Elliott Wave Educational Video Series
Counting
Waves
Correctly
Workbook 2
WORKBOOK
for the
ELLIOTT WAVE EDUCATIONAL VIDEO SERIES
WORKBOOK 2
COUNTING WAVES CORRECTLY
Copyright © 1990 by
Robert R. Prechter, Jr.
Printed in the United States of America
January 1990
For information, address the publishers:
Elliott Wave International
P.O. Box 1618
Gainesville, Georgia 30503
NOTICE
All charts are copyright © Robert R. Prechter, Jr. 1990 or have been previously
copyrighted by Elliott Wave International, Robert R. Prechter, Jr., or other
entities. All rights are reserved. The material in this volume may not be reprinted
or reporduced in any manner whatsoever without the written permission of the
copyright holder. Violators will be prosecuted to the fullest extent of the law.
ISBN: 0-932750-25-7
Elliott Wave Educational Video Series
10 Volume videotape set including workbooks
ISBN: 0-932750-27-3
Elliott Wave Educational Video Series
Tape 2 and Workbook 2:
Counting Waves Correctly
ACKNOWLEDGEMENTS
Background charts for some of the illustrations were provided courtesy of the following sources:
Trendline (Standard & Poor’s Corp.), 25 Broadway, New York, NY 10004
Daily Graphs (William O’Neil & Co., Inc.), P.O. Box 24933, Los Angeles, CA 90024
Commodity Research Bureau, 75 Wall St., 22nd Fl., New York, NY 10005
Ned Davis Research, P.O. Box 1278, Nokomis, FL 34274
Foundation for the Study of Cycles, 3333 Michelson Dr., Irvine, CA 92715
Commodity Perspective, 30 S. Wacker Dr., Chicago, IL 60606
Securities Research Company, 208 Newbury St., Boston, MA 02116
The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
What’s wrong with this picture?
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
CALLING A BOTTOM
It has long been recognized that wave analysis
explains the past very well. Of course, that
ability in itself reveals that the Wave Principle is
a valid theory. After all, many constructs cannot
even describe the past accurately. However,
what most people want to know is whether
wave structures can be analyzed in current
time to provide a knowledge of when a turning
point is likely at hand. The excerpt below is
taken directly from the November 29, 1982
issue of The Elliott Wave Theorist. It shows how
an analyst can use the Wave principle in “real
time” to make profitable decisions on markets,
even markets as exotic as futures contracts in
Cocoa.
(The comments below are reprinted from the November
29, 1982 EWT.)
COMMODITY CORNER
Here are some charts that are worth their weight in candy
bars. Cocoa is falling into what appears to be at least an
intermediate low, if not a major bottom. Just look at these
three charts: the long term picture, the breakdown for
wave C, and the daily chart showing the final “fifth of a
fifth.”
Here’s the history: After a tremendous 12-year bull market
lasting from 1965 to 1977, Cocoa dropped in five waves,
then recovered in three, forming what appears to be waves
“A” and “B” of an A-B-C bear market. Since then, a clear
five-wave decline has taken Cocoa to its lowest levels
since 1975, deeply into the area of the previous fourth
wave of lesser degree, a normal bear market limit. What’s
more, the fifth wave has occurred at the same time that
Coffee has pulled back into its Primary wave 2 dating
from June 1981. Coffee looks ready to move up sharply,
and the two markets often move in the same direction.
The minimum upside potential for Cocoa is around the
2100 level from the recent low at 1300. The shape of that
rise should reveal whether Cocoa has indeed begun a new
large bull phase, or is just tracing out the fourth wave up in
a five-wave decline. In the meantime, it’s a bullish chart.
(Note: The ensuing upswing took Cocoa to $2800.)
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
(The comments below are reprinted from the January 9, 1984 EWT.)
HOW PSYCHOLOGY WORKS
I no longer comment on commodities, but the
development of psychology in Cocoa is extremely
instructive. Remember after the close of November 26,
1982, when Elliott analysis recognized the bottom of a
five-year bear market in Cocoa? The July contract
ended that week at $1495/ton, as bearish articles filled
the pages of financial publications. As an example, on
the week of the low, an article entitled “Stocks Build
Bearish Scenarios for Coffee, Sugar, Cocoa,” quoted
analysts who gave all sorts of reasons why Cocoa was
going to go lower. In June of last year, the same month
that the first issue of David Weis’ Elliott Wave Commodity
Letter (Box 1618, Gainesville, GA 30503) forecasted
$3000/ton for Cocoa, I mentioned in EWT that I had
read “nothing but bearish and skeptical articles on
Cocoa. It closed Friday at $2110, and is still only in the
middle of its third Intermediate wave.”
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XXXXXXXXX of
Smith Barney, for
instance, scrutinizing a cocoa chart, says
it’s holding up like a Picasso. In
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XXXXXX view, the next stop is $3,000 a
metric ton, “but that’s not the last stop.”
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XXXXXXXX of
A.G. Becher-Paribas
thinks that the bull market will continue;
she looks for a rally over the next few
weeks to $2,800 a ton.
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Shearson’s 12345678901234567
XXXXXXXX says that
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cocoa, “in a nutshell, is a blazing bull
Last week Cocoa met Dave’s wave 3 target of $2766
basis March, and we agree that it is now peaking in
wave 3 of its second, and perhaps final, five-wave
advance. In other words, although there is one more rise
ahead following a correction, the most reliable profits in
Cocoa are now behind us. A December 26 article in
Barron’s correctly comments that “High prices are
remarkable, since total cocoa stocks are huge, an
imposing 600,000 tons.” The fact that stocks have been
huge since the bottom highlights the role of market
psychology as a crucial factor in determining prices.
Then the article presents the latest commodity analysts’
opinions. Forget the fact that forecasting $2800 or
$3000 when the price is already $2700 and going up
vertically is no feat of prescience. The main point is
that, in stark contrast to the opinion at the lows 13
months ago, no one (see bottom) is suggesting selling it!
These are classic quotes. As we’ve seen over and over
again, human beings will never change, and that’s why
the Elliott Wave Principle will always work.
market.” He’s looking for prices to rise,
not in a straight line, but erratically, and
he thinks quotes ultimately could climb
to the high $2,000-a-ton level.
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XXXXXXXX
of Cargill Investor
Services says that cocoa’s funadmentals
remain bullish. Stocks may well be high,
she concedes, but they could fall sharply.
Retracements are possible, she says, “but
I look for the market to reach $2,800 at
some point next year.” If so, she goes on,
$3,000 is next.
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XXXXXXXX of
ACE International
in Miami says he still is bullish, even at
current levels. Any trader “in his right
mind” must be bullish, he says, entering
the new year. His initial objective
on the
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March contract is $2,800 a ton. 12345678901
XXXX
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XXXX of Merrill Lynch Futures
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describes herself as “emphatically
bullish.” In her view, $2,800 to $3,000 a
ton on the March contract is not out of
sight, for she believes that prices will rise
until the threat of buffer stock sales
becomes real.
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
QUIZ CHART
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The Elliott Wave Educational Video Series — Workbook 2: Counting Waves Correctly
1-770-536-0309 (outside the U.S.)
or 1-800-336-1618 (inside the U.S.)
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