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September 19, 2014 (revised March 23, 2016) ^Ctrl+ to fill the page

New-Wave Elliott™ Part 1 is a synthesis of Elliott, Mandelbrot & Shiller

New-Wave Elliott™ is a highly-evolved version of the Elliott Wave Principle - a radical

departure from the establishment’s version, advanced & refined over the course of 26 years by

Eduardo Mirahyes, Founder & President of Exceptional Bear - Timer Digest’s 2015 Timer of the

Year.”

New-Wave Elliott™ is a fusion of RN Elliott’s chronicled price patterns, reconciled within the

context of Robert Shiller’s Nobel Prize-winning “Century of Market Valuations” and Benoit

Mandelbrot’s Market fractal discoveries. Substantiated by Elliott’s previously hypothetical

Channel to prove its veracity, New-Wave Elliott™ is the first, major advancement of RN Elliott’s

legacy.

Figure #1 New-Wave Elliott™ - the foundational long count 1900 - 2016

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Executive Summary: Despite being highly distorted by buybacks, current P/E ratios are

dangerously high on the historical basis chronicled by Nobelist, Robert Shiller. Historically,

each time stocks have reached such lofty valuations, they swiftly plunge to result in

catastrophic losses. Obviously a limited upside, versus a black hole downside, imply the

current risk/return ratio is highly skewed in favor of the bearish camp, yet if you persist

in a “Buy & Hold” strategy in a Bear Market, wild gyrations will still have you down-sizing

your lifestyle before long.

In order to survive and prosper in a Bear Market, you need to adapt your investment

strategy to the long-term, volatile conditions. Such is optimally executed via expertly-

timed swing-trading, to scale-in and out of inverse ETFs and long commodities. If you are

unwilling or unable, to swing-trade, you would be wise to bail out of all stocks now, and

allocate your wealth into temporary “safe havens”: the unlevered Euro & Gold for the

next 12-18 months –for the most advantageous timing, wait until the dollar peaks and gold

pulls back near the low. For anyone with a portfolio worth in excess of $50,000, getting this

timing right is worth far more than the cost of a subscription, and with the 30-day risk-free

trial, it could potentially cost you nothing to time the reversal into gold and the Euro near the

low – just this one action could save your skin.

The essence - The Wave Principle pictorially depicts the collective unconsciousness through a

series of nested impulse/corrective market cycles. Such cycles are the product of linear

projection by the vestigial, limbic brain, to result in emotionally–driven behavior, exemplified by

herding in the Market, from extreme over-valuation to extreme under-valuation and back again.

Investors habitually buy stocks at the top of the Market based on (linear) momentum, just

before the downturn. This time, the stakes are likely higher than they have ever been.

At Cycle degree and higher, waves I & III (depicted in the map in figure #1) describe

expansions and capital creation, while waves II & IV are capital-destructive Bear Markets, to

describe a lesser Boom/Bust cycle. Wave II corrects wave I, and wave IV corrects wave III

while the 5th impulse wave, transcends magnitude to complete Supercycle (III). Impulse waves

are annotated with numbers, and corrections with letters, in a hierarchy that is easiest

assimilated via color. Supercycle degree is 4x the magnitude of Cycle degree, which in turn is

twice the magnitude of Primary. Labeling is found at the end of each segment, whose

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subdivisions are annotated one degree of trend lower. For now, this is all you need to

understand this piece.

Although RN Elliott hypothesized the channel via lower-degree fractals, he was never able to

reconstruct it at higher magnitudes. Just as the New-Wave Elliott™ channel in figure #1 fits

neatly between two parallel lines, Robert Prechter’s forced channel compared in Part 2, reveals

the his count for a blunder, to explain why the wave principle has taken bad rap over the years.

Obviously, an erroneous, foundational count, which fails to identify where we are in the Big

Picture, cannot possibly serve to forecast where we’re going.

From my own experience, the blunder count’s bearish bias in a roaring Bull Market cost me

small fortune. That’s when I realized that I could forecast better, and cancelled my EWI

subscriptions. Years later, well into the Bear Market, and ecstatic from having seen my first Diag

II, I fell back on thinking that the experts at EWI must know more than I. So before buying

calls, I sought a second opinion from my Advanced Elliott Wave Tutorial teacher 12 years prior.

In what appeared in retrospect to have been a bout of professional jealousy, he convinced me

that I was “all wet”, that what I had seen was in fact a Diag >, to indicate an impending dramatic

reversal and advised to “buy puts up to my eyeballs”. Well, that Bear Market Rally persisted for

another 5 years, and the $80,000 I had speculated in staggered puts, was a total loss. The

same amount in calls would have netted well over $1m. That time, I learned my lesson.

For those who persist, nothing teaches faster than losses. If you can learn from my

experience, and “unlearn” nearly everything you know about the wave principle, you will be far

ahead of the pack. That’s why the aggregate refinements found in New-Wave Elliott™ and the

integral long wave count are major milestones in the evolution of the Wave Principle, which

reveal how the market really works. In the hands of a capable analyst, New-Wave Elliott™ will

produce in a quantum leap in the percentage of winning trades to compound market wealth like

never before. The long count in figure #1 is a solid foundation from which to forecast, and of

great advantage to anyone who wishes to Master the Market, as opposed to knowing about it

superficially.

Below in figure #2 you see two examples of the a-b-(a); a-b-(b) magnitude-transcending

pattern in monthly candlesticks. The first occurred in Cycle Wave IV’s d-wave, which culminated

1973 in an irregular top, to gear up Bearish magnitude 2x for the e-wave plunge. Only this final

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e-wave within the Diag II A-wave, unfurled entirely at Cycle degree. In Bear Markets, magnitude

gears up to the highest degree in the final Bear Market Rally before the plunge. Apparent as

an irregular top, wave e reached substantially higher price than the previous Bull Market’s

orthodox top. After reversal, Cycle magnitude was swiftly recalled in the echoing Diag II (1973-

1974), to confirm, and follow-through in a mini crash, tempered only by its lower magnitude.

Since the Market is a fractal, where the whole is echoed in its parts and sub-parts, in the

absence of Fed Manipulation, Cycle Wave IV provides a 25% scale preview of the current

Supercycle (IV) Bear Market.

Figure #2 Magnitude Transcending in Bearish Cycle & Bullish Supercycle

The second example of magnitude gearing in figure #2 arose in Bullish mode, to herald the

great Bull Market ended 2000. Right after the conclusion of Cycle Wave IV, between 1978 &

1982, magnitude geared up three times, as a fractal within a fractal. Each Diag^ relates a

semi-log (200%) magnitude increment. From Primary degree baseline, three were required to

ascend Supercycle magnitude, to be later recalled in the Bullish Diag II, after Primary wave 4.

At the tail-end of the Great Bull Market beginning 1996, the same structure geared magnitude

back down to Cycle degree, to become the new baseline, just prior to the 2000 Bull Market Top.

This discovery is a major milestone in the advancement of the Wave Principle, and restores RN

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Elliott’s “A-B Base”, rechristened as the a-b transition. Not only to signal every reversal, but

also to reveal magnitude via the number of its visible repetitions on a monthly scale.

AJ Frost and Robert Prechter’s rejection of the pattern in the Elliott Wave Principle clearly

demonstrates the lack of pattern recognition aptitude. While Robert Prechter is a brilliant

orator and a master of public image, his highly-publicized genius, does not extend to pattern

recognition, which is the only genius that’s relevant to mastery of the Wave Principle.

In the current Supercycle (IV), the magnitude gearing achieved in wave D, ended 2014 as an

irregular top, and is currently being recalled via an echoing Diag II, to gear magnitude back up

for the Crash to follow. See the magnified structure in figure #3. Take special notice that the

47% plunge of the e-wave of Cycle degree equates proportionately to an 89% plummet at

Supercycle degree, while a Grand Supercycle plummet, resulting from Fed manipulation, would

mean a ~97.7% plunge to the trough.

Figure #3 Magnitude Transcended down twice

near the end of the Bull Market (1997-2000)

Within the colossal Diag II in Figure #3, wave A plunged at Cycle Degree, wave C dove at Supercycle

Magnitude, and wave E will most likely plummet at Grand Supercycle Degree. Meanwhile, magnitude

transcended higher with each Bear Market Rally, as above, higher magnitude was recalled via a Diag II

fractal near the beginning of each plunge. Wave B augmented 2 Diag ^s to Supercycle Magnitude,

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Wave D augmented via 4 Diag ^s to Grand Supercycle Degree. In my work, the Diag ^ signifies

transcending magnitude, beyond the Diag > which RN Elliott’s took to mean dramatic reversal ahead.

New-Wave Elliott™ -differs from previous versions of the Wave Principle in critical ways.

1) RN Elliott’s “A-B Base”, long discarded by Robert Prechter, has been reinstated as a key

structure, and re-christened the a-b transition, to precede every reversal, regardless of

direction. This transcending structure was long relegated to the “garbage heap”, of mere noise

for decades. The Diag ^ relates the wave’s post-reversal magnitude. In figure #3 you see

magnitude gears-up in Bullish mode after the IVth Cycle Wave, and morphs back down after the

subsequent IVth Cycle Wave, essentially framing the Supercycle segment.

2) While RN Elliott discovered & termed the “degrees of trend”, which describe augmenting

magnitude. Elliott neither identified their location, after the 4th wave, nor recognized the a-b-A; a-

b-B pattern by which magnitude transcends.

3) Below Cycle degree, magnitude augments in a single semi-log increment (200%), while above

Cycle degree two semi-log increments gear-up magnitude 400%. With the exception of Hamilton

Bolton’s Bullish Diag II discovery in the 1950's, by forsaking of this indispensable pattern, the

establishment degenerated Elliott’s legacy.

4) In Bull Markets, once Supercycle magnitude is recalled via the Diag II, corrective waves drop to

Primary magnitude, 1/8 the degree of Supercycle impulses to explain why Bull Markets appear

so smooth. The identical smoothness in Supercycle Bear Markets, manifests as mere pauses, to

replace upside corrections, in waves (A) and (C) of an (A)-(B)-(C) Bear Market. Such

unanticipated 4x leap in magnitude, compounded by the vast disparity between impulses and

corrections, highlight the predominant emotion of fear in Bear Markets, as a far more powerful

emotion on the collective unconsciousness than the greed, which prevails in Bull Markets. Fear is

analogous to gravity, which accelerates plunges, and acts like a head-wind to temper impulse

progressions. As described in Newtonian Mechanics Supercycle Bear Markets Crash as a result

of 4x higher magnitude, accelerating into free-fall, the product of Mass x Acceleration. Where

acceleration is defined as velocity squared, and Mass by peak Market Capitalization.

5) The highest volatility corrections in Supercycle Bull Markets are concentrated within the Diag II’s

where the magnitude disparity described above is temporarily suspended. As you see, the

highest volatility in Supercycle (III) was the 1987 Crash, a wave ii within the Diag II, as the

higher magnitude was being recalled to result in growing pains. A similar volatility spike shook

Markets, as Supercycle magnitude geared back down to Cycle degree between 1996 and 1998,

to include the demise of Long Term Capital Management, a hedge fund packed with four Nobel

Laureates. Like the Titanic, LTCM was thought to be unsinkable.

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6) The 1929 Crash occurred in wave 1 of the echoing Diag II, before magnitude was fully recalled

in 1931, and therefore was less severe, than it otherwise might have been. However, once the

Diag II completed, the plunge resumed. From the high of the 1930 bounce, the subsequent

trajectory to the trough was 3x greater than the Crash. But since the initial 10% plunge wiped-out

the majority of speculators on 90% margin, the collective consciousness remains fixated in the

Crash. Note below the same two Diag ^s in the (B) wave as recently geared-up magnitude in a

Bear Market Rally, before the plunge.

Figure #4 Supercycle Wave (II) Bear Market 1906-1932

7) The Diagonal Triangle type 2 (Diag II), is virtually ubiquitous at the inception of complex Bull &

Bear Markets above Cycle Degree, to confirm their extended duration, here is one exception to

market fractals, resulting uniquely from higher magnitude. I have not witnessed the pattern at

lower degrees.

Rather than the “extremely rare” pattern described in Frost & Prechter, the Diag II is

foundational to the long wave count, and heralds the start of a long trajectory, proportional to its

physical dimensions in severity & duration, regardless of bullish or bearish.

Just compare the dimensions of the 3-year Bullish Diag II in 1987, with its Bearish reciprocal

spanning 14 years in Figure #3. In arithmetic scale, the distortions of log scale are backed-out to

reveal a real eye-opener. A rough estimate of the disparity communicates the Bull Market

appreciated nearly 15x to the 2000 orthodox top in Supercycle (III). Observe its parabolic ascent

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only took hold after the Diag II, when Supercycle magnitude was recalled. Obviously a relative

colossus, the Bearish Diag II presages cataclysm.

Once these insights were reconciled with Nobel Laureate, Robert Shiller's Research on Market

Valuations compiled by Andrew Smithers, along with Benoit Mandelbrot’s reciprocal fractal

perceptions; the radical New-Wave Elliott™ count in figure #1 emerged.

Smithers’ Values Research confirms New-Wave Elliott™

Below is the Smithers’ Values Chart annotated with Exceptional Bear’s New-Wave Elliott™

count, to show historical market valuations by two metrics: Tobin’s q-ratio, of replacement costs

& Nobel Laureate, Robert Shiller’s P/E 10 (a 10-year moving average Price/Earnings ratio).

Since the Market is a fractal, Supercycle Waves (II) & (IV) equate to waves 2 & 4 of the 5-wave

Grand Supercycle [III] progression since 1900, analogous to Cycle Waves II & IV within

Supercycle (III)’s 5-wave progression from 1932 to 2000. In both cases, only the final segment

unfurls entirely at the higher magnitude in practice, yet in principle, its entire length bears RN

Elliott’s original magnitude classification.

The historical Market Values found in figure #5 merit careful study. On the y-axis you find the

valuation scale, where zero infers fully-valued, plotted against time on the horizontal axis. While

Shiller’s 10-year average P/E in blue is analogous to a film clip, Tobin’s q-ratio represents to a

snapshot valuation.

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Figure #5

The lower orange line at -0.9 (90% discount) is the likely minimum Supercycle trough

consistent with Deflationary Depression. While the dashed red/yellow line at a 60% discount

marks the lesser of two Supercycle troughs in the absence of deflation, and both Cycle degree

troughs. These observations concur with Russell Napier’s The Anatomy of the Bear. His

conclusion: the 2009 trough did not suffice to end the Bear Market, having only reached

“fair value”. From Napier’s perspective, the Pendulum swing to undervaluation will not

be complete until it reaches the minimum 60% discount. Although Napier did not delve

into Elliott’s magnitude classifications, a simple annotation of the chart, consistent with the long-

term channel in figure #1, reveals far more than Napier’s conclusions. Moreover, reconciliation

of the Wave Count with Shiller’s Values, made it obvious that the lowest valuations of a Century

could not possibly exist within the confines of any Bull Market. Yet everyone before me

considered the entire Bear Market ended in 1932, to have popped out of nowhere in 1929. Even

by Robert Prechter’s count, Cycle Wave IV, despite being incorrectly classified, lasted 12 years.

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It does not take a genius to deduce that a Supercyle Bear Market of 4x the magnitude, could

possibly conclude in one-quarter of the time as a Cycle Bear market. It’s comparable to

conceiving that a giant could have hands & feet ¼ the size of a dwarf’s.

At a valuation of -0.9 in 1920, stocks sold for ten cents on the dollar of replacement cost, and

less than a single quarter’s earnings, vs. the long-term average price equal to 12 years (60

quarters) earnings. As you may surmise, a Grand Supercycle trough would result in valuations

approximating three cents on the dollar. Consistent with a dramatic shrinking of the money

supply, deflation would serve to dramatically increase the purchasing power of the fewer

dollars remaining. It goes without saying that the aggregate of Quantitative Easing must be

withdrawn in the aftermath of the Crash. Such deflation would threaten default of Government

debt, since deflation is much more difficult to tax and requires debts be repaid in higher value

dollars.

Note in Figure #4, that despite the Crash in Wave (C), the lowest valuations of the century

occurred in 1920, shortly after completion of a truncated Wave (A), to suggest Fed

manipulation even then. As a result of massive Deflation, the Consumer Price Index in 1920 had

reverted to the level of the American Civil War, 70 years earlier.

Figure #6 Historical Consumer Price Index, Gold Standard & the Fed’s heavy hand

The Fed was instituted in 1913, with the purpose to avoiding another Panic of 1907. Such

intervention was not just hinted in the truncated (A)-Wave of 1918, but also by the gargantuan

(B) wave, known as the Roaring Twenties that followed. A Bear Market Rally very similar to our

Wave D ended 2014.

We still have not learned the lessons of previous interventions. In recent history, Ben Bernanke

despite his distinction as Depression-era Scholar, made the identical mistakes to force a

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monstrous Bear Market upon us. Just as the First Great Depression was all the more bitter and

enduring because of Fed intervention, so too will our economy crater once more to a greater

extent. With the exception of the bounce into 1930, after the crash, the Market continued to fall

freely into 1932. The repetition of these events, with only minor variations, is a certainty. This

time, there may not be a bounce, since we have already progressed far beyond wave 1 of the

Diag II, where the 1929 crash occurred. This time, it would appear that Grand Supercycle

magnitude will be fully replicated in the Crash of 2016. If S&P 2100 is reached in the current

trajectory, it will suffice to complete wave 4 and imply the possibility of an imminent Crash,

without further pullback to precede it.

Figure #7 Where we are today, relative to the 1929 Crash

Note how closely this Values Chart in figure #5 illustrates Elliott’s observation that Market

prices perpetually swinging from highly overvalued, to highly undervalued, from any time

perspective. From a 60% premium ($1.6x) replacement costs in 1906, to a 90% discount

($0.10x) by 1920 describes such a valuation swing, beyond imagination then, as now.

Obviously those who sold in 1906 and 1929 to go short, like Jesse Livermore, made fortunes.

While those who held plummeting stocks in 1929, would have waited 8 years to recover

perhaps half their market wealth. If they happened to miss that window of opportunity in 1937,

they would have to wait another 33 years before they would get another chance to recover half

their previous net worth. Their real net worth, measured by purchasing power, would only have

been surpassed until the late 1990’s - but anyone who withdrew funds during the Depression, or

held stock of companies that went bankrupt, like the New York Central Railroad, WorldCom or

Bear Streams, likely never recovered. As John Maynard Keynes quipped, “In the long-run we

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will all be dead” – when would now be a good time for those conditioned to Buy & Hold to let

this warning to sink-in. Fail to adapt, and you too will go the way of the dinosaur.

History repeats itself most often in the Market

From the 1906 high labeled Wave (I) in Figure #4, values plummeted soon after the values

chart Diag II to trough in 1920. A very similar Diag II leading from the 2000, Bull Market top,

labeled Wave (III) has the identical implications. Once more, market valuation will plunge to

levels beyond imagination.

Benoit Mandelbrot’s Fractal Logic

To Benoit Mandelbrot, we owe the basic premise that every bullish structure must have a

reciprocal, bearish fractal, and vice-versa. In other words, just as the Bullish Diag II heralds the

start of a long bullish move proportional to its “magnitude”, in a similar vein, the Bearish Diag II

signals a Bearish move of relational size. I applied Mandelbrot’s logic to invert Hamilton Bolton’s

Bullish Diag II, to result in the Bearish Diag II, which still remains unrecognized by the Elliott

establishment as a corrective pattern. Attempts to rationalize the Bearish Diag II by Elliott Wave

International (EWI) include the imaginary labeling of Cycle Wave IV as an imaginary “running

correction,” a count later modified to A-B-C-X-A-B-C, both attempts entirely missed its

impulse wave subdivisions, assuming they must be 3-wave, as opposed to meticulously

counting them.

From my own empirical observations, I had been counting the a-b reversals for some time

before I recalled RN Elliott’s description in his Masterworks, together with their condemnation by

Robert Prechter, its editor, from years earlier.

Like everyone else, I assumed Robert Prechter was infallible for at least ten years after I

completed the Advanced Tutorial. On one occasion, he gave such a brilliant discourse that left

me mesmerized by his brilliance, like never before or since. In that speech, he described

ancient history in terms of the Wave Principle: The rise of the Roman Empire and the

Renaissance were two Great Bull Markets, while the Dark Ages between them was an enduring

Bear Market.

Along the same lines of Mandelbrot logic, what RN Elliott termed the “A-B Base”, not only

marks the beginning of an upside reversal, but rather a reversal regardless of direction. For this

reason, the term A-B Reversal describes this structure more accurately. What’s more, after the

4th wave, magnitude gears-up in a transcending A-B structure - a subset of the A-B Reversal, &

the key to correctly identifying magnitude and arriving at the correct count.

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Supercycle Wave (IV), which has already transcended Grand Supercycle degree, will break

through the lower channel boundary, to the trough. In other words, when the bottom falls out of

the market, the Channel will widen exclusively at its lower boundary. As Elliott stipulated, the

channel must be widened by redrawing the lower parallel to intersect 4th wave’s trough.

Economically & pictorially the widening of the channel represents a severe, enduring economic

contraction - euphemized as Recession since FDR’s presidency during the first Great

Depression, a Recession is an economic Depression by any other name.

New-Wave Elliott™ Guidelines

1) After magnitude transcends in Bull Markets, the 5th wave is always the longest of 1, 3

& 5 due to its higher magnitude. Up to now, 5th waves have been called extensions

since Elliott’s time. The only extension results from the b wave of the a-b transition

which often repeats 3x at major market reversals, like the present. Similar to all b waves

it is a diversionary move, or smoke screen fueled by intractable suckers.

2) In Bear Markets, the longest wave implies the Crash. Magnitude is geared up in either

the B wave of a simple A-B-C Bear Markets above Cycle degree, to Crash in Wave C. In

complex Bear Markets, magnitude gears up in the D wave of a Diag II sequenced by the

longest 5th wave which corresponds with wave E, where the Crash most often occurs.

3) In figure #1 the Diag II ended 1918 was a failure, which means that the E-wave was

truncated to end above wave C of the Diag II. Logically this implies Fed Manipulation.

Corrective waves C & E are analogous to impulse waves 3 & 5, except in extraordinary

circumstances, wave 5 should exceed wave 3, as Wave E of corrections exceeds C.

4) All Bear Markets “chunk down” to Simple or Complex A-B-C structures, where the Diag

II in the A-wave accounts entirely for its complexity. In this context, B-waves are always

Bear Market Rallies, sandwiched between two Bearish plunges in waves A & C, and

counts that artificially “create complexity” are merely the result of magnitude confusion,

to mean confusing the lower degree fractals with the larger structure.

5) All Supercycle Bear Markets include at least one Crash.

6) New-Wave Elliott™ defines Bear Markets as waves 2 & 4 of Intermediate degree and

higher where corrections endure two years or more. At Supercycle Degree, Bear

Markets can persist for 26 years, as witnessed from 1906 to 1932. By taking magnitude

into account, this description is far more accurate than the traditional 20% decline from

the 52-week high.

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7) Bull Markets extend organically in the 3rd of the 3rd wave by serially transcending down

magnitude after each second wave, and morphing back up after the subsequent fourth

wave. In figure #1 you see Cycle Waves I & II are followed by Primary waves 1 & 2,

which in turn are sequenced by intermediate waves i & ii. Whereupon the entire process

is reversed, Intermediate waves iii & iv are sequenced by Primary waves 3 & 4, as the

wave gears back up to Cycle Waves III to end at the same degree as it began.

8) Where are the 5th waves you ask? After ascending magnitude, Intermediate wave 5

is entirely replaced by Primary wave 3, and Primary wave 5 becomes Cycle Wave III at

the higher magnitude. Bottom line, these are not synonymous, as Elliott labeled them.

Following this insight to its logical conclusion, you see that Cycle Wave IV is sequenced

by Supercycle (III), once again to replace Cycle Wave V entirely. In a similar vein,

Suprecycle (V) will be replaced in its entirety by Grand Supercyle [III] and tag onto the

end of the progression, right after Supercycle (IV). The Fifth impulse wave always

transcends to higher magnitude, to become the first or third of the next higher

magnitude – in summary, 5th impulse waves do not exist.

9) The Diag II is a prelude to & integral part of the first impulse wave within a long

trajectory.

a. As you may surmise, although the Fed may successfully postpone the Crash in

an initial intervention, on the second attempt, it fails miserably, largely the result

of its own forcing magnitude higher in a Bear Market Rally.

b. As seen in figure #2, a complex, Cycle Wave IV of 13-year duration alternated

with a simple, Cycle Wave II lasting 5-years. Likewise, a complex, Supercycle

(II) enduring 26 years, should have alternated with a simple, Supercycle (IV) of

10-year duration. In no case can the Fed ever prevent a Bear Market. Fed

interventions merely postpone the onset of the crash, while magnifying and

prolonging the resulting economic Depression. In 2009 the Fed forced the

market higher, so rather than completing a simple, Bear Market in an orthodox

bottom in 2010. By forcing it higher via Open Market Operations, the result will

be a far more devastating and enduring Bear Market of Grand Supercycle

Degree, 4x the magnitude of the Supercycle degree which would have occurred,

if we had simply allowed the Market to self-correct.

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New-Wave Elliott™ requires some adjustments to Elliott’s 3 Rules & guidelines.

Elliott’s only 3 rules

1) Wave 2 cannot correct beyond the origin of wave 1

2) Wave 3 is never the shortest, and often the longest of waves 1, 3, & 5

3) Wave 4 cannot overlap wave 1

In New-Wave Elliott ™ Diag >s (Diagonal Triangles), Diag IIs (Diagonal 2’s), break all of

Elliott's rules. In these structures, waves 1 & 4 overlap by definition. What’s more, RN Elliott’s

a-b reversal, long discarded by the Elliott establishment, will often exceed the origin of wave 1,

as an irregular top or irregular bottom, once wave 2 completes, beyond the orthodox

termination. This is where extreme herding sentiment is expressed, as a false break-out, or

false breakdown.

Figure #8 Bear Markets in Pink 1900 to present

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Elliott’s 1st Guideline: “The most likely extent of any correction is the previous 4th wave of

one lesser degree, and usually its extreme”. In Figure #1 you see Cycle Wave IV’s A-wave

trough in 1975, retraced the extreme of Primary Wave 4 in 1962. Since the Market is a fractal,

in the absence of Fed manipulation, Supercycle Wave (IV) would have logically plummeted to a

minimum of ~Dow 572, the extreme of Cycle Wave IV, the previous 4th wave of one lesser

degree.

In the absence of the correct wave count, Elliott’s 1st Guideline serves of little use. A corollary

of Elliott’s 1st Guideline, the Supercycle Channel widens after Supercycle Wave (IV) to

accommodate Grand Supercycle Degree, of 4x higher magnitude.

Elliott’s 2nd Guideline: Waves 2 & 4 within the same 5-wave progression alternate between

simple & complex; sharp & flat corrections.

Figure #9 Transcending Magnitude simulates the action of a particle accelerator

After magnitude gears up, the 5th wave morphs to the higher sequential magnitude to become

the longest of waves 1, 3 & 5. This is a stark departure from traditional Elliott, where the Cycle

Wave V, and Supercycle Wave (III) are erroneously labeled synonymously. Supercycle Wave

(III) replaced Cycle Wave V entirely, to become the longest of waves 1, 3 & 5, and the only

segment to unfurl entirely at Supercycle Degree, in practice. A corollary is that 5th waves are

never extensions; the only extensions occur in the b wave or a-b transitions, which can repeat

3x to extend beyond the orthodox top or bottom at major reversals.

Eduardo Mirahyes

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