What Makes Us Different

The basis for analysis and forecasting at Elliott Wave International is fundamentally different from everyone else’s. 

Most investors and economists think that news and events buffet financial markets as if they were a mechanistic system. A few coincidentally timed events and market moves have made people think causality is involved. But they have not studied the matter. Careful academic studies have shown that there is no reliable correlation between dramatic stock market movements and news.  

Our thesis is that crowd psychology is immutable. When a particular market catches the herd’s fancy, it bids up prices in a seemingly chaotic but actually structured series of steps. When the herd reaches maximum commitment, the trend reverses, and another series of steps takes the market back down. The model that describes this process is the Elliott wave model. 

The same causality governs the social experience. Naturally occurring waves of social mood are the engine of social action. As the herd moves from optimism to pessimism and back again, it behaves in a predictable manner, socially, culturally, politically and financially. 

To us, what matters to market forecasting are four things: social mood, herding behavior, chart patterns and market psychology. Everything else is noise. 

To understand our entire philosophy of financial markets and macroeconomic causality, read The Socionomic Theory of Finance, which you can find under the Books tab in the drop-down menu under Education at the top of the home page at elliottwave.com. 

What Are Elliott waves?

In the 1930s, Ralph Nelson Elliott discovered that financial markets follow recurring patterns, which he called waves. Waves form on all timescales and are nested within each other, revealing the fractal nature of markets.

Under the Elliott wave model, a complete market cycle consists of a motive wave subdividing into five waves (labeled 1-2-3-4-5) followed by a corrective wave subdividing into three waves (labeled A-B-C) or a variation thereof.

Applying the Elliott wave model to real-time markets requires adhering to strict rules and probabilistic guidelines governing all aspects of the fractal. Analysts at Elliott Wave International are skilled at this task.

You can explore details of the model through our Education page.