I&)'in( here il that .. ben an .otenoion
llCltUn ill the rlft.h ...... up. an ~ar top will <:an)" the marlt", illto
ne" bilb IJ'OUIId, tbereby ..tolld"" the "movem.nt" booyood the
orthodoo top or the fiftb ... y ••
II Elliott'l UM or'lll" to..-t1 an ••tend..! "u. i.uMI"ul.'...
Itudenll bay. IDIploy..! it.
II Tbio It.I.~nt io true ror Imall d...-. but not tN. ror
..evil 0( higber than lntennedioto d The 1961-62 rally _
mn'tlCI. on .~mdy hillb lumeand '11" ....... The 1930 rally,
a ....,...,uy...ev••dy." , occurred OIl yolume bia;ber tban thot .t
the peak in 19251.
I' 'nU. rule ie poIrt or.. h.t ..... l.w dubbed the Rille orAlterna-
tion.
,. Elliott later moclifi..! hie rulll to inclieate that a trian,g:I.
a1..~ P""'"'!.. the Ibt.aI impulH ....... itI • ""'lU...... Tbuo, a tri_
...,to ..... n _ oeeur ........ t..o ill a five-...... eeque....., only ..
...... rOW" (or .. "ev. B itI &II A·B-C corTettion).
to Thia <lilCUllioll ie IUperlluoua if 011. UIIlierwl.alldl the "u.
P"itOoti 0( the rormation.
,. That ie, a cli..,:mal triangle.
17 A Yf1r1 important poUtt. Thia il an«ber r.... t 0( tho Rule of
A1temation.
•
VI
I
SPEED, VOLUME AND CHAR11NC
(1)
~-
~, ... "' t N>.5
H<Jy ~ 10 """"" W37
Figure 52
,.
In fast marketlllike th~ advance of 1932 and 1933, it is 118-
Mntia! to obeerve the daily .. well .. the weekly TIlIlge8, other-
wiee chancteristie. of importance may be hidden, auch .. fO!'
eumpl~, trianglea and entlrWollJl.
In a .ub.sequent headina entitled "Charting," a reference ia
made to -linea." In the average market, alow apeed and the <!.I_
cluaive UK ofdaily range may COllOlla! important patterna. T....e,
fO!' uample, the period from the Jut week of January to the
fint week in June 1904, five montlla, during which the maxi·
mum ..-nge or daily clOllinp (Dow-JoDell IndWltrial Average) was
only 4.09 pointll (50.50 - 46.41). On the daily chart, the appear-
ante is an uninterestinaline, but wben condenaed into a ...eekly
range charta perfect triangle ie diaclO»ed, with the aeoond wave
pointina up... ard, lhUll USIlI'in& the trader that the market would
move upward followina the end of the triangle.
Vohulle
Volume dlllCTeue. gradul.1ly from the beginning to the end
oChorizontal triangles, flata and other typea ofClOl'ndiona. Vol-
ume often helpe to cl.rify the character of. movement. Ho..._
ever, when marketll .n .bnorm.lly "thin," the u.u.1 volume
eignalll are fIOmetimea de<:flptive.
Chancterilltica of volume an very imprellllive when con-
aidered in conjunction with the five ....ve cycle. For e.Iample,
during an advance or a decline ofllOme importance, volum~ will
intreIIH during wave number one, diminieh duri"ll number two,
increue during number three, deere...... during number four,
and increue durilli" number five. Immediately following num-
ber five, volume .bauld be fairly well maintained, with little, if
any, further progreu in price, indicating reversal.
Henin nfenllOll ill made to volume and ratio. "Volume" i.
the actual number of.barM tranaferred, wherelUl "ratio" i. the
ratio ofvolume to listed .hare. on the New York Stoc:k Exchange.
In ita bulletin for July 1938, the New York Stock Exchange
ooted in chart fonn lIOllle intereet.ing comparieona of volume and
ratio. An upward nltio Cycle .tatted In 1914, completed five
PrimIlriN, ending in 1929. Then began a downward Cycle, end-
ina June 18, 1938 (eee Figure 53). Precieely the ume phenom.
enon occurred in the price of Matll on the New York Stock
EllCh.nge Ieee Figuree 54 and 55).
,.
'"
, ....•
,
,
,
•
•
<l!
, ..
, ,,
<l!'
, ,• ""
'"
, ~
,•
,.
On the fint page mit. monthly bulletin for November 1937,
the New York Stotk Exchange DOted volume ratio to price change
of the period between A~ 14th and Oetober 1937, and aeven
other periods ofequal duration. I have reduced the comparison
to pen:entag1! and find that the 1937 period Will, by far, the most
remarkable of all.
lloII>;I, "' ... 5If, ......... - - . . .. ol><... <hort
= -r"'--""'"e-",.'''''-'''------------,
-•
•"
•
:L --C~''___=__=~,(;!.LJ
TM W....... Principk
'"
Data obtained from the Puhlic Relatiollll Department rela-
tive to money value of trana.ctiollll are ahown in Figure 56.
The following outline of compariaollll i.a interellting:
~nt ~r mar.hl
Top. Man:h 10. 1937: 195.59
Bottom, Man:h 31, 1938: ilUJl
Deeline: 98.13 points, or 50.1'1>.
Time: 9 yellt1l.
,
%~:t:*
.$IIxi £cJu CI*
,...",
.YadIl9'.Ub ....1938
L....,...~, .. .saa .....
FOOTNOTES
1 Baaed on the abrupt chang. in orpniUlUonal.tyl.. (and "u,e•
......n point., IUch U lpellincl, I conclude that chapten VI, VlJ and
IX written by Elliott and in.1Ud by him al\er Collin.' manu_
IICript _pl,ted.
,.
VII
~ •.
6) The larger the c:.teJll,lry, the more probability of. throw-
"
R. N. EturYrT's MASnR'rfWIJa
'"
- One .heet for each complete advanee of five primaries,
and itll correction.
10) Theae rerommendationa apply to the three principal
Iveragea (Induatrial, Rail, Utility), to email groupB and indi·
vidual.1tocb. The daily range of the three avemges, of groupll
and ofindividual,toeb in which the investor may be inte~,
'oould .t.o be maintained, and ordinary arithmetic lIl:ale ia lilt-
iar_etary.
11) There are three important realIOlI8 why weekly range
chuts are ne<:tls.ry:
- Only by thia method ia it poalble to Dbeer've the move-
mentover I aufflcient hiatorical background in order to judge
the nature of the lMlveral degrMI of W1lVN, ""pecially the
Illl"geT.
- ScH:l.1led "linl!fl" are ronverted into PD.ttel'Tlll of nat.ll or
tnang!elI, composed of three or five waVN, respectively,
uaeful in determini"i' or oonfinning future movements.
- Any d_ptio~ of the aman daily range are obviated.
12) AlwaY" pl."" the pou1.ieular movement under supervi-
mn, whether it be a Minute, Minor, Intermediate, Primary, or
even gnoater degree, on one cbart. OtherwiH the numbering of
wav.,.,. their Nlative mllillitude, and the ehanneling of move-
menta become distorted and confwled.
13) The beat time meallUTflll for Primary ..nd leuer move_
menl.lare ...eekly, daily and hourly ~hartII. Never be guided en,
tirely by any ooe ol th_ three important time m6UUfl!8, but
keep them all ill. mind ill. I.IIIl)'%ingwave numbera. In fut mar-
keta the hourly and daily movemenl.l are the beat guid...; ill.
.10... muketl, the daily and ...eekJ,y.
I') For the first time eill.Cl! 1928, .toc:b, bondll and volume
ratio got mto gear JUDe 18, 1938. Only with. knowledge of the
W..ve Principle me,y theae phenomena be oboerved and followed.
16) Some itema appeu to have declined in five ...avea. In
.uch cuel, all. "irregulu" top oocurred and .....ve "C" thereof
...... oomposed offive wn"",,, ""plaine<! under the title "Cor-
rectiOIl.l.-
16) Ill. lOme CUM it ie impouible to obtain fii\l1'l!l rorchart.
ing, such .. rell.l eetate, for the reuon th.. t there ill. no oenl.l'1l
market; the itemt are not atandardized, and pricellepecified in
t....nafen are Oftell "nominal." The IOlution ia found in "for&-
•
'"
clOfled mortgagM.~ Reliable fli\llU of the.e ant available. When
foreckwluree ..-e at .. bottom, real .... tate il at .. top, and vice
versa.
17) In other~, while reliable flgurea are available, it ia
difficult to define the millO!" degree_. An ezample il volume,
whieh fluctuate. in minor degree with the momentaty direction
of the market. The K11ution is found in prioea orNe... York Stock
EEhange _ta.'
18) Senonel tluctuatlOnli p"",aent difficulties which may be
overcome by cllarting a ten year averai!' of ween, mOlltm or
quartel'8, using ume IJ!I I. ratio buia. For eu.mple, weekly Ita-
tiBtka ofear loadinga are available, and the ratio of the current
week to the ten year average may be charted, \.1m. diacJo.i.nj:
the r.«II needed on whieh to bll.lle an interpretation under the
Wave Principle.
19) When twoitem8, which do notalwaya tl'avel in hannony,
unite oa:8lionally, unullUai diaturbanoe may take place, aueh 8.lI
that deeeribed under the title "Volume."
20) Not an ItoeD perform hannonioualy. While the princi-
pal averages topped on March 10, 1937, the _ral Standard
Stati8tica groupa commenced to top in November 1900, increued
to the maximum number in Marcil, then gradually decreased
until May. On the other hand, .toeo tend to bottom aimulta-
neoualy.
FOOTNCYl'E8
l Four. actually.
• I.•.• "Keep the channel li".. parallel.'
I Thia rather cryptic ueertion il better ltolted in obJIpter VI.
EV1In ..., lin"" ...t prieM .... not actively tnded -..ugh to regiater in
"minor degree," it ia difficult to _ h_ their ....",could h.lp clarify
the lbon tenl:t """lid.
,.
VIII
,.
'"
af • certain de(lTfl! from aoother wave of the ume degree. A
IIlOn! ""rta.in guide, however, can be derived from cllanneIliq.
The Super Cycle running from 1857 hu oompleted four wavell
ofleaer degree (Cycle movementa), and thua by connectq n-
~ eontaet.8 ofwave terminals two ud four of the Super Cycle
and drawilli • panlleJ line acrolIlI the terminal point of wave
Uuw, an upperpanllel i, Nt.abliehed, about which line the fifth
Cycle, or that running from 1896, ahould end, thWl completing
WIlve five of the Super Cycle movement. Similarly, the Cycle
movement from 1898 hu c:ompleted four wavn (Primary mov...
menta) lOG that, u for the Super Cycle, it can be given its final
upper channel line about which the fifth Primary movement
now under way ,boulcl terminate.
Attm.pointtheinvelltor, whoeeMtp~ia to hold.toeo
pun:hued in June 1921 until the Primary movement then start.-
illi hu terminated, obeervM thOlNl rules which will help him in
.elling out. Some of thClR ndell have been prevlowliy mted;
othen are fim preMot.ed at thi. time.
t) The Primary movement will be made up oftive Interme-
diate waVN. Selling is not to be colUlidered until four Inter-
mediate ...vee have been witneued, and the fifth ia under way.
2) Whom the fourth Intermediate "ave hH terminated. and
the rlfth illta under ..ay. it will be eom~ offiveleMerdegree
or Minor wavel, and lelling il not to be conaidered until the
fifth Minor wave i8 UDder wa,y.
3) When the fourth MinOf' wave of the fifth Intermediate
....ve hH tenninated, and the fifth Minor wave get. under way,
it will not terminate until five Minute wav"", have been wit..
neMed. and ...lIing ia not to be eol\.lidel'fll ahead of the fifth
Minute wave.
4) It i8 probable that the fifth Minute wave clthe fifth Mi·
I\Ol' wave of the filUl Intermediate wave will alao be made up.
hued upon hourly aver.e, of five Minuette ..avea. the fifth of
whi~h wavee will likewi... be compoeed of ftve Suh-Minuette
wavel. To reaeh the .nn.me top of the Primary wave R.arling
inJllDe 1921, therefore. it will not be neeeaaryto liquidate hold·
~ until the fifth Sub-Minuett.e "'ave of the filUl Minuettll "'ave,
of the Ofth Minute ..ave, of the fifth Minor wave, of the fifth
Intermediate .ave haa terminated.
5) The filUl "'avea of a Super Cycle movement, of a Cycle
movement and of. Primary movement generally penetrate or
,.
'"
"throw-over" the upper channel IiIHl utablisbed for the termi-
nation limit of each IUch movemenL Upper channel lin.... (_
earlier paragraphl) have been elltllblished for the termination
limit of the fifth Super Cycle wave and the fifth Cycle wave.
Sinoe the Primary movement ltarting in June 1921 will end a
Cycle u well u I Super Cycle movement (_ Figure 14), it may
be antidpated that auch Primary movement will not have "nded
until it hu aimed price. (on a logarithmic lCIIej above the up-
per chlnn"l lilHll of the Super Cycle and the Cycle. Likewiae,
the fifth Intermediate movement oftha wilting Primary -.n
Intermediate movement that is yet ahead - .h(M,l\d pelHlb'ate
or thro.....,..er the upper ehanneJlilHlutablished for iL
6) Terminal pointe of the fifth wave of Super Cycle, Cycle,
and Primary movemente are uaually aceompanied by he.vy vol-
ume of tnding relative to prior . .vea of each .uch movemenL
Intell8ll volume lhould therefore be witneued during Ind near
the peIIk of the fifth Intermediate wave of the Primary move-
ment now getting under . .y.
With the above general mIet! in mind, the invt'lltor leta the
market unfold, plotting ita weekly and monthly movement in
order to keep .b.......t of each Intennedi.te move . . it OOCW'I.
The weekly movement ia given in Figurea 57 through 61. Inter-
mediate wave one terminates in Man:h 1923. It il made up of
live Minor Iwinp, u a glance .t Figure 157 will indicate. There
followl Intennediate wave two made up, u .hould be the cue
for even numbered or corrective movementa, of three wav.,..
Intermediate wave three
DIIA ~e.l:1y Rono- l'llJUI toNovember 1921i.lt
loll... ".....Ie ,..,.1 ia R1ceeeded by the usual
A..og.I92' 1OM<:.d.1973 three wave OlH'n!Ction. '
,.
Tlu W""" Principle ".
"'leo "...kile t.b.3
MJr)92~ 10 Nov.192S
,..
,"
i'"
.
"1' , " "
•• l
,.'I "
""I/'y!'
l
/
FlfJUre 59
lrWr"*'ate t.b.S
Mar 1926 10 Nov.19'28
f'.l<h lite e.<tended sdl_
FIgure 61
FOOTNOTES
le., Inl.umecliato! ..ave four. Tha abrupt to!rmlnal.ion of lJtia
1
diKunion leada me to belieya tlLat a page omiuecl fJoom the
lIIOIlocnpb .. pllbliohecl. In any cue, the laat t o ~ or <hapter IV
can M"'a \0 """'pi.... the diocuuion.
"
IX
II I I II
'"' f- -
""
""
00
no
11 0
III
.,.
90
,.
'"
\ .
M , '"
d> '"
163.31
Flgu~"
-"
,.
'"
Fifl'un 65 embodiH the greatellt llumber ofintereeting fea-
ture. known to the author. Note the paraUelogrUl pIlttern. Thco
"irregular" top, OT to B, (oreeutll • IeVlre decline. The Rten-
Ilion xa to lie forecutlan immediate retraeement in three wavee
to Dl and nentuall,y lower prieeB than n. The tint n!tl'acement
w.. f;OlI1~ oft.hree ...v". u Ilhown in Figure 66, which con-
firtu lower level•. Thepg·ugA·B-<: In FigI.In 64 indicatell that
the OOI'Ted.ion lublequent to C in Figure 65 will be. flat or tri-
angle. The triangle ehown in Figure 51 reconfirm,lowef level•
. . per Figun 66, February to Much 1938.
•
OJ
C
,.
.,
2
HalfMoo..
'Thill. it II. name given to the pattern which developed be-
tween February 23 and March 31, 1938, 132 to 97. It curved
downward and at bottom WQJI almOllt perpendicu1u (lIN Figure.
66 and 67).
The eltteMion down to 115.62 (refer to Figure 65) foreeallt
thia lower level The lint advlI.nre, from 115.82. beillll'rompoeed
of three waves, confirmed. The triangle recoofumed.
The same pattern occWTed in April 1936, 163 to 141. Both
were ret.l'll.cementa of exteMlollll. On account of the high speed
it it necelll8ry to refer to the hourly nlC:Or'd, ....pecially during
the latt&r half.
From SeptembertoNovember 1929, wave 1 {rom38I to 195
wu extended and immediately retl'aced in 1930. No exteOaiOllll
appeared in waVIlfI 3 or 6 becalUM! one OCCUlTed in wave I ujU4t
deecribed (_ Figure 19, arithmetic _Ie). Hthe eItellllion had
132.86
...."'"
,
Oc~ 1937
115.82
-"'"
,,,.
,
R. N. Eu.JOJT's MASRI/WOlIn
'"
;
,
97.46 ~ •
F/gcJre 67
•
'"
FOOTNOTES
1 Elliott lbouid baYe mtMpftted tin. entire pkwN ditrennUy.
The IUppoHd ...... A and B.t the upper nEbt ofFicur- 64 an w~
out orproportion to the bUl" C wt folio.... W... C .. be l.bel. iH.
IlCtually ""YI three artbe fi............ doclin. wt be label. "I'" (l in
Figure63. 1'lMorthoclOJ< toporwave twoi. Au«uaf. 14 at 190.88 and i.
folio..... by fi... _avlll doWll for wave three,,, it.bouId be. A 0ClI'TICC.
oount for Fi«ure 64 would. be AI foU.,..1: WM... Elliott bue@,putl;
..ben be bu b, put 2, completing an irTwllular C<II'TeCtion tbat .ubdi·
1'id. perfeciJ,y; wbere II. I....u. put 3; .. t.-n he lIN d. put.; ...here he
hu <». put S. Then an irregular ~on upwanl follow., ..here h.
baa@, put A; where b. b.M Q), put 8; then • C be pIKed .t lbo
A~ 14 h4lb on tho top or. d".... niJI........ .-I (Ii...........
with utenmn).
• Tb_ a>mmentA are important in predleUll1 tbe speed 0(
OOI'l'fICUOI\ll. Unfonun.t.IJ Elliott ........r expatldocl on the. uu)u.lb",
in Ietel' writinp.
• Elliott'. 11M of l.hi.o temI il confuting inil.ially. 1U doem't
define it and faila to iIlUltn.tA hi. thou«btA complet.e!;r. WhoIt he ;.
,.
". R. N. EUJorr':r MA8J'D'ItOIWJ
,.
x
THE WAVE PRINCIPLE IN OTHER FIELDS
For yea", the word ·cycle" hM been in common uH, but
alway. in a rather IooIe manner implying mereJ,y a broe.d up-
ward IlDd downward movement, ThUll, as concerns the COline of
trade in the United StateB, 110m" eronomUta refer to the period
1921-1932 lUI a completed cycle; nthen say that the period COD-
tained three c:yc1N of 1.._ or greater inte.mty _ the mov.
ment from early 19'21 to mid-l924, from 1924 to lata 1927, and
from 1927 to mid-1932. In general, the cycle hu been l'llIXIg-
niz.ed in a rough way, largely for the rU80D that, in itll ertreme
upect8, it necMArily intrude. on our pl.... IlDd opinion.. but
the \Ulderlyilli law of the cyele has eluded the obeerver.
This tnt,tiR, u.ing the atock market lUI but one iIlWltl'a-
tinD, haa dealt with the law of the cycle, and in the dillClOllIIJ'e
baa mown bow one cycle becomea but the lltarting point of an-
other, or llU"J:el', movement that, itllelf, i •• part of and 1IUbject. to
the aame law WI the I_r movement. This il entirely conao-
nwt with every .tndy of Nature, for we Im",w that She h.. ever
unfolded in an upwani dire<:tion, but alway. in an orderly pro-
~ion. Underlying this prognuion, however, in whatever
field, ill a flIed lUId. rontrolling principle, or the muter rule un-
derwhich Nature worD. It hal been the purpoee ofth.ifl volume,
finIt to p........nt the law and then to IIhow it.ll praetical applica-
tion in one of the mOlJt baflling fielda of IInlllytical..-rch.
Merely aa C'Ul'IIOI')' uampl... of the operation of the Wave
Principle in other fieldIJ, we have pr1lIMOnted .,me grapha herein,
ehoeen at rand.om, which rudily ilIuatrate that the law ill at
work wherever motion emu (aile ehartl 69 through 78). It ill
reeommended that thie lIUbjeet be Iliven further attention by
atud.enu in fie1dIJ of activity outside the atoclr. market., .. it Ibould
lIimplify and clarify their particular work...
,.
,..
...
".
,~
'"
.. ,.
~
••
•
~
.
Gasoline con~ption .. II... U. S.
5
3
, •
0925 >937
SIM' ""tput
'"
."
5
3
" •
•
o L- -----'
""
/'bpojoIioII dOC .., ...",
"lO
3
•
10
J." ~-----_::!:!
1921 1932
,.
R. N. ELU<TTT'. MMTUlffOItU
""
~_Iftc_~
,•
,., ,;,. ....... ,
s. ,
'" ""
j
•
,~ "'"
~ 125
• "'"
.,., m,
, 100
.. r:-==-c--'h
US OeUcjh
• l..I\
:I H, .f
,
, ~,--------:::!
1931 1931
,L ---' FlrJUffI 78
1921 1937
,.
'"
By no meaN do cyclee of dilTerent itemA top and bottom
~ther. Two or mOre may top together but bottom on widdy
dilfe",nt datell, or vice versa. A few iteD1ll are noted below:
S""..
Orthodmc Top.
1928 (not 1929) ,,,,-~
B<>m"
Produdion Activity '''''
'''0
>8"
>8"
CommoditiM
Real EAtate '''0 1932/33
::rr:;/''\::;:::::;:3tC~'''''''''''''''''O'''''''''''''''''''----;--l
• 'Jl
s @ "
~
"
~ ,
~
1\ •
~
~
,
~
FOOTNOTES
I N.R.A. refen to the Nationallndunrial Recovef)' Ad, ellActed
in 1933.
,.
Copyrighted ma~nal
THE FINANCIAL WORLD
ARTICLES
,.
ANNOUNCING "THE WAVE PRINCIPLE"
A few months ago Mr. R.N. Elliott presented to us faroonsid-
e.-ation the results of his st\I~ whkh led to the discovery of a
phenomenon in human activity wltich may be ob5erved most
readily in stock market cycles. Believing tNt OUr reader5 ahould
be inlonneci of new d~elopments in the art of interpretation of
stock market movements, we hIove arranged with ltirn 10 prepare a
aeries of ~ on the prinrip~ whldt he hH discovered, the first
of whkh will appeu in the next ;,sue of Tht Filll/ltd,,1 World. Many
yt'anI of Mr. Elliott's career Wen! spent in Latin America, where he
lll'fVed as an acwunlimt ;and in other capadtil's in the rai!rwding
profnskln, ;and in 1927 he retired to La. Angeles, California. At
tNt time the stock market attracted his atknlion. He.h.>d>ed ec0-
nomics and many ·systems; charls and theories of market
interpretation and forecasting. Expressions CUITl'nt then as now,
such as ~resistanee levels,· Mdouble bottoms,~ '"head and shout-
den,~ ~trend lines; de., were examined, butlhe signifi<:u>ce of
their applications was found 10 be limited.. However, the possible
implications of the word -cycle,- which. was applied rather"va8U"ly
In stock market studies, o=!ted his curioIJity. In 1934, he began 10
I'lllIio> certain dupl>cations of patrerns whkh were similar in both
large and smaJ.I moveD'l<'nli. Th.is eventu.;Uiy re!lulted in his di&-
covt>ry, wltich h.e has named "'The Wave Principle. M
- The Editors
,
lj;""'!'!IH11!
Jp:;:e$~ ~n~t~ -\ 'lll~Vf'!' -\
H!H~E~~I~ 'i';i'f
~~~r~q
.Jlj'II,;!,jlj ~. "ll
j ·!1 ·
I!l["lll>-'
1)" II'l
IlliliAhft.Jnh' 'J!inlHI.
. ., ,:.' 1... ~ -'I
1,.1 1 ",_I!
0.... ' I ~·I'
-"
t,I""!'l "'!l.' .I~....j .J
I"u. . - \ ' .lit _ ~
• ...-( -.~ I! . - ,. i. i .. ;$ ~ §'.• ~
"0.... U : • l!ud
'!1i;,I"'IH"!'l1i\'''j' "'I'O'W i l'Jji jil 1
'1" iIi' bf j'l: ," {11 'jll'!'l h '" I ;
9 0 II) C ;:, j1
~ ..... ..c.;::
~u I--(
c; f-<
~
0.. !!!!~lljlilll,l!l :d!~;1 lJil11iHli,;.NltJ'Ii!
rt'i ':i ~-.~ ~ 1-1 J··i··,li·~I·llt;:' lJ!~ ··H.!~'" . Sr·
~ - . Hlk!IJi.,hliill.l ! t;,!llt;lWpNl!lj"1
~ I "''''! iJP~lim!liil~:ljlill lhl 111mI,hlfhijij
l'lllj'l'." 1j!' 'jl;"l; I I i "1'\ " il' l" 'P'! '1'1
"I! 'J
~"'! ._ I,_ f,il
"II'·' "P"l' "'1lit·I·q
"t·1.~
1!,f1';1,II!J"'Jd!,1 Ijiw!l'l 1k~:!lf
i~'~: !!'~ tH.' ~! HJ-
i
"'t"l'll·!iW
11 1 ! ·,·"p."·l"l! Ill'!,"' r'!f1ld"
,,'/.h! J "'nll"
.J., II
I
. !" 'fl"l"I" i '
_ Cl liHl .d"',a III
:> . .1, . ':; ~,; j,.
'" ~ ,J"'I" .
i ...
~lHil!~1l1/1I1ntl
lj .-. ~ ~. ~
PART I
,.
'"
ior. Gradually the wild, HIlMI. . and apparently uneontrollable
eh.angeiI in pricea from year to year, from month to month, or
from day to day,linked themaelvel into ........biding rhythmiQ
pattern of "aves. 'nit. pattern .-rna to ~peat i!.H1( over and
over again. With knowledge of this law or phenomenon (that I
have called the Wave Principle), it ill PQIlIribl., to meuure and
rorecut the varioua trend. and ml'nletioIUI (Minor, Intermedi-
ate, ~ and even llIO'Iemente of.... till grellter degree) that go
to complete .. grut cycle.
5
3
2 •
Thi, phenomenon it di"doeed in Figure 1. The full_va or
progreAive phue of the qde colUriBtll of five impulaes: three
moving forward and two moving downward. Wavell 1, 3 and /)
are in the direction orthe main trend. Wave 2 co.. a.-tI "ave 1
and ..ave" colTed.l wave 3. Uaually the three forward move-
menu are in appromnately plU'aUel planes; thit may abo be
\.nle nfw.velI 2 and 4.
, 3
5
2 •
,
". R, N, ELUtTrr'. MMTUJroIfD
..,
• bear market UI in progreu king Won the economic, political
01" (mandai......,,,,, for the chal1jfe in outlook an! clearly IIppar-
,
3
, •
FOOTNOTES
, ",. "d..tnu,ti.,.. r.........• ......\id....ced by l.hfl bear matUt,
whid> ,,"dM in 1~2 .nd .bkh coincided with the nadir in tbe
fOl'tuJMo; or the Allie. in World War II.
,
PART II
In the preceding diAcuMion of the Wava Principle u ap-
plied to the foreculing of ltock price movemente, it was pointed
out that a completed movement COlllliJltl offiva waVII, and that
• set offive wavel ofone degree completetl the flrlt wave of the
I1lllI:t hi&'ber degree. When wava 5 of any degree bu been com-
pleted, there ahould occur a COll'edion that will be more severe
than any previOUll corredion in the cyclical movement.
Completed Movement
The rhythm of the corrective phlllel ~ different from that
of the waVelI moving in the direction of the main trend. Th_
correetive vibrations, or wavee 2 and ... are each made up of
th1'ft l _ r waVelI, whereu the pro(lrflllllive _vllll 0, 3 and 5)
lin'! eaclt compolleli of {ille Imaller impu1aell. In Fi&'ure .., the
completed movement is ehown, being identical to Figure 3
lIJ:cept that waves 2 and" of the ~ig·z.ag" pattern are shown in
greater detail. Th_ WaVeB 2 and .. are thus lhown to consist
each ofthreecomponent phlUlel. but u theae twowavelIlln'! aleo
·completed mov<mIente,· they are alao charact.eriDd by fille,wolle
impul_; that ~, the "a" and "c· phuell (the first and third move-
mente of the cornction) Iln'! a110 each comp<Med offive tunaller
waVeI, while"b" (the correction of the correet:ionlis compoeed of
three lesser wavea. This queetion of correctiollll will requ~ more
extended dilleUBlrion later on, as /lOme fOflllll and typell Iln'! 10
complicated in lItn1cture that their preeentation at this stege
mia:ht be conflUing.
3
,
1
b • ,
•
•
The Itudent using tha Wave Principle to forecast price
clulrtgee does not requ~ confirmation by a companion average,
inatunuch .. the Principle applieB to individual stocb, to van-
OUI groupl (steels, raile, utilitiel, coppen, oils, etc.) and a1lO to
,.
,m
commoditiM and the varioua "aver&iN,· web .. tbOH of Dow-
JOIlell, Standard St.atilltklJ, New York Timea, New York Herald
Tribune, the Financial Times of'London, etc. At IUlY given time
it will be fmmd that.mlll atoclul are advancing and othen are
declininl, but the gnat m-.iority ofindividuallrtocu will be fol-
lowing the ume pattern at the ume time. It ill for tha rn.an
that the wave pattern of the "averages" 'frill correctly reflect the
cyi:liCIIl poIIi~n of the JnllI'bt . . . wbolol. The larger the num-
ber of Roeb ioduded in an averap, the more abarply outlined
the ...ve imJl1'f!*&iOllll will be. 'I'Iu. meana Wt ifat.o'lUa are widely
diatributed amonil a large number ofindividualB, the relIpon&e
to o:yclical UtfI~ ...m be ~red ""'"' definitllly and rhyth-
micall, than nthe diatribution ill limited..
Price Rant- UHd
No reliance can be placed on ·cIo.inpt daily or weekly. It
it thll hiiheat and lowell range. thu ruide the lubaequent
t:Ourie of the e:yt;le. In rad, it .... only due to the NtlblWunent
and publication by Dow.JoneJI oftbe "daily range" in 1928 and
of the "hourly range" in 1932 that IlUfficient ....li.ble data. be-
earne available to eatabli.h thlll rhythmic rec\lrrtlnce of the
phenomenon that I have called the Wave Principle. It II
the leriel of actual "tl'avell" by the market, hourly, daily and
weekly, that reveal the rhythmic: ron:ee in their entirety. The
~clOlinp" do DOt dilclOM the fullltory, I.lld it ill ror thil reuon
Oaek or detailed datal thlt the phue-by·phue C'OU/'8ll or the
London ltock market ill mOf'e difficult to predict than the New
York market.
The complete meuurement or the length or I wave il there-
rOft its continuous trliIvel between two COI'nlCtioIll of the ume
Of' grelter degree. The length of a wave of the Iowellt degree ill
ita travel in one direction without any IIOrt ofcorrection even in
the hourly record.. l After two eorrectiolll have appeared in the
hourly reconI., the movement then enters iu fifth I.lld Jut ltage.
or thin:! impulH. S<KaIled "resiatancfl"levm and other techni·
c:aI eolllideratiOlll have but little vslue in rorec:uting or mes-
lUring the length or duntion ortheee Wives.
OuWde Inftue_
N the Wave Principle rorecuu the different phuu or Iei-
menu or a cycle, the ~rienoed IStudent will lind that curnmt
•
Fj""rlCUJI World Article.
'"
........ or happeninp, or even decreee or act. ofi<fVernment, _m
to have but littl••freet, ifany, upon the coune ofth. cycle. It ia
t.rue that lIOmetimell unel<pect.ed new. or sudden event., p.....
ticularly thoee of a highly emotional nature, may enend or cur-
tail the length of travel bet.... een correctiona, but the number of
wavee or underlying rhythmic regularity of the market remain.e
conetant. It e",n aeeme to be more logical to conclude that the
cyclical derangement of trade, bri~ng wid.eepread lIOcial un-
reat, is the CRUH of wan, rather than that cyclea are produced
bywara.
FOOTNOTES
1 When minuta-by.mi11ut<l or tidl-by.ticlr.......,.... .... available,
....11 .meller .avee .... quit<l di....m.ibl..
,.
PARTlIl
BecaWMl after the fifth wave ofan advaneina' movement has
t-n <;<>mpleted the COJTeCtion will be n>onI MveN! than any yet
uperienced in the cycle, it ill desirable to determine beforehand
where the top of thill wave will be. With Neb knowledge, the
investor can take the 0'" -a,.,
atepa to lllllIUlDf! a defenaive policy
and convert profit. into cuh under the uu:..t favorable OlllI'ket
conditione. He will 1110 be in a 1trOna: poeition to repurchase
with confidence wbeo the coiieetion baa run itll eourtNl.
The previoua article auted that '"!'he complete measure-
ment of the length of a wave il therefore ita continuOUA travel
between two eorreetiollll of the aame or greater de,ree.· By re-
peatedly measllrina: the le~ of th_ wa""" as th~ develop,
under a method known al ebanneling, it ill po8IIible to deter-
mine at the time of oompletion ol wave. approximately where
wave Ii loouid "top.~
,.
·..
\lnJ_ wavll 3 wu uoeptionally atroog.:1 When the hue and
upper parallel lin"...... drawn u augguted, the approJimate
tennination (If.ave (; will be foreeut, .. ahown in Figun 10.
F~'O
FOOTNOTES
1 B:r en'Orof omiuion, no chart l.ab.led "Firur- 15" appeared in
tho. anitl.., poHibb" due to ild.il.l... by t.he mac''; ...·
• Elliott _ tc> be "rerri. . tc> .. phenomenon I bave noticed
...........,. when an thrN il ab""",,oill;r strona••lm"'l1\ vertU:a1. the
CIDft"eI:t channel for marl<i.nc the end 0( ...... fl..... ia conll\lucted by
<in"",,, ... upper cbann.11ine that toucbeo l.be peat of ...va ona and
-
cut. IIorouBIt .... ve u..... Thil id.... i.I Uh••trawd in EUi""t W.....
,.
PART IV
A completed price movement hu been lIhown to fIOrain of
five waves, with the entire movement teprellenting the firat wave
of the next larger dei"". By clllallifying the degree of the van-
oua phuea, it ill poaible to detennine the relative poIIition of
the market at all times .. wen .. the economic changea that
should follow. l
The longeat reliable record of Ameriean ltock prieM il the
Ax&-Houghton Index (published in 'I'M New Yor. TiMt. Annal·
ut) dating from 1854. Long nmge forecutintr u.nder the Wave
Principle m\llt therefore start with the _pletion of the bear
market that terminated in 1857. The great tidal movement that
commenced in 1857 and ended on November 28, 1928 (the or-
thodox top) reprelentl one wave of a cycle of the largelt
degree. Whether this utended movement wu the Firat, Tbif'd
or Fifth wave oCthe Grand Super Cycle neotll,rily depend. upon
what hlppened previoua to 1857. 8y breaking thil historic wave
down into ita component lI8ries offive..wave movementa, and by
breaking in tum the fifth "'ave of the next lIIJlaller degree into
ita five wavee, the .tudent will have actual exampllMl of the veri·
oua degreea that marketa traveree. To lvoid conflllion in claa8i-
fying the vanOU/ll degreee ofmarket movements, it is Suggl!llted
that the namell and .ymbole devilled below be uaed in their","
epective order (lee table, nen PI8").
The Iongeet of theee WIVf!ll luted for Over seventy yean
and included along lI8riee of "bull- end "bear" marketa. But it i.
the combination ofthesmaller hourly, dlUly and weekly rhythmll
that complete and mee.eure the important Intenned.iate and
Primaty cycllMl that are of great practical importance to every
invelltor.
When the Dow.Jonell lndu..etrial Average reached 295.62 on
November 28, 1928, the price movement completed the fifUl
Minuette impulee of the fifth Minute wave of tha fifth Minor
phaae of the fifth Intermediate movement oC the flfth Primary
trend In the rlfth Cycle of the fifth Super Cycle In WaVil 1, 3 or 5
of tile Grand Super Cycle. For that reaaon, Ilthough the actual
top of386.10 Will not reached u.ntil September3, 1929, the point
reached 00 November 28, 1928, ie designated III the "orthodon"
top. Tbia may .allDd confUfting to moetreadera, but the patterIUl
in which "irregular tope" higher than "orthodox tope" occur win
be ~d in due CO\ll'1Ie.
,.
'"
Duration
1857-1864
lie 1. . . . . • . . . . . . . . . . . .
ae .1:1 ••••••••••••••••• 1864-1877
Super <:yet ••••••• se III. ••••••••••••••• IB77-1881
sc IV ••••••••••••••••• 1881- 1896
ae v .•..•.•...•..•.... 1896-1928
c 1 ••••••••••••••••••• 1896-1899
" II ..••.••••••...••• 1899-1907
Cycl••••••••••••• Q IlI ••••••••••••••••• 1907-1909
" rv 1909-1921
{ " v...•.........•..•.. 1921-1928
{(I) .•.•• Jun••
1921-Mar •• 1923
((I1)l •••• Kar •• 1923-101..1', 1924
primary.......... ((III) .•• Kay, 1924-Nov.• 1925
(Uvl) .... Nov .• 1925-M.. r .• 1926
{
(IV) 1 ••••• Mar.. L926-Nov.. 1928
FOOTNOTI!S
1 Only • tn>1 technician would make thie COlDIDIM.
,.
PART V
The IICOpe and duration of any price movement are influ-
enced by what happened in the PrevloUll cycle of .irnilar or larger
degree. The movement th.t .tarted in 1896 .. nd took 33 yee.n to
oomplete, culminating on September 3, 1929 ..t 386.10, "ae ItO
dynamic that the cor....ctive bear cycle wae corre.pondingly
.evere.
Orderly Decline
Within leu than three yean, pricee were reduced to 10.5
per cent of the peak level. Deapite its high lpeed, the downward
OOIll1l8 of the bear cycle followed a well-defined and rhythmic
pattern of .... v..... Furthennore, it kept within the limite of the
pre-meuured channel. It was, therefo...., pouihle to determine
beforehand ..pprorim..tely ..here the be.. r market would end
and the new bull market begin. Becauae of the amplitude of the
previoua qcl...., the new bull market would n«:eNtIrily be of a
large degree, luting for yean. When taking .. pomtiou for luch
a movement, the long term inveetor ..ould be warnnted in main-
taining hill investmente until the end of the fifth Ml,jor wave
wu in meuurable .ight. From that point he ahouid be extl'emely
careful.
Previo.... dillCu"ion. have dealt with the f...ndamental
theory of the Wave Principle. It ill now appropriate to ahow the
application of the th",,1)' to an ad...al market. In Figw"e 11, the
completed five-wave movement of the erlnlme monthly price
rangea of the Do.. ~on.... Industrial Average from July 8, 1932
to Man:b 10, 1937 ill charted arithmetically. The eeri.,. oCMin...-
ette, Min...te, Minor and Intennediate wav.,. all te80lved them·
....Ive. - in the monthly, weekly, daily and ho...rly record. - to
fonn and oomplete e.ch of the five Primary w.v.... W..v.... «I)),
«UI» end «(V) were each oompoeed of[fivediatinct phlllletl, and
wa""" «II» and «IV) ot]' three diatilKt phuea, as ehown by the
A_D-C patteme. The e:ltent and duration of each important phue
are ,ho.. n in the aa:ompanying table.
When wave «IV)) ia fini,hed and wave (M) ill under w.y,
mIlCh cloeer attention to the market i' required. Accordingly,
the ehannel wu carefully noted. A bus line was drawn from
the bottom ofwave «ll)) through the bottom of...ve «IV)), and
". R. N. Eu»n'1S MMTI'IIIJOllD1
~ oJ lhePr;mcryMovemenI 1932-/937
\fave (lIll f~"", 40.56 July 8, 1932 to e","pletion of
Wave (tV») at 195.59 on Ih.rch 10, 1937. (Dew Jone"
In~u.trial Monthly ~ver.geal.
~"
,.,.
•
ro
• • •
((I») •••.• 40.56 July
'.'. 1932- 8l.39 Sept.
•• 1932
«U)) ..•. 81.19 Sept.
A •••••• 81.39 Sept.
B•••••• 55.04 ~.
••
,.
1912_ 49.68
1932- 55. O.
1932- 65.28
~O.
","0.
Jan.
,U..
H. 19))
1932
1933
C •••••• 65.28 Jan. U. 1933- 49.66 Feb. H. 1933
«(III»). •• 49.68 Feb. H.
«(IV)) •.•. llO.53 July
".
1931-HO.53
1933- 84.58 July
".
July
".
1933
1934
1< •••••• 110.53 July
".
n.
19))_ 82.20 Oct. n.
,. 1933
B•••••• 82.20 Oct.
C•••••• 111.93 Feb. ,. 19n~1l1.93 F"b.
1934- 84.58 M, ".
1934
1934
«(V») ••••• 84.58 July
". 1934-195.59 Mar. >C. 1937
(WI)
FIgure 11
'"
upper liM parallel thereto wu utended forward from the
I.ll
top of ...a". ((III». So. the aceom.,.nying tabla and chart.
Be.n..h lndleadon?
In November 1936, immediately an..r the President ......
reelected by an overwhelming m8jority vote, eJ:temal con-
ditione appeared to be IJO favorable for the bull market that it
wu Rtl'emely difficult even to think of being bearWt. Vet!ll:.
oordilli to the Wave Principle, the bull marlleteven then ...u in
i1.8 final atage. The Iona tenn movement that It.arted in 1932
bad by November 12, 1936 .-dled. 185.52, and the variola flv.
""VII .dvaneH of the prec:eding 53 Ill<lnthl were in the culmi-
nating stage of the Primary degree. Note how cl_ the priM
level Wall to the upper part of thto clannel ..t that time. Yet it
required another four month. to complete the pllttem.
The (mal and relatively in.ignificant "'ave, De<:ellUry to
contino that the end wu at hand, developed during the week
ended Wedneeday. Much 10, 1937. In that w.....k both the indWl-
triall.lld railaveragM moved forward on huge volume to. mod-
erately higher rec:overy level, and a<XlOrding to one of the moet
widely followed market theorie. therebr -reaffinned that the
nu,joT trend was upward:
The indU8triaJ. ruch«l 195.159 _ compared with the N...
.....m ...... l929 panic bottom of 195.$ and the February 1930 rally
top of 196.96.' ln that week the advancing pricea met the top of
the channel. The Pre.ident's remarks about pr1ce11 for copper
and steel beillll' too high did not take place until April. and by
that time the be... movement Willi well under way.
FOOTNOTES
1I added the words in bncl<.eta, .. tbey appeared to be miMing_
I I.•.• the Dcror 'I'heory.
I Elliott ......... iJ.ad thil ~ype of IUppoftlreoiatlLn.. 1eveJ. in the
............ ",. mart~ Olt.olll cho<-eo lovala an>Und which to turn
continuaU1 DC to break on!}' dramatically. Uouall1 the.. IeVeil have
1IO<lIMJU... to do witlo Fiborlacci I..tionahipo. Loot eloul,y .. t the 740
lavel, the 780 loYal, the 847 1 1 and ~h. 99& level on .. chart of th..
..-nt hiatocy of the Dow.
,.
PART VI
In the 1932-1937 Primary bull movement (_ Figure II,
Part V), ",aVIM «Ill and «m)) ran at high speed. Natllrally they
terminated in a abort time. But wave (M) w.. .., gradual and
orderly that it t..ted longer than the time interval required ror
the previoua rour wave. combined. In the dilJcuaion ofthU: move-
ment, it ..... atated that by November 1936 it wu evident that
the bull merket wu in an e:rtl'emely advanced etage, but that it
required anotber rour montha to compillte thll pattern. Althongh
thlllargMt p~ of"the Fifth Primary went in the culminating
atap, the amalll!llt componllnt phaaee (Minuett.e, etc.) were atill
developing.
,
I
• .---- l<I>-
F/f1UrfI 12
,.
C<lnfwJion in the identification of the wavllll of the amaDer
degreell, developillJl' toward the end of the fifth wave of the im-
portant degree, itllOmetunel!l caueed by "throW.-;lYen." A throw-
over ill a pelliltration in an advancing IDOVllDlent of the upper
parallel line of the channel <see Part III), and in a declining
movement of the lower parallel line of the channel. Volume tends
to rUe on a throw-over, and ehould be very heavy .. applied to
the fifth Intermediate ....ve of a Primary movement. Failure of
the fifth wave of allJl degree to penetrate the cbannel line, ae-
c:ompanied by indicatiol1Jl ofa mmuned decline, ia a warning of
weakneaa. The IUtent of the wealmeaa dependa upon the degree
of the wave. Sometim...., auch ...eakDe" furniah... a new baae
for the reeommencement of the fifth wave. Throw-ovel'1l are alao
cau.aed by the _Ie of the chart atudy of the movement. They
are more likely to 0I;l:Ilr in an Ildvancing movement on arith-
metic acelea, and in declining movementaon losarithmic _I.....
Sometimea the fifth wave will "atretch· _ that it, deploy or
epread out. The fifth wave, instead ofproc:eeding in the nonnal
one-wave pattern of the aame degree aa the movement u a wbole,
aimply atretchea or aubdividea into five wavetl of lower degree.
In rhythmie fon>callting, thia atntching appli.... to the fifth wllve
itaelf, nther than to the terminating cycle of which it il a part.
Such apreading out ia a charaeterilltic of marketa that are un-
ueually atrong (or weak, if a down movement). An nample
of atretc:hing CIc:CUlTecI in the 1921-1928 upolwiq, repre...nting
the culmination of a 72-year advance.
,.
PARTVll
The rhythm of eorreeti.ve movementa is the lDOlIt difficult
feature at the Wave Principle. Inten.ivtl st\ldy of the detail of
the col'nldion will lKNDetim" be neceuary in order to deter-
mine the poeition of the market and the outlook. Mutel)' of the
aIIbjed, however, mould prove utnomely profitable. All corree-
tiona uecharacterized by thrft broad ..avea, but the detail and
extent can vary conaiduably, and thua different pattema are
formed. Varioua facton (time, rate ofapeed, extent at previoua
movement, volume, ne""s itema, etc.) tend to influence and allape
the corrective pa.ttem. Baaed on the writer'a market research
and experience, there .ppear to be four main type. or pattema
ofcoutctiona. Th_ typea have been deaipated u ~-ug, fl.t,
irregular and triangle. DilJCUlllrion ofthe triangle, in ita vllrioua
forma, muat be Pl'l!lIeDted in. aeparate article. The other three
fonDll are diagrammed in Figunra 13, 14 and Hi.
Small cornction. that run their COIU'H in a comparatively
.bort time an enmplified in Figure 13. Correctiona of a larger
degree are dNCribed in FiIUf'll14. Figure 15 aJforda a diagram
atthe market action when the Primary Of' Intermediate b'anda
tum downward. Some of tb_ cornctiona, particularly thoee of
the irregular type, may extend over a period of yean and em-
brace movement.. that are commonly mistaken for "bull mar-
keta.~
,.
F ,
~~.
Yb ~
A J
, I
,,~,
~
.,
,.,.. " , ",
JS , •
1 r b '3)
Dioponol Triogles
•
redion. In the other fomul the ap« ill the end of the correction,
whieh, however, may terminate before the apez ia actually
reached.
All trianglell contain five wave. or lep, each of which ia
com~ ofnot more than t.hree l _ r .avell. Outli_ that do
not conf"orm to this definition fall outllide the law of the Wilve
Principle. All waves in a triangle muet be part ofa movemell.t in
one direction; otherwille, the "triangle· is only .. coincideooe.
The entire tnavel within the triangle repreBell.1.8 a wave of
the main movemenL The horizontal triangle occun .. wave 2
01' wave 4. Uit occure aa wave 2, the main movement will have
only three wavea. At the conclueion of a horizontal triangle, the
market wil\ reaume the trend that w.. interrupted by the trio
angle, and the diredion of that trend will be the aame u that of
triangular wave 2. The "hree.k-out" from the horizontal triangle
(in the direction of tnal1jf\llar .ave 2) will ueually be fut and
repreaent the finlli .ave of the main movement, and be followed
by revereal of the trend. The extent of the "hreak-out" will ueu-
ally approximate the distance between the wideat partlI of the
triangle. The diagrama in Figure 18 illuetnlte the "hreak-out"
from horizontal trianglee.
Diagonal trianglee 8ttl either upward or downward. They
can occur .. either wave 3 or wave 5 of the main movemenLI
Uaually they occur .. wave 5, and are preceded by four main
wavee. But the completion or the diagonal triangle repnllll!ntll
the end of the main movemenL The lIet'Ond wave within the di-
agonal triangle will be in the direction oppoaite to that of
the roain movement, and will indicate the direction of the re-
veraal to follow concluaion of the triangle. At the conclusion of
the filth wave in thisform of triangle, the rapid rtlveraal of trend
willu.ually return the market to about the level from which the
triangle atarted <aee Figure 17, third diagrlUD).
Trianglea llI'l!! not apparent ill. all atudiea. Sometimes they
will appear in the weekly &cale, but will not be viaible in the
daily. Sometimea they are present in, lIlY, The New York Times
average and not in another average. Thue, the broad and impor-
tant movement from October 1937 to Februa.ry 1938 formed a
triangle in the Standud StlItiatice weeldy range, but .aI. not
vilrible in other averl.gea; the aeoond wave of this triangle pointed
downward; the fifth ""ave culminated on February 23; the dra.
tic March break followed.
,
'"
FOOTNOTES
, B&Hd on tbe diKuuion of diqonal trianll... in TM WOlle
I'Iindpk, tliliI oo:m.mant;' aJmo.t UlIlJ"Idl, unintentional. Diqonal
trilll\lla. II....... ort;ur thrw. Third ".veI ..... Ch.aracl.erilti·
...u, ottoill'. whill flftb t.enninal tnOvetDenti. There ;1 ....".,
mile""" tn.t u..y aomM.imM .p~" tint ......., bu~ in that """
they aubdivida a bit di1l""",,,l.1J'. See EUi«r W",w Prilldph.
,
PART IX
The "extellllion," though not frequent, ill one or the moet
important market phenomena meuurable by the Wave Prin.
ciple. In an extenaion the length (and degTe&)1 of' the _ve be-
cometl much larger than normal. It may occur u a part10fwave
1 or 3, but ie .anally a part of'wave 5 of the main movement. I
The erlended movement ia compoaecl or the normal fiv..-.....ve
phalM!, followed by a three-wave reb"acing colTflCtion, and then
by a HCOnd advancing movement in three ph.... or the nor-
ma! five "avetl, the fifth vibration ill .aually the laJ1r&llt and
most dynamic of the aeriea,4 thUll becoming, in e!Teet, an enen-
Ilion of the extension.
A warning of the approach ofthill dynamic phlllM! of wave 5
ia conveyed when wav'" 1 and 3 are abort and regular and con-
fined within the cllannel,6 and when the fint corrective vibra-
tion of'the erleDllion iB completed near the top of the cbennel.
The length of important extenBiona may be aeveral time. the
breBdth of the original channel.
Channelling ill a1BO UlM!ful in meuuring the tnvel of the
extel>llion. ThUll, in Fiprea 19 lind 20, the line "h-d" repreeenta
the baee line, and the dashed upper pareJlelline "c~" meuW'ell
the nonnal f1Xpectan<:y for the "tint top" of'the extension.
The completion of the normal 01" fint five wavu of an ex·
ten1Iion ia never the end of the cyclical movement but doH con-
atitute a diatinct warning that the bull cycle ie approaching an
end, U only two more broad waVetl (one down and one up) would
fully reflect the maximum fon:e of the bull market.
Aft.er the fint five wavee of the ext.enaion have been rom-
pleted, a aevere correction (thBt iB usually in three _vee, but
may be triangular) IM!te in. Thill correction beeomea wave A of
an irreiuJar cyclical correction. Wave A generally carri... the
market down (breaking the erlerurion channel) to about the be-
ginning of the exteMlon, a1thoUSh a protracted period ofbaek-
ing and filling may serve to mitigate the IM!verity oftb\$lXlI'!'eetive
pbaae. The duhed line marked "X" in Figure 20 indieatee the
average expectancy for the completion of wave A.
When wave A baa been completed, the main or cyclical move-
ment ill reumed in three broad phuee that carry the market
into new high ground - even though "e" in Figuree 19 and 20
may have been the "orthodw< top· or a MIjor or Primary bull
,.
R. N. Eln<J'rT's MABnIlrtOiWl
movement. But \.hie new top, Of "'iJngular top,. is the final hiSh
point for the bull market. Thi. three-w.ve .dv.ncing pbue be--
cornea wave B or the irregular cyclical conation.
FOOTNOTES
1 The liD of an ulended wave to \atgff, wI the dqroc (Minor,
........
Intermediate or Prim...,.) to the _II ... !.hal of l.be t1O<I non-enend.d
,.
PART X
FolloMq the completion of the bull market fl'Ol11 1932 to
1937 {aN Figure 11, Pan. V>, a thne-phue cyclical correction
wu in order. The fU'St phue ahould and did 0Gn8istoffive large
_ .... The lint ph.... of thia COII ....t ion "'II the decli.... that
ran from 195.69 (Dow.Jo..... lndlWtrial Average) on Much 10,
1937, to97.(6oo Marcb 31, 1938. 1 The aoootllpanying FiiUl"e 21
abo. . the ",eekly range of the market dlU'ing this period, on an
aritlunetk Kale. neapite the higbly emotional nature that pre-
vaileclat certain 1tageI, the rhythmic forec:uting principle eon·
tinued to f'u.netion. 'The minute detaila ~lItered in the daily
and hourly pattern! are, or 00W'lIe, not entirely visihle in the
weekly range. For WI reaIOn, the eNelltial detaila of price and
time of the five big "'a... making up this fll'lt eyclieal pbaH are
given:
Cyclical Wave W - from 195.59 on Marcb 10, 1937,
to 163.31 on June 17, 1937.
Cydical Wive (8) - from 163.31 on June 17, 1937,
to 190.38 on Auguat 14, 1937.
Cyclical Wive (C) - from 190.38 on AquJlt 14, 1937,
to 115.83 OIl October 19, 1937.
Cyclical Wave (D) - fl'Ol11115.83 on October 19, 1937,
to 132.86 on February 23, 1938.
Cyclical Wave (E)- from 132.86 on February 23, 1938,
to97.(6ooMarcb31,l938.
,
".
F'fJUrtI 2'
The "imlgular top'" wae completed on AUguJlt 14, 1937, fo,..
cut.iq a Mvere cyclical decline.
,
''''
Ihlbatantial r&WVery would follow in at leut five large wavea,'
thu. forecasting the 1938 March-November "bullmuket."
FOOTNOTES
I
._twoI }.,.
Here Elliott col'T«t!y foreelll~ wt tIM beaJ' ID&l'ket that
IIarttd in le37 . . . not ....81'". The
later iJI. 1942.
0CC\lJ'I'..t four)'1&1'1
,
PART Xl
In UlIiDg the Wave Principle &I a medium for forecutin&"
price movementa, the etudent ahould recogniu that thenl uti
cyclell within cyelel, and that eacll web cycle or wb<ycle muat
be Itudied and eorrectl.y placed in reaped to the broad underly-
ing movement. Th...... wb-cyclieal or conective ph_ in I bull
market uti often importaot enoua:h to be m;'tal"m for "bear
marketa." The Itrolli but lub-cyelieal corTeCtion from MInh 31,
1938 to November 12, 1938 had a "bull pattern" offive impor-
tant WIVel mWIli up ita lint phue,1 and Will (and lltill is) re-
garded by many ... I rflal bull market. Broadly apeaking,
extended ralliee or eorrectiOIlll of bear eyel.. uti compooted of
three phaeee, and this ie .Ieo true of eneNliVfl beariIh 00n'eC-
tiona or bull movement&.
Wave Charactert.tic.
The eharaeter of the ....vea ma1l:illi up an enended mov&-
ment iI affected by a number of facton th.t may -.m irrel-
evant to the inuperienced. EIamin.tion of .ny completed
movement llHDllI to llUpport the fataliltie theory that the extent
or objective of the price movement ie fued or predetennined.
The time of the entire cycle il a1eo poelIibly fued, but the time of
the eomponent ph.... appeal'l to be variable.' The variatioWl in
the time cycle .ppear to be governed by the _peed or rate of the
price movement, and vice ve!'la. ThUl, if the marlult movement
baa been violent and r.pid in ooe phue, the next eorreeponding
phaee i_likely to.how. marked _lowing down in 1lpeed..1 EI_
ample: The lim Primary "ave or the 1932-1937 bull cycle ad-
van<:eG 40 pointa or 100 per cent in 9 ...eelui, aVeragllli 4.4 pointa
per ...eek. The HIOOnd hull phaee advanced 60 pointll or 120 per
cent in 2Oweeb, averaging3 pointe per ...eek. The third or final
phue erflpt fo.....ard 110 pointa or 130 per cent in 138 weeb,
averaginr 0.8 poiot per ...eek. High _peed at the tlod ollong
movementa usually genenlte. _imilar Ipeed in the lim wave of
the nlvt,"IlII: compare the March 1938 downward movement with
the following April reveraaL
At certain lIt.qee volumtl _m_ to play an important part
in the price IllOVemtlnt, and volumt! itaelf will eIpand or eon-
tnet to help eoot.rol and eomplete the price eyele. Study of the
time cyc:ltl .nd volume eyclea iI ..metimea distinctly helpful in
,
". R. N. EUJO'TT'II MtU1Uff'OJWl
,.
."
FOOTNOTES
l Here Elliott ~ r"...,.,..1.1 tha~ OM mon new hiab will be
mad. (which it ...... in ].r,1.I 11l31i) t>.fon tIM lItW bMT m.ark," low
(which <>ecUnWl ill 1942).
I Thia ......... tio" illn"" "'nabl., Ii...,. ' .... ry wave ill itaolf both
an """tire cycl." and , "ocmponenL'
I Thia i. anottw Npect of r.h. RIll, of A1temalion.
• Hen Elliott 118M tM word ".piral,· ...nectin& tIM IUbjed.i".
f.-lm, on. pc.
Ipi.nlU. mod,l for
.hU.u.. tnc.k:inc "'''eI. The theory of tb. l"larithmic
WIve PrincipiI bad not occ:wTtHI to him.
• My muti.. do not IUpport c.m. UHr1oion.
,
PART Xli
PreviouI articlea have diKuued the thlllQr)' of The Wave
Principle Illld ita application to brnlId market movementa. The
broader the (;8tegory, the more e1eu1.y the _ve impressiona are
outlined.. The ..ave pattern of the romprebenaive at.ock price
averapa auch u the DoW..!onelI, The New York Tlmell, or Stan-
d.ard StatilJtica averapa will correctly reflect the eyclical paoli·
tion of the market u a whole. Therefore, pun:hallell and ..lea of
a divenified liH of repnaentative Hoelu in accordance with the
movement. of the averagee will ...ult in profit.e, u their aggre-
pte market value will ewing in aympathy with the general
market. But for the _Iter of muimum proflt.e conaietent with
..fety, it ia not enough to buy or eell a lJnlUp ohtocb without
eeparate analyeie of each individual Hoek. TheIle individuailltud-
iea may ..-veal that IIOrne com~...... experiencing a cycle
differing ereatly from that of the market u a ..hole. A promi-
nent IlltlUllple ..u the cue of American Can in the epring of
1935.
The accompanying charta depict the lUUIlyaie of American
l
Can byThe Wave Principle. In Figure 22. the complete monthly
price I"llll(e hi.etory ;., ehoWD from June, 1932 - the beginning
oftbe bull movement - to JUDlI 1935, the time when the -ortbo-
do", top. ~ . The action or the Hoek from that point on to
completion ofUM cyclic:al correction in December 1937 ia ehown
in ~nd lin....• Th;., monthly rec:a;rd cond",_ th'" weekly IlIld
daily detail. into the five broad Primary W:IV" that complete a
cyclical movement. '111_ relatively broad charta allIO help ma-
terially in maintaininj' the proper perspective.
When the important fifth Primary _ve of the cycle com-
menced in M.,. 1934 - or in other warde, when the Primary
...ave@reaction ..ucompleted-it Warne neoellllaty to Hudy
the market action more clOllllIy. Hence FiiU"' 23, which ehowe
the ....,kly pri... record of the fifth Primary wave. After thia
Primary _ve bad prosreued througb Intermediate wave of, it
became important to follow the daily price rangee, u ehown in
Fii\lNl24. The fifth Intermediate _va ataned in March 1935,
and five Minor wavea we.... completed by June 1935. ~ lIig-
nailed the ·orthodox top" of the main bull movement in Ameri·
can Can at 1«.
,.
Flgum22
Dow ""'"
/wtria' A~
,
".
and mil ~d to uperience five upwlU'd Intermediate waVelI. By
June 1935, the long term invelJtor in American Can wO\I!d have
realised that any further appreciation in that Iltocl< would be
highly uncertain, and t.hat mueb greater profite Went avail.bl..
in the general market with minimum rillb. FnJm that point the
general market advaneed nearly 80 pointe or 65 per cent.
FOOTNOTES
, III FicuN 22, w --...et -'nl, avoidina; o"vl.pping and rul-
fillina Urird waV1l nquitalllllllUl, would be 10 place tbe@wbereElIiott
hu a, and (witbin ••".. @)lwherehehaab, 2 whe he h.. c. and 3
.boo... be hu 1. Wave 4 ofQJl then taIr... an .-h-e .1l U, and the rule
of aI_tion ill .till ..r.wied.
I In Fi«ur'e 24, ElIi,,"~ ... tbe _lappinJ and the iJauffi-
ci...1 tllird wna nahiol"" "e"). From the d......ption of the auppoHdGY
.nd@wa".. wtfollow,it_m'hl.rhlylikelyloh.tthethird ...near
the final "'ave 6 of ID limply Illlt<lond-.l. thuo eliminating the impe....
feet <»wIt. Elliott'•• and b an all ~bt, but bile _lei be .-.-.ed for
the Ikot peal< within IJM ruppoNd (]j.l (thereby compleu", an uten-
Iliott li-om tbe low at bl, the d for the lien omall.....uon (hi. b 0100).
Md the .. for the Ktual b.i(b. Ju pr8\'iouaIy di....'..ed. Elliott c:aI.I•
........J Io~ "irncular" tbtlt",;pt be beUer ,""plained by Lhinl-wue
ute!WioM.
,.
SELECTED ESSAYS
1940-1942
,.
l
THE BASIS OF THE WAVE PRINCIPLE
OCTOBER 1, lHO
Civiliution nlsta upon ellanie. Thdi ellanie di cyclical in
origin and characterilltiCll. A rbythmic lIerielI of extreme cbangee
ODn-.titutel a cycle. When a cycle baA been completed, another
cycle illtarted. The rhythm of the new cycle will be the me u
that ofthe previous cycle, althouib the enent and duration roIlY
nry. Tbecycle progreuel in acoonIa.nce with the natunlllaw of
movemenL
The behavior of cydea b.. been Itudied eztensively by
puz%led economi.... banken and buainllSll men. In thil connee-
tion, the conaervltive London Eeonomul in a recent issue, com-
menlilli upon the reault. of along atudy of trade cyc:l.. made by
Sir William Beveridge, the noted Britiah economillt, &aid:
,.
...
botany. Even time and mathematicll appear to be amenable to
the application of thiA law of rhythm, from the ..mall unit of
boura to the great intervalll of decades, centurietll.Ild millennia.
Meuuring the behavior of eyclell ahould therefore offer a reli-
abl.. meana of forecuting chl.DiN, regard.lesa of the cauae, I and
thua yield hand80me profit..
In an independent .tudy of the avail.ble data, extending
over a period of ml.llY yean, the writer hu obeerved certain
reeurring behavior of change in movement. Apparently th_
changes foUo" • natural law that inevitably influeftl)f)ll the mUll.
Finally there evolved certain principlell, which were eanfully
tel!Ited back over a long period of years.
By 1934, 1_&11 able to reaolve the varioua trende· of changell
in.tocl< priCllll \.(I. rhythmic lIeri" ofrompooomt _VelI, which l
I called. "cycle." Thill (yelieRl rhythm hu oecurred regularly
and repeatedly not only in the avail.bl., record. of the Vu1OW1
stock uehanges, but .1110 in oommoditiell, induatria' production,
temperature, mWlic, vari.tion in ""lOT, ellldrie output, popula-
tiOD movements to and from dtie., etc. In fact, it il manifHt Ml
widely, not onlJ in human activities but abo in the workinp of
nalureitBe1f, that I have termed this diseovery'"I'be Wave Prin-
ciple.»
Undentanding ofthia law enablea the clOlIe atudent to fore-
cut tlie terminatio~ of cycl" by mellllll of the market itllelf.
The Wave Principle;a not • -market" ayatem Ol' theory. The fore-
casting principle inyolYed iON far beyond the eooeept of any
known formul•.
The number of waYIlI .nd tile extent and d.....tion of move-
menl.llllf!eIll. clearly to be allied. with the principle ofmathemat-
ice and with the puaage of time, but the number of..ay" neyl.!r
yarie. except undl.!r certain rec:ognaable conditiona of a cyelieal
natun. The ullilth of. waye may poMibly be affected by emo-
tional newt, but the munbt'r of WaYe! la clearly not affected by
meh t.... n.ient developmentl. nu. Principle forec&lltl and at the
same time mea.8Ul'elll the extent, COrnctiOIlll and revenall of the
variowl trendlland C}'clell long bef,,", any IUpporting lltatistical
evidence is aYailable. A featun ofunusuaI merit is the faet that
the experienced ltudl!nt knoWI at all tim. the CUfTflnt poI!ition
of the market in e.ch cycle and therefo", ;1 forewarned of the
apprc.eh ofreYenall. By meanll ofthia rhytlun~ anal";". the
,
1" R. N. Eu.IfJn"tI MA..'I'/"UJfO/tu
,.
'"
u
>
u
~ • •
w
~
~
'[
~~ .~
-. - :~
E
<
. •
• :} §
~
u
0
~
~
,.
'"
o "18
.... "'.... ,",!... e ... ~
~
0-
•
N
. -. •
--............ 0
~.
0 0
- .
0 0
0 0 0 n •
M 0
0
0
0
0
0
0
,
· -.. -. · .....• · ... - . · ........
• 0
N
N
•
•• • - -
•
n n
'i~ • ~ A t
jj: .. •.. .. . i i---...f• - {
• • •
• N
I.
• ••
•n
~ n
• • • ••
C
t,
•
n
• • ••
•
•
0• o.
• •
Co
n _
0
0
0
0 .....
n
~
• ••
.. .. .. . .. .. .. . .. .. ..
0 _oN
0
• 0 • • •• • • •
! ... ,..............-i;;
0 0
"'dt
•• • •• • ,
-
N- 0 N_ ; _
0 .....
I'
• •
0 0
_.. _.. _a .
-.!, !.! •I
O· • • • ••
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• ..........
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]- •• , --••• !-
• • • • 0
• • •
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•
F/(/Ure 2
,
R. N. EUlWT'. MA.'I'T'P1I1OJIX1j
'" •
•
•
- - --
• •
- -
• • -
.-.. -
Flgum3
_.,, ....
, h,. "" -.
!L. !!!m.Ill.!et. l!2....!!I>!U!!!l!t
"" ., ,,~
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~ 'pl. ~
h •. ~
•, ~
"" ""
J~I.
~,.
•• ....
~ ~
"
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"I.
"" ",- ....
.~.
',I. " ~
h •. ~
" "
""" .,
U ~,. ~
":1 M.
h. "" 0.\.
J,". ~
~
.."" • P•••
J~I.
,~.
""" . •••
'.1.
"I:" ....
,_.
~
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•••
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',1. "" .:1 .... ..'" ~
~
":l"
,_.
•••
""
""
.,
J.".
T.'.
.,. .
'pl .
..
•"
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P••• ~
tdb '1'
,
@ J 19'\l I>y
~.ilf.
A1\
Ellion
rl,Mo
, I h .....<l-.
I
FOOTNOTES
1 Thil""'" includ..._tion. from. pajll iuued in Sept.embftr
or Cloe\oIIer 1938 alld from Ed.....tio... al Bulletin A, iuuecl in Iac.e
Decamber 1939 or .....lJ' January li40,
• H. mMn& PUle. that are Jllftumed 10 be CII"1ft.
• Id.
• Tbi.o would bet..". .....d, "JIIIW!ma."
• He...-, •...• compt.te up-and-down oeqUIDCe or ...him ....•
• Tbe tint thrH parqrapb& ofthi. euIIJ' are from Inl.erpretivl
LeWlr No. 26,"'The Ruli". Rae.;., ofWu.... d.ated J...,u"'Y 11, 11M3.
T All l\otoHi on tM i""'pb.
I 8M the "P)thqotu.n Oiacnm" on tIM ....:n pap and tbe
picture ofJ'rl.hqona In Nal"rc" Law, obapter XXV.
I H. ia prob.bl, referring to tbe Docennial Pattern. Tbi.o and
the nom parqrapb beg for e1ahorat.ion. See the ~on in Ellioct
We.... Pri.ncipl..
"'Thia oecUOft;1 from.lnterpretivi Leu.or No. 18,.tate<! AU«W't
27,1i41.
"
MARKET APA1HY-
CAUSE AND TERMINATION'
7 40 ~l
1lo• ...Ion••
ln~u ..... tol
··tC°"
,
upanda or conb'aetl with the Imgth of the price t.r1!nd. The
longer the trend, the greater the public interest and turnover in
stocb, and vice verN. During recent yean, the awinp in the
price t.r1!nd have become progreuively ahorter, IS iI charac·
terilItic at movement. within an orthodon- trillDl)e.
The awinill of the Dow Jonel Industrial l1lOnthly average,
I I ahown in the accompanying chart, afford a clear erplanation
for Walack of ronfIdenee and I'MU1ting apathy. The two d...hed
linea, Q - V (drawn a~ the falling tops al April 1930, March
1937, and September 1939) and R - V (drawn ICr08lI the riling
boUoma of July 1932 and March 1938), fonn a triangle ofgigan-
tic area. Each completed awing of the pendulum within thiI trio
angle baa become p~ively shorter in accordance with the
geometric ratio alO.618, I I regarda: bath extent and duration.
The triangular outline iI therefore a1ao a "ratio triangle'-
and .. auch, differa in important relIpectli from the .....ave tri-
angle· described in my Tl'eaUse, ~ Wow Principle.1 The ratio
of 0.618 and itll reciprocal, 1.618, Item directly from the ratio of
the circumference al a circle to the diameter, or 3.1416.1 Thil
ratio iI a1ao the buic characteristic alt.he Fibonacci Summation
Seri., which ia identical in numerical count with the etruc_
tura of The Wave Principle. Thia aimilarity ie dillCulled
fully in a circular, '"The Buil of The Wave Principle." The Fi·
bonacci SeJ'i1ll, the ratio of Il1lCh term to the next tenD, and the
reciprocal value, an revealed in the following:
Table of Relativity
First S«ood Ratio ReciprocII
T,m Term R.tio
,
2 plus J equala
• S •
S
8
0.60
0.625
1.67
1.60
S • •
8 •
•
8
""
•
•
"" 0.615
0.619
0.617
1.63
1.616
1.62
"" •
""
•
•
"" 0.618 1.618
""
•
• 89 • ,...
89 (1.618
0.618
1.618
1.618
,.
&I«ud Buoy. from J94I).J942
Oat- P<>inla
To rr-. To a.anp
JIl111"2 2M.0 .0.5 260.5
Mud> 1t!1T 40.5 1911.0 1M-5 1106.51151.5 • IO.K
Jola«h 1938 1118.0 lt1.0 iII.0 iII.0/IM-I • 13.5
SepI. U3\! 117.0 15&.0 no 61.0/ no • 11.8
,~
u .•
Thil felture provu that current eventl and politiCi have DO in-
nuence on market movementl.
Since the ClUNe of this pheDOOlenai market. behavior origi-
nl"" in the ",lativity ofthecornponentcyclell cornpreeaed within
the triangular I",,, it il diltinctly encouraging to be able to
point out that the ... pidly approaching apex oftbe triangle .bould
mark the beginniq of a relatively long period of inaeaaing Be-
tivity in the atock market.
With the Wave Principle, the fact that all five meaaure.
(the ratio of cyclical tnnda. the relative time for the movement,
the mathematical nature of a trianale. and the Fibonacci Sum-
mation Seri.,. all .""mming from the common lIDuroe) point to
an approaching culmination of a tnmendOUll thirteen-year cy-
clical correction ia extnl.ordinary.
FOOTNOTES
1 This trealiM ia an uadlenl innovative analylia and I eorrec:t
COIleluaion.
1 The difJ"erenoe 8lliott pointll out ii, in fact, cn":isI. Appantnl.!y
• ratio triangle may appNJ' lpart rrom a wave triangle. ThUl. the 13
yeu triansJe ill not a 1'llq1tired intel'JlUtlltion deIIpite the FibanacQ
....l.oti"".hiPII.
I See dixuolion in ch.pter III of Elliotl Wave Principk.
,.
lWO CYCLES OF AMERICAN HISTORY
AUGUST 25, 1941
,.
..
. ~
:~
.
,
I
.....'1....
•.tI .... ··" ..
. "".u
!lI !
•
",' ;
_- <il "I
-- i
0-
-
-
I --",1
~
I
•
•I
~,
•
F..".,
.peed in the enauilli movement in the oppoaite diftlc:tion. 4 The
momentum carnell over, in correctiOll8, Into the ~beequent
awinp. Similarly, the extent, duration lod yollU'tlll el1araeteria-
tica are relative, cycle by cycle. In lIUlIllIlAtion, the proportional
IUTIlngement of the neceeaarily 8Xtenaive corTeCtion orthe 1857-
1929 wave called for .honer and lhorter tJ)()Wnanw together
with dem!uinj: _peed and volume. Nature'. inuorable I.", of
proportion _unla for the recurrent 0.618 ratio of awing by
nring OOIllpariton. The whole movement(or all the movemenla)
lIince 1928 (and at.o from April 1930) form a uemendOUll tri-
angle, and thiJI triangle wregarded .. Cycle IV of an order dat-
Ina: back to .. early u 1776.1
,
..
• -
, •
"
• -~
. "
" .
I
•
"" _. , • • • •• •
-_-"".
'~
_..........,....
._,.-
.., ...." .... ,. t
FOOTNOTES
1 TbiI....,.;1 from lnleJ'pnltiY<t Letter No. 17.
I A ........Uble ooncllWoD, fu1b" IUpported. ..,. the diacovery of
additional data. s... tbe prewn\.lltion in ElII<>I1 WallO Prl""lpk, all
w.tI .. u.. updated ebanol 011 the nut pap. TboI flnt obowa the e
count for the Or.nd Supen:ycle bull market from 17M in the Do...
J__ IndUitriai A.wq:e odjlUtd {M ill/latiM (i.e., uaing ......tant
"
<lollaro), which.bows a!ecitimata trianrlo in tM wov. (IV) poitll.ion
from 1929 to 1941hn<la Iypieally bri.rthru.teanyinrillto 1968. TIM
_<l.ho. . tM counl I" ~li"""lU <loU...., b,.- which ...... un tho bull
market baa lutad 62 ye.... frotll 1932, ju.ol8 y""" .", at Elliott'. 70-
,..,. ..timat.a (from 1942).
,""-'''''''
-~
p- "'" T."""'0 U.S._
p-
'00
1'1
X(yf/ .
_~
C ,m
__,__-I 1
._-
_,__-~_ _,__-C-;::·~·~·c:;;::·C·C·-,I.
._ "... '7'00 , , . 'toO 'Il1O ,~ ... ' . . 'toO ,.., ,~ ,~ ' . . ...,'
,
I H, meanll 1696.
• Whil, common in COlMlocllt, prieM. ouch beba...or i, oot aI-
w~ _ in lJ1e ,",,=k marke~ In (act, the OPPMite oRen nccun.
I Good..n. The....,....j lhowa the low in 1784.
1 Tbie ..um..te il baMcI l:J on , \.enctb equi.elent to tlM
l867-lns (GrthodGI top) ed'fance be ,talel in the nut _Y•
...". FuWTe P'ttem oftlM Muket."lrc>nicell:J, bownei'", thrult.o...
be poil1t1 out ,lMwben, ..... I1O<1Ile1l:J lhort and lharp, 10 thi, time
.tim.ote Ip,,"," too far into lJ1e futunlpYen hil tn'IIII, inteJ1>reta-
tion.. Eye... forpttina; thII triInIl., lifUl w......... u ~ .honer
than thirdo. H. Uw:o' pol .1eI t.hiI id.. irI the ot.horwiI<o id,"tleal
t......,..t in thII fillll1 ~ of NI1l~" L:w>, but luglltl I thnolt thot
io tGG briIt. N the ch.art in IOotD<Jta 2 .bow.. tlM lit\h ....... luted 17
,.... in _ t dollaB, from 1949 to 1966. Reprdl_ of thNI
tacbnic.! poi.nt.o, bio call for. mlllti-<lecode Id.'flllce irI tlM mid.t of
the plJ""ui... aI""'" of llU2 ie ot.unnillll irI;tI a<><Un<J' and roreoilht,
ODd pouibl:J onl:J bec:ouoe he iplored III the ne... t .nd eltC1uoi'fel:J
.... mined lb. PlUUI1·
,.
THE FUTURE PATTERN OF THE MARKEl'
OCTOBER 26, 1942
••••
I
;
, • .0
• • ,,
oi.. ,
, i ,t . ~
,,
I
•
I •
I I
I
•
•
,• I
• •
fJgo~8
,
'"
WaVN 2 and .. are I.IWayJI corrections. 1HD1Iil"' may op-
pmr Oil wow 4, Mvcr 0lI _ 2 iMofru OlIIlKJw obHrwd. TMre-
fon, the pattern ofUte period l'tom 1929 to 1942, being a triangle,
ia .Ive@of. Supercycl..1 W.v.~ ia .bout to lItllrt, and hued
on the duration ofwave@(l8ri7-1929),itll'louldtenninatclabout
theyear2012. 1
Having eetabli.bed that wave@ atarted in 1929, wave@
obvioualy ended in the IWlHl year.- Wave \Xl of Graph 1, from
1857 to 1929, ,. detailed in Graph 2, UlIing the Axe-Houghton
lod~
The 5th wave ofar.ph 21t.arted in 1896. It Ilubdivided into
five WIVN, and iullUbdivided 5th WIve, atnrting in 1921. u-
~n.ckd. &1,lUIioIu MWr opptal' twice in 0 eyek. Themono, no
uteIl8ion olt.hill deiI'M abould appear between 1942 and 2012. 6
Doubtle., neither did one appear in wave (!l. previoUll to 1850,
for ....hicb period I have no record. For thelle reaaona, the two
daahed lillell in Graph I,· previOUll to 1860 and following 1942,
are ,,",uod IXIncluaiolUl.T
Wave ® of Graph 1 will embrace three bull market. Ind
two intervening bear marketa. The amplitude Qf wavn
(poon:eotqewiH) and volume will ruemble th...... of the period
between 1857 I.lld 1909, u depieted in Graph 2. No one DOW
living will witnellll. "New Era" oftbe 1920s type,'
FOOTNOTES
, Elliott'. analywW ben (from "Edllutional Bulletin 0") Uo a
repeatoltha -.....J.yai.o ... tha p'O .. djnl_Y, upd.wd ata timo wben
be u..w W~ m. marlr.ot had pUMd ita SlIpenyd. w.y.
~ bottom.
Tho .... wa1l anal,-oUo ramai". a .........ubl. r..~ ud w.. ahown ttl be
IlllI'Tert with tho DOW availabill~,. ,,( put data, .. pnMnwd ill Elliot!
WCIl.. Pri'tCipU.
• !ih<:M>ld rud "Grand Suparqrcl•. •
I Sao r_6ofm. pnoedin,--.r.
• Thia ....t.a.... and tho nut three, .. woll .. Graph 2, !'eYIII
that on .~ 1 _ tbio oocaoion, Elliott illt.arprewd 1921-1929 AI •
atniahtforwotd "Ii...... ClInclllaon with which I antiroly . . . . 1929-
I~:l Uo then a otniabtforwotd A-B.C. Hio "irntcul... ttlp' tbeoio il
\lllDeceuory, AI b. himHll' reyea!o ill tbio paooqa. HWttIry oha....
tbo~ tho otoclf marlr.1t olmoot illvarilbly t ..... wt on. alDple pal-
!.ern aft.er .....c.her, deopit.a tbe reeliq onl pta ........won.ally ill real
,.
&~ EUD.:p from 1940.1942
tim. tha~ lOme ne.. "trick" ia beitlll pLo.,od. N. a pa~tern ....... ita
end. miMina clarity al...,. retuma in anuh of real(Diuon.
• Elliott'. eumple ......... thaI oril.hin a li~. _". nruCl.UJ'a,
onI,. OM .ub-or will contain an en.mion in 0I>Il or ita impulM
...b......., .. he actually the lllIITKt lIUidew.. ia tha~ only on.
impulaa .. ava orit.hin a liva ..ava atnIetura oriU be an utanaion.
1'benl ia no reuon .. b, an .:rtenaion .bouId not appear . . . • "blDG'"
or eacb impulaa ...... in .liva "a~. "'lu....... In r.et, i~ DHTIy al...,..
doaa. N. biatory b.. born oul, the riM £rom 1942 t.o 1966 .... en
.nandad oritbin ...... @. Howe"..., if ...~........ itaelr an
-.ion ~ .. <D end ® .bould _ be.
• Elliou. aometime. earal_ oriOl bl.a dTawlnp. W ® in
....pb 1. ror inat.anoa, .... clearly int.andad to climb to hiP..
Neilher did the 1932 low rail below 01. peak or ...... (j).
1 Elliot~'a biatorical ... ~a MUll~ i. brillian~ and accurata. Hie
conduaion, owIa onI,. six monthe aftu the 1942 low, w.. entirely
c:ort'Kt tbat Ol.t kna orould not be ceed.... on the do..-id. prior t.o
• llIu1ti-dacade edn..... Hie 1 APtditJc the riM into the
beJinnini orhi. data in 1850 imilarlJ ta, .hbou,b .. a ...
<D becan in 17M ...d .nded in 1836 (tbe..........,uon a n.1, orith an
int.orvellitl& biab in 1862).
• TbalUtb wawe of Cycle delP"" thaI aa:el.ntad in 1982 and baa
earriad into the lQ90a baa been • 'New Era" ..." (i.•.• founded on
hope) and baa Men anaIOIOU' to ~he 192Oac.~ Supereyele (tbouP. not
Gnn.d Supercyde) doIp-ea.
,
NATURE'S LAW
THE SECRET OF THE UNIVERSE
by
R. N. ELLIOTT
,
REFERENCE INDICATIONS)
(O) Diagram. For eIample, "D of· meaml Diagram No. -t.
FOOTNOTES
,.
f.-:~;;' .... "- .. - - .r:: .-
"' '. ~" .
"-1'----------.. . •
r NATURE'S LltW
tHE SECREt OF tHE UWIVERSE
By R. N. ELLIOTT
,.
VJ.If, J...,-I"", /w .
T-.~_C ' -,10_ 0 •
__ _ Tact.' .. IIanUn" _ . . . . ..
F ".;r.-
•
•
'!,~...-
--
-- .
INTRODUCTION
RHYTHM IN NATURE'
,
,,,
luger. Lutly, the broad .dvllllCll cited above.,... DOt in a atraight
up....,-d Une, but rather by • ..,riN of upward and downward
atepll, Dr zig-UK movemenu of a number of montha' duration.
Th_l"'lMer awinp afforded even lJnlater opportunity for profit.
Despite the attention given the IItoek market, lIllCX:flllll, both
In ~ aoeuraey of prediction and the bountiell attendant thereto,
hu nece5lW'il;r ~n h.phu..... beea"," thOM! who have at-
tempted to deal with the ITUlTket'. movemenu have r.iled to rec-
ognise the extent to whieh the market i •• paychological
phenomenon. They have not 1T1UIped the fact that there iA regu-
larity underlyiq the nuctu.tiolUl of the market, or, atated nth-
erwi..... that priCtl movemenu in stocb ant luhject to rhythm.,
or an ordered lleQuenee. Thua market pred.ictiona, lUI thOM who
have had any experience in the lubject _11 know. have lacked
O'!J'tainty or value orallY but an aa:idenbll kind.
But the market haa ita law, just lUI ia t.rufl of other thingll
t.hrougbout the univel'lle. Were there no law, then! COl.I1d be no
center about which pricell could revolve and. therefore, no mar-
ket. IIUltead, there would be .. daily -eri.,. of dillOllI'lUlized., con-
fUHd price nuctuatiorw without reason or order anywhere
appanont. A clOlie .tudy of the market, however, u will be RUb-
seqUllntly diaclOlled, proVII that thla ia DOt the eue. Rhythm, Dr
regular, measured, and harmonioll.l movement, ill to be dia-
cemed. Thi.law behind the market can be discovered only "hell.
the market ia viewed in ita proper light, Il.nd then Ia analyzed
from thi' approach. Simply put, the .tack market ia a CI'llal.ion
of man and therefore reOectll human idiOl)'ncruy. In the page.
which follow, the law, orrhythm, to which man l'l!lpond. will be
dillc:10lIed .. regiatered by market movement. that nuctuate in
accordance with a definite wave principle.
Nature', lAw hal alwaye functioned in every human activ-
ity. WaveR of different dflitMa occur whether or not ,.,,;ording
JU.chinery ia preeent. When the machinery dellClibed below ill
pruent, the pattemJI of _vllfl are ptrlected and become viaible
to the uperierw:ed flYe. Thil machinery i.;
A. E:rteMive commercial activity repreaented by rol'JlDra-
tiOILl whollOl owne...hip Ia widely distributed.
B. A general market-place wbere buyer and leller may con-
tact quickly through repreeentativee.
C. Reliable reoord and pubHcatioll.l oftnllUlaction••
,.
'"
D. Adequate atatilltia available on ..n mauers relatilli to
corporations.
E. Daily high and low range charted in luch • manner aa
will diadOM the w&vu of all degrees u they occur.
FOOTNOTES
I Exeept fOl' t1UMlI" revi.ionl, thi. Inln><luction ill c.b. _ ..
obaptet' I of TM W...,., Pri~.
,.
CHAPTER I
,.
Nature', L4w ,,,
The outlines of a aide vieW' y that of a cycle, that y, 8 linK;
in a pyramid there ..... S .url'acetI, four above ground and oDe.t
the bottom; from the .pes 8 lines are villible; tot.alllUriaeea and
linea: 18.
Fibonacci, an Italian mathematician of the thirteenth cen-
tury, visited EII)'JIt and OD hi. retllm diaclOied a .sununation
aeriea .. folio...: 1 2 3 5 8 13 21 34 ISIS 89 1".... Any two
adjoining numbera equal the nut billher - for example, 5 • 8 •
13. The ratio of any number to the n'llt bia'her i. 61.8"'. (The
lower numben produee a r.tio alightly.t variance), Therefore
1M el.uatUm l<l 1M baM of 1M pyramid proouu. a rutio lhol
rcdu til.. tntin:'"..w•.
The lIMds of. /IUD tlower are located in curved roW" that
intened each other. Tbt highellt number of interaeetiorul i. 1".
Thill y alao the number of Minor w.vea in • complete cycle of
the atock market (bull and bear marketlll. Numben of the eeriea
are preeent in the human body, botany, production. animal.,
muaic aDd wavea of humaD activitiell inc1udiq the atoek mar-
FOOTNOTES
1 SiDce proved to be otbltI'WiM, of CCW'MI
,
CHAPTER 11
NA1URE'S LAW
Nature'l ~..... Dxnrn at Ieut 1'1"1 ''''11M yean 1&0-
EcYJll. wu "Ul no...- by at __ 1,500 B. C. and ia tbI okINt vi
toUTl tiatoCnltiml.lt ill DOt k-..n wben 1M Fc::fptian pyn-
midi: _ _ builL The at-t Pyramid. GiMh . . . eDMtr'IICUd It
Mut fi... ,.......- yean ICO- SomI.wdeati ad'l'UlCe..-idoerw:e
lhallt_..Wed bIf"on tblthtatvltloocll that p~pted Noah tAl
....
build tblark. OtJ..-ltudenti belieft lhal it IIl8J' be thirty 0..-
,..,.""-
In W. _ ....;... (December 3, 1lM51 thin a"..,s a "ely
Int.ereltinl artide eotoitW "Tbe BWldinc'vltbI at-t Pyramid.. ~
Mr. Bel 0eddeI ,",pared nxdell vi different ItqM of CIOIl#rUI>
t.ion and. pictureI of them. .... Ihown. The report .... prepared
for theE~C1BritcuuUca.lt ..,. that tha total_iJbt r:L
material UMd wu 3,217,000 toaI, wberal the mlterial UMCl In
tbI EIDpU1l State Buildilli, the tallm b...Udinr in the world.
weilhl onb' SOlI,OOO tAlll.l.
The mUWlIOUI I~nuit)', Ikill, timl and labor ulMnded by
the ckll1rners and builders of the PY"JDIdi tAl &reel I perpetual
zymbol demol\ltntel the lupnme import.anee ofthl me.1plI
they d.m.d to convey tAl poIIlerit)'. That ers ...11 pre-Iitenry
and pn-hieroctYPhlc, therefore Iymboll were the only mell\l vi
recordi...,.
For eenwnell the pyn.micla have been eahlUltively inv.ti-
pted, Mpecillly duri..., ~nt years. ln80far .. I have obIet wd.
£cptoIO(iItI o¥erlooked aD important, perll.IpI the mCMt im·
portant I)'Il1bol..1 ~ tAl the outer tme. atlhe pynmid (llieh.
~ . . . I reoo'l'FDlMl Gnlek phUo.opher of the fifth
ceDt"'"1, B. C. Tbeoldereydopediuri.... I..., c1etl.ileddeecrip-
tioD at m. 1diYitiee. The EJw:ydcj I W.
~ Ibowa a dieeram &D!I ~
tic title which ~ be the cmly..-d be
left. It . . . made &ft8r be reblmId tAl
Greece followiq I prvloapd. "riait tAl
Ec7Pt. The &.cnm and. title appear in
ncur-
I')tbqoru m.eram ref"en tAla pyramid.
_.
L It ia Wr tAl a_me lbIt the 1M Sluel 01 If. ..........
No!ure'. Low
F.,,,,,
Fibonacci wu an Italian mathematician of the thirteenth
century, A. D. He ... better known in hil day lUI Leonardo de
Pin. He vilit.ed EiYpt and Greec:e, Ind on hi. return to Italy
dilIclOllfld. what ia known u I 8I1mmation teriee. Thi.lI.wriee of
numbers followl: 1 2 3 5 8 13 21 34 55 89 144....
Any two alljoining numben equal the nut higher number,
for example, 5 + 8. 13. Any number divided by the nut higher
numberlivN a ratio of.618, ror ftXIl..lIlple, Bl13 • .618. Any num_
ber divided by the next lower number givee a reciprocal of 1.618.
In the lower numbera the ratiOil are not euet, but dOle enough
for practical purpo5flI. To aimplify reading, I will hereafter ...
fer to the fonner ...62 and the latter .. 1.62.
Note that the fU'llt fiYll numbera of the Summation Seriea,
1, 2, 3, 5, aru:I 8, aruOOwn in the complete diagram of a pyramid.
,
The late Jay Hambidge, an American aniAt, viaited Egypt,
Grtlef:e and Italy and wrote eeveral vel)' important and intel'-
uting boon. By permiMion of Yale Univemty Pre.M, I qwte
pagN 27 and 28 of hill book entitled PnJctioo1 Appli«1tioM of
DytlGmi.: Symmetry:
,.
Not"re'. Law
N._
tabltl and in Figure 7, Chapter 4:
qfWfa_ ,,-.,
B. .
,
...,
".....
....,
(c~f:7CW
Major 3 8
21
InlAlrmedialAl
Minor 89
13
" "
144
•
R. N. EUJOT'T's MASRIIJfOIlD
,.
Nature'. Law
,
CHAPTER III
HUMAN ACTIVITIES
TlwI expre"';on "human activitiel'" iociudelllueh iteml lIS
.well: priClll, bood prieea, patentll, price of sold, population, move.-
menl./l of citiUDII from citi.,. to f.1'IlIlI and vM:e vel'l8, COlllDlOd.i-
tiM pricea, government upenditUf1!ll, production. life i~,
electric power produced, guoline ooll5Ulllption, fin! 10000e, price
of • •1.8 on the IJtoek exchange, epidemicl, and real eatate. The
main item of intereat y the price of lJeCUritiell, which everyone
ehould undentand, at leut to lIODle de~.
It bebooVM ... to prepaN for the "rainy day.~ Penn.nent
improvementll, lIUch IllI for e:u.mple, the construction of build-
inp, oon.aervation projectll, roadl, bridgM, f.ctoriu, homea, etc:.
ehould ....ait cyclical low. for the double pllTpOlle of low eolIt to
the owner and employment of labor. F1uctuatio~ in economic
welfare .re lUI unfailing II the earth'. revolution.
FOOTNOTES
,.
CHAPTER IV
DISTINCTIVE FUroRES
OF HUMAN ACTIVITIES
All human activitiea tt.ve three dilJtinetive (eaturM - pat-
tern. time and ratio _ all ofwhich obHrve the Fibonacci Sum-
mation Seriell. Once the wav,,", can be int.erprMed, the Itnowledge
m.,. be applied toany movement, u the urn.. rulN apply to the
price of llt.ocU, bond., jnina, cotton, coffee and all the other
activitiea previoWily mentioned.
The m.-t. important of the three (acton ia pattern. A pat-
tern ia alwaya in proceaa of formation. Uaually, but not invari-
ably, the ~udeDt ia able to viaualize in adunetl the type of
patlA!m. Thia facility ia fumiahed by the type of pattern that
preceded. See ChaplA!r 8, ~Altemation.-
A perl"ect diagram of a atock market cycle ia ahown in Fill"-
ure" 5, 6 and 7. It ill divided primarily into "bull market- and
"bear muket," Figure 5 aubdividea the bull market into five
Mejor l wavell and the bear market into three Maj/:lr wavea. The
diagram of the bull market in Figure 6 aubdivid. Maj/:lr _vea
<D, Q) and@intofivelntermedialA!wav... each, Figure 7 aubdi-
videe InlA!rmediate wavee 1, 3 and 5 into five Minor wavea eaeh.
In Figure 5, the bear macket ie aubdivided into three Mejor
_vea indicated by the letlA!n (,Y,@and©. In Figure 6, down-
ward wavea ® and iO are aubdivided into five InlA!nnedialA!
_v.... Wave@upwudiadividedintothreelnlA!rmedialA!_vea.
In Figure 7, the IntermedialA! wavea an eubdivided into five
Minor wavea.
In other worda, a bear market ie the revetH ala bull mar-
ket, e:w'lpt that a bear market hn three MajoT wavea down,
wheren in a bull market there an five Major wavee upward..
Correctiona m both bull and bear awiop an more diftkult to
learn.
AtI the dillCOVeriell diacloeed herein are original, new expree-
nona had to be coined. In order to explain the patterDa and their
COlTflllponding esprMBiona, perfect diagrama are .hown in '<lUi-
oua degr-. Tbe wonl"cIegree" ~ relative importance, an to
,
J
,
2
ill
•
, A
,
Natu",'. Law ,3>
1
• 2
(]) , ,0
~
, c ""'"o.g..
<2>
2
Figure 7
FOOTN<ml8
I The tenD. "Mitior" il uoed c.ltJoou«hout the nut _ a l ehapt«a
.. a lUt:.titule for the term "Primary: wbic:h .... ilttn>cl.u"""'- ilt the
tint mooocraph.
I Elliott hu improved tlwl ..avelalwllirtg lyatelD uoed ilt the tint
IJKIDCIil'I.ph.
•
CHAPTER V
CORRECTIONS
.......
alllie.
"..,
,.
233
F/gvre II
,
Fl...
The nert ilIUl1tr1ltions are nata of Minor, Inten'tled.iate and
101.;0.- degree, both OO'dinar;y (FI(uru 1<1, HI and 16) and inverted
(F'ilrurN 17, 18 and 19), Th_ diagram. are given the name
"flat- for the reuon that thei!' UlIualappeuance ie nat. At times,
they ,Iant downW&t'd or upward.
~ IImatter off.at, th_ pIItterm might be called -3-3-5."
In the lut anal,..it. they are ~ wave pattema, i,e" It. B and
C, whenu II bull pattern iJla -5-U-3-&-for wav.... 1, 2, 3,'" and
•• 'nle pattern or. human being i8 -5-3-6-3.• The... are 5 pro-
jections from the tono <head, two anne and two lepl; the arm.
and leas are lJUbdivlded into 3 lMIdionl; the endll of arm. and
lega are lJUbdivided into 5 lillie", or 5 toN; each finger and toe ia
again lubdivided into 3 MCtioDll.
Whether or not wave C of an inverted nat il elolllated or
DOt it IJtiIl rem-.inll cornc:tive. It ia pDlllIible. bowlI!Ver, to know
wben an elongated wave C will occur by ....ding canlfully Chap-
ter 8, "Alternation."
,
c
-"
R. N. EU»fT''' MASTUJIOItU
•
FIf}UI'e 77
~ . .","",*
o b
Flflure 18
Flflure 18
,
NatUM" Law 237
eo_pin: Cm.ectiOlU
A Minor lXJIT'fIl:tion would be oompaeed of three wlvea d01O'il,
aa in Figurea 20 and 21.
,,
,,
'\\
,.:' a
.,:'
"
,
,, ,
,,
,
''0...
,,
. .: "'~./
,,
,:
, WY\
,,
I
,
,:13579"
,,,"""2
In other wOi"Cb, a lidewilte oolTeCtion to an up trend alway.
enda in a down wave', whether it i. oompcaed of one, three, aeven
or eleven WaVell. They are named U {ollo.....: three waves ill •
"llingle three,.
aeven WIVes ill I "double three" and eleven wavea
ill a "triple three.·
The aame number of wavea upward aTe oorrective, II in
Figuree 24, 25 and 26.
•
,\
\,J! ...'.
•
'.
...
FIfIIJrfI24
"
R.N.EUKJJT'.MA8TUf#'ClUS
,,
,,
--- ..
"""""
,,,
,
FlgUl827
...... ""'" ,
,,
,,
• ,,
,,
,, ,,
,, ,
,
F/f1Ute 29
Tri·......
Triangle. are c:ompoeed of five _Vel, or better Mid, five
\ep.ln the larger typM, ucb Ietr will be compDHd of three waVeI
each ...hown in Figurell 31 and 32.
, -, ,,
~
, ", ,,
,,, ,' , ,,
,
,,
\,~f---"1 , ....,
,
'-
"
'"
In medium .ised typee, the fourth
and fift.h lep may be compoeed of one
wive eacb," in Figure 33. In the very
small typea, the Iep are often composed
of jll*t one .....ve. The main ~d" to the
,
fonuation of a tri'Drle i. the outline,
that ii, the 8traight linea drawn Urolla
the tope and bottona. The Itudent cannot be OIirtain that. tri-
.n&!e wforming until the fifth wave hu .tarted.
There are three typell of triangle.,' .hown in Figunl 34.
,.
The fiM leg may terminate within or without the outline
of the triangle,I u in Figures 3ti and 36.
FIgure 37
,
Nature'. Law
'"
FOOTNOTES
• f'icuret 10 ....d 13 .... 1lC\Uall,J dr.winp or"dDllbloo Iiptp,"
..hich Elliott di.pltyt in cb.ptel" 6. Either Elliott mit..... hit ill...
tntiona Mn or be decided thtt doublt ~ipap WffII men common in
~ decn-l.ban ..,.w.... :ripap. For .... ill",tr.tion of. trua ~ipq:
of ~or dep'ee, rer.... to tbe ~ teetion of f'icure 7, ....ell ..
f'icure lIS in tht 1'itta1lCi<U World uticlea tJld Firun '¥1 in ~ W.....
l'rlIldpk.
• Elliott overlooked thi••tatemerat ..ban dn....m, tbe illultI.-
ti_ in FicurN 27 and 28. He i"'d'OerlenUy left out an additional
"thAoa" in NCb CGn'eCtlon, .. hicb ClUlI>lll. \.benrON Ie..... to rein.tete
tht ~ p.....oo....ly in motion.
, Id.
• n.. illuatr.tio... depict _nding, d_dinJ and aymmatri_
eaI (amtrKtinal trianclel. For......,.... not .tetecl., Elliott omit. dia-
c:uHiOll 01 W ..........ymmMcal (n~nding) typa.
• The fitUl triaJllll. w.va ~ terminate beyond the tl'ianJI.
bound....,., but nnt baYOlld tht level of termin.tion or tbe third tri_
tJlIl. w.v•.
• Sea f _ 1-8 in chepur XI.
• They .... abo fDllnd in tbe B wave poaitiOIl.
,
CHAPTER VI
EX7ENSIONS
An nteneion may appear in any one of the thnle impm-,
i.e., ..av.. 1, 3 or 6, but never in MOI'O! than one, u .hOWD in
Figu.rea 39, 40 and 41 (upward) and Figw'N 42, 43 and .... (in_
verted).
FIfJI,JI'e 40
,.
Noturr', Low
• •
, ,
,
R. N. EUXJT"f's MASRRIfOU1I
--.... -
ErroDeoUll CoWloUnt'
The three irnpw.e wavee, 1, 3 .nd IS, are ee1dom of the same
IeJl(th. One of the three i. Ulullly ooDlider.bly longer than ei-
therofthe other two. It ill imponantto note that w.ve 3 i. never
shorter than both l wavea 1 and 5. For eJt8.lllple, when w.ve 3 i.
shorter thin eithe........ve 1 or 5, II in Figure 49, the OOiled.
method of oountin& is u in Fi~ SO.
Foure49
•
F(lUre51
En1.u'paleat of c:on--tiOD.ll
It Wimportant to graph a movement in the daily range in
order to kno... whether or not the lint upward movement it com-
pl*>d oftbree or fiYII way". 'nI1I wl!llkly lllfIill might not eli.
clOllll thia f&et.. For eumple, in Figu...... 53 and 54, an invllrted
flat wabown in both daily and weekly ranp,i Note that in the
...eekly ranae, the prectN WlIlpoIition of the firat ....ve up it not
di.d..ed. and the .tudent might IIJTOlIIIOUIIly IIUIImll th.t it was
compoBed of livlI W,VIII in the daily. The weekly range of an
inverted flat would appear'" being c:omp<.>lOll<l of ""nn wavlIII,
,
R. N. EUIOJT's MA.nu1JORD
o
FIgure 57
BidewiMo Move_DtII
N will have been noted, all oorreetive movements regard_
1. . of the degree are eom~ of three waves. Sidewille mov&-
ments follow the ...me behavior, and are of the aame character,
,.
'"
QDrreo:tive. Figun 58 aboWI two typet; of IridewiM movementa'
followiq an advance. In Figl.lnI 59, the main trend i' down·
won!.
FOOTNOTES
, Cenainly pGI1 oran ute1I.IiOD in tboo firR or third ..."...-ill be
reulcecl. but it will not be ..,tn<:ed ill t.be ..",., manner u t.boH
within fIl\h ........ Only afI.eT lif'I.h WavN win t.be lint r.uac:ement
rel.unl . . far back AI the low of ... ve I"" of the utenlion.
• Depw doe. nol. alfflet pat.tenw. nu.. ....."-Plent i.o • reference
to an ifntlular top that i.o IUP~)' foUoundby double nllncema"t,
....d ...u1w from Elliott'. ocl<l in""lllrfiolt.ion of c.M 1l¥.!8-1930 period.
l H. meano. ".borI.er tbati wave I and 'hotter than "eve 6,"
• Id.
, n.- fitIw'- .... hardly n.u in .ppear....... 'I'boo oYlO1'all ou'"
Une "'iPN • double Iip,q. Tl\l.I diacuaaiCltl probI.W, rwullol from
Elli,,"', c.end.nq- to -.nt extended fifth ....ns .. holll in r..et
the third
i.o _ .. dM, thereby \uvUla It """pia of"utr." ........ at 10M ••ul that
be coutIted &I Ii. ....d B.
I The lint illu.otntion in ...,b or Figutel tl8 and Ml i' • full. Th'
oea>nd m.rel, .bow. the look of &D1 n.t ..ben tboo d..tIo Illter 10 no!.
omall ell. • to ,how it. aubdimiona.
•
CHAPTER VII
IRREGULAR TOPS
A movement that e«ee<h the
top of. fifth wave (the orthodOJ: top)
, ill an "irTe(rulu" top ( _ Figun 60).1
/ SupJXllM'l that the five wavea up in
/,
,,
Figure 611ll"e of Major devee. The
top of the fifth w.ve would be the
,/ C -ortbodoz'" top ((YI'). The fuwt move-
/ Itlf!nt from point -5" down would be
oompoaed of three wavell and let-
tered. -A.» The Illmnd movement
would be upward and ezceed the top of IS. Tbia movement would
be letteted "B." Like •• ve A. it would be oampo.lf!d ofthrM ....vf!&.
The IH'xt movement would be compo.lf!d offive waVell down and
lettered "C.-
b ,
o
FlgUffJ 61
,
FOOTNOTES
1 All "imtgular top";• .ur.ply lb_ hirw pri"....-wded by ....ve
B of an irTetluIar n..t COf1'8Ction.
I See roe>tn<M II ilo eb.pc.er N of:nu w..... Pri"dpU.
,.
Clf.A.PITR VIII
ALTERNATION
Aoeording to the diettonary, alternation i8 "OCC1.UTence or
amon of two thinga or Hrilll!l ofthinga, in tum." Alternation it. a
la... ornature. For irm;ance, leave. or branchee u.mally appear
fir.t on One IJide of the main lJtem and then on the oppollitf! aide,
alternating their polIition. The COIIIpolIition of the human body
folloWll the &ame rule; 6-3-6-3. An endl.... li.t of example. could
be cited, but the object ofthi. dixuMion it. the habit of alterna-
tion in human activity.
Bull and bear marketa alternata. A bull market ia compollf!d
of five wave. and a bear market of three WlIvN. Thus, five and
three alternate. The ume rule governl in all degree•.
A bull movement i.e composed oCfive WlIvl!l. Wav... !, 3 and
5 are upward. Wav... 2 and'" are downward or lidewise. ThUl,
the odd numben alternate with even numben.
Wavel 2 and'" are corrective. Theae two wavee altematf! in
pattern. If wave 2 il "Iimple," wlva ... will be "complu," and viee
vtlrIa. A "lJimple" correction in the amaller degreea ia composed
ofone wave downward. The "campi"" ia oomposed oftllne WI_
downward or IJidewiae. See FiiUJ'H 62 and 63.
•
Law
NCltUrtt',
'"
capital A Thia i. followed by an upward awinr.nd dellignated
u w.ve 8. The thin! and lut movement downward u. ..ave C.
Wave A may bea zig.ug pattern. In thiI event, wave B will be a
nat, inverted. Jrwave A i, a flat, wa.ve B will be a lig-ug, in-
verted. (In any event, wave C will be c:omposed of five wavee
down. It may be _re and approach ~e .tarting point of the
prevk>ua bull marl<et.) Thua, wav" A and B alternate.
The thirteen-year triangle furniah.. anotber eumple 0(
alternation. From November 1928 to March 31, 1938 i. a nat. I
FnimMarcli 31, 1938toOctober 1939iauig-zag, inverted. From
October 1939 to May 1942 ia. n.t.1
An irregular top i. one in which wave B exceeda the top of
~e fifth wave of~e previou bull market, U explained in Chap-
ter 7. Even thellll a1tern.te. The top 0(1916 wu irTegular, 1919
regular, 1929 irTefluIar, 1937 regular.
Up to 1906, the Rail.. led upward movemente. For 34 (FSS)
yeatlI, from 1906 to 1940, the IndUltriallled upward movements.
Since 1940, the Rail. have been leading.
ro<YrNOTES
I s... footnotea 4 and II i.e. eh.tpter XI of Nl1Iun', !Aw.
I ActuaIl,y, thi..o period ia either. "five: 01' eD11l..illl Uw IaIt part
of .. lriancl_ f".. """WI B, then.. fin·"".WI C. Either """-"t ccmp1_
tba A·B-C from 1937. See footnote 8 i.e. chapter XI or Tht w_ PriJI·
cipU.
,
SCALES
To employ either IHlmi-logarithmic or arithmetic lICllie and
not the other aa a (1lneral prac:tice ia erJ'ODlIDU8 and deprivea the
student of their vallie and lltility. The arithDlfltiC Kale ahould
alwaya be employed wUellll and untiliog lleaIe ia demanded.
In a mllVflDlflntcifive wa... upward, a "b_line· ia drawn
againat the enda ofwavea 2 and 4, then a ·~llelline· against
the end orwave S. Figw'e 64 abowa the example.
F.... "
Usually wave (; will end approximately at the parallel line
when arithmetic _Ie ia UMd. However, if ..ave (; eJ:~ the
parallel line colllriderably, and the compc.-itioo of wave (; indi-
ClItes t1uIt it hu not completed ita pattern, then the entire mov......
Dlflnt from the beginning nfwave 1ahouid be graphed on NOli_log
lICllie. The end ofwave (; may reach, but not exceed the parallel
line. For narnple, if the aame figurH w"no grapbed on both
lleaIea, the pictlll'flll would appear .. in F'igurH 65 and 66.
Wben aemi-Iog acal" bfl(:omes necenary. innation ia
prellflnL I If aemi.loe acale ia uaed and inflation ia not preaent,
_ve (; will rail to reach the parallel line by a good margin...
ilhaull.ted in Figure 67.
,
_.. ......
,-
R. N. EUJUn', MMTI"IlWU«D
FOOTNOTES
I "Infletioo" .. !aloer deflned by Elliou in ch.aploer 12 ill no\
monetary inflation ...... know l.he term <_ footnote 1 ;n cb.ploer
XII). The deciding rector in arithm.tic va. ...,,;-1"11" cbann.lil\l il
limpl,. u.. Ih.apee of the ...eva. Ir arilhm.t.ic oeeIe il COfTfIC~ then the
",ov. il d...-J.oping with ...,renonee to ~ .dvenoed. If ..."'i-I"I
ocaI. ill correc\, the move ill developing with ...,ferenoo l.o !Hl"OIIltl4(fl
adva:nced. Any""" can be pven thl &eJlle ltatting poin\ end ending
poin\ end e IP"cifie tim. rrenl. end <IT.... • pe:rl"1Cl. EUion wen on
botb arithlnetic end ..."';-1"1 eceif!.
,.
CHAPTfRX
EXAMPLES
DemonstnltiolUlofNatuTe'. Law in preYiowJ ~ have been
made to facilitate an underetanding of tile graphl that follow. l
..
~r-----------
Figura 68
,
.. ""
I
'"
m
'"
,.
'"
The time ractor iI important becaUlMl it uaually confl.l'lm
and oonfonmo to the patlAlrn. For example, from 1928 to 1942 it
13 (FSS)yeaJ'lI. From 1937 to 1942 ia 5{FSS) yean. Both periods
end .imultaneou.ely, The enti... mOVftIIlf!nt from 1928 to 1942 it
onll patkrn,. triangle. Each wave Dfthe triugle ilI6~ ofit.
pred_. All three facton - pattern, time and ... tio - are
perfect, and ;n aeaH'danefl with the Fibonacci Sumllllltion S&-
nell. See Figunt 71.
In the pnrviOUJl pa&t!., Nature'. Law hu ~n explained.
The number. of the FSS apply in three ways: number of ••vee,
time (number of da)'ll, weeD, montha or y"ara), and ratio of the
FSS numben, 6Z'l'.
FOOTNO'l'ES
, Por • 10011 at tbe Grand Supen:yde, _ FiIure 1 of-rbe
Futuro. P.tt.em of u.e Mat:tlOl." in the Sel~ Euays HCtion of thi.
boot, u well .. FiJure 98 in the ftnal papll of Nlllun', Lew.
I "Apin," meanin&"" in u.e 1896-192fl adVane<l ,1>0"", In Fil"
\lNI 61land the 1932·1937 advance IboWll.;1\ F;g.,r. 7:J. Thil recur-
renee i' remubble.
I Ap~ntly Elliott ill countinJ l.be n...t WUe up .. one bull
market and tM thinl and fifth "uee up u three bull market. each..
,.
•
1
•• ,
! , , ........m e
I
,•
~
"
CHAPTfRXl
,
"'"
-JIIly 1921 to November 1928: 89 month8.
- September 1929 toJuly 1932: 3.f. montha.
-July 1932 to July 1933: 13 montha.
-July 1933 to July 1934: 13 montha.
-July 1934 to MlUCh 1937, 34 montlul.
_July 1932 to Man:h 1937: 5 yean.
- Marcil 1937 to ~ 1938: 13 months.
- March 1937 to April 1942: 5 yean.
-1929 to 1942: IS yean (62'10 0121 ye....).
The pattern and dMaiptiOIl oftriall(lellllNl ,howD in Chap-
ter 15. The triangle between November 1928 (the orthodox top)
and April 1942 ill thfll)'mDlfltrieal type. It diffel'8 &om the ordi-
muy type bocaUlNl it ill oompaeed of two pattemll, flit and zig_
zag. FinIt there .... a flat, then a zig-zag end apin a flat..' Thil
wu oee.aary becIouae of it. immen.e sUe, the alternation of
pattemll. the neceNity of advancin&: to 195 in 1937 in order to
eomplete a dou.ble rt!tn.cement oftbe inflationary enension from
1921 to 1928, the neceNityofeompletinai"" pIIttem by 1942 (21
}'UI'* from 1921), the necellllityofmaintain.ing the ratio of62%,
and the neceuity of retn.cin& the entire fifth ".ve from 1896 to
1928, all or"hic:h ill. very taree order.
I
,,
I
I ,'
,*",192ll Jo Na: 1938l,...u..'38 JoOctJ9lOct'39 III Ap,;I ~2
F/g<No 73
'"
The t.hirteen-yeartriangle from 1928 to 1942 wu composed
of three ~tterna, .. followa:
_ November 1928 to March 1938: a f1at l {triang!e wave.
@'<ll. and Q).
_ March 1938 to October 1939:. ,igzag. inverted (triangle
wave0l.
- October 1939 to April 1942:. fult (triangle wave (il).
Note the alternation of patterns: flat, zig-ug and flat. M.l.D.Y
other eu.mples of limilar na~ure could be cited. Both the flat
ami the inverted ui-r.ag are del'JCribed in Chapter 5. ~y and
the rorreaponding triangle wave are reproduced in Figure 73.
Figure 74 ~. graph on arithmetic -eale of the Dcn¥-JODeI
Ind"..trial Averare from November 1928 to April 19U. Each
vertical line repreeentli the monthly rlIngt!.
Triana"le ..ave CD from 1928 to 1932 i. composed of"lIvN
1iI.@and e. Wavtl <6l ill composed of three wavo down from
November to December, 1928. They wer'C! rut and thtlrefore vi._
ible only in the daily ranp. Wave@i,anirregulartopin the
form of an inverted flat. Wave~ is composed oCfive wavee down
from September 1929 to July 1932 (aee numbera on chart), and
COfUIUUled 84 month..
Trialli1e wave(1) from 1932 to 1937 ill. typical bull paU:em
becall8e it ill compoHd offive wavM.• However, due to itll .bMf'.
mal aize, it may be claaaed aa an inverted flat1 of very large
degree beeause it forme put ofa °COlTet"tive,- Wave <D conaumed
"- T riangle wavea> waa down in five wavell from 1937 1.0 1938
and luted 13 montha, Triangle wavea <D, (J). and a> therefore
colUltitute a flat, from November 1928 to March 1938.
Trianllle ... ve@, 1938 to 1939, ia an inverted zil-ag.
Trianale wave(j)from 1939toAprill942 ia a nat. l It~
and il very lOlli, Ita extreme length waa lUlCnllry in order to
coincide with the overall time period of 13 yeara from 1928 and
21 ~ from July 1921.
N lltated in Chapter li, the fifth ....ave of a triallile may or
may not be confined within the outline ora trianale. In thia cue
iteueeded the outline.' Nevertheleaa, it is a perfect. nat of three
wav"., marked ®. @. and \0. Wave @ ia 62'10 of wave ® and
62')1, of wavee. In other..-orda, wavea <0 and e are the llUIIe
len&tb,
,
,.
FOOTNOTES
1 Elliott'. tl'oubln witb int.erpAt.ation in thill yolUlDOl .... d...
woe, ftItinly to 1M ... ~pt Qr 10M r.birt.een-yeu t.riatIIJe. While
many orthe r......... in tlw 1928·11142 period f.uciMtinlI, and
wbile the CODCIIpt Mlped Elliott call • lD.8Jor I ill 1942, the thir-
wen-yea>' triangle co"""pl .. ouch iI invalid. The maitI. probl_ ....
thet the 1932·1i37 riM iI • "five" and \hI 1937_1938 d.clin. i I .
"li..... tbUi .liminetina' U>em u poaihle trianlle lego .i..... all tri_
ancle lep mu.t be "threM." The ..... t per1Iuuive &fllWDI'nt tlwt •
triangle had fOl'Dlfld "AI the aeriM of .618 A1or~mln~ all within
perfectl, conYerJinl trendlillN, an IlCCIll'Tl!nM WI ind"", quite
unca!lDJ'. ",,-Y«, thiI phenomenon CAn IloCC\1t " " diff"relll _
(u it did £rom 1976 to 1979), and ill"", .nourhjUltilicati...., by itHIf,
to claim that. ln1II trianJle i. being form...t Unrortwlately, El~
t...d mad. up hi. mind on an irrelevant point ""Llid_ the WIve
PriDciple, narnel, that 1929-1932 wu too ahott • eim. period to
~ \he p... YiOUI Supnqde. ThiI auumption led him to the
thitteen-ye... triangle interpnltation, wbiel! in tW'fl led him iDto
trouble with u.. ball,,,. ofWUI form ... be tried to fit the IUbw.....
in\O hi. pndltermined (:(>11Cept. ThiI Im>r of interproegtion .bouId
lICK detract from the reader'1 eJl,joymlllt of Ellioct'. faednatinl dill-
CO'I'en- and. anal,rli. wil.h reptd to the period af\.er the 1929 pealL
I Whil. t ..... lumina: point. .... no\ colndde...., tyiJ\« them 10
the'double ~ace:me.. t" rule. allean .. i\ ia lUted in theo<y, ......
to):,. ,tntchUta; the rule too f.,... The enollliOll .,.;thiQ!.he fltIh wa...
oftbe 19:11_1928 riM W<lI doubly rel.nl<ed .. n........,.. the top part.
by EllioU'l A ...d B....d the..-l by 1 orc and 2 orc. The noon tha~
the ."ti", 1921_1928 riM falled to doubly reto".... eMireb by multi of
an in'qu.1.,.. OlIITedion il tbaL, .. Froet and I have concluded, 19:11-
1929 _u.. . .
1929 w.. nol itaelf an ,""tended wave. The extended wue in the 1~7_
w. . ~be third, .. II normal. Therefore the lilUlwauld
haye no I"IUOQ to b. doubly retraced by ... ilTttttUl.,.. lop. Tho fKt thl~
the flnt I'ItnoImln~ eo'Iered more thIn tbe entire filUl WIYI iI
further evidence tho~ the wave w. . Qot In eEteltlion. Eyen if_we...
to CGIlIidu it In ut<>nalon. ~he enaui"l lifU> Su~ WlYI would
otmltitute the MCOnd retraoe:ment eventually. Still. the action of the
.......bt at\er tbe 1921l peak il intrilUina, ... d onl <:an _ why Elliott
eo... idered hia dOll!>!, retrIoomInt rule ..tWled.
I True. Thll ia ~be tnOIt dranlatic bull market. in U.s. hiatol")' in
_ of pft'Centlp I........... oYlr ti.ml.
• Elliot\ II deocribil\J &Il of the ftnt three WlYelI top1.heT .. ,
lla\ bee&uoe tbe third Waye of \.be triangle ill(> IUIdlniably a ·fhl.·
,.
I Elliou. breaks b;., own ruI. in tbiI interpretation. If 1937_
11138 ill the"C" ler of'. flat, it mun 1». "Ii..... If it ill • I", of hil
trianlle, i~ mUl~ be • "tbree." Ha .bouIdn't be able to hava it both
wa,..
• Abaolutal1. v .... will noaee that in Fi(ureo 72 .nd 7</', Elliott'.
labale are not eon.o;"tent with bill Irian&!. thnia, but witb the eornct
interpretation.
• Ftwt and I dilCUu tbiI in ...... book. It ill ~ble to
ntinn.H... al\1 fI_....... _ "tbrw: but only .t the upe"",,, of
tha ul.ility of the Wue Principle and wb.t .... withe "rigbt look.'
Flato are 10 wled~.... they .... f/4I. The B w of. nat alw.,.
recedeo dNp into A-w.va lerritory. In. fiv..w _va, thare;" ""
ovarI.pping ot ... v.., by defrnitlon. Therefore the 1932-11137 adnnee
muat ba eluaifiad ·(i.e."
• AgaIn, nata n.t and lhould not "dn>op." Actually it ;" •
fi_w.... dlOdine, with no ovarI.pping, finiohine: 011" th. 1Iip,q that
bepn in 11137. To count it <>IlI'TeCtl,y, put 1 .. here Elliott bal a, 2
wbe,.. be baa b, 3 wh..... he baa(6l, </, .. her. b. baa@.ndtow,"-b.
baa e. Then ;" • Ili«btly better -.tilt involving. ~e. Bepn.
ninI.t the 11138 low, put@wheraEllioubaaeo@wbe.. habaathe
nut~ e ..b.... ba baa the nut@, (j) ... ba,.. he baa 1, and(j) ..be,..
be h.. 2. Thio triang1. ill ...... B of tballipoa trorn 11l37, with the
decline from ita IIlld tIMn bej". wue C hi<b lubdi"';<lea .. jOlly Into
• "fivI." Thio -.nt il illultTlltecl belo .
I It abo uceeded the low of tbrM oftbe trlangle, ..hicb it
ahould not do.
-
••
~
...
•• ..
••
~
•• •
••
••
...
•• •
• ®
"
CHAPTER XII
INFLATION
The term "in1Iation" ia defined in the didionill")' u "uten-
aion beyond nat........ Iimita-" One bull market dON not e:n:eed
"n.turallimitll," A Rriee of bull market., one above the other,
would be "beyond n.turallimitll." One bull market would not be
"alxrve .nother" were it not for .1Ib-normai intel'Veninlil bear
markau.
Inflation I oecu.rred dllril1i the "l'wentiea beeau.ae ohub-oor-
mal bear muketa. Durine th~ period theA! were three normal
bull marketll and two .ub-normal bear marketll, toul five. Warn-
ioge of infl.tion oecu.rred in the following order. normal w....a 1,
.ub-oormal .......e2, DOrmai w....a 3, mb-nonnal ........a 4, and pen-
etnr.tion of the puallelline by .......a Ii on arithmetic: eeale (_
Chapter 9, Figure 66),
Fiauu 75 piet...... DOrmai bllil market and. normal be.r
ool'T1ldion(w....ea., b and c) which penetratell the bualina eub-
&tanti.a11y. FillU"l 76 pio:tw'M • eub-nonnal bear col'T1ldion that
bolrely penetratell the hue line.
F/{JUIW 75
,
R. N. EUKTIT's MASTU.J//ORDI
FOOTNOTES
I Ellloc.~
.. u.inr a certain dietionary definition 0( inflat.ion, noc.
tb. monetary ""e. B, hi. darlnit.i"", "iftflatioo" oeeura in a marltM
IJIat underp>el ......lera~ioo i" term. of po;nl.l I.d......... per unit of
tUn.. See f_ate 1 in cb.o.pter IX.
,
CHAPTER XIIl
PRICE Of GOLD
Another e:u.mple of the importance or dilferentiatilli be-
tween the virtUeII of uithmetic and 10( a e J. the price ofgold.
Thegraph ofthiaitem coven one hull market from 125010 1939,
oearly_n eenturiell.In F~ 79, wave(l) illimple and wave
@ia(:(lOlplu. Note the letten ®. @and<Oofwave@.
~SooIo
MorW
(_ _ ..... PO'Mo 0 - . <J lIOl:!
.... 1:I1'I3l
,"
~
••
• •••
: ' /90
,
"'" ...
In Figure 79, plotted on arithmetic lICI.le, the priclllinll n-
ceeda thll paralllllline, therefore IMlmi·lotI' IICI.lll ia demanded u
"
F..,.80
,
CHAPTER XlV
PATENTS
,.
'"
""
Co'
• -•
•
~
1/
,s , ,
FOOTNOTES
I Tbt Wave Principle teach lDOA than emotional phenomena
bea.... it iI aloo • .....,..,j or tho prosr- or Man, .. bleb i. arcuabJ.r
paturned 'l\er hit colIec:I.i•• emotional lwinp. It can _ be PMtu-
iIle.d tbat tho lDOOC!I refllIICUId by \he av.....,... """" pi ogre..; p. .
aum.Ny Man will prod..... more and inv.n~ more wben th. dominant
~ u. "up' rather t""'" "down,"
,
CHAPTER XV
TECHNICAL FEAmRES
,.
•
,
".
One dll,)'. London experienced a 8eVeN! "blitz." London lItocb
,dv,need ud New York lJtocu declined. Flund.l ","ten in
both plaee. etreMed the blitl .. the cal1M'. At the time, London
. u in an uptrend and New York in a downtrend. Each followed
it.. ~ttern reprdJ_ of the blitl. The flame wave behavior oc:-
CWl'ed following MlIHOlini'. exit on July 25.
The above analym. prove. tluIt tec:hnical ractonlfOVern the
market at all time..
POOTN011!S
1 And &pin in 1974! r... term.II of'....., l.h. Fibonacci number /ill
ill ttl'length ohhe -Oed Kond...u.trWave of fIOOl1oOtIlic IlCtivity.
I Al:tu.all,y, chaptllr XVII.
,.
CHAPTER XVI
,.
,."
35
100
75
25
50
2OLo........""n>,,~
25 Flgud'
,.
CHAPTER XVII
mE VALUE OF NEWS
Wall Street hlUI an .dage that "newalit. the market.." ThiA
meana that, inltead of the neWI "trulkina the market.," the mar-
ket foreaeea and .ppraiaea the importance of the underlying
foreea that l.ter may become neWI. At beat, ne.... ia the tardy
recognition of forcea th.t h.ve ll1ready been at work for aome
time and ia atartling only to tholle \1D&ware of the trend.
The fOl'CN th.t C8uae market tund.a have thlrir origin In
nature and buman behavior and can be measured in varioua
wayl. Fon:ea travel in _veil, u demonatrated by GalilllO, Ne....
ton and other acientillta. The... fOrce8 can be computed and fore-
ca.at with eonaiderlble accuracy by eomparina the atrueture and
extent of the wavee.
The futility in relyiOi on anyone'l .bility to int.rp""t the
value of any linrle newa item in terlm of" the atock market bu
IOIli been recognWld by uperieneed and auocesaful traden. No
alOile neWI item or aeriea of development. c.n be regarded ..
the underlying cauae of.ny auatalned trend. In fact, over a lolli
period of time the earne eventa have h.d widely different ef·
fecta, becauee trend conditiona were dilIaimilar.
Thia at.,tement can be verified by • <:UUalatudy of the forty.
live year record of the Dow.Jonea lndUAtrial Average. During
that ptIriod kiop have been nluain.ted, there h.ve heen wan,
rumon of wan, boorna, p.nicl, bankniptciea, New Era, New
Deal, "trust huating," and .n lION of hiatoric and emotional de-
velopIDI!nta. Yet all bun m...keta acted in the aame way, and
likewilll! .11 be... m...keta evinced aimil... cb....rten.tica that
controlled and meuured the ""lpolUe of the market to any type
of DeWI .. well .. the extent and proportionl of the eom.ponent
aegmenta of the trend II • whole. Th_ ch....eteriatiea can be
appm-l and u.aed to forecaat future action of the market, re-
gardleu of the newa.
There are tim.... when IIOmething totally une:o;peeted hap-
penl, auch .. an earthquake. Nevertbeleu, regardleu of the
degree of aurprl.ae, it _rna we to conclude that any lucb de-
velopment ia dWcounted very quickly and without ffWrflfll tM
iM~ tfTM un.ckr way Ixton the rumt.
,
'" R. N. EUKITT's MASTD100IIU
,.
CHAPTER XVlll
CHARTING
•
'"
It it NiPlIted that charu 10· J: 15" be UMCl, and tht.t not.
rmn than two.~be ehaned on _1IbMt.. For uampte,
on one &beet 10' I 15" the daily ranp of the 1DcIuatria1ll and
daily YOlWDe .bouId be ahowD, and on anot,-".beet 10· II: 15:
tbedaib' ranpoltbe RailiI &Dd lnduatrialL u.. two ott- u-c.
10· J: 15: _ for the howiy record at the I.nd1.lltriall and the
bowi,r yolWlMI ohhe whole market, azwI .......... roc- the hourly
r-v. 01 the Ran. and Utilia-•• total 01 (our .heet.I for the
entin pnIJl'am.
For individual a!.oeu and eommoditiea, the same general
reeommendatio,,- apply e.cept that the chart. paper ahould be
subdivided by fO\U'thll instead otr1fUla.'
The weekly nlnge ahoold be chaned on forma of the largHt
aiu charta available in order to cover a long period, one for an
entire cycle. The monthly range, eapec:ially of the average. and
groupA, is important for obBervina eomplete cycle..
Fiprea 53 and 54 in Chapter 6 demonatl'ate the value or
the daily range in order to eatabliah beforehand the extent and
pattern of the weekly range. In like manner, th" weekly ranKe
U/liAta in flltIbliahini the e:dent and pattern of th" monthly
range. Th" monthly range alllIista in eatablillhina th" ezt.ent of
eyclea. LikewilJe, the monthly range facilitatea ot..ervaneea of
monthly tim" pericxb and ratio otwav"e.
In Figure 87, the vertical alloWanoll for th" IndulJt.riaI. ;.
one point per quarter inch. The Raila and Utilitil!l are allowed
on" point per half inch. Th" weekly range may be redueed to two
pointa per quarter inch for the Induatriala and one point per
quarter inch for th" Raila and Utilitiea. The monthly range may
be reduced Itill furthI!\'".
On the actual chart paper the en- ruled linea a .... pale green
in eolor, and it will be noted that the chart patt.ena, which are
drawn in black ink, are acx:entuat.ed agaill8t the pale green back·
ground, which il highly advantageoua in ......dina wava.
FOOTNOTES
~ ...
1 For pricea uptelIMd illllligbtlu Ill" quarteR rat.her tban decl.
•
CHAPTER XIX
INVESTMENT TIMING
TUning ill one oftheehiefelementll in the lIDiverwe. Wellflpa·
rate the time. of the year into aeuona: aprilli, awnmer, fall and
winter. We rec:ogniz.e thedaylightllll the time ofaetivity and the
ni&ht time for reluation and rest.
In the matter of invlllItment, timing ill the mOllt ellllential
element.. What to buy ill imp3rtant, but wMn to buy ill more
important.. lnveetment markete themse!vee progrellllively fore-
tell their own future. Wavflll ind~te the nen movement of the
market by their pattert1ll, whoee beginninp and enwnp are
.mxeptible to definite and oonclUllive analysis.
Nature'a Law embraces the mom important of all elementll,
timi1l6. Nature'a Law ill not a ayfJtem or method of pllYini the
market but a pheoomenon which appeanl to mark the proflJ'el&
of all human aetivitiea. lUI applif:ation to foreeuting ill revolll-
tionary.
Ifone had invllllted $1,000 in long-term Government bond.
in January 1932 and enld in Jllne 1939, a total profit of $5000
(including intereat and appnldation) wOllld have n!lJll1ted in the
89-mooth period. In January 1932, the yield on market value of
Govemmenta wu 4,... In June 1939, it W1UI only K. loa for the
lJtoek market, an inveetment of$I,OOO in July 1932 would have
been iDa"elllled by March 1937 to approximately $5,000 without
takilli wvidanda into aCIXIllnt.. Thill atatement ill baaed on the
per oent cbange in the popll1ar averli"a.
The importanoe of &«\lrat.e fo.--.tilli hu resulted in an
immense increue in the uae ohtatilltica. A oompariaon offiJee
of newapapenl of fifty ye.... ago with thoee of today will be a
revelation in thia reeped.. MiIlioDll are being lIpent to lind a aa1-
isfactory forecutilli device, bllt tbe aeareh will be fruitl_ with.
out recognition of the fact that the habit of the market ill to
OJItkipou, not to follow.
,.
CHAPTER XX
,
NO/lire'. Low
Previou ~ _ l n TradiIlf
Many tradenJ acquire prejudicu agaillllt certain stoeka be-
caUR of previou unfortunate e;qlerien<:eli. To punue such a
CO\lI'llC!, the trader would evsntually find. no group free from ob-
jection.
hulctive &ocb
A .toek that i. frequently nr oc:cuionally inactive .hould be
avoided for tn.dilli, tha re8llOn being that wavea are not regia-
tered. Inactivity clearly indicate. that the.toek doea not eJl,joy
......
thoroullb distribution, or else it haa re.ched the fully-developed
IDaiden~
UIJU.llIy inaide tips from well-intentioned. frienda refer to
inactive and low priced. .toeb. It ia preferable to conrme one'.
tl'ading to .toeb tha~ are alwaya active.
The Ap of &ocb
The life of a .tack UI\lally hall three~. The Ii... t ia the
youthful or uperiment.al.tage, during which .w:h.toe'" ahould
be avoided. u they have DOt been properly aeaaoned. The aecond
ia the (:feative atage. Stoeb tha~ fall within thi. category have
re.ched bulthy development, thua makinll them. d..irable
medium for trading, provided they are thorotlihly aeaaoned. Ths
t.hinI or grown-up stage repre8llnu the period offul1llllt develop-
menl Dividenda may be uniformly reliable and. nuctuationa
n8lT(lw. For thelfe reaaons, the certificate. become lodpd in
port!oliol and tharefore the atock i. 1_ attn.ctivs for trading
"""""'•.
lD summary, when the pattern of a reliable average ia fa-
vor.ble, follow theM recommend.tiona:
1) Select the IffO\Ipe whicb perform in harmony with the
average.
2) Then select theatoeb that move in .ymp.thy with tbese
",,"po.
3) Al_ye chOOllll.stocb that are constantly active, medium
priced and 8lluoned leade....
4) Divenify funde, i.e., employ more or 1_ an equal num-
ber of doll.... in from live to ten .toe"', not more than one
"
atock of a group (for example: General Moton, United Air·
craft, U.S. Rubber, U.S. Steel, New York Centcal, and Con·
aolidated Ediaon).
FOOTNOTES
1 A bll1lllluket ill any ad'fance that IlOlItaina t.he 1Ieceaa&ry five
wave,. Defining tha tenn "bull market" or"bear market" by duration
or per<>enLap price chanp ill arbitrary.
• I think W, ill an WlinlentiOflal miaatlltement. Bear marlr.el.a
are alm...t ,1.."Y' ,bOnM than buI1lllarketa, and over the long rull
lend to rull ,bout 81.8110 of the time nquinHl. for buI1lllulr.eta (_
chapter 4. 0( ElliDU W.."" P,;.... ipl~ .
• Tba _ . upectati<m ill pnlvalent today. With th...... bea of
1969-1970 and 1973-1974. babind ua, m..t ..... curre.. tl)' lookinr for
an "iMtaI1t ...pla)'" at t.h. next four·,.... ""de I..... F_ can envi'ion
th. poaaibilit,' of, lea "ovanold" bottom, .... pile \he ract that \he
wa... porition IlUII"l.a that, .. Blli..tt pule it, .....",. )'''''' will
.lap" bar.........h a drutic d-:li,,. ....., ba qpada<i."
•
CHAPTERXXl
P¥RAMIDIC SYMBOLS
AND HOW mEY ARE DISCOVERED
,.
R. N. EUJUrr'tI M.uTDlWIWI
R. N. Elliott
No. 63 Wll1l Street
NewV....k (6), N. V.
FOOTNOTES
1For more 011 tbillubjert, read PeterTbompkinl' S«~U o{fM
Gmll PyNJIIlid (Harper I: Row, lint).
,
CHAPTER XXII
mE LAW OF MOTION
Dictiooary definitiooa of the word ·cycle" are .vera!: ".
period of time," ".n entire turn or circle," ". epiral leaf Rrue-
tunl,""• .erie. that repeate itself," Attention baa been maim,.
directed to cyclical rhythme in the IItocl< market whe.... they are
very pronounced, Every movement, from wheela to planeta. ill
cyelicaL All C)'l:IN have eubdiviaiona or degreea wbid! facilitate
the meuurement of their progre.ee.
.. ,,
,, ,
"" \ /
'" <»\
, .
,
...
II " ...
.,,
,,,
,
,, ,
,
P1anetll travel in orbitll and at 1peed8 peculi.ar to each. The
Earth revolvell on itll own wa and onee in every twenty-four
houn divide. nilfht from day. It encirclN the gun onee a year
and thua provide. the fO\U" IIeQO}n&. The meehllnillm of plan-
etllriulIUl may be turned hackward or forward to ahow the I'flla-
live poaitiona and movementa of planeta and their ntelliteillt
any time, put, preaent or future.
Some elementll never change their patterns. For example,
water conatantly obaervetl complete eydell. The lun'l taya on
the ocean'a IUtface cause water to evaporate. Air currentl move
the vapor until it enco\Ultenl cooler atmoolphere over hilill and
mountaina, whieh in turn condellSflll the vapor. Gravity draWl
the water back to earth. where it againjoina the eea.
Nationa experience political. cultural and emnomic eydea,
both If"!at and amaU. Pattenul of human life are obeerved in
JnU8 movementlluch 81 milfl'1ltion to and from citiell, average
1lIf1l. birth tate, etc:.
Figure 88 demolllt.ratel that one human activity cannot be
depended upon to forecaat another. TherefOl'e, the pattern of
each factor must beanalyud by itlown wavelland not by extra-
neoua facto.... Duril\ll the period from 1939 to April 1~2, the
lag in the ltack market compared to that of bulineea produced
mucll diacullion but DO uplanation. The anawer il that eight
yelltll of inflation during the Twentiee created a thirteen-year
triangle to 1942.
The graph of temperature lhown
in Figure 89 iJI important. Tempera_
ture ia not _iated with human
-
aetivitiea; nevertheleaa eyclieal wave&,
over a period of one hundred ten
year&, formed a perfect. pattern offive
wav... upward.
Periodicitiel between peaka and
"
valleyl of many iteltUl, euch III epi-
demica, production oflynx pelta, tent
eaterpillan, lalmon runl, etc:. atil
fairly eommOli. In human aetiviliel, F9Jre89
eytIea are not llil uniformly apaced. They follow wave patterns
in aeoordanoe with the Fibonac:ci Summation Serin.
,.
Nat",.,', Law
'"
Dynamic lI)'DlIDetl'y ill a law of natuTe and therefore the buia
of all fol'1lUl of Ktirity.
Since the diaoovllry that the earth il round, the cycle haa
been the tnlbjeet. of much reaearch. There are three clUllllI of
cydes. FirlIt are uniform perioclicitilll between peab Illd be-
tween nadira, luch all day and night, 1Ie8llODI of the year. tidea,
epidemic.. weather. Iwarml of i~. ete. (\ recommend an
artide by Donald G. Cooley entitled "Cycllll Predict the Future-
in Mtcht:uli.% rulUtraud, February, 19«). Second are periodical
fluctuatioDl cauaed., in lIOIIIlI iDlltaDClIlI. by aatronomical aapecta.
Third are patterna. time and "'tio, in accordance with a .wm.
matioD Mriea ddclOlled by the mathematicilll Fibonacci.
A pamphlet entitled ~e Relation ofPh,yllotuill to Mechani-
cal LaWll" by Profll"""r A.H. Chun:h ofOdord ill very interut-
ing. Phyllotuil ia the leaf arrangement of planta. Mr. Jay
Hambidge .pent many yean relllarcbilli recorda, and ia the
author of a book entitledPmcti.cnl Applit::t:dw.u 0(Dy1ltWlic 8ym·
"",Iry. One chapter ill entitled '"I'he Law of Ph,yllotam.- A copy
of pages 27 and 28 thereofi. repeated in Chapter 2 ofthi. trea-
tille.
Dr. William F. Petel'llen, ProfelSOrofPathology at the Uni.
veraity of nlinoia, ill the al,ltbor of a very important and inter-
esting book entit.led T1l.e Poti#:ni oAd tlu Wrothu. Therein are
graphed the p ~ of dilleue. The patte"", are precillllly the
ume .. any other activity. includilli the ltock market.
FIfIlJI'fI 91
,
CHAPTER XXIII
,
The lltock market never ball. -depreuion;" it only correctll
• previOUll .dvance. A cycle is action and reaction.
Many tetViua and rlJla.Dcial commentaton in newllpapers
penist in diKuuing I:\U'TeIlt eYflntll all caUllN of advancell and
declinell. They have available tbedaily neW8 and market behav-
ior. It ill therefore alrimple matter to fit One to the otber. When
news ill abient and the market Duetu.ltee, they aay itll behavior
is "technical.~1 Thill feature is di8C\lllHd in Chllpter 17.
Every now and then, ...me important event ooeun. If Lon-
don decline. and New York advancetl, or vice Yflrsa, the com-
mentaton are befuddled. Mr. Bernard Barucb recently Aid that
p~peli~ will he with us for IIlIverai ye&1'1l ~.. of whet
U OOM 0#' IIOC deM. - Think that over.
In the -clark ages" the world Wall SIlPJ)Ulled to be flat. We
persillt in pellllltuating lIi.milar delUlliolUl.
FOOTNOTES
I 8ouJI.d fllJl:li\iar1 DoK:.del l.ter, c.m. pnc1ice ill AI prnelent ..
~,.
•
CHAPTER XXIV
,
The blood cholesterol aeema to bve a cycle of about 56
~..... 'I1te thyroid output, .. hich determillM th. total .. mo-
tional "Ycll'!, UIUI1ly makel a round trip from low to hii;b and
back in from 4 to 5 ......1<.1•••• III hypertbyn>id C_, eyel... may
be .. abort II 3 ..eekI.
There MemI to be DO dilferente in cycle \enith betw""'D
men and women.
,.
PYTHAGORAS
CHAPTER XXV
PYTHAGORAS
Pythagoru, liJ'ut man, lived in the fifth centUl)' B.C. and
made III impression on history that is seldom approached. The
raader il urged to review a report on m. activitiN in the Ency-
clopedia Brit4ntUco. He wu a perai5tent invetltiptor of the dia-
coveriet! of othen and vililed Egypt., which ia often mentioned
all "The Cradic of Civiliution."
Pythagoru is prominently known for hia atudiN in math-
em.Uca. InsoCar u 1 have _n, the molt import.llnt of hit dia-
coveriea hu been OYlIrloDked. He drew • triangle I.lld placed
thereunder the cryptic title "Tbe Secret of the Univene." 11Ii.
feature is deecribed e:rterWvely in Chapter 2.
In 1945, Mr. John H. Manu, Ph.D., PTe.idenl of the
Pyt.haaorun Society, wrote. book entitled ~'. Riddh So/.ved,
in whieh he di.elOlJed. pie:t\ll'e of Pythagoru, and I have pe....
miuion from Mr. Manly P. Han, head of The Philoeophical Soci-
ety ofLo. Angelell, California, to reproduce it <- op'-;te ~).
There ue many -rmboI. in t.h.ifI pieture, but we will f0C'U8
our attMtioD on two itelllll, the pyramid which Pythl.iOru bold.
in m. right hand. and the three ~uare. in the IOWilr right hand
earner of the pieture.
The pyramid repre_ot. the Great Pyramid of Gizeh, pre-
Nmably built about lOCK) B.C., although 110m" atudenta 8fi\le
that it ill much older. Tha Pyramid di dUlled. u one ofthe-Senn
Wonders oft.he World.- The preciaion of meuunment and plao>
inr in poeition of the immenH marble slonee employed are nl'-
marbble. However, thdifeature di insignificant when compared
to the Imowledge I)'ID.bolized. It may be that a paragraph in the
Bible (l..iah 19:19) refef'll to it. It react., "In that day ahall there
be an altar to the Lord in the midat oftbe land of EiYPt. and a
pillar at the border thereof to the Lord.-
In Chapter 2 are graphed different viilWII ot'thi. pyramid.
For convenient reference, the view of one lide il repelted in
Figure 92.
The baH of one side 11 9,181 inehel. The hue of the four
lidel meuutlll 86,524.22 inchell. Thill)'lllbolizetl the oumber of
,.
'"
daY' in O\lJ'.mar year, 3&1' daya.
Our calendar yearie S65 d~ but
every fourth year an extra day
mWlt be added (February 29th).
nul i' "leap year.· The totaJ clap
u.
in four yean 1,.(61.
The elevation from hue to
topia5,813iDChel.ThebueoCone - -
aidlll ill 9,131 ineh". The ratio of
the elevation totbe buei.63.6....
The pyramid hu five .urf.~ and eiaht liDM. 5 pilla 8 equal.
13. Note the elevation, 5,813 inehN- 5, 8 and 13. 5 U. 62.5'10 of
8. 8 i' 61.5'" of 13. Note the application ofthia ratio in Figure
7l.
In human ad.ivitiH. all. advancing movement is composed
oCfive ...va, three up and two interVening eorreetiOlUl. A eyele
it compoeed offive _yea lip and three w.vea down, total eight.
Thi. ia tnle of all dap'llU, Minor, Intermediate.nd~. Set!
Chapter 4.
The diagram ahown in the lower
rii:ht hand of the Pythqonuo pict.ure i'
l'epJ'Oduced u Figure 93. I have num-
bered th. MjWlrea which are ,haded in
the picture. The upper right IIqILUfl bu
five ,haded equare•. The upper \,,1\
FOOTNOTES
I Elliott t.rimmed tbe pidure to a 6" I 8" GoIden~. in bie
reprodudoion.
•
CHAPTER XXVI
MISCELLANEOUS'
Vol....." ofWaVM
In aD adVaDee, the volume of ....ve I> dOlll. Dot ""ceed the
volume of wave S; oecuioJlaIly it i8 Ita. So loq I.JI vollllDfl in-
ere-... n.other ..dvl.Il<:e iI. due, until a ntl.. hiib regil.ttln with-
OIIt aD mere... in vollllllfl. See Figure 95. Note ..1$0 that the
volwntl of..avtl2 i,1Na than the volwntl ofwaVtl 1. It i8, favor-
.ble indication.1
J,-_ ~
--'~'-o'-I"...Jme - - - - l
""'" ..
c.....
The word ·cycle- meaD. circle. Oceuionally tbi. featllre
'ppean in gr.pha of .tocka. Tbtl cin:le in Fiill"fl 96 i8 dividtld
into four aegRlflnta, A, B, C aDd D. When a graph i, I'OIlIlding
downward, I.JI in aegment C, and thtl downward patttlm hl.Jl btltln
eompleted inaofar I.JI thtl number ofwavlIlI. i. eollOllmtld, it may
be e:rpected that .t the bottom, one or more IIflriea of "three-
W,Vtl movementa" may develop.nd then be followed by an ae-
QIller,ted I.dv&nQll U per aegment D. The entire pictllnl down
and up will then reaembltl lIflllltlenta C and D combilltld, or in
other wonIa, the lower half of the circle.
NlJlu~·. Law ...
The flood of .trike. around the
end of 1946 i.llimply the lwina: of the
pendulum !'rom left. to riaht. 1 to 2 A
then to 8, .. in ~ 96. Before la. 1 3
bor ...... Ol'p.IliUld (previoue to 1906),
many. if not ma.t I!mployen, were
alitocRtic, ruthlellll and hevtl_ to
employ_. compet.iton and the pub-
lic. The behavior of.ome .triUn to- 2
day ill not worM than the behlviot' of
manaa:ement in early dlYI. Every FIflIJf896
natulD. human aetirity and iDdivid..... bu it. own cycle-.ame
Iona:. otben lbort, dependina: on the c1ull and eItent of each.
The "A·8 Sue"
The A·B b~, I!hown in FilfW'll! 58, Chapter 6, i. _ion.
ally compoeed ofdouble t.hrM. oreven triple threu, .. de8c:ribed
in Chapter 5. Thil i. Npecially true when a rollndina: bottom i.
made, .. diacuued in the tint pllnif"*ph under "Circle.•• above.
FOOTNOTES
I 1'b;' c:haptft" oripnally contained .....en1 paracrlplw that III
dinctly into eam.r MetioM o( tha hook. Apparently Elliot~ t.bouch~
or 1OIlD. additional poin" Il1tIr the bulk of the manUlCrip~ .....
completed and ~fl*I.1 he•• ....,...111 tb-. par..... pbe to u..lppropri·
1101 arear in the pt"PiouI tert.
• Th-.t ii, indiao\.i" that ...... 2 ia indMd in Pf'OITeM and t.be~
w... S will follow.
I The "A-B baH" SMmI !ina u -. dMCrip\.ion for tbI fll'lt ~wo
w• • • of an A·B-C irncular ooo,eaion. Elliou'l ..f _ to Firur-
53 ......... ~ fim to indiaolol tha~ t.bet ill whet hi meant. Hown ill
tbI diaalMion of tbI IH:l-li46 bull tat tha~ fol1ow•• be tbI
A·B bull eotlOIpt I I an atUlirumlli w p h _..OD whi.h c:aa ooau"
between the end of -. correcU.. WI.e and thl beeinnilll oC I cardinal,
or Lmpu1M w...... The addi\.ion of tbiI id.. il " .... " • •.,.. aineI.
eoDItnlotion with that look baa been. in our ""perle_, .......IJ put
oltha pre,,;OWl correcti•• WI.I or c.he next irnpul. WI". Appven~
~ or III "A·B baH" a1W-'J1I ba.... another UlIIuo-.tion. onl
more <:omillt.ent wiUl Ull WUI Principle.
,.
CHAPTER XXVII
F/fIUre 97
,
,
"6,s -P"I.' fS-51!l
:1
~::l!i
'I]'
,!dl-!lb
". -I ,,:.1
il!t IJ)j
1 ~.~. -~J. I,ll'
ii ."1 ·.1' -ijJ!
I •
!J;: ~!~] !ll.!!'
~,i ~~~~
o. 1·t~5!~. ~" J~ "''Ii ,-.
""~ ... : : . , ~ .... ji;l~.1> ....
! ~1 jli~~t!li ~l~!ji
'!f'- -h,.,
•~
!, ·.1
;. 1.~:~.i:g~ t-.i'.f~!
.1 l' -!i'·-' -f ,to •
•" !i jlj]~if~j .~ji1i
~i; fjh'1~ ,;'1 H1.fj
~ e~ ~!~~~tli~;i;~~ll~~~
Ii f.ih ~m Id1.
REVIEW AND CONCLUSION
,,,
,
1800
,, "" '
,
•1i'090'
r-- ~I
"
There i. a different HqU8II<:e of prooedUrtl now u compared
to 1921-1928. During 1921,1928, the flm wave'wu a nonnal
bull marlr.et without inflatiolllll)' BYJD.ptome. The fifth Wllve end·
ingin Navember 1928 W1lII dec:idediy inflationary. Now, thetint
wave, from 1942 to 1945, dillClOl!illd inflaliolllll)' thatacterirrtiu.
Low·priced IItol:k.e of quelJtionable value eurged ahelld at the
upenae of the "blue chipa.~ ~ New Yor.ll Su" IIllected ninety-
aiJI: .toeo that advanced phenomenally. Every .toek etaTted at
lOme fiiun below $2 per .hare. The highllllt rate of advlIJ>(:II WIUI
IS.S~. The lowest rate ofadvance wu .33.... The average for
the group wu 2.776....
The pattema ofgTaphi ehown on pRVioua pagea fumieh a
hiatoric outline of the United States. Ito! development ill marvel-
DU.I for many reaaona:
- Geographic Pl"ilioo. eh,pe and boundariell: A .-quare,
bounded on two aidllll by laTlfll OCIIIIIUI. and on two eidea by
friendly ne;'hbon.
_ Latitude and climate: Semi-tropical, thua facilitating
agrieultUrtl.
- Natural rlllOurce.: Gold, iron, coal, oil, timber and wa-
ter._ya.
- ~niua and individual initiative: The number and value
ofpatentll from 1850 to 1929 ill m.arve10U1. Attention ill in-
vited to Chapter 14. Note that the graph of patent applica-
tione (Figurtl8l) coincide. with waVIlll of the .toek market,
both in time and pattern, which in turn reflec:tll bUlineu
Ilctivity and maae paycbology.
_ Democ:n.tic idelllA: The form of government lltimulate.
individual initiative. Thia doea notimply that perfection hu
been achieved, but it does ellgKelt that we may be on the
right road.
FOOTNOTES
1 Onu q:llill, with ulnmely limi\lld dAta, Elliott outlin........
reetly tba e"tire Grand Supercyell rrom tba lata 1700., jun II ha did
in hi. IIIII.YI of 1941 and 1942 (_ Stl«ud Eua:!. oedioD.). Hi.o
prodi..c.iOll of I 11_ high above 1929 Will 11111 """""''' However, in thia
depl..c.ion ha .bowa II ahort time rnm. ending in 11160, whloh II .u out
or p>oportiOll 10 tile other rOUt _ye.. It _ _ that eVIll • ouraory
,.
Nolure', Low
.--
• This oomputil'tiOll '" buecI "'" the telI.et tbe.t u.. t.hrutt, or fiI\b
w..... r"ll"willl' bori..... tI.1 tri....'-. il.-.raU1 ebcMlt u""" u the
widMt. patt or Ihe tri..,p..
,.
.. R. N. EUJmT's MASTUJf0U3
REFERENCES I
FOOTNOTES
l'I'M oriIinal pap tont.ained .... era! mi...,.. ..,..,.. of ....Uing
and tiu., which ha... bHn CCJn'eCted (or thil ?OIUfM.
When is it right to judge an
investment book a "classic"?
ilhlecn ~ •.,. i, 100, enouplO
E jlldxe whether invalOrS deem I
book obou'ltl ;n"51"""" method ..
"dassie." and .....11' 1lle iutY is in ""
,hi. 0'."H/JhJtI 1Ilo... I'riIIcIph has
bon fJUbli~ in "ftD lan~.
and <ontin.... to ..Il lhou»,,'h or
ropiesc>'U)' yur.
800-336-1618 Of no-S36-0309
Only U5$29
t:IIMIt1 W
l'ot< omc.
I_ _
,...
u.s Ilc...........
EwopoSll:"I .. _SI~_
"f«_=
Col_ G<oo<IIo _ U.s.A. ISIN: G-9Jl7¥l-1:Hl
(IU' , ."",'.. _ ... _ ....... _ , . . , . . . ......,.
_ . 11> ... iI'lllCM'd""- _ 3OdOI'IlOf' U. _ '" h p<IId'-. pric<o.
DAlLY AND INTRADAY MARKET ANALYSIS
available on The Bloomberg. DIN. Knighl·Ridder.
Reuters and Telera1e
A$J'O'I""'<riIicalin\O:llmmlIlf1llIridit1il~~lhe~
0III1ooU .,...;..... "" £lJi8tt IIlrw InlLmmw-.!:r ""pm martrt onalyu
Y""~.., receive wr """'1"""""""" modrI onaly$i, ",,·Iino.. "",,h 0IJlI".,t
. ~ beJ<lw Ki ves 0IIf ""'" I=n marbI arWY'" ...... Ib< EUi<JIt Wove Principle
_ ." ....
and o<l>er """""'i"l .-t.)do. You "oi II<o«i"" drioilrd <:ommmtary. SOPl"'" and
..,,;~ r..b, ....."" onalyoisllf1ll....e- n-lOOh will p",,)<lU'--.isIancc
in implcn>tnliJl, y<u' "'*J:i<:I.
W< wiU .................. Owloob IOJ'O'I_yl!woolgll Friday. andouppla,,,,(
ihcm wi'" _ 1 opdlla as """"""" 24 Inn. <IIy.
,.
Other titles from
New Classics Librwy
/0. dIvlslon Q/ EtuOfl Waue Inrerruulonc.l. lrv:./
AI the en., olillt Tid4J w...... _ A FonclUrjOl' lilt GnlM Bur M<Utr,_
......
Robcn_·.r"""...._;n~yean..E _in"'*"' ....Il ..........
""'.........tI<lmi'll •• _ ~ in thi. book belor< lortniDI .. ."wm _ "",,"y",
fin>o><:iollJ<1l<h. ,US paces ando..... 2OOchan.cb.II"'J< <......,,1""'.1 ... i~m lik< ....
.oN........ befono. ".,.. ..1lo<Ulllbis boot ea.i~ ",m _rH lhc mool.
ISIISJ o-,n7~""·7
R.N. EIIitJtt 'J MtlTbl fAlUn (19J8_1 U6J _ by Rnbom R. i'fffhl<'. J•.. «li,o,
I'reo<nt. £11;«", .....·Ii.......... }"<. on<! fO=a<l. of marI<<l
....y.... ,he """,Icalion of ,he: W... Prin<iplc.
""""",.lonI
with .."n"" ....
E>."""'~ly r _ ond """"_,,,fa·
_«I by Bob Prt:<hla. 1511:-:. MJ17~_
~~
~.......-:.u
•
• • • f:rt . . . . eeIT....,.....
Flobert A. Prtdller, Jr. ~ at«! WII""
Pr*qM - K-r 10 St:d' ~ PraIb .., 1IPS,
n In 181'9 ~ putIbtq 11111 EIk1ll waw
TMorl.f, I 1IIIIneili loreclltlrl(l publication
ooveltng the atodl rMrbt, II ,...... mil. ~
matlll, till economy Ind locIll trelldl. Mr.
Piec:tl1el nu beer'l,*,* "onI 01 the p'. . . .r!lm-
_ In Itodt rM/ket history" by nn- ~ "IhI
~ , marlf8tforecert Aby FOIfune rnagazr.,
"IhI world IMdef In EllloIt WI"" ~ . by
The Sec:urIIiM 1nrtiIlM.1nd "!he l'lI:tIon'IIoi.,lOIIl
P'090'.-nl oIthI EIIoll W_lTlI'lhodol '-at.
Ing" by T1III ~ yet*" n...
R.N. ELLIOTT~s
MASTERWORKS
The Denoltl"e £ollootloo
"An Impressi'o'll volume from coVllr to cover. Prechter's knowIedll& of the subject
showsclearty in puttir19logeth8r this new volume." - FMluros M",tlZiu
"BetieV1l ~ or not, tI1is is the first time anyone has as!lelri)!ed aM 01 Mr. Ellioll'S wort<s in
one booiL That alone makes the book worthwhile tor your linane!al ~ry. An altlra
bonus is a delightful chapler 1H1~11ed 'A Biography 01 R.N. Ellioll,' which gI\Ies a rare
Insight Into his 1I1e: - J"",~, Di,,~,. TIt~ 0;" •• lAlI.r
"This book is ideal lor those market students inte<ested In Ellioll but unable to secure
oneol theoriglnal rare c:opMls 01 his wrilings." - Mi€luul LIlt_iud:.
SM/njI'" lit. I" ".,11'0110" 01Ru"rri"l EHIIlJ
"The bJogrllphy in this book is lerri/it: aoo !llls in the ptOCes 10 the mystery 01 Elioll the
man: -DoWJ W.i,. Tuhwl FQt"t!u
"I stili can't get over the e~cenence ot R.N, EIIIorr"s Masrerworlrs. I pick h up <lally:
_A.). "rolt
"Prechler has Cfeeled the most con~lH1lenl introduction 10 the Etlioll theory's geneSIS
and early evolution, something any espiring Etliottician should read.·
_ Joh Swu".y, T.d,,1aI1 ""aly,1l olStDC" d c>",,,,t>diJi~,
".0 0-""SO·'1-.
Investmentl Finance 90000>
111111-