Validating Elliott wave counts
by H. Ralph Cripps
The practice of Elliott Wave anal ysis allows for alternative wave counts, and it is critical to
differentiate among the various choices. Prioritizing is best accomplished with a confirming
filter—which "validated" the Elliott waves that clearl y indicated the Dow J ones Industrial Average top on
August 25, 1987, which preceded the massive decline of October.
Almost every Elliott Wave technician will use some technique to assist in establishin g an appropriate
wave count. Some aids for defining wave sequences, magnitude and alternative wave counts are c ycles,
momentum studies and Fibonacci numbers. One of the indicators I use to enhance the longer-term
perspective is the slow D line of the 21-week stochastic. This indicato r, developed by George Lane, has
exceptional merit when used to confirm Elliott waves.
This validation methodolog y, on August 25, interpreted the Elliott wave count for the Dow as being at
the end of the fifth wave of a fifth wave, which signaled a significant correction as the most probable
possibility. The ensuing decline appears to be confirming itself as the beginning of Primar y Wave 4,
indicating the prior top as Primar y Wave 3.
The rationale for matching Elliott wave counts with the 21-week stochastic is that major Elliott impulse
and corrective waves will have comparable major top and bottom patterns in the stochastic indicator and
lesser Elliott waves will have lesser patterns. This should be true if both Elliott waves and the stochastic
reliabl y define market moves. Such conformit y in action appears to have excellent correlation based on
my studies beginning with the bull market inception in 1982.