• Edited by ROBERT R. PRECHTER, JR. INCLUDES: The Story of R.N. Elliott The Wave Principle (1938) The Financial World Articles (1939) Selected Essays - 1940-1942 Nature's Law - The Secret of the Universe (1946) ...... Ne .... DI .... Ralph NelIIon EIiolI (1871-1948) led an advenlur· OUI and produdive tle. He ~ a temarkably tueeeSIfuI aoc:ouoting career. inYoMng book 8Ulhoi1ll1ip. fI1lIllIIZine oontJb.JIiorw. lixl ........ lraWll and ""'" Ii U.S. Slale Depar1Jrlert ,""",Ill ...... EMotI pc.mlitlhed his tnt book on !he SUIdl matkeI mille lIlIlI of 87. N1 ill'ploallc:o, to IWl)'OIlOI facing hill "dec:IlrIing" yea ... EIiol1'. evident geniu. ,MChed lui ~ i'I fie. dec:ede of his lie, 'Atl&'l he broI.Jght Ii great gift of Ia 10 .. 1 "'gii III mao*lnd. EIott _ of lhaIllIf8it of breiidi, Ii truellCholar i'I lhe plllCtlcfol wond of 1iIiinoe. l-k ~ Iheoly 01 itOdI rnatkiiI b8haYIor goes way biiyond IIle UIUOII Imilalioni lhaI lIrii thaIa:tellitic 01 !he bulk of !he 1itenduN. .... A. l-lllmiIIc:w'I Bc*ln, Iooodet of !he Sank ~ ~ iiild. "He de- Viiklped hIii pll..ciple ir*' Ii ralionIlI method of itOdI matkeI aniilyiii on II .:ale _ beIor1o lll&.it*Kl." 11'1 '-:to !he Wave P110 ~ ill far ITIOIe lhan Ii use- fullll'llllyticell mettlOd. <Mr!he years, • has had Ii pn;lb.i1d eIJea on lhoM .too not ony have !he llblIily to ,eoogou. .Iheoly of 1o'.'llllll8 pnIdicaI \IlIk.e, but who can apprec:liilii !he • I ltiillc beau- ty 01 !he hI.man ellpIIrieolCe n!he iIbBlJiLl Thll WI.,. Pt. lCiple has rucinliliid philolophers, 0'I'IllIhemllli, 1*fd')Io .... ", lheobgIa .. and INnciers aIikii. Now. IIfIef being out 01 pm lor "'" , lhe CIIigO'\aI worQ 01 R.N. EIiolI havii bMn i'llhil DOli ...... , .. hl.lItIbne. R.N. ELLIOTT'S MASTERWORKS The Definitive Collection EditH, fonwonld, ",,11 with 01 biogNlpJry by RoIwrt R. Pnclrter, Jr. Published by New C1aaaiea Library Th1_ One IllllllllllllllllllllltI~ EVHH-LAR-eKZS R.N. ELL/07T'S MASTERWORKS Copyright C 1994 by Robert Rougelot Prechter, Jr. Fint Printing; September 1994 Second Printing: July 1996 Printed in the United States of America For information, addrea the pubt~hen: New Cluaica Library A div~ion ofEUiott Wave In~ational Post Offict! Box 1618 Gainesville, Geo'lPa 30503 USA The material in this volume up to a lll8.lrimum of 200 words and/or fourchart.a may be reprinted without written penniaaion of the puhlisher provided that the 8ClW'Ce ~ aclmowledged. The publieher would greatly appreciate being informed in writing of the "...., of any IIUCh quotation or reference. Otherwi .... 11 riirhtl are relltlrved. ISBN: 0-932760-37-0 Library ofCongresa Card Catalog Number: 93-87631 71iis 600(.15 tft,aUAu4 to lUfn4 JtlM ~rtJSt, a t40r frinu£. ,. The Foreword and about half orthe biography were initially publilhed in TM Major Wor" of R.N. Elliott (New Clauics Library, 1980), which il now out of print. ThiIJ volume feature. a greatly expanded biography, uPftaded footnotea. and the Selected Euay8 lIllCtion, makini R.N. Elliotf. Maa~rwor.b a truly comprehellllive anthology of the author'. important writinp. Compl"tiJlta ma,y wUlh to obtain R.N. Elliotf. Momt fAtt",. 1938-1946 (N"w Cl ... ics Library, 1993), which oontaill.l all orhia additional publicationa. , • ACKNOWLEDGMENTS A number oCpeople have been instrumental in thai project. A.J. Frolrt provided a copy of 'I'M Wot>t! Principk Illld copjea of the Elliott Wa.,. Supplement. too the BaM Cndit Analyll, and collabMated on the fore'llfl'lrd.ing comment.. Alfred H. Kingon, editor-in.ehief of FiNJ/lCUU WM!d magazine, i1nerouely eoD· .... nted to the republication crt Elliott'. 1939 article•. The New York Public Library yielded much information, and ia the only library Imown to have. photoa>py aIth .. oripnat Natun'. Lew. Cl.ire Chartrand, an .uoci.te of the late Hamilton Bolton, helped dear up a few cloudy areu on the avail.bl, reproduc- tiOIlll. The Library of CofIiI'eU provided the material for the Selected Eua,ya lIeCtion. One of the main reuolW. compRbemrive republicaUon of Elliott'. worb has not been Ittempted before 'If AI the prolIpect of the formidable ilhatratina job neceuary to do jUltiee to Elliott'. conoepl.8. Hi. two boob are rather roughly illllAr.ted and. mere phatographk reproduction would not have lIUffic:ed. Robin M.ehdnslri ~Uy tackled thitjob, and 'If' are proud to featun her wwk herein. Arthur Merrill of Merrill Analr-il, Inc. provided m. invaluable photographie talomtl toward the reduetioo of the illuatratioll8 to eaDlllr&-ready lize. The ropy edili"ll for the C\1lTelIt edition 'NO dODe by Jane Eltell and Kareo Latvala. The jacket design Wall erafted by graphics artillt Pamela KimmOnJI. For aeknowledgmeDIa relati"ll to Elliott'l biography, _ the Authora Note 00 page Ill. CONTENTS THE FINANCIAL WORlD ARTICI r 8 11m) AnDow>cinc tho w.... PriDcipl. p"rt I ACKNOWIJ'iDGMENIlI FOREWORD ... BIOGRAPHY OF R41" NEI.SON £Ilion DIE WAVE PBJNCIPLI UlWl) p ... I I 13 .. M " " '" 108 lOll 112 114 III no '" no 120 121 '" '" ,,, ... 14.0 1M '" '" 1M 'M 11\6 , II m " v " '" "'" IX x Rhythm in Nat""" Stock Merkel W._ Identi/)'iDI tho W .... T ; ...... vi!!;;;;.".,; ...... Fi8.b W."" Cgrredjon. Knepp", .. ExkmmO' Of EltcooilKl' Boha ... of MatkeI. Fonowinr EntnIioo ... lmcWar CorNo""", &toq Correeliom hUu ... WMn tho SlUMP' ja;o Doubt TrianIl- Sp!!d, Volume and. Chamn, MiKooIl...- N_: Cbartinr AwlItIlllIho W .... PrInciple Rori .... in the 1937.1R38 Beer M.rb, HeIr MOO!! Su.pp!.olDOlO!arY CrciN ",. W .... Prindp!ol in Oth« FWlela ~ '" '" '" no '" '" In 110 1M 1M 191 ,,, '" 196 "" n ""m """ "" v "" " "" '" "" "n Par!. IX Part! p"rtn p""m SEI FcrKD gUrU ltfO,IH2 on.. Bam. of the Wn .. PrincipII Hoor Iho W~ Principle Woob. and.1~ eon.leCion Wit.b nuratjM AI' Tim. E'.m""t • 201 Market AP'll!u' _ Co. ... and 1WmiJla_ 204 ~ Crcl. <L Amenc.n Hi,IO!'T 209 ",. .....tUN Patt.rn '" 1.1>0 M...... 1Ot 213 NmJRm lAW _ THE SECRET or THE uNJYERBJ: UHf) 216 I"trod""""", Rhythm in Na1.Ure 220 I Tho G.-t Pyrunid GiselI 222 n NatUN" (.aw m MiMlaMouIOlwtryation, m m Hnmn Ad.jYitje, 229 [V DiAtU>c:live Feu\InlII of H........, AdiYltiM '!I!2 Y CornrtiQ!!1 232 ZipAp 234 nato 237 C<mple2 ~ 238 Tri.aocl .. 242 III EllenMon' :ua EJum'igu, ofE ....... 1jpn1 :ua ExwwioNI in Wave Ii wi Pre*'" iIak • I U4 E............. Coun1.inl ~ Enlargemenl of Correcl>onl 2fll 5idnrj. Moyrmenl.l us vn Itrecu!ar Top. 2110 vm A11en1.tioto. 21\2 IX S .. I" 2M X E:aomplH (Au.Hollihton A'1IJ 269 XI The 'I'hir\ftfl Y.ar TrianI!' 2M XII lttfl.lI'an 267 XW I'rit!I of GoIcl 270 XIV Patenl.l 2'12 xv T..JIDig,J Futuru 2'15 XVI Dow Joan &oj! IMtq 277 xvn Tho YoJlleot'NmI 280 XVIU Cbminc 283 XIX ltt_unant Timing 284 xx Selaetian oITn.diq Madia 287 XXI I'Yratrjdio SymhoIa and K>w Thq .... Dio<o¥erod :l88 Ilat.io Rultr 289 XXU The I.w <If MQljon 292 XXIII '"'" Gteo.t o..p..- 294 XXIV Erno/>ono.J. C)'clM of Individual. '" XXV .......... 300 XXVI Mj_J1,ofQUl 300 \lq!p!DllofW._ 30lI CirrlM 301 A.B B_ 302 XXVII The 1!l.42.JlWj Bull M.Get 30ll R«rlow ,pc! Cqncluoion 3lIlI Bcferu_ , Copyrighted material , FOREWORD Hamilton Bolton aid in 1953, "For every ODe bWldred in- vutonl who have heani of the Dow Theory, there is probably DOt one who ltno~ about Elliott'. Wave Principle.oln the aer- vice of juAtiee, the time hu eame to remedy thu overaitlht of hutory. Fordecades. demand has ui8ted for reprinl.8 o£Ralph Nel- 1100 EUiott'. major writinp, but until now no one hu Men fit to bring .U the boob and articles together in one profeuioully ilIlll1trated vol\lltle. I undertQok tbi, prqjeet in reapol\$e to de- m.nd from ...... denl of Frwt'. and my book and out ormy d.... p concern that the form oftlMo original di8eovery DOt be loet in the duBtbin ofbilltOry. It ie for those who have an llPPnlCiation for the hi.torieal record and who oriBh an undenta.nding of the de- velopment of th" Wave Principle throuch itll dilKXlVerer, R.N. Elliott, that thia book ill publiJ1hed. Hiatory ill replete with example. ofinnovaton and discov- eren, men ~IU'II or even centuries heron their time, wbOR ide .. reached lID far ahead of their contemporariel' thu they were ignored by the profeMionl.l MtabliAhmellt of their cay. While Elliott wu not ignored, he mofi certainly wu not affon:Jed the recognition he deaened, In my experillnce, there are two eategoriN or people who have atood in the way or providing Elliott'. W.ve Principle a wider audience. The fi,..t i. made up of thoae who ~ it, in_ cluding both thoae .... ho dillmiu any RUch idl!U out of hand and thoIIe who graJlp the theory but chOOlle not to believe it beca\llle they will not erpend the energy required to find out ifit ill true. A neutl'al rNpo ...... to UIlrt!uonable rejection of th. Wave Principle would have been impoeaible for the discoverer ofthill remarkable phenomenon, who undoubtedly reared that hia diA- COVeT)' would go entirely l,UllKltioed if he were not able to c<.>n- vince at ll!Ut a portion of the invelrtment world of ita validity. The eloquence ofTM Walle Prindpk and the inteDllity of Nature'. Law partly derive from Collina' and Elliott'1 desire to convince the invelltment utabliahrnent not only thlt the Wave Principle wall I vllid theory, but a1Ao that it wu the truth behind the prugreaion of the Itoek market, and that in fact it reflected the la .... govemini the form oCtile natural ptIth of all human activi • • ti"". My goal with thit book, however, is Dot oeeeMarily to con- vince reade ... that "EllioU ia the ~," but merely to lIlllke aVllil- lIble knowledge oCthe WlIve Principle to those who have enough lIel\Ml lind energy to WIe it. Aa for the lleCOnd category, I find that among thOle people who understend the theory's immeDlle value and apply it eue- eeufully, lDOllt have done their bellt to keep it Heret. I have been IUlked lIeveral times by Itudentll of the Wave Principle to refrain from pubJilhing any matenalat all on Ellilltt'l great in- novative work for fear that "tou many" people would etart using the Wave Principle in their inveetmeot timing, thua diluting the utility of the theory. I must lay that at times I have had lIeCOnd thoughta. The WlIve Principle frequently can call turnlI and projec:t. tergeta with IUcll incredible accuracy that I mil find my .... 1f amazed. As II tool for eIplaining the otherwise surprilling and indecipherable w~ ofthe market, it hae no &qUill. However, the relIder mUlt realize thllt, dl!llpite the buic IJimplicity of the concept iteelf, "Elliott" analysis is not that euy to do if your goal it to do it .. ell. On the other hand, it is very l8IUIy to do haphuardly, and mOlJt pou1.--time practitionere do ""'_ aeU)' that. Even if the Wave Principle were to become popular, there would be 10 many opportunittie haelu Doating about their ill-considered opiniona that the l.l'Ilth probahly would be 10IIt to the investment majority in the elUJuing babble. The degree of uncertainty in wave pattern rKOiIlition, moreover, enauru enough forecasting erron that the averagt! penon will dismillll it after dillCOYering the imperl"ection of ita application. For moo people, the best approaeh, even by far the beat approach, is not enough, ... they demand the Holy Grail of perfection. In Ilddition, let me say thllt even among devotees, it is one thing to recogniu that the Wave Principle aovems stocl< pri""s while it is quit.e another to predict the nm wave and still an- other to profit from the ue.rciee, ae anyone .. ho ever hu at- tempted to turn a good market forecasting Ipproach into money knowll rull well. None of us can eecape our human nature, a natunl that involvea us in the univenal deaign whether we wish it to or not. I have met few men who invest or trade with a eom- pletely rational Pl'Olll"aDl baaed 00 re8llOnable probabilities with- out allowing greed, fear, erlraneous opinions or irrelevant n judgmentll to interfere. Tolman ofluperiordillcipline, the Wan Principle will yield a fortune; but then 80 will many other meth- <Ida. What no other method of reading the market am give you, however, which the Elliott Wa"" Principle mUM pouible for the tim time, ill • framework within which to obeerve, reflect upon and eqjoy the beIIuty of nature in the lIOcial activity of ~. 111 ..... in the end, I find my.telfpenuaded by the nobler wonb ofbotb Elliott ud Collinll, whoagreed in their lett.en thet what is important above all elM ill the ".eean:h forTruth."Thia .. ucll ill, projeet for.U mankind, and keepioil dramatie new conoepta from othen will only hinder prognu. If the Wave Principle it nature'. w.:y of giving WI' peel< at the future, we mUJIt nevertheleu realiu that it is only. peek, not the full panorama. Foretelling the future with e:u.ctitude all the time ill not nne oC the bleu:inp available to man and likely never ... ill be. Elliott him.If, dupite his great achieve- ment, ...... not fanatical.bout hill ideu. He knew that the Wave Principle, for all ofitll value, wu not the be·&lI and end.all.-rhe diacovery ohhe Wave Principle," he said, "hu only opened the door to real progreu.. A1J you n!8.d EUiott'. worb, it may h..lp to recall hd wonh of guid.nce to Charla J. Collillll when lui uid, ~I hop' you 'po pn!Ciatoo that application of 1"\11 ... requirM eolllliderable practice and a tz"IlnqUU mind." - Robert R. Prechter, Jr" 1979 • Copyngnted matanal A BIOGRAPHY OF RALPH NELSON ELLIorr by Robert R. Prechter, 'r. • Copyrighted material AUTIlOR'S NOTE Until now, nothing .. hll.tIlOever had appeared in print per- tainina'to Elliott'a per1lOna11ife nr hiA activitiea prinr to di!lCOV- erina the Wave Principle. The facta I WIl.8 able to put toeetber WeN! gleaned partly by atudying hill. boob and market letwnl, c:orTeapnnding with the Library of Cnngreaa, and talking with fnnner uaociatea. Howard Fay and BN!nda Taylor wera helpful in providing biographical information. Journalillt fetu Kendall followed eevera11eada to ~lIent reaull. Uk" • determined pri- vawlnvntigator, Market TflChniciana Aeaociation member George A. Schade, Jr. in over two yean of re&earch "Y.temati- cally uncovered a wealth ofinfonnation on Elliott'alineage, fam- ily and geographical locationa. Elliott Wave International'e Michael Buettnere:lplored the U.S. State Department'. archivee to come up with atartling informetion on Elliott'a role with the Coolidge Admlniatr&tion. Marie Eliadea took the photo ofEliiou'. houae in Loa Angelea. and Paul Brodtkorh took the photo nf Elliott' ....... idential hotel in Bro<Iklyn. My deepetlt gratitude, however, goea to Chari.,., J. CnlIine, who Hnt me the entire file of early letwra between Elliott and himaelf. Not only wu that 6le one of the moet exciting coUeetiona of material 1 have ever read, hut the lette .. told more tlan any other lIO\Irte about the story nfEliiott and hill. diAc:overy nftlle nature nfmarket behav- ior. Significant information Wll.ll nbtained from the following lIOurcea; U.S. National Archivea; U.S. ~partment of Staw; Church of JflIIuA ChriAt nf Latter-Day Sainta Family Hiatory eentu {AZl and Library (UT); Fairchild Sona Funeral Home, Inc., Garden City, NY; Kinga Park Paychiatric Center (NY); Little, Brown'" Company; Mra. R. M. MacLaury: FelTOClUTiIea de Guatemala: Pottawatomie County Regiater of Deeda (KS): Loa Angelea Cnunty RegiAtnlr-Reconler (CAl: Lexington Genea- logical and Hiatorical Society, Inc. (IL); Grac:eland Cemetery Aaaociation (ILl; Livingaton County Circuit Clerk (lL); Mont- clair Public Library (NJ); CaliforniA Department of Health Ser- vicea; Inglewood Park Cemetery (CAl: City of New York Department of Health; Arizona State Reeearcb Library: Arizona State Univeraity Librarillll (including Hayden): Pboeniz Public Libnuy (AZ); Dominy Memorial Library (ILl; MaryeviUe Public " Libnlry (KS); Oregon State Univenity Library (OR); Brenau Univenity Library (GA); Georgia State Univel'llity Library; ChNtatee Regional Library (GA) and GeineMlJe College Library (GA). A. you read the atory ofRalpb N,,\..,n Elliott, you m-.y be as intrigl.led .. I am t.h.lt. theory lJ(I remarkably unique, when compared to other methods ofmarltet analylria U that time and IIlVell tboae of today, could have ~n developed.., late in lif .. by • man not of Wall Street baekground. Bolton uc=ate!y de.cribed thfleDOnnity of Elliott'. feat when he Hid that "he developed m. principle into a rational method or-toea market analysia on • /ICl.1e never heron attempted.- A BIOGRAPHY OF RALPH NELSON ELLIOTT A man',flif., Jb. pi«» 01 !6pUl1)', is mMJ. up 01 many sun., wh#dl ... ~ mM<. •• pan.m; ftl ~I •• ~ 0fHt IIf)tJ 100/0; ., it .",. f1(1( 0I'iT dHlI'OyS ltIot ~, blJI gtVu In. flrn In"'" laJse 'IlIIlw. - - Leamed H;wv:l Wave One: The FOI"IIUltive Yean Ralph Neoon Elliott'. family tree oont.ained IIOme dimn- guiBhed Americanl. Hil maternal great grandfather, Jonathln Hamblett, foughtaa a private militiaman at Bunker Hill during the American Revolution. He waa wounded in battle and later appointed one of General Washington'l bodyguAfiU. Elliott'. grandfather, Hugh Elliott, WIUI • veterln of the Wlr of 1812. Hugh Elliott was residing in Ohio, then at the nation'. we.tenI frontier, when hilllOn FTanklin, Ralph Elliott'l father, 111'11 bom in 1835. Franklin became I merchant and mamed VillPnia NelllOll, who came from a wealthy flnning family near Philadel- phia, .... he,.., her brothen and ei.ten each fenned 80 a<:ree. In 1865, at the dose of the Civil War, Franklin and Virginia Elliott had a daughter. Anna May. She WIUI three yeara old when the family moved to Maryaville, Kall.HIUI, allIIUlli community by the Big Blue River in the northeaatern part of the ltate. Franklin hed oontinued hi. father'. practice of heading west with the nation as a whole, u at that time, Marysville WlllI a bu.etling edge.-:>f-civilization stop for the Pony Express and travelen on the Oregon Trail. The family'e eeeond (and lut) child, Ralph NelllOn Elliott, was bom in Marysville three yean later on July 28, 1871. TIM! family then moved I few hundred milea .... t to Fairbury, Illinoill, a small and pfOllperoUll fanning oommunity about 100 miles lIOUthWetlt of Chicago, apparently a better loca- tion for a merchant. The femily lived on Elm Street, where El- liott .pent hil early childhood. By the end of ISSO, Elliott had moved with hie parente and .ieter to San Antonio, Te ..... During hie teen years, he learned to epeek end write Spanieh Ouently and developed a love for Mexico, the border of .... hic:h wall 150 miles to the IIO\lth. He vieited Mexico at timllB during hill youth and in fact lived there wben be was 15 to 16 yean old. ,. " R. N. EuK)tT'$ MAlITDfIOUS In 1891, at the age or 20, Elliott len home permanently to work on the railroads in Mexico at the heirbt of North America'. great railroad boom. Shortly thereafter, in the early 18908, his family moved to La. AngeIN, California, where hiA parente and lrister t<!mained for the rest. oftbeir livell. Elliott stayed in Mexieo thro\li:hQut hill early tw"ntiN, w}woe he .... uemp!oyed .... riooely .. a lineman, train di8Jlatcller, atenographer, telegraph opera- tor and at..tion qenL Around 1896, Elliott entered the accotlnting profeMion,· though by what educational path i" unknown. BecaWlOl he had already learned the indUlltl)' from the bottom up, he developed the specialty of railroad accounting. FO!' the followin, twenty- fivlll )'ean!l, ElIio" held l!JIO:!'Cutive poeitiOM with" Dllmber of 0;:0..... potation., primarily railroad companietl, in Mexico. Central America and Sou.th America (including Argentina and probably Chile), many of which wen! U.S.-owned. In hie three decadellllpent mOlltly in that region, Elliott be- came intimately familiar with .11 claue. of people. -Latin America ia a land ofextrllmea,· he later wrote in a manUKripL "Rich" and poverty, health and aickneM, enliihtenment and dirNt ignorance, virtue and vice rub lIhoulden continually, pre- IIf!nting conb'uta perhape u atrikiqu in any other partofthe ...... Id.· He colorfully deecribed IocallJtylee of Jiving that ~neeted great affluence and lUIUl}''' well u abject poverty and eQ.ua- lor, .. ~neeted by the following ucerptll: 'The wealthy L.tin American build.. ~If a palace, driveoo npenaive automobil_, pI.,. bri<J&e f.,.. a doll..-.,.. monla point, nee. hie tboroua:hbrede, and enjoya hi. eulUlive c1ube, hie -.II appoin!A!d born" and ita leviehly ee..-f table. Hie wife and cbildren are exquilitely druHd, and are denied nothing th.t mooey can buy; their Engli.h and French are Inothingl ehnrt of perfect.. Hie eountl')' houee will bout e ewimmin. bath, tennia eourta and landllc:.pe gardene, ao<l not infrequently e rae&-trac:1t and e IOlf COW'IIf!. Even (there,1 hie iUeeUlll'lI fur- niehed with the e ...... ebolee imported wi"'" and viande, eerved by perfectly trained domMtiCi. 'Some nHaJ'Chen mey dieeover libr..., ..-.:ll of e Mr. R.N. Elliott (F.C.A.) .. bo _ • stud,- r.,.. the lnotituta or Chartered Accountanta in Alntreli.a. '"'- reeonla refel'" In. different pe ........ ,.