| Although it is the
best forecasting tool in existence, the Wave Principle is not
primarily a forecasting tool; it is a detailed description of
how markets behave. Nevertheless, that description does impart
an immense amount of knowledge about the market's position
within the behavioral continuum and therefore about its probable
ensuing path. The primary value of the Wave Principle is that it
provides a context for market analysis. This context provides
both a basis for disciplined thinking and a perspective on the
market's general position and outlook. At times, its accuracy in
identifying, and even anticipating, changes in direction is
almost unbelievable. Many areas of mass human activity follow
the Wave Principle, but the stock market is where it is most
popularly applied. Indeed, the stock market considered alone is
far more important than it seems to casual observers. The level
of aggregate stock prices is a direct and immediate measure of
the popular valuation of man's total productive capability. That
this valuation has form is a fact of profound implications that
will ultimately revolutionize the social sciences. That,
however, is a discussion for another time.
R.N. Elliott's genius consisted
of a wonderfully disciplined mental process, suited to studying
charts of the Dow Jones Industrial Average and its predecessors
with such thoroughness and precision that he could construct a
network of principles that covered all market action known to
him up to the mid-1940s. At that time, with the Dow in the 100s,
Elliott predicted a great bull market for the next several
decades that would exceed all expectations at a time when most
investors felt it impossible that the Dow could even better its
1929 peak. As we shall see, phenomenal stock market forecasts,
some of pinpoint accuracy years in advance, have accompanied the
history of the application of the Elliott Wave approach.
Elliott had theories regarding
the origin and meaning of the patterns he discovered, which we
will present and expand upon in Lessons 16-19. Until then,
suffice it to say that the patterns described in Lessons 1-15
have stood the test of time.
Often one will hear several
different interpretations of the market's Elliott Wave status,
especially when cursory, off-the-cuff studies of the averages
are made by latter day experts.
However, most uncertainties can
be avoided by keeping charts on both arithmetic and
semilogarithmic scale and by taking care to follow the rules and
guidelines as laid down in this course. Welcome to the world of
Elliott. |