Elliott Waves In Motion

The Elliott Wave Principle

The Elliott Wave Principle is a detailed description of how markets behave. The description reveals that mass investor psychology swings from  pessimism to optimism and back in a natural sequence, reating specific patterns in price movement. Each pattern has implications

regarding the position of the market within its overall progression. past, present and future.

The purpose of this publication and its associated services is to outline the progress of markets in terms of the Elliott Wave Principle and

to educate interested parties in the successful application of the Elliott Wave Principle. This is probably the most comprehensive  trading

education  on how to project high probability time and price targets based on Elliott Wave pattern structure.Under the Wave Principle, every

market decision is both produced by meaningful information and produces meaningful information. Each transaction, while at once an effect,

enters the fabric of the market and, by communicating transactional data to investors, joins the chain of causes of others’ behavior.

This feedback loop is governed by man’s social nature, and since he has such a nature, the process generates forms.

As the forms are repetitive, they have predictive value. Sometimes the market appears to reflect outside conditions and events, but at other

times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own.

It is not propelled by the linear causality to which one becomes accustomed in the everyday experiences of life. Nor is the market the cyclically rhythmic machine that some declare it to be. Nevertheless, its movement reflects a structured formal progression. That progression unfolds in waves. Waves are patterns of directional movement. More specifically, a wave is any one of the patterns that naturally occur under the Wave Principle.

A Power Law in the Stock Market

R.N. Elliott’s depiction of the progress of the stock market unequivocally implied that while larger stock market reactions occur less often

than small ones, they do not occur less often relative to the size of advances that precede them, but in fact just about as often. In other words,

Elliott implied that the stock market follows a power law.

In 1995, Boston University physicists Gene Stanley and Rosario Mantegna found that the fluctuations in the Standard & Poor’s Composite index

of the 500 highest capitalized stocks do follow a power law. This particular power law is a Levy stable law (named after a French mathematician

of the early 20th century), which produces a bell curve with extended wings, indicating that far- from — normal fluctuations in terms of size occur

a bit more often than they would if they followed a one-to-one relationship to the duration of the data sample. Figure 2-16, from Mantegna and Stanley’s article in Nature, demonstrates that the S&P’s fluctuations are quite uniform throughout the time scale, from 1 minute to 1000 minutes. This finding is consistant with the added wrinkle that large fluctuations. at least in this data example, occurred a bit more often than smaller ones relative to the time intervals between them.

Levy laws also govern birds’ flying and landing patterns, drips from leaky faucets, the wanderings of ants, and fluctuations in cotton prices and heartbeats.Stanley is applying the behavioral similarities of complex systems to understanding landscape formations, traffic patterns, Alzheimer’s disease and the behavior of neutron stars. Like fractals, power laws suffuse nature.

(The Wave Principle of Human Social Behavior, p.44, Prechter 1999)