|  JAN 1990

Elliott Wave dilemma: Bull or bear market? by C. R. MacDowell

Elliott Wave dilemma: Bull or bear market? by C. R. MacDowell The Elliott Wave Theory, while complex and subject to individual interpretation, offers a powerful means of putting the overall market developments into reasonable perspective and provides some guidance for what to expect of the future direction of the market as well as the possible extent of its moves. In mid-October 1989, the stock market was at a critical juncture but subject to two contrary wave theory interpretations. Elliott Wave Theory is a pattern-recognition technique published by Ralph Nelson Elliott in 1939 which holds that the stock market follows a rhythm or pattern of five waves up and three waves down to form a complete cycle of eight waves, and that each of these cycles constitutes one wave in a larger cycle in an ongoing expansion of five waves up and three waves down. The three waves down are referred to as a ""correction"" of the preceding five waves up. A bear market recovery? In October 1987, many Elliott wave followers viewed the almost climactic runup in prices and subsequent crash as the precursor for a major correction. The question was which wave of cycle Wave V had been completed — Primary Wave 5 or only Intermediate Wave 3 of Primary Wave 5. After the October 1987 market crash, the generally accepted Elliott wave interpretation of the period from the Cycle Wave IV low in August 1982 to the crash was that Cycle Wave V — the culmination of an uptrend from the 1932 low — had ended at the market top on August 25,1987. The consequence was we had entered the first stages of a long-term and major bear market. The severity of the 1987 crash, both in terms of price and time, made this the most logical assessment and somewhat parallel to the start of the 1929-to-1932 bear market.

by C. R. MacDowell