Additional terminology. Progressive, regressive and pro-regressive waves.

Elliott Wave Theory Rules

In trends of any degree, regardless of their directionality, a 5-wave action will be followed by a 3-wave opposition.

Any progression will begin with a driving pattern (most often an impulse, much less often an initial diagonal), depicted, as a rule, pointing upward. This is because a prolonged upward trend in the stock market ultimately reflects human development.

The downward-trending driving waves are part of corrective patterns and cannot identify progress. Another judgment is also true. Corrective upward-trending waves are inherently corrective in nature and do not carry out progress. In order to designate goals which are followed by a wave (to distinguish between waves leading and not leading to progress), we introduced, in addition to the previously introduced terms, three more auxiliary terms.

  • A moving wave that is directed upward, which is not part of a corrective wave of a larger degree, is called a progressive wave. It is identified on the chart by numbers 1, 3, or 5.
  • Any descending wave is called a regressive wave, and this rule applies to all types of waves.
  • Any wave directed upwards is pro-regressive, in case it occurs as part of a higher degree corrective wave.

Regressive and pro-regressive waves can be corrections or components of corrective models. Progressive waves, on the other hand, do not depend on counter-trend forces.

You have probably noticed that the term “bull market”, which is often used in everyday communication, is applied to progressive waves, while the term “bear market” describes regressive waves. The term “bear market rally” is an excellent characterization of a pro-regressive wave.

Many technical and fundamental analysts define a market as bearish when an asset falls 20% or more. At 19.99% it is not, it is only a “correction” when any 20% drop is considered a bear market. Evaluating the usefulness of such terms in practice is not always easy.

Elliott Waves reflect the qualitative side, because all principles will be fulfilled regardless of the size of the model.

According to the Wave Principle, progressive, regressive and pro-regressive waves can have different degrees. For example, wave B of the supercycle in the correction of a large supercycle would have a significant amplitude and duration, which would allow to identify it as a “bull market” from the usual point of view. However, within the framework of the wave principle, it would be more correct to call it a pro-regressive wave.

Sources: by J. Frost and R. Prekter: “Eliot’s Wave Principle. The Key to Market Behavior” 2005

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