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When This Targeting Method Is Applicable

The level of the ?fourth of the third? wave is a reliable target for a rally when wave four peaks lower than wave four of three and when the third wave is fairly long relative to the first wave. This is actually the most common development, so the target is often applicable. This target is less often valid when wave five is extended, in which case the ensuing rally generally tops between the peak levels of wave two of five and wave four. This target is almost never valid when the first wave is extended because, by the rules of wave construction, wave three is then shorter than wave one, and wave five is even shorter than wave three. In these cases, the ensuing rally typically carries to around the peak of the preceding wave two or even wave four of one.

This retracement is not common to reactions in bull markets. It seems to come into play after a short fifth wave. Normally, though, the area of the preceding fourth wave is the most common target for bull market corrections. This tendency may simply be symptomatic of advancing waves during periods of monetary inflation, which we have had for most of the past century. We should not generalize these observations as traits of Elliott waves per se.

The Next Big Opportunity

Over the next couple of years, we should observe the culmination of a declining wave a of Cycle degree. Then wave b will take place on the upside. If the wave structure is compatible with the prerequisites for this targeting method, we should watch for a peak in that rally around the top of wave (4) of 3 of wave a down. As noted above, if wave 5 is short, then other guidelines will be applicable.

Market Strategies

Speculators have been riding this bear market ?200% short.? Given the possible bottom in a 40-week cycle, lighten up to only 100% short. We will return to the more aggressive position if stocks have a summer rally. Investors should stay in cash.

Wealth Preservation Seminar

For most people, Conquer the Crash provides all you need for instructions on how to protect your investment capital. Those with substantial net worth may wish to attend a big-ticket wealth preservation seminar being offered by the SafeWealth Group. Their week-long seminar, to be held in Switzerland from September 29 through October 6, will include personal introductions to safe banks, previous metals storage facilities and other financial institutions. For those few subscribers who may be interested, we will forward information in coming weeks.