پرسش و پاسخ با گلن نیلی-23

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What factors determine the classification of various Triangles?

ANSWER:

Triangles are probably the most misunderstood and misidentified wave formations. There are three categories of Triangles under NEoWave theory – Contracting, Expanding and Neutral (the Neutral category does not exist under orthodox Elliott Wave). Each category has very specific requirements for its construction; if those requirements are not met, some other pattern is forming.

In a Contracting Triangle, wave-A is always the longest and most violent, followed by wave-C (which is almost always 61.8% of wave-A) and wave-E which must be at least 38.2% of wave-C but no more than 99% of wave-C. 

In a NEoWave Neutral Triangle, wave-C is the longest wave with waves-A & E tending toward equality (the same that occurs in a 3rd wave extension between waves-1 & 5). Waves-A and E in this pattern should be at least 38.2% of wave-C, but will usually be between 61.8% to 72% of wave-C). 

In an Expanding Triangle, wave-A is the shortest wave, wave-C is between 101% and 161.8% of wave-A and wave-E is usually from 101% to 161.8% of wave-C. In rare cases, where the Expansion is concluding a major market advance or decline, wave-E can get “out of control,” producing a “blow-off” or “meltdown” which could make wave-E as much as 261.8% of wave-A or wave-C. 

Notice in none of the above Triangle definitions do I mention the behavior of waves-B & D. That is because the behavior of waves-B & D never determines the type of Triangle forming. As long as waves-B & D conform to NEoWave rules of price, time and complexity similarity, virtually anything is allowed. If waves-B & D produce standard alternation, the channeling of each Triangle will be as you would expect (converging for a Contraction, expanding for an Expanding Triangle and parallel for a Neutral Triangle). If waves-B & D exhibit NEoWave reverse alternation, the channeling for Contracting and Expanding Triangles will generally be parallel and for Neutral Triangles will be either converging or expanding, but not parallel.
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پرسش و پاسخ با گلن نیلی-22

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Is it possible to produce accurate market analysis without religiously applying Chapter 3 of MEW (Mastering Elliott Wave)?

ANSWER:

This question was posed by Mushtaq Khair of Maharashtra, India. It is a simple question, but the answer is quite complex, requiring some historical background. The first release of Mastering Elliott Wave in 1988 (Version 1.0, called Elliott Waves in Motion) had a very simple Chapter 3 – only 10 pages. When Windsor Books picked up the publishing rights a year later, I insisted Chapter 3 undergo a massive rewrite, expanding that chapter to 69 pages! Chapters 4 & 6 of Mastering Elliott Wave were also expanded for the release of Version 2.0.

The old Chapter 3 was easy to understand and apply, but assumed the reader understood the “logic” of NEoWave, which is subtlely presented throughout Chapters 4-12. When I decided to rewrite Chapter 3, I did not realize I was committing myself to the most complex undertaking of my life. Rewriting that one chapter took 12 months, delaying the release of the book for more than a year (what I now call the infamous rewrite of Chapter 3). The goal of the “new Chapter 3” was to allow a complete novice the ability to piece together a logical wave count during their first attempt. Without the expanded Chapter 3, it could take years for the new student to properly understand and apply all the logical NEoWave concepts presented in Mastering Elliott Wave. Chapter 3 automatically integrates the inductive and deductive reasoning of NEoWave (along with pattern limits and post-pattern behavior requirements) into the wave analysis process so even the beginner could produce bankable forecasts.

Many times since I have questioned the wisdom of presenting such a complex chapter so early in the book. Most who purchase Mastering Elliott Wave fail to heed my warning on page 3-22 and attempt to “read” all the way through Chapter 3; unfortunately, many become so frustrated that they give up, never reaching Chapter 4. Chapter 3 was designed for reference only, where each section applies to a specific arrangement of waves and provides the assistance required to apply proper labels to each wave segment. If you read Chapter 3 from beginning to end, it is similar to reading an entire dictionary just to get the definition of one word.

So, in answer to Mushtaq`s original question, Chapter 3 should be considered your “personal wave analysis assistant” until you internalize all the various NEoWave concepts subtlely presented throughout Mastering Elliott Wave. Once you understand the logic of NEoWave and its associated rules, the tedious process of analysis presented in Chapter 3 becomes unnecessary for producing accurate wave analysis and market forecasts.

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پرسش و پاسخ با گلن نیلی-21

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What would be the best approach for confirming the end of wave-5?

ANSWER:

This question was sent in by Dr. Mircea Dologa of Nanterre, France. This NEoWave concept is discussed in great detail in Mastering Elliott Wave, Chapter 6 (Post-Constructive Rules of Logic). One of the crucial dividing points between Elliott Wave and NEoWave is that NEoWave requires specific, post-pattern behavior to confirm your analysis. If you (or someone you know) is constantly changing their wave counts, it is almost always because they are not applying the NEoWave Post-Constructive Rules of Logic to their analysis.

There are two stages of NEoWave pattern confirmation possible in impulsive patterns; the first is mandatory and occurs when price action returns to the 2-4 trendline in less time than wave-5 took to form. The second stage of pattern confirmation occurs when wave-5 is completely retraced in less time (or no more time) than wave-5 took to form. The second stage of pattern confirmation may not always occur, but if it doesn`t, it raises doubt wave-5 actually ended. If both stages of NEoWave confirmation are met, there is little doubt your analysis is correct. If the first stage of confirmation is not met, there is no doubt your analysis is incorrect.

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پرسش و پاسخ با گلن نیلی-20

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What are the minimum requirements for wave-C following a running B-wave correction?

ANSWER:

If wave-C is part of a Flat or Zigzag, wave-C should be at least 161.8% of the price of wave-b of the running correction (i.e., wave-b of wave-B), but will almost always be 161.8% of the price of wave-A. Pattern implications do not necessarily carry through from one wave to the next in Triangles, so if wave-C is part of a Triangle (any version), the “power” implied by the running B-wave correction may not be represented by wave-C. In that case, wave-C should still be at least 161.8% of the price of wave-b of wave-B. NEoWave TIMING concepts will apply to the time consumed by wave-C, which is based on how much time wave-B took in relation to wave-A (see earlier “Questions of the Week” for details).

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پرسش و پاسخ با گلن نیلی-19

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What alerts you to the non-impulsive nature of a group of waves that many would misinterpret as impulsive?

ANSWER:

This week`s question was posed by Paul Collaros of Gauteng, South Africa. First and foremost, if there is no price, time or complexity alternation between waves-2 and 4, what you are witnessing is a complex corrective rally or decline, not an impulsion.

Secondly, under NEoWave theory, one of the important characteristics of a true impulsive pattern is that it is difficult to channel. Some waves will touch the upper and lower trendlines and some will not. Therefore, if you can easily encase an entire advance or decline between parallel lines with each high and low touching one of the parallel lines, the pattern is corrective, not impulsive. This concept would apply even if the lines slightly expanded away from or contracted toward one another.

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پرسش و پاسخ با گلن نیلی-18

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Under NEoWave theory, what is more important – structure or behavior?

ANSWER:

This question strikes at the core of what differentiates NEoWave from Elliott Wave. Under othodox Elliott Wave, STRUCTURE is paramount (i.e., if an advance follows the rules of an impulsion, it is, independent of future price action). Under NEoWave theory, LOGIC is paramount (i.e., no matter what you think of structure, if post-pattern behavior is inconsistent with your labeling, your wave count is wrong). Put another way, under Elliott Wave the analyst decides what a market has done and is doing (don`t confuse me with the facts, I`ve made up my mind). Under NEoWave theory, no matter what you believe about past price action, future price behavior must confirm your assumptions, making post-pattern behavior the final arbiter of analytical accuracy. For example, if you see what you think is a perfectly designed impulsion making up wave-1 of a larger advance, but “wave-2” retraces 99% of wave-1, then the market is telling you your analysis is incorrect and you must change your labeling. Through this rigid post-pattern, verification process, NEoWave removes the subjectivity notoriously associated with Elliott Wave.

This week`s question arose when Milind Karandikar of Maharashtra, India discovered I had changed the structure of the 1995-2000 rally from corrective to impulsive with the release of last year`s, newly revised long-term stock market forecast. Origainlly, weekly and monthly charts suggested the 1995-2000 rally was corrective, but less detailed, yearly charts allowed room for interpretation. Ultimately, post-pattern price behavior (from 2000`s high to present) forced me to change my interpretation, labeling the advance as impulsive (i.e., wave-3 of a 5th extension impulsion).

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