Ralph Nelson Elliott’s 150th Birthday: How He Discovered the Wave Principle
Elliott wanted to learn if “there was any rhyme or reason to the stock market”
by Bob Stokes
Updated: July 28, 2021
In the 1930s, Ralph Nelson Elliott (1871-1948) discovered that the stock market moves in recurring patterns that he called waves.
July 28 is his 150th birthday so it's an appropriate time to pay tribute to this extraordinary man, his work and the unusual circumstances under which he discovered the Wave Principle.
To start off with, Elliott had led an active life as an accountant and management consultant, working at various times for railroad companies in Mexico, Central America and South America, a business magazine, and for the State Department before becoming seriously ill with pernicious anemia.
In the book, R.N. Elliott's Masterworks, Elliott Wave International President Robert Prechter describes what happened next:
Despite being physically debilitated by his malady, Elliott needed something to occupy his acute mind while recuperating between its worst attacks.... It was around 1932 that Elliott began turning his full attention to... finding out whether there was any rhyme or reason to the stock market...
Around May 1934... his numerous observations of general stock market behavior began falling together into a general set of principles that applied to all degrees of wave movement in the stock price averages.
Elliott's insights continue to be employed by investors today.
The basic Elliott wave pattern consists of five subwaves (denoted by numbers) which move in the same direction as the trend of the next larger size and three corrective subwaves (denoted by letters) which move against the trend of the next larger size:
When this initial eight-wave cycle such as shown by the illustration ends, a similar cycle begins.
In other words, the basic Elliott wave pattern links to form five- and three-wave structures of increasingly larger size.
An important point is that the Wave Principle helps investors to identify turning points in the trends of financial markets.
Follow the link below to learn what the waves are suggesting are next for U.S. stocks, bonds, gold, silver, the U.S. dollar and more.
Is A Perfect "Balance" of Stocks, Bonds and Precious Metals Possible?
Many financial advisors would answer "yes." They might even suggest that you add more assets to the mix -- such as international equities, REITS and perhaps other assets.
But, in EWI's view, no matter how carefully an investor constructs a "balanced" portfolio, it offers little to no protection during a major financial downturn.
In truth, "balancing" a portfolio is a poor substitute for knowledge of financial markets.
Get the knowledge and insights you need now from our Elliott wave experts by following the link below.
China Evergrande was the world’s "most valuable" real estate brand. Yet when the bottom fell out, not all investors were surprised that Evergrande is in trouble: See why the unsurprised includes Global Market Perspective subscribers.
Sir Isaac Newton said: "I can measure the motions of bodies, but I cannot measure human folly." Get the financial context of this famous mathematician's statement, plus learn how investors can lose money in the best performing mutual fund.