Question of the Week: 4/11/2007

When a market is forming a significant top, would it be accurate to say that, while Elliott rules will be respected, guildlines with fall by the wayside?


This question was sent in by Eric Noel, a great customer in Ontario, Canada. It is a very important question that touches on issues I've raised lately in more than one NEoWave Forecasting and Trading service.

An integral part of NEoWave theory is that large-degree pattern conclusions are associated with unusual behavior. At every major high or low I can remember for the last 25 years, either a new pattern variation emerged or a completely new wave formation developed.

For example, the high in 1987 produced the first 3rd Extension Terminal I had ever seen. NEoWave Diametric formations began to occur in the S&P around 1995, right as the 8-year Contracting Triangle was coming to an end. The stock market high in 2000 ended with a 5th Failure Terminal, which (if memory serves me correct) was the first I had ever witnessed.

Currently, in T-Notes (where a decade-long, Expanding Triangle may be ending) we can see an upward-drifting, Neutral Triangle. The (e)-wave of that pattern is drifting in the opposite direction, breaking the (b)-(d) trendline BEFORE it has ended. Something I've never seen before. The same phenomenon appears to be happening in Gold's 1-year Contracting Triangle where wave-(e) is drifting outside the b-d channel before its conclusion.

So, to answer Eric's question, while all Elliott and NEoWave pattern construction rules must be met at all times, unusual or never-before-seen types of behavior occur at major pattern conclusions. Such new behavior does not negate or diminish prior rules and guidelines, but simply ADDS a "branch" to the NEoWave "logic tree." This ability to adapt and evolve is what separates NEoWave from Elliott Wave and is the reason NEoWave produces more reliable, accurate and stable wave counts than orthodox Elliott Wave.

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