V.7:2 (43-46): An Elliott Wave perspective: DJIA 400 or 6000? by Elliot Brenner

An Elliott Wave perspective: DJIA 400 or 6000? by Elliot Brenner

To put the stock market's present wave structure into perspective, I believe it is helpful to examine an important rule of Elliott Wave analysis—the Rule of Equality. This rule has been completely "bent out of shape" by analysts who have used it to confirm that a long-term bull market advance has ended and a long-term bear market correction has begun.

What is the Rule of Equality? It states that two of the impulse waves (waves in the direction of the main trend) in any five-wave advance or decline will tend toward equality in terms of price and time. (In some cases, a Fibonacci relationship will exist.)

The largest wave observed by Elliott – the Grand Supercycle – entered its fifth and final wave pattern in 1932 (see Stocks & Commodities, April 1988). This wave – called the Supercycle 2 has within it the requisite five Cycle waves. Elliott Wave analysts are pretty much in agreement on the labeling of the Supercycle's first three waves (Figure 1). Wave 1 lasted from 1932 to 1937 (5 years) and saw the market advance 372%. Wave 2, a corrective wave (a zigzag), lasted from 1937 to 1942 and saw the market give back 52%. Wave 3 lasted 24 years (1942-1966) and advanced an incredible 971%. It is Waves 4 and 5 where many Elliott Wave analysts part company.