Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts, + Website

APPENDIX C

Serial Sequent Wave Method

There is a huge body of historical evidence, the author believes, that suggests chaos wave patterns do, in fact, repeat themselves according to some internal development structure. R. N. Elliott uncovered a method to label waves in the early part of the twentieth century, which has become an analysis practice by educators and vendors for decades, and is generally now referred to as Elliott Wave. Price history labeled by the rules of Elliott Wave seems to show good replication and some predictive qualities when comparing historical data to that of the current market charts.

One of the problems in using this method in real time is the alternative wave count subject to interpretations at any potential turning point. A trend can seem to extend indefinitely, but the limit to the count of a section of impulse trend is fixed at the maximum fulfillment count of 5. When the trend proceeds to yet another wave, the current 5 must then be carried to the new price extreme, and the previous wave must be given a new count attached to a lower subdegree of wave strength, also with the maximum 5 limitation.

At some point, there are enough subdivisions of lower degree to fulfill the needs of the highest degree, and the trend finally comes to an end. That may be just fine for the author of a newsletter who can post his analysis in arrears of the event and sort out the subdegree labels to make the formula work out perfectly. But for the Trader who must commit ...