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> I've been reading 2 books on Elliott Wave: Elliott Wave Explained, by
> Robert Beckman, and Elliott Wave Principle, by Robert Prechter. They
> disagree on a very important point: the time necessary for corrective
> waves to form.
>
> Beckman says that the time required to correct an impulse move should be
> in a realistic proportion to the overall time frame of the impulse.
> IOW, if an impulse move lasts N amount of time, the corrective sequence
> that follows should last somewhere in the order of N x .382 to N x .618.
To complicate the issue further for you, I'm afraid there are other Elliott
guru types who believe a corrective phase should last as long, if not longer,
than the impulse wave it is correcting. I tend to agree with this, and find
more evidence of corrective activity in the markets than impulsive.
Certainly in the past couple of years the upward moves that one would
naturally assume to be impulsive, seem to break some of the accepted rules by
most Elliott types. I guess it comes down to the idea that corrections in
markets where the higher degree waves are exerting upward strength, can also
head up, along with the impulse waves of the same degree they are correcting.
A pretty good "general" rule is that a lower trendline drawn from the start
of an impulse wave to the end of wave 2, should not be broken by wave 3, in
the relative short term. If it is, then most probably, wave 2 is not
complete.
A trendline drawn from the end of wave 2 to the end of wave 4 will not be
broken until the impulse sequence has completed, and that trendline should be
broken with some authority.
A couple of simply rules, but in conjunction with others, I find far fewer
impulse moves than I do corrections.
What can be gained from all this, is that when you have identified a
correction of the same degree going up, after a legitimate impulse move, you
know the subsequent impulse move is really going to motor to the upside.
Take a graph of the Dow or S&P 500 from last April, and try to draw lower
trendlines from low to subsequent low (several weeks at a minimum), and
notice how the market eventually falls back onto and through the trendline.
Yes there are valid impulse moves in there, but some very bullish type
corrections, still moving up, but not strongly enough to remain above lower
trendlines.
In the short term I think it may be argued the thrust from 7/1 to 7/7 is
impulsive, but the entire move as a whole from that area (7/1) looks very
corrective. There is little if any necessary alternation (difference)
between possible wave 2 and 4 down moves, and the whole pattern channels
between parallel lines. Not impulsive behavior. The false break of the upper
trendline of the period, this past week, to stay within the channel is more
evidence of a rising correction.
All this is very bullish for the intermediate term outlook. Short term, this
correction will probably finish with a downside thrust, perhaps even a .618
pullback toward the 7/1 area. We may also see a triangle go sideways to end
it, but confirmation will come from various upper trendlines. No matter what
happens in the very short term, this market has a long way to go in my humble
opinion.
PJLaird
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