What is NEoWave "Reverse Alternation" in a Triangle?

Most students of wave theory understand the concept of alternation as it applies to impulsive patterns, but are unaware that the same phenomenon that impacts development of waves 2 and 4 also impacts waves b and d (under NEoWave Theory) within all Triangle formations.
If a Contracting Triangle is unfolding, but wave-b is just around 38.2% of wave-a (instead of 61.8% or more), then wave-d (to create proper alternation) must be larger than wave-c. This creates a Contracting Triangle that follows all the important rules (i.e., wave-c is 61.8% of wave-a and wave-e is from 38.2% to 99% of wave-c, plus wave-a is the most violent in the pattern), but the Triangle does not channel as you would expect during contraction. Instead of the trendlines converging to a point, they will tend to be parallel.
If reverse alternation occurs in an Expanding Triangle, wave-b is likely to be around 138% (or larger) of wave-a, which then allows wave-d to be much smaller than wave-c. Wave-c must still be larger than wave-a and wave-e must be larger than wave-c, but the behavior typically seen between waves-b and d switches places, creating NEoWave Reverse Alternation.

NEoWave Pattern Discoveries

New Discoveries that were not addressed by Glenn Neely in his maiden book Mastering Elliott Waves

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Time Limits of a Corrective

A Look at Dollar Index

Dollar Index seems to form a textbook Double combination. A Double combination is 2 corrective joined with an x wave.

The abv figure shows a double combination from Mastering Elliott Wave which consists of an Elongated flat and contracting Triangle.

In our case of Dollar Index similar situation exist . We have Double Zigzag as first corrective and then a contracting triangle as second.

Final leg e of the contracting triangle seems to form a double zigzag too with c as terminal

impulse.Initially it should head towards 79 and 86$.

NEoWave Question of the Week

Question: The Fed keeps printing money, Gold keeps going up and everyone is worried about inflation. How can you be predicting deflation in the future?

Answer: First, whatever the public is concerned about (or whatever they spend a great deal of time discussing) is usually an issue that has reached its zenith or moved beyond its nadir. Since "inflation" is an important issue of discussion on major news networks, the odds are high the current inflation rate is about as bad as it's going to get. Second, U.S. banks operates under a fractional reserve money system. Under such a system, when money is borrowed from a bank, it is created out of nothing (causing an increase in the money supply or "inflation" of the money supply); when it is paid back, it disappears into nothing (causing a decrease in the money supply or "deflation" of the money supply). The U.S. recently ended a multi-decade credit expansion (i.e., a period of inflation). Since all financial trends run in cycles, what follows a credit expansion (inflation) is a credit contraction (i.e., a period of deflation). The most recent credit contraction began with the stock market decline of 2008 and should last at least 1/4 the time of the expansion period (i.e., 7.5 years). During credit contractions, debt is paid off (which removes money from circulation), less borrowing occurs (which prevents more money from being put into circulation) and some debts are simply written off (which means the money disappears as if it never existed, creating a decrease in the money supply). As economics 101 teaches us, the more of something you have, the less it is worth. An increasing money supply reduces the value of each dollar in circulation, so it takes more dollars now than in the past to buy the same item. When it takes more dollars to buy something, we say the price has gone up or that inflation has occurred. When the money supply decreases during a credit contraction, each dollar in circulation is worth more. When it takes fewer dollars now than in the past to buy something, we say the price has gone down or that deflation has occurred. In conclusion, the public's heightened concern over inflation is probably marking the end of this "inflationary" period. In addition, the credit contraction, starting in 2008, will cause a decrease in the money supply for at least 7.5 years. Those two observations combined suggest the decade from 2011 to 2020 will be characterized by historians as a deflationary period.

Sensex Daily Plot

Sensex Daily Plot 08/04/2011

Sensex Daily Plot

Sensex Daily Plot 26/03/2011

NEoWave Question of the Week

Question: In the past, you've warned that markets are difficult to predict when wave structure is in its "middle phase" of development. What techniques should one use to trade such periods?

Answer: The "middle phase" of a Flat or Zigzag is wave-B. The "middle phase" of a Triangle is wave-C; in a complex correction, it is wave-X and in a NEoWave Diametric it is wave-D. The larger a correction, the longer its "middle phase" will last. If a pattern spans years or decades, its "middle phase" will last months or years (respectively). During such periods, wave structure uncertainty can be so high that trading is all-but-impossible. To successfully navigate the "middle phase" of any correction (on any time frame), Tier 2 market analysis techniques are necessary (Tier 2 refers to mathematical manipulations of price data that suggest market turns as opposed to direct analysis of price action, such as wave theory. that can be used to "confirm" and anticipate market turns). During large, complex corrective patterns (like the 20-30 year S&P consolidation beginning September 5, 2000), overbought/oversold indicators (i.e., Tier 2) can be used to assist with market entry and exit. Some of the more popular might be RSI (relative strength index), MACD (Moving Average Crossover Divergence) and Bolliinger Bands. I've developed my own, which I call the MOAT index. The problem with overbought/oversold indicators is they can stay overbought or oversold for very long periods, causing huge, potential losses if stops are not employed wisely. A methodology should be used to reduce risk and increase the odds of success. I'm not an expert on publicly available, overbought/oversold indicators, but if I were using one of them and knew a market was near the middle of its pattern development, I'd employ it this way. TO GO LONG: If my indicator showed the market oversold, I'd find a prior, identifiable low to use as a sell-stop to limit losses in case the downtrend resumed. In other words, I'd buy into an oversold decline that occurred AFTER a major low and use that major low (minus 1-tick) as my stop. TO EXIT LONGS or GO SHORT: If my indicator flashed an overbought condition, I'd exit my Long when market strength is present, or a level of price "excitement" is evident OR upside acceleration occurred along with excess media coverage. If I'm out of a market, and the indicator is overbought, I'd wait for a larger-than-normal decline off a major high, then look to Short on a 50% retracement (or more) of that initial drop off the major high. Under this approach, the major high (plus 1-tick) would be used as a buy-stop to limit losses in case the uptrend resumed.

NEoWave Question of the Week

Question: How much can wave-2 retrace of wave-1? Most orthodox EW analysts allow 99%, but it appears NEoWave only allows about 61.8%. Answer: The amount wave-2 is allowed to retrace of wave-1 depends on two, important questions. Is the larger impulsion Trending or Terminal and is wave-2 a monowave or does it subdivide into an a-b-c? Let's address each variable one-by-one. In TRENDING Impulsions (this is where waves-2 and 4 CANNOT share any of the same price territory) 1. If wave-2 is a monowave, it should NOT retrace more than 61.8% of wave-1 2. If wave-2 subdivides into an a-b-c, on rare occasions, wave-a might retrace more than 61.8% of wave-1, but wave-c (of wave-2) must conclude at 61.8% or less of wave-1. In TERMINAL Impulsions (this is where waves-2 and 4 MUST share some of the same price territory) 1. If wave-2 is a monowave, it CAN retrace more than 61.8% of wave-1 2. If wave-2 subdivides into an a-b-c, BOTH waves-a and c (though not required) can conclude beyond a 61.8% retracement of wave-1. It is during Terminal patterns that wave-2 is allowed to retrace as much as 99% of wave-1, but never 100% or more

NEoWave count on Sensex Weekly

Sensex seems to have completed its wave B with truncated wave c of Double Zigzag. As a result wave C down opens which can consume around 16-18 months.(As per Neely in a Flat wave C is equal to time taken by A+B/2).

Now there are 2 possibilities

Either wave C takes normal imuplse

Or it can be Terminal Impulse.

As of now its not clear which shape it takes. So I continue to label it as both 1/a , 2/b....

Now as wave C could take 16-18 months of time , its more probable wave C takes shape of Terminal impulse, in which wave 4 over laps wave 1.

In terms of Price wave C of a Flat can be either of the three.

Normal...

.if in terms of price wave C = wave B. as per this wave C could reach 8000.

Elongated....

.if in terms of price wave C is atleast 127% of wave B, as per this wave C could reach as low as 4500.

Truncated...

.if in terms of price wave C is less than that of wave B, in this case wave C could be in range of 11k - 12k

So its best for investors to stay out of the equity market for atleast 18 months. Buy and Hold is not right strategy.