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should now note the strict departure from the ludicrous practice of most “chartists” who insist on predicting absolute levels in the D.J.30. I would state quite emphatically, that such predictions are utterly useless and totally beyond the realm of any reasonable probability. During our excursion with Elliott we will be using expressions such as the “maximum probable extent” of a particular move, or the “minimum expectation” of a move. When we say, the “minimum expectation” of the corrective wave is D.J.30 848, as above, we are in no way suggesting that the market will end up there. “Minimum expectation” means precisely that. The D.J.30 may end its correction at that point, but it could conceivably move downward much further. To those seeking the absolute, this may not be a satisfactory approach. I am confident those who seek such an absolute will never find a satisfactory approach nor will they ever achieve any degree of success in the stock market other than that which can be accomplished by selling pieces of paper with irrelevant predictions to investors.

      The strategic aspect of dealing with factors which establish minimum and maximum probabilities, is that one never acts in a fashion counter to the risk factor. In the aforementioned example it would be totally imprudent even to consider a buying programme until such time as the market reaches its minimum objective. Likewise it would be imprudent to consider instigating a selling programme until the market had achieved a level close to its maximum objective; i.e. in the aforementioned case, the completion of Wave 5.

      Many will now wonder why I have chosen to use such small hypothetical movements in the D.J.30 for my demonstration. I could have proposed that the hypothetical movement of Wave 1 in Figure 4 was say 70 points or so. I could have assigned movements of 110 points or so to Wave 3. The “corrective waves” 2 and 4 could have been proposed as downward moves of 30 and 40 points respectively. But the choice of sub-minute movements was quite intentional. I have attempted to present a situation which could be put into immediate practice, representing the smallest feasible amplitude which would be commensurate to what may develop as one watches the hourly action of the stock market.

      Practice Runs

      In subsequent chapters I will show how to use these hourly movements as a departure point in order to assist in wave classification. In the meantime, one can try a few practice runs with our Elliott Wave Principle. Attempt to determine the last important pivotal point in your favourite stock market index. From that pivotal point attempt to build a wave pattern, starting with the smallest movement. Naturally you will need an hourly chart of the index to do this.

      Should the last important pivotal point have been, say, two weeks ago, you will want to build the hourly movements from that date. You will start with the sub-minuette moves that are the tiniest one can record. When you have completed the first cycle, you will find that you have also completed Waves 1 and 2 of the waves of the next higher degree, the minuette cycle. You then continue your monitoring of the hourly moves in search of a completion of a second complete cycle. When you have completed the second complete cycle based on the hourly move in the sub-minuette form you will also have completed Waves 3 and 4 of the moves of a minuette cycle, no doubt involving a longer time frame.

      The final move that you will be looking for will be a “five-wave” in the sub-minuette cycle which when corrected will produce the first part of a larger wave which acts in correction of the minuette cycle. The corrective phase of the minuette cycle will be larger than any of the corrective waves within the upward phase of the sub-minuette cycle and will also be larger than any of the corrective waves which complete the three sub-minuette cycles.

      Upon completion of the corrective wave of the minuette cycle, you will then have completed Waves 1 and 2 of the cycle of the next higher degree upward, the minute cycle. And so you will build, higher and higher, completing cyclical forces of greater and greater amplitude, while using the simple tenets established regarding the behaviour of the waves in order to plan your investment strategy.

      I am fully aware that at this point in your introduction to the Wave Principle the tools at your disposal may appear limited, while the development of cycles of increasing magnitude may appear somewhat confusing. It is that particular characteristic of the Wave Principle that usually causes the most difficulty. In subsequent chapters we will discuss the aids that will help you in this respect.

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