Practical Application 2

The ability to identify junctures is remarkable enough, but the Wave Principle is the only method of analysis which also provides guidelines for forecasting, as outlined in Lessons 10 through 15 and 20 through 25 of this course. Many of these guidelines are specific and can occasionally yield results of stunning precision. If indeed markets are patterned, and if those patterns have a recognizable geometry, then regardless of the variations allowed, certain price and time relationships are likely to recur. In fact, real world experience shows that they do.

It is our practice to try to determine in advance where the next move will likely take the market. One advantage of setting a target is that it gives a sort of backdrop against which to monitor the market's actual path. This way, you are alerted quickly when something is wrong and can shift your interpretation to a more appropriate one if the market does not do what is expected. If you then learn the reasons for your mistakes, the market will be less likely to mislead you in the future.

Still, no matter what your convictions, it pays never to take your eye off what is happening in the wave structure in real time. Although prediction of target levels well in advance can be done surprisingly often, such predictions are not required in order to make money in the stock market. Ultimately, the market is the message, and a change in behavior can dictate a change in outlook. All one really needs to know at the time is whether to be bullish, bearish or neutral, a decision that can sometimes be made with a swift glance at a chart.

Of the many approaches to stock market analysis, the Elliott Wave Principle, in our view, offers the best tool for identifying market turns as they are approached. If you keep an hourly chart, the fifth of the fifth of the fifth in a primary trend alerts you within hours of a major change in direction by the market. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so. Elliott may not be the perfect formulation since the stock market is part of life and no formula can enclose it or express it completely. However, the Wave Principle is without a doubt the single most comprehensive approach to market analysis and, viewed in its proper light, delivers everything it promises.