Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature's patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions and, as recent discoveries have confirmed, in market prices.
In the August issue of his Elliott Wave Theorist, market
forecaster Robert Prechter alerted readers that the U.S. stock
market was slicing the neckline of a classic head-and-shoulders
pattern in technical analysis, and that this may send the market
into critical condition.
Prechter said that when the Elliott wave count and a head-and-shoulders
pattern are saying the same thing about the stock market, it's
best to pay attention.
Here's how the August issue of the Elliott Wave Financial
Forecast, the sister publication to Prechter's Theorist, described
the head and shoulders pattern unfolding in the stock market: "The weekly Dow chart [below] shows the development
of an intermediate-term, head-and-shoulders pattern from the
January high at 10,729.90 to the present. The January high
marks the left shoulder, the April 26 high at 11,258 is the
head, and the right shoulder is now ending. The April [Theorist]
discussed the pertinent characteristics that Edwards and Magee
used to define this technical pattern ... all apply to the
current formation. Observe how weekly stock trading volume
has contracted during the development of the right shoulder,
a necessary trait of this pattern. The downward-sloping neckline
-- exactly as on the big ten year pattern -- displays market
weakness, which is consistent with our interpretation of the
This chart shows the head-and-shoulders pattern.
Here's what Robert Prechter himself said in a recent Elliott
Wave Theorist: "Generally, when the neckline slopes downward, the right
shoulder does not rise to the level of the left shoulder ..."
Please look at the chart again -- then re-read Prechter's quote.