Motive Waves: IMPULSE

IMPULSE

The most common motive wave is an impulse. In an impulse, wave 4 does not enter the territory of (i.e., “overlap”) wave 1. This rule holds for all non-leveraged cash basis markets. Futures markets, with their extreme leverage, can induce short term price extremes that would not occur in cash markets. Even so, overlapping is usually confined to daily and intraday price fluctuations and even then is extremely rare. In addition, the actionary subwaves (1, 3 and 5) of an impulse are themselves motive, and subwave 3 is specifically an impulse.  Figures 2, 3 and 4 all depict impulses in the 1, 3, 5, A and C wave positions.

As detailed in the preceding four paragraphs, there are only a few simple rules for interpreting impulses properly. A rule is so called because it governs all waves to which it applies. Typical, yet not inevitable, characteristics of waves are called guidelines, which are discussed in an upcoming section. A rule should never be disregarded. In many years of practice with countless patterns, the authors have found but one instance above Subminuette degree when all other rules and guidelines combined to suggest that a rule was broken. Analysts who routinely break any of the rules detailed in this section are practicing some form of analysis other than that guided by the Wave Principle. These rules have great practical utility in correct counting, which we will explore further in discussing extensions.

Extension

Most impulses contain what Elliott called an extension. Extensions are elongated impulses with exaggerated subdivisions. The vast majority of impulse waves do contain an extension in one and only one of their three impulsive subwaves (1, 3 or 5). The diagrams in Figure 4, illustrating extensions, will clarify this point.

Often the third wave of an extended third wave is an extension, producing a profile such as shown in Figure 5.

Truncation

A truncated fifth wave does not move beyond the end of the third. It can usually be verified by noting that the presumed fifth wave contains the necessary five subwaves, as illustrated in Figures 6 and 7.

Truncation gives warning of underlying weakness or strength in the market. In application, a truncated fifth wave will often cut short an expected target. This annoyance is counterbalanced by its clear implications for persistence in the new direction of trend.