Equality
Key Takeaway: The guideline of equality states that in a five-wave sequence, when wave three is the longest, waves five and one tend to be equal in price length.
One of the guidelines of the Wave Principle is that two of the motive waves in a five-wave sequence will tend toward equality in time and magnitude. This is generally true of the two non-extended waves when one wave is an extension, and it is especially true if the third wave is the extension. If perfect equality is lacking, a .618 multiple is the next likely relationship.
When waves are larger than Intermediate degree, the price relationships usually must be stated in percentage terms. Thus, within the entire extended Cycle wave advance from 1942 to 1966, we find that Primary wave ① traveled 120 points, a gain of 129%, in 49 months, while Primary wave ⑤ traveled 438 points, a gain of 80% (.618 times the 129% gain), in 40 months (see Figure 1), far different from the 324% gain of the third Primary wave, which lasted 126 months.
When waves are of Intermediate degree or below, the price equality can usually be stated in arithmetic terms, since the percentage lengths will also be nearly equivalent. Thus, in the year-end rally of 1976, we find that wave 1 traveled 35.24 points in 47 market hours while wave 5 traveled 34.40 points in 47 market hours. The guideline of equality is often extremely accurate.
“So wait… I can really learn to predict the markets?”
Yes. Markets aren’t rational. For every action, there isn’t always an equal and opposite reaction.
What drives prices isn’t logic, but emotion. Market emotions unfold in predictable patterns called Elliott waves. That’s what makes prices predictable.
What you just read is from the Wall Street bestseller, “Elliott Wave Principle: Key to Market Behavior.” For 40+ years, it’s been a top-shelf book on unbiased market analysis.
Amazon reviewers call it “classic and essential” and ” the bible of the theory.” Now, you can get instant, FREE access to the full online version of this book ($29 value).