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Because the
tendencies discussed here are not inevitable, they are stated
not as rules, but as guidelines. Their lack of inevitability
nevertheless detracts little from their utility. For example,
take a look at Figure 2-16, an hourly chart showing the first
four Minor waves in the DJIA rally off the March 1, 1978 low.
The waves are textbook Elliott from beginning to end, from the
length of waves to the volume pattern (not shown) to the trend
channels to the guideline of equality to the retracement by the
"a" wave following the extension to the expected low
for the fourth wave to the perfect internal counts to
alternation to the Fibonacci time sequences to the Fibonacci
ratio relationships embodied within. It might be worth noting
that 914 would be a reasonable target in that it would mark a
.618 retracement of the 1976-1978 decline.
Figure 2-16
(Click Image To Enlarge)
There are exceptions to
guidelines, but without those, market analysis would be a
science of exactitude, not one of probability. Nevertheless,
with a thorough knowledge of the guide lines of wave structure,
you can be quite confident of your wave count. In effect, you
can use the market action to confirm the wave count as well as
use the wave count to predict market action.
Notice also that Elliott Wave
guidelines cover most aspects of traditional technical analysis,
such as market momentum and investor sentiment. The result is
that traditional technical analysis now has a greatly increased
value in that it serves to aid the identification of the
market's exact position in the Elliott Wave structure. To that
end, using such tools is by all means encouraged.
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