The Rule Of Alternation

December 17, 2013

My very first recommendation to all subscribers was and still is to not only buy these two items but when it comes to the markets use them at all times.

When it comes to the markets ignore everything you hear and see with the exception of the markets themselves. You can see all you need to know about the markets’ progress on charts of the markets. The only thing you need to know is how to read them. It is as simple as A, B, C. It really is. You just have to wipe the brain clean of all acquired nonsense … and I mean all!!

Contrary to popular opinion simplicity is the best approach to projecting the future path of the markets.

According to articles in the Wall Street Journal and various other business media gold bullion has lost its sparkle and is surely a useless investment. “It has lost 25% of its value this year.” Special reports inform us that some of the wealthiest billionaires have dumped their gold holdings. “The gold ETF’s have had to sell most of their gold due to the fact that investors have deserted them in droves.” “At today’s price of gold most gold mining companies are losing money and near broke.” Many well-known world renowned market experts from various banking and investment institutions are informing us that gold is fated to decline further or remain price stagnant. A dramatic rise in the price of gold according to these experts is nowhere in sight.  

However, there is this little known “gold bug” character who lives somewhere in Central Florida who smiles when he reads these negative gold comments. He mumbles to himself “Perfect, perfect, everything is on schedule. Nothing has changed in 100 years. The timing is magnificent perfection to this very day! ”

He has demonstrated that the current Major Bull market pattern in gold and the current Major Bear market megaphone patterns in the S & P 500 and the DJIA are consuming twice as much time as did the minor patterns of the 1960’s to 1980. We are now very near the point of collapse for the S & P 500 and the DJIA and an upward bullish explosion for gold and the rest of the precious metals complex. Nothing, absolutely nothing has changed in 100 years. Even the various negative media statements about gold have demonstrated perfect timing. Exactly when we should expect them to appear, voila, here they are. Nick Laird of Gold Charts 'R' Us assembled the following charts for me. I have shown them on numerous occasions. There is precious little time left before the explosion begins.

Ron Rosen - Elliott Wave –

 DJIA & S&P500
Elliott Wave - The Rule Of Alternation

There is a general tendency for the pattern of the two corrective swings in a completed 5-wave sequence to alternate between a simple (very often an ABC) correction and one of the more complicated or complex Elliott corrections.

Elliott Waves - Wave (2) simple abc pattern

Again, this is a very useful piece of information, because once Wave (1) is complete, then the most likely pattern to unfold is a simple ABC correction. And, because of the rule of alternation, this leads onto Wave (4) usually being the complex correction in a completed 5-wave sequence. Apparently the Rule of Alteration also applies to the megaphone patterns on the S&P500 and the DJIA. The 1966 to 1974 megaphone pattern for the S&P500 had a rising upper trend line. The 1966 to 1974 megaphone pattern for the DJIA had a horizontal upper trend line. Starting in the year 2000 these megaphone patterns alternated their location. The S&P has a horizontal upper trend line and the DJIA has a rising upper trend line.

Minor wave 4 alternated with minor wave 2. Major Wave IV is alternating with Major Wave II.


Minor wave 4 alternated with minor wave 2. Major Wave IV is alternating with Major Wave II.

The result of comparing movements in the gold complex to movements in the megaphone pattern in the DJIA and S & P 500 during the 1966 to 1974 bear market was a potentially very rewarding timing discovery. When wave D in the 1966 to 1974 megaphone bear market pattern in the S & P 500 and the DJIA topped, minor wave (3) of Major Wave III in the gold bull market began. If we fast forward to the year 2013 we find that wave D in the megaphone pattern of the S & P 500 and the DJIA is close to topping. At the same time minor wave (3) of the current bull market in gold appears ready to begin. The difference is that the current movements represent Major Waves whereas the movements in the 1966 to 1974 time period were minor waves. This difference should result in a more severe bear market in the stock averages and a more powerful bull market in the precious metals complex.

Gold and silver prosper when the stock averages are in a bear market. The bear market in the stock averages will be entering its most damaging [E] wave decline in 2014. At the same time gold and silver should be rising in a dynamic phase.

Minor wave 4 alternated with minor wave 2. Major Wave IV is alternating with Major Wave II.







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There are three things that investors and traders want to know.

WHAT?     WHEN?    WHY?

1. What will happen?

2. When will it happen?

3. Why will it happen?

We will never know why for certain even after the event takes place. There are always a number of reasons why an event took place.

Therefore, I totally discard the need to know why.

This leaves us with the need to know only two things as investors and traders.

1. What will happen?

2. When will it happen?



A pattern of market movements that has continued to unfold as projected for 100

years such as the The Rule Of Alternation should be followed to completion or until such time as it no longer is in effect. There is no evidence of any kind that indicates that the The Rule Of Alternation is not working or will not continue to work. There are projections that some can make based on various technical approaches that show that the The Rule Of Alternation will not continue. However, that is not evidence that it is not working. I will accept as a fait accompli that the patterns I have continuously shown for several years will continue as projected until they actually do not. 100 years of perfection is sufficient for me to accept them as the most viable evidence of future market movements in the S&P500, the DJIA and gold.

Along with the three W’s of What, When, and Why there are also three probabilities that should be applied to the markets that I cover.

I just explained the one that I believe is a fait accompli.

A second one would be that I am wrong about the The Rule Of Alternation and the stock averages are in a genuine bull market and gold is in a bear market. This would mean that the stock averages would continue moving up and gold would continue moving down.

A third probability is that both the stock averages and gold continue to move up.  This would be indicative of a horrendous hyperinflation a la the Weimar Republic beginning to unfold. I do not see any evidence as yet of that taking place. 

My conclusion is that we should with confidence rely on the The Rule Of Alternation until there is evidence that it is no longer working as it has for 100 years.

I further do believe that based on time in place that the The Rule Of Alternation will continue to flow as long as this continues to flow:


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