ANSWER:

This two part question was raised by long-time subscriber Manfred Koeller of Hessen Germany. In Chapter 6 of Mastering Elliott Wave (MEW) I address the two stages of pattern confirmation, which answers the first part of his question. To elaborate, before the process of confirmation can be addressed, it is essential the formation you are attempting to confirm obeys all NEoWave and Elliott Wave rules. If that is the case, and you think an impulsion has ended, Stage 1 confirmation must be present, which occurs when the 2-4 trendline is violated in less time than wave-5 took to form. Stage 2 confirmation exists when wave-5 is completely retraced in less time than it took to form. If both stages of confirmation are met, and all wave development rules for an impulsion are present, then NEoWave theory has given you the “proof” you seek that your impulsive interpretation is correct. If the first stage of confirmation is met, but not the second, the impulsion is in question and must be confirmed by future price behavior.

Regarding the second part of your question, NEoWave theory creates the first, logical structure to market analysis, where the analyst does not “predict,” but rather observes and confirms, behavior events. As such, NEoWave is not able to predict (i.e., before the evidence is present) the confirmation or conclusion of a pattern, it can only confirm it shortly after the fact.

ANSWER:

The world of trading/investing has gone through at least four major phases as technology has progressed. NEoWave begins phase five in the evolution of markets, analysis and trading.

Before telecommunications, reliable news outlets and market data were available, the trader had to rely a great deal on hearsay and rumors to make decisions, leaving the final decision much to personal INTUITION (what I call Phase 1).

With advances in equipment, telecommunications, plus access to market data and business news, the FUNDAMENTAL era (Phase 2) of trading emerged. This phase would include the development of P/E ratios, EPS (earnsing per share), market cap, revenue growth, debt and dividend ratios.

When the recording of market data improved (including the reporting of high/low and intra-day data for each period, not just daily closes), TECHNICAL analysis (Phase 3) became possible. This phase would include moving averages, stochastics, open interest and volume studies, etc.

Phase 4 was created by merging Phases 2 & 3, producing what some might call the “Golden Era” of PSYCHOLOGICAL analysis, which is what Elliott Wave is all about. This type of analysis includes pattern recognition, Fibonacci price and time relationships and the science of fractals.

With NEoWave I introduce a new paradigm – SELF-DEFINITION (Phase 5) – to the field of market analysis and trading. In other words, NEoWave is not just a way of forecasting market action, but also a new way of trading based on observation, not forecasting. NEoWave provides the first LOGICAL, self-confirming and self-defining process of market analysis and trading.