Steven Hochberg

Chief Market Analyst

Elliott Wave International

www.elliottwave.com

Is the Bear Market Really Over?

FIA

Futures & Options Expo 2003

November 5, 2003

The Wave Principle is Ralph Nelson Elliott’s discovery that crowd behavior trends and reverses in recognizable patterns. Elliott named and illustrated thirteen patterns, or “waves” that recur in markets and are repetitive in form but not necessarily in time or amplitude. He further described how these structures link together to form larger versions of the same patterns and how those in turn become the building blocks for patterns of the next larger size and so on. Regardless of the size, the form remains constant. In 1938, he coined this phenomenon The Wave Principle.

The Wave Principle describes the pattern of progress and regress characteristic of social (and apparently other) phenomena in which progress occurs in specific patterns of five waves and reaction occurs in specific patterns of three waves or combinations thereof.

The Wave Principle

A Third Type of Fractal

(1) self-identical fractals, whose parts are precisely the same as the

whole.

(2) Indefinite fractals, which are self-similar only in that they are similarly irregular at all scales.

(3) Robust fractal – Though variable, its component forms,

within a certain defined latitude, are replicas of the larger forms.

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