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Lesson 6: Zigzags CORRECTIVE WAVES Markets move against the trend of one greater degree only with a seeming struggle. Resistance from the larger trend appears to prevent a correction from developing a full motive structure. This struggle between the two oppositely trending degrees generally makes corrective waves less clearly identifiable than motive waves, which always flow with comparative ease in the direction of the one larger trend. As another result of this conflict between trends, corrective waves are quite a bit more varied than motive waves. Further, they occasionally increase or decrease in complexity as they unfold so that what are technically subwaves of the same degree can by their complexity or time length appear to be of different degree. For all these reasons, it can be difficult at times to fit corrective waves into recognizable patterns until they are completed and behind us. As the terminations of corrective waves are less predictable than those for motive waves, the Elliott analyst must exercise more caution in his analysis when the market is in a meandering corrective mood than when prices are in a persistently motive trend. The single most important rule that can be gleaned from a study of the various corrective patterns is that corrections are never fives. Only motive waves are fives. For this reason, an initial five-wave movement against the larger trend is never the end of a correction, only part of it. The figures that follow through Lesson 9 of this course should serve to illustrate this point. Corrective processes come in two styles. Sharp corrections angle steeply against the larger trend. Sideways corrections, while always producing a net retracement of the preceding wave, typically contain a movement that carries back to or beyond its starting level, thus producing an overall sideways appearance. The discussion of the guideline of alternation in Lesson 10 will explain the reason for noting these two styles. Specific corrective patterns fall into four main categories: Zigzags (5-3-5; includes three types: single, double, and triple); Flats (3-3-5; includes three types: regular, expanded, and running); Triangles (3-3-3-3-3; four types: three of the contracting variety (ascending, descending, and symmetrical) and one of the expanding variety (reverse symmetrical); Double threes and triple threes (combined structures). Zigzags (5-3-5) A single zigzag in a bull market is a simple three-wave declining pattern labeled A-B-C. The subwave sequence is 5-3-5, and the top of wave B is noticeably lower than the start of wave A, as illustrated in Figures 1-22 and 1-23.
Figure 1-22 Figure 1-23 In a bear market, a zigzag correction takes place in the opposite direction, as shown in Figures 1-24 and 1-25. For this reason, a zigzag in a bear market is often referred to as an inverted zigzag.
Figure 1-24 Figure 1-25 Occasionally zigzags will occur twice, or at most, three times in succession, particularly when the first zigzag falls short of a normal target. In these cases, each zigzag is separated by an intervening "three," producing what is called a double zigzag (see Figure 1-26) or triple zigzag. These formations are analogous to the extension of an impulse wave but are less common. The correction in the Standard and Poor's 500 stock index from January 1977 to March 1978 (see Figure 1-27) can be labeled as a double zigzag, as can the correction in the Dow from July to October 1975 (see Figure 1-28). Within impulses, second waves frequently sport zigzags, while fourth waves rarely do.
Figure 1-26
Figure 1-27
Figure 1-28 R.N. Elliott's original labeling of double and triple zigzags and double and triple threes (see later section) was a quick shorthand. He denoted the intervening movements as wave X, so that double corrections were labeled A-B-C-X-A-B-C. Unfortunately, this notation improperly indicated the degree of the actionary subwaves of each simple pattern. They were labeled as being only one degree less than the entire correction when in fact, they are two degrees smaller. We have eliminated this problem by introducing a useful notational device: labeling the successive actionary components of double and triple corrections as waves W, Y, and Z, so that the entire pattern is counted "W-X-Y (-X-Z)." The letter "W" now denotes the first corrective pattern in a double or triple correction, Y the second, and Z the third of a triple. Each subwave thereof (A, B or C, as well as D or E of a triangle — see later section) is now properly seen as two degrees smaller than the entire correction. Each wave X is a reactionary wave and thus always a corrective wave, typically another zigzag. Next Lesson: Flats |
