For the Life of Me ..!

Degree labeling may yet help solve another problem. You know if you're an Elliott analyst and concerned about degree labeling then one market problem stands out above all others: the 1929 - 32 'crash' is simply 'too short in time' to allow a smaller degree wave to take place from 1966 - 1974. The 1929 - 32 crash wave took only 3-4 years. Yet, 1966 to 1974 is 8 years. Then too, the 2000 - 2009 correction is nine years. Again too long. Something is grossly wrong for degree labeling definitions to be satisfied. 

Now, it is true that Elliott may have considered the waves to 1942 as a thirteen-year triangle. But there is insufficient evidence in the DJIA for a clear triangle. Still, a thirteen-year structure would certainly explain that eight-year time sequence from 1966 to 1974, and the nine year sequence from 2000 - 2009. These later sequences would be of smaller time degree. But is this correct? No, I don't think so. There isn't sufficient evidence in the record of the DJIA to claim that a true triangle formed. But I did develop this unique and simplified explanation that may account for the time sequences. It is shown in the chart below. Again, I have never seen this explanation before, and as far as I can tell, it simplifies all the degree labeling sequences. Here it is.

What IF Elliott was off by only two waves?!! What, if instead of a triangle, the 1942 wave is that last part of a "Running Second Wave" - a failed double-combination? In other words, label it as cycle W-X-Y. Such a running second wave would presage the truly huge and historic SuperCycle wave [III] to follow. Isn't that what running waves are supposed to do - show extraordinary market strength - or weakness - to follow?

Without this explanation Cycle Wave I (which is supposed to be a sub-wave) is longer in log price than its larger degree counterpart wave in same direction: SuperCycle [I]. But with this consideration, Cycle I is shorter in log price than SuperCycle [I], and it is shorter in time. Then, and only then, do all the other corrections also work out in terms of degree labeling as well.

For additional evidence, look to the peaks of the RSI indicator. And, oh! by-the-way, there are 126 yearly candles on this chart, to boot! And here's a bit of magic - you now know why the Dow had to poke it's head above that 1,000 level in 1973! It needed finish off a fifth wave! Further, this makes wave SuperCycle [II] at least 33 - 40% as long in time as wave SuperCycle [I], instead of only 10% as long in time. Much, much better!

So, SuperCycle [IV] may come back down to the log channel. And it may take a very, very long time to do so. It's a fourth wave. But, first, we must confirm that Cycle Wave V does not contain a triangle and that Cycle Wave V is not ending as an ending diagonal. It is not necessary to form a triangle within Cycle V, or for Cycle V to end with an ending diagonal, but such waves certainly could form given the scale of the move. There are still ways triangles and diagonals could form at the top! We will try to keep you aware of them while the daily bias still remains lower. If the daily bias flips to higher, that would be a first warning that a triangle or diagonal might be in the works.

I, for one, am happy to have this long-standing mystery solved. It's not in the books folks. It's not on other people's web-sites. But it just may be the result of a long-running curiosity and continued, persistent application.

Have an excellent rest of the weekend!

TraderJoe