A complete Elliott wave cycle

The stock market moves up in five waves and corrects in three waves. That's the basic tenets. There are many variations but in general the stock market follows this basic pattern. Take a look at the chart.

Here we have a perfect example of five up, three down. The FTSE 100 moved up in five waves [(i),(ii),(iii),(iv),(v)] during the first half of November. A common feature is for the third wave to extend in five waves as shown on the chart. Inside wave (iii) are five waves [i,ii,iii,iv,v]. Very often the fourth wave will be sideways. On the FTSE 100 chart note that wave (iv) is sideways (triangle).

Once five waves up are complete the market should correct in three waves. The FTSE 100 did correct in three waves. The first wave is a zigzag [(a),(b),(c)] ending at 5225, the second wave is the rally to 5375 [wave (x)] and the third wave is the last zigzag [(a),(b),(c)] ending near 5100. The entire correction is called a double zigzag.

This simple observation last Thursday led me to conclude that the FTSE 100 would rally. That was a good call, thanks to the clear Elliott wave pattern.

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