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Why It Pays to Act Like a Boy Scout -- Be Prepared -- When Fifth Waves End
A.J. Frost and Robert Prechter describe what to look for in fifth waves

By Bob Stokes
Tue, 06 Aug 2013 17:30:00 ET
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Decades of meticulous observation reveals that the stock market's price pattern repeatedly unfolds in five waves up and then three waves down. So it would be good to know when the market is in the fifth wave of a bull market, and, if it is, when it's likely to end. You could then position your portfolio for the downward trend. 

Elliott Wave International subscribers were given such analysis for the crude oil market in June 2008.
 
The Elliott Wave Financial Forecast labeled a price chart of crude oil as a completed five waves up. Part of the accompanying commentary read, "The case for an end in oil's rise is growing even stronger."
 
Please take a look at the chart below.
 
 
 
It turned out that this chart and forecast were published less than six weeks before oil hit the high of $147. By December 2008, the price of oil had declined 80%.
 
The five waves up then three waves down progression unfolds in all financial markets, including the stock market. Here's an excerpt of how A.J. Frost and Robert Prechter describe fifth waves in Elliott Wave Principle:
 
Fifth waves in stocks are always less dynamic than third waves [the strongest phase of a five-wave sequence] in terms of breadth. They usually display a slower maximum speed of price change as well. ... [L]ook for lesser volume as a rule in a fifth wave as opposed to the third. ... During advancing fifth waves, optimism runs extremely high despite a narrowing of breadth.
 
Elliott Wave Principle, pp. 80-81
 
An analyst also employs technical indicators to help determine whether a fifth wave is unfolding in the market, and, if so, at what stage of progression.
 
Now is an important time to see what EWI's analysts are seeing.
 

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