🔸Double Three Correction Ending in August 1982
Last updated
Last updated
The technical name for wave IV by this count is a “double three,” with the second “three” an ascending [barrier] triangle. [See Figure A-3.] This wave count argues that the Cycle wave correction from 1966 ended last month (August 1982). The lower boundary of the trend channel from 1942 was broken briefly at the termination of this pattern, similar to the action in 1949 as that sideways market broke a major trendline briefly before launching a long bull market. A brief break of the long term trendline, I should note, was recognized as an occasional trait of fourth waves, as shown in [R.N. Elliott’s Masterworks]. [The main] disadvantage of this count is that a double three with this construction, while perfectly acceptable, is so rare that no example in any degree exists in recent history.
Figure A-3
A surprising element of time symmetry is also present. The 1932-1937 bull market lasted 5 years and was corrected by a 5-year bear market from 1937 to 1942. The 3½-year bull market from 1942 to 1946 was corrected by a 3½-year bear market from 1946 to 1949. The 16½-year bull market from 1949 to 1966 has now been corrected by a 16½-year bear market from 1966 to 1982!
If the market has made a Cycle wave low, it coincides with a satisfactory count on the “constant dollar Dow,” which is a plot of the Dow divided by the consumer price index to compensate for the loss in purchasing power of the dollar. The count is a downward sloping Ⓐ-Ⓑ-Ⓒ, with wave Ⓒ a diagonal [see Figure A-3]. As usual in a diagonal, its final wave, wave (5), terminates below the lower boundary line.
I have added the expanding boundary lines to the upper portion of the chart just to illustrate the symmetrical diamondshaped pattern constructed by the market. Note that each long half of the diamond covers 9 years 7½ months (5/65 to 12/74 and 1/73 to 8/82), while each short half cover 7 years 7½ months (5/65 to 1/73 and 12/74 to 8/82). The center of the pattern (June-July 1973) cuts the price element in half at 190 and the time element into two halves of 8+ years each. Finally, the decline from January 1966 is 16 years, 7 months, exactly the same length as the preceding rise from June 1949 to January 1966.
Advantages
Satisfies all rules and guidelines under the Wave Principle.
Keeps nearly intact the long-term trendline from 1942.
A break of triangle boundaries on wave E is a normal occurrence.
Allows for a simple bull market structure as originally expected.
Coincides with an interpretation for the constant dollar (deflated) Dow and with the corresponding break of its lower trendline.
Takes into account the sudden and dramatic rally beginning in August 1982, since triangles produce “thrust.”
Final bottom occurs during a depressionary economy.
Fits the idea of a four-year cycle bottom.
Fits the idea that the Kondratieff Wave plateau has just begun, a period of economic stability and soaring stock prices. Parallel with late 1921.
Celebrates the end of the inflationary era or accompanies a “stable reflation.”
Disadvantages
A double three with this construction, while perfectly acceptable, is so rare that no example in any degree exists in recent history.
A major bottom would be occurring with broad recognition by the popular press.
Triangles portend “thrust,” or swift moves in the opposite direction traveling approximately the distance of the widest part of the triangle. This guideline would indicate a minimum move of 495 points (1067-572) from Dow 777, or 1272. Since the triangle boundary extended below January 1973 would add about 70 more points to the “width of the triangle,” a thrust could carry as far as 1350. Even this target would only be a first stop, since the extent of the fifth wave would be determined not merely by the triangle, but by the entire wave IV pattern, of which the triangle is only part. Therefore, one must conclude that a bull market beginning in August 1982 would ultimately carry out its full potential of five times its starting point, making it the percentage equivalent of the 1932-1937 market, thus targeting 3873-3885. The target should be reached either in 1987 or 1990, since the fifth wave would be of simple construction. An interesting observation regarding this target is that it parallels the 1920s, when after 17 years of sideways action under the 100 level (similar to the recent experience under the 1000 level), the market soared almost nonstop to an intraday peak at 383.00. As with this fifth wave, such a move would finish off not only a Cycle, but a Supercycle advance.
[Near Term Wave Structure]
In the [August 17] Interim Report, I mentioned the possibility of a diagonal having been completed at the [Friday,] August [12th] low. The two daily charts below illustrate this count. A diagonal from last December would be wave [v of] c of a large a-b-c from the August 1980 peak [see Figure A-4] or wave c of a large a-b-c from the June 1981 peak [see Figure A-5]. The strength of the explosion off the August low supports this interpretation.
Figure A-4 (pertains to Figure A-2)
Figure A-5 (pertains to Figure A-3)
