ANSWER:

You are correct, the “thrust” out of a 4th-wave expanding Triangle is insufficient to produce a 5th wave extension (which is what my long-term DOW count assumes). As a result, the only way the S&P could currently be forming an expanding Triangle – off 2000’s high – is if it is just the first phase of a more complex correction. 

Based on discussions in past Questions of the Week, we know wave-4 must take 20-30 years. Only 12 years of that allotted time has so far been consumed by wave-4, which means it is just about half-finished. Consequently, wave-4 has plenty of time to end its current expansion, form an x-wave and begin another a-b-c before its time runs out. Therefore, we must allow the S&P time to move past the “confusing middle section” of this 20-30 correction before we can expect the final design of wave-4 to become obvious.

ANSWER:

The size and speed of the 2000-2002 stock market decline made it clear a “larger degree” correction had begun. That correction had to exceed the time of the prior bull market, which was from 1982 to 2000 (i.e., the correction staring in 2000 needed to last more than 18 years). As a result, by late 2000, I knew the S&P had begun a 20 (maybe 30) year correction! 

Inside of that 20-30 correction, Wave-A bottomed late 2002; wave-B topped late 2007 (wave-B ended January 2008). After obtaining that information, projecting the ideal time for C-wave was easy. All I needed to do was apply the NEoWave TIME rules found in Chapter 9 of Mastering Elliott Wave (MEW). There I wrote, IF wave-B takes much more time than wave-A, the time of wave-C will equal half the total time of waves-A+B. In this instance, Wave-A took about 2.5 years; wave-B took about 5.5 years. Their combined times (8 years) divided by 2 yielded 4 years. So, that is how I initially knew (in mid January 2008) that wave-C would take at least 4 years. 

Addressing your second question, what recent event forced me to extend the required time of this bear market? The shape of the correction, which started January 2008, is that of a Flat. Wave-b of that Flat takes far more time than wave-a; so, the time of wave-c will follow the same rules mentioned above (i.e., it will be about half of a+b). Small wave-a consumed about 1.25 years, and small b-wave took nearly 3 years. Adding the time of those two patterns and dividing by 2 yields 2+ years as the ideal time projection for wave-c. When applied to a recent chart, we can comfortably assume wave-c will end in early 2014.

ANSWER:

Traditional pattern confirmation, discussed in Chapter 6 of Mastering Elliott Wave, refers to post-pattern price action immediately after the last leg of the previous pattern. For example, after a 5-wave move, it is important that the 2-4 trend line is broken in less time than wave-5 took to form. It is preferable post-price action retrace the entire price range of wave-5 in less time than wave-5 took to form. That type of price behavior helps to confirm an old trend (pattern) has ended and a new trend has begun. 

The problem with traditional pattern confirmation is it cannot be used when wave structure is unclear. For example, in long, complex, corrective phases, wave structure is frequently indecipherable. Without a specific wave count, traditional confirmation concepts are useless. As a result, some years after Mastering Elliott Wave was released, I realized the process of confirmation had to be expanded. I was able to do this by exploiting NEoWave’s rigid, “degree” concept. 

In complex corrections, when no identifiable pattern can be found, search for the largest, counter-trend move inside the unfinished trend. That provides a “yard stick” by which future trends can be measured. For example, let’s say a market has gone through a long, corrective decline. If that market (all of a sudden) experiences a rally larger and faster than any previous rally during the corrective decline, it strongly suggests the correction is over and a new uptrend has begun. 

To avoid problems, this rule should be applied only when wave structure is unclear and you have made sure the minimum time required for the correction has been met (waiting for the correction’s ideal time target is even better). See Chapter 9 for TIME rules that can be used to project a patterns minimum and ideal time conclusion point. 

I’m going to call this second type of pattern confirmation Type 2. Since larger degree moves make it obvious when a new trend began, Type 2 confirmation will not normally be used for historical analysis. It is best applied to real-time trading when you must calculate the exact point in price and time where a new, larger degree trend will probably begin. 

WARNING: Unlike Type 1 confirmation, Type 2 can provide “false” signals when the pattern unfolding possesses an expanding bias (such as an expanding Triangle or a NEoWave Diametric, which will begin or end with an expanding phase).