The
Elliott Wave Principle and Fibonacci Sequence
Elliott
Combining his observation of stocks market cycles with his
knowledge of the Fibonacci series, Elliott noted
that the market moves forward in a series of five
waves and then declines in a series of three waves.
E
lliott
concluded that a single cycle comprised eight
waves, the upper part of the
cycle consists of five waves. Waves 1, 3, and 5 are
define as impulse waves. Corrective Waves
are waves 2 and 4 because they correct waves 1 and 3. The
declining part of the cycle consists of three waves,
known as a, b, and c.
T
he longest cycle in
the Elliott concept is called the grand
supercycle. In turn, each grand supercycle can
be subdivided into eight supercycle waves, each of
which is then divided into eight cycle waves. The
process continues to embrace primary, intermediate,
minute, minuette, and subminuette waves.
A
s the wave principle is
one of form, there is no way to determine when the three
corrective waves are likely to appear. However, the
frequent recurrences of Fibonacci numbers representing
time spans between peaks and troughs are probably beyond
coincidence.
W
e have hardly scratched the surface, and in some
respects the old maxim "A little knowledge is a
dangerous thing" applies probably more to Elliott than
to any other market theorist.
Its subjectivity in itself
can be dangerous because the market is very subject to
emotional influences. Consequently, the weight given to
Elliott interpretations should probably be downplayed.
Stocks Investing - The Elliott
Wave Principle and Fibonacci Series
