12,000 Years of Elliott Waves and What This Means for The 21st Century

December 2, 1999

INTRODUCTION

The information in the article that you are preparing to read is breaking new ground in the long-term analysis of human development. This project is an ambitious effort designed to show that the upward direction of human development over many millennia has taken place in a series of structured up and down cycles (or waves, in Elliott terminology).

The Elliott Principle says that Elliott Waves of varying degree can be observed in organized markets such as the DJIA or the S&P 500. These waves can cover hours, days, weeks, months or years. Prior to Elliott's death, he talked and wrote about a large wave that he called a Grand Super Cycle Wave (GSC), which lasted up to 300 years and was the largest wave discussed by him. During the research for this article, the authors found evidence that larger waves were evident when longer and longer periods of human history were examined.

An earlier work concerning this topic covered a shorter period from approximately 1600 AD to 2000 AD. In researching the shorter time period the concept of an X-wave that consists of 5 full GSC waves was introduced. It became apparent the analysis raised important questions which could only be answered by broadening the time span even further to include a great deal of earlier history.

The authors learned when they examined human development from the end of the last Ice Age in about 10,000BC through to 2000AD, that there was evidence of several large Elliott Waves. These larger waves have been designated as follows: an X Wave that lasts 800 to 1,000 years and is composed of five complete Grand Super Cycle Waves; a Y Wave that lasts from 2,500 to 3,000 years and is composed of five complete X Waves; and a Z Wave that lasts from 8,000 to10,000 years and is composed of five complete Y Waves.

The reason for taking the longer-term view is to adequately interpret just where we are in the wave structure at the end of the Twentieth Century. More importantly, without this additional information, it was impossible to develop a picture of where we are headed as we enter the 21st Century. It is really the search for an answer to this latter question that guided the work presented here.

Most research concerning the Elliott Principle has pertained to the last 150 years, and has been based on the value of equities as presented in stock market averages. The reasons for this include the fact that such averages have only been available in a reliable form for that period of time. Further, for typical investment decisions it was not necessary to go any farther back in time to gain additional perspective of where stock values had been and where they might be heading.

In our much more ambitious project, stretching further back in time, we were faced with the problem of how to evaluate the position and timing of past cycles (waves) when there was no viable stock market average to guide us. The only choice we uncovered as usable was a combination of history and archeological evidence. The authors encountered some problems in using this type of data to analyze past cycles (waves) prior to about 1850. A critical reader, especially readers who have a working knowledge of the Elliott Principle, need to take especial note of the problems the authors faced and the limitations these placed on our analysis.

It was not until circa 3000 BC that writing came into existence. Prior to that time archeological records are our only source of information, and of consequence are imprecise to say the least. After circa 3000BC written accounts of events are available and over time became more accurate. Even so, many important periods such as the Roman period still pose factual problems because many of the histories of Rome were not written until as late as 300 to 200 BC and covered all of Roman history from the establishment of Rome in circa 750 BC. Much detail was lost and many dates and important historical events were only approximately pinned down due to the time lapse between the historical events and their written record.

One obvious problem this posed to the authors was in ascertaining the starting and ending dates for cycles (waves) with any degree of precision. In the absence of market related data the authors assumed that the rise and fall of empires and civilizations are good approximations for the peaks and troughs in the economic cycle of the region under review, which initially consisted largely of the Middle East and Europe. Also, this meant that time became a more important characteristic for deciding on cycles than the actual level of economic activity or of market prices, which are prominent in the analysis of more recent market action.

At this point a direct quote from Nature's Law is appropriate. "(Elliott) Waves of different degrees occur whether or not recording machinery is present". The recording machinery Elliott was talking about was a viable stock market average. In spite of the fact that adequate recording machinery was not available prior to circa 1850, it is the opinion of the authors that the data as available and presented in this article displays remarkable adherence to the Elliott Principle and its rules over a span of 12,000 years.

Our conclusion is that there are relatively few instances where it appears the Elliott Principle has been found wanting, and these do not warrant dismissing the other evidence that confirms the working of the Elliott Principle over the last 12,000 years. The foregoing is especially true when the difficulty of obtaining precise dates is taken into consideration.

An obvious question a reader may have is, "This is ancient history. Is any of this important?" As our analysis progressed, it became more and more clear that this study is in fact very important.

The reason is that Elliott Theorists have observed that we are ending a Grand Super Cycle Impulse Wave in the period from 1998 to 2000. During the research by the authors of this work a question arose. Is the GSC Wave now nearing its end the first, second or third impulse GSC Wave in the next higher degree wave, the X Wave? The answer to this question will determine the depth and duration of the coming correction.

Much additional data had to be accumulated and digested to learn the answer. This search took us back to the end of the last Ice Age and uncovered the waves described above. This research has convinced the authors that in this period of time just prior to the 21st Century, the GSC Wave being completed is the third complete GSC Impulse Wave of an X Wave which started in about 1000AD.

When a wave of any degree ends, the Elliott Principle says we can expect a correction of that wave commensurate with the degree of the wave ending. It makes a great deal of difference to a market observer in 1999 to know that we are not just ending a GSC Wave, but also an X Wave.

This is important because our study of history shows that a reasonable correction for a GSC Wave lasts about 40 to 60 years. However, for an X Wave the duration of the correction appears to be 100 years or more. Obviously, even the shorter correction will boggle the minds of current market participants who have been taught by market action over the last few decades to expect bear markets of only a few days, weeks or months.

The data and history used in this discussion will concentrate on Western Civilization, starting in the Middle East and progressing through Greek, Roman, European, English and finally United States history. Readers who are unfamiliar with the Elliott Wave Principle will perhaps have difficulty following the wave sequences described in the text. To overcome this difficulty, an elementary discussion of the Principle has been included in Appendix A. We recommend to those who are unfamiliar with the Elliott Principle to not dwell on the intricacies of the wave sequences, but to focus on the conclusions drawn by the authors based on their study of the Principle. If this monograph stimulates your interest in the subject, there are several good books you can read for a more complete understanding of the Principle.

Many readers will perhaps have a tendency to dismiss the findings and conclusions drawn by the authors in this article. The reasons for this are several. The most obvious will be that the Principle itself is too esoteric. Another reason is many people distrust technical analysis in any form, and this Principle relies heavily on technical analysis. Still other market participants are just too optimistic, have too much faith in technology and the future of humankind to listen to any long term bearish arguments. It is the opinion of the authors, after much research and thoughtful consideration, to say to the reader that they ignore the message the Elliott Wave Principle and this article are sending to them at their peril.

A study of history clearly indicates that humankind has progressed over time in a series of up and down periods (waves). The story of human development is certainly not an unbroken upward movement. There have been many regressive periods that have interrupted the upward path. There is every reason to believe that future events will repeat and confirm this type of up and down movement in human development.

Various studies have shown the Elliott Wave Principle to have been operative over many decades. The results of the study you are about to read indicate that the Elliott Wave Principle is apparent in the entire 12,000-year span of human history that is the theme of this study. Using this knowledge allows the authors to reach some very interesting conclusions about the future of human activity and the Western stock markets and economies as we go into the Twenty First Century. These will be discussed in subsequent parts of the article.

 

(C) 1999 By The Authors

All rights reserved

The term “carat” comes from “carob seed,” which was standard for weighing small quantities in the Middle East.