Table Of ContentNo truth has found greater universal acceptance than that the universe is governed by law. It is
obvious that without law there would be chaos, and where there is chaos, there is nothing.
Navigation, chemistry, aeronautics, architecture, radio transmission, surgery, music - no doubt the
full range of arts and sciences - everything, interacting with animate and inanimate objects, obeys
the law, because nature herself acts in the same way. Since the distinguishing feature of the law is
precisely the established order or constancy, it follows that everything that happens will be repeated
and can be predicted if we know this law.
Columbus, who claimed the earth was round, predicted that a westward course from Europe might
eventually bring his ships to land, and despite the scoffers even among his own crew, he saw his
prediction come true. Galei, having calculated the orbit of his comet in 1682, predicted its return,
which was remarkably confirmed in 1759. Marconi, after studying the transmission of electrical
vibrations, predicted that sound could be transmitted wirelessly, and today we can sit at home and
listen to music and other programs from across the ocean. These people, as well as countless others
in various fields, studied the pattern. After its publication, the forecast was a matter of technology,
as it became mathematical.
Even when we do not understand the underlying cause of a particular phenomenon, we can predict,
based on observations, that the phenomenon will recur. Day after day for many thousands of years
people waited for the sun to rise at the appointed time before the reason for this result was known.
The Indians associated the beginning of their months with each new moon, but even today they
cannot to say why regular intervals are the hallmark of this heavenly sign. The spring planting of
seeds is proof of the cyclical nature of the world, as summer is expected to be the next season; but
how many farmers understand why they are afforded such constancy of the seasons? In each
example given, the rhythm of a particular phenomenon was used.
Man is a natural object no less than the Sun or the Moon, and his activity, expressed in the language
of numbers, is also the subject of analysis. Human activity, though striking in its essence, when
viewed from the point of view of rhythmic processes, contains an accurate and understandable
answer to some of our most stupefying problems. Moreover, since a person is a participant in the
rhythmic process, the predictions made in connection with his activities can extend far into the
future with justification and reliability previously unattainable.
A very far-reaching study in the field that falls under the definition of human activity has shown that
practically the entire course of development, which is the result of our socio-economic activity,
follows a certain law that causes the results to repeat themselves in the form of similar and
invariably recurrent sequences of a certain set of waves or impulses. the established form.
Moreover, it showed that these waves or impulses in their depth carry a stable relationship with
each other and over time. To demonstrate and explain this phenomenon in the best possible way, it
is necessary to take some example from the field of human activity, which will provide a lot of
reliable data, and for this purpose there is nothing better than the stock exchange.
Particular attention was paid to the stock market for two reasons. Firstly, there is no other field in
which forecasting has been attempted with such great intensity and with such little result.
Economists, statisticians, technicians, rulers and bankers have all attempted to predict the future of
New York Stock Exchange prices. Undoubtedly, a certain field of activity has appeared, aimed at
predicting the market. Although 1929 has come and gone, the reversal from the largest bull market
known to the largest bear market known took almost all investors by surprise. For leading
investment firms that spend hundreds of thousands of dollars annually on market research, this was
a surprise, and they suffered millions of dollars in losses due to stock price drops held for too long.
The second reason for choosing the stock market as a demonstration of the wave impulses common
to any socio-economic activity is the large profit that accompanies a successful market forecast.
Even an occasional success in a single market forecast will pay off with slightly less than fabulous
wealth. For example, in the market move from July 1932 to March 1937, the average rise of thirty
leading and exemplary stocks was 337%. However, during this five-year move, there were individual
stocks whose percentage gains were much higher. Finally, the overall growth mentioned above is
not the result of a straight-line move, but a series of up and down steps or zigzags lasting several
months. These smaller moves present an even bigger profit opportunity.
Despite the attention given to the stock market, the success both in the accuracy of predictions and,
moreover, in the attendant rewards, was inevitably accidental, because those who tried to work
with market movements failed to realize the extent to which the market is a psychological
phenomenon. They did not understand the fact that there is a pattern underlying the fluctuations of
the market, or, in other words, price movements are the result of rhythms or an ordered sequence.
Thus, those with some experience in the matter are well aware that market predictions lack the
validity or significance of any sort other than random.
But the market has its own law, just like other entities in the universe. If there were no law, then
there would be no axis around which prices could circulate, and, consequently, there would be no
market. Instead, there would be daily sequences of spontaneous, erratic price fluctuations with no
cause or apparent order. However, as will be shown later, careful market research proves that this is
not the case. Rhythmic, systematized, adjusted and harmonious movements will be highlighted. This
unknown law of the market can only be discovered when the market is viewed from an appropriate
angle and then analyzed using this method. Just imagine that the stock market is a human creation
and therefore reflects human characteristics. In the following pages this law or rhythm to which man
obeys will be revealed as the movements of the market, changing according to a certain wave
principle.
The wave law is a phenomenon that has always functioned in every branch of human activity. Waves
of different levels (degrees) developed regardless of whether
whether or not there was a mechanism for their registration. When a similar mechanism, described
in the line below, was available, the wave patterns would emerge and become visible to the trained
eye.
A. Extensive commercial activities represented by corporations whose ownership is widespread
(covering the general population*).
B. A general market where the buyer and seller can interact quickly through their representatives.
C. Reliable recording and publication of transactions (transactions).
D. Availability of relevant statistics on all matters relating to corporations.
E. The extremes (high and low) of the daily range (prices*) charted in a way that will reveal all levels
of waves as they form.
Daily range (price*) recording of stock transactions was introduced in 1928, and hourly recording in
1932. All this is necessary to observe waves at minor and minute levels, especially in fast markets.
Contrary to the doctrine of the Dow Theory, a popular method for evaluating stock market
movements, "Law of Nature" does not require confirmation for two stock indices. Each index, group
(stock*), stock or any other human activity is interpreted by its own waves.
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FOOTNOTE (hereinafter R. Prechter's comments)
(1) Except for minor modifications, this introduction is in accordance with Chapter I of the Wave
Principle.
Chapter I. The Great Pyramid of Giza
Many years ago I tried to figure out the meaning of the word "cycle", but no one could define it.
Curiosity led to the study of charts and I discovered rhythm in change (prices*) (described in my
work published in 1938 (The Law of Waves*)). Later I discovered that the basis of my discoveries was
the law of nature known to the designers of the Great Pyramid of Giza, which was probably designed
five thousand years ago.
[Apparently, we are talking about the pyramid of Cheops, the first and largest pyramid on Earth,
located in the Giza Valley, Egypt. Giza (Gizeh) - an area on the left bank of the Nile, almost opposite
Cairo, famous for the field of pyramids. Here are the three largest pyramids (called the Great),
belonging to the pharaohs Cheops, Khafre and Menkaure, and several smaller pyramids. The
construction of the Great Pyramids was completed in 2590, 2550, 2505. BC. respectively, but the
author speaks of only one of them.*]
Several pyramids exist in Egypt and the rest of the world, but the Pyramid of Giza is the first of its
kind and is the only one to display symbolic figures. The remaining pyramids were built later and
served as a crypt for the bodies of kings and their families. Back in 820 BC. The Turkish caliph Al
Mamoun mistakenly believed that the Giza pyramid hides the bodies of former pharaohs and that
gold treasures could be found there. This confirms that even at that distant time, the symbolic
figures of the pyramid at Giza were not known. The period of designing this pyramid took place not
only before the emergence of literature, but also before the emergence of hieroglyphs (i.e. Egyptian
writing*). On other pyramids outside the Giza Valley, hieroglyphs are already present.
Enormous funds have been spent on the study of these symbols, especially in the last fifty years.
Their interpretation is extraordinarily accurate, as far as modern knowledge allows their
understanding. Much of this knowledge is relatively recent and shows that these scientific symbols
embodied in the Giza pyramid must be of a supernatural nature, or that there was a previous
civilization equal to or superior to the modern one in terms of its level of development. It is possible
that a highly developed civilization was previously located in the Western Hemisphere, mainly from
Mexico to Argentina. The Bible mentions giants, and not so long ago were found
jaws of giants that could reach a weight of four hundred or five hundred pounds (150..220 kg *).
(one)
As far as I can tell, Egyptologists have overlooked some important symbols contained in the Great
Pyramid, such as the ratio of height to base of the pyramid of 61.8% and the height of the pyramid in
inches of 5813. (Note the numbers 5, 8, 13 mentioned below in numerical sequence.) The unit of
measurement in Egypt was and remains the “inch”, which is also known to us at the present time.
The contour of the side is something like a cycle (closed contour *), i.e. 3 lines; the pyramid has 5
surfaces, four above the ground and one - the base; 8 lines are visible from the top; sum of lines and
surfaces: 13.
Fibonacci, an Italian mathematician of the thirteenth century, visited Egypt and upon his return
discovered the following sequence of numbers: 1 2 3 5 8 13 21 34 55 89 144 ... The sum of any two
adjacent numbers is equal to the next, for example, 5 + 8 = 13. The ratio of any number to the next
equals 61.8% (the ratio of the numbers at the beginning of the series gives a slightly different result).
Therefore, the ratio of the height to the base of the Great Pyramid gives us a ratio that establishes
order in the entire sequence.
The seeds in a sunflower are arranged in curved lines that intersect with each other. The largest
number of crossings is 144. In addition, the same number of Minor waves make up a complete cycle
in the stock market (bull and bear markets). (This fact is discussed in detail in Chapters 2 and 4. See
Figure 7.*) Numbers from this sequence are present in the human body, botany, manufacturing,
animals, music, and waves reflecting the result of human activity, including the stock market.
Pythagoras, a Greek philosopher of the fifth century BC, visited Egypt and upon his return discovered
the diagram and inscription presented in Chapter 2 (Fig. 1*).
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FOOTNOTE
(1) Undoubtedly, it is very convincing to be otherwise!
Chapter II. Law of nature
The law of nature was known at least five thousand years ago. By about 1500 BC, Egypt, the
oldest of the modern states, was in the prime of its powers. It is not known when the Egyptian
pyramids were built. But the Great Pyramid of Giza was designed at least five thousand years
ago. Some scholars suggest that it existed before the threat of a worldwide flood that forced
Noah to build the ark. Others believe that it may be thirty thousand years old.
In Life magazine (December 3, 1945) there was a very interesting article called "Building the
Great Pyramid." Mr. Bel Geddes prepared examples of different stages of construction and
presented their sketches. The report was prepared for Encyclopedia Britannica. It says the total
weight of the building materials used is 3,277,000 tons, while the materials used in the Empire
State Building, the tallest building in the world, weigh only 305,000 tons.
The amazing ingenuity, craftsmanship, time and labor expended by the designers and builders of
these pyramids in erecting an eternal symbol demonstrate the greatest significance of the
message that they wanted to convey to posterity. This was a historical period before the
emergence of literature and hieroglyphs, therefore, symbolic numbers were the only means of
recording.
For centuries, the Egyptian pyramids have been thoroughly studied, especially in recent years.
But as far as I understood, the Egyptologists missed an important, perhaps the most important
symbol. I'm talking about the outer lines of the Giza pyramid.
Pythagoras (Pythagoras) was a celebrated Greek philosopher of the fifth century BC. Old
encyclopedias give a detailed description of his activities. Encyclopedia Britannica gives a
diagram and a cryptic inscription that may be the only record he left. It was made upon his
return to Greece after a long journey to Egypt. The diagram and the inscription (Secret of the
Universe *) are shown in Figure 1. It is logical to assume that the Pythagorean diagram refers to
the pyramid.
he following initial dimensions of the Great Pyramid of Giza have been established: the base is
783.3 feet, the height is 484.4 feet, their ratio is 61.8%. A height of 484.4 feet equals 5813 inches
(5-8-13 Fib).
Looking at the pyramid from one of its four sides, 3 lines are visible. The diagram in Figure 2 is a
complete cycle. Looking at the pyramid from one of its four corners, 5 lines are visible, as shown
in Figure 3. The pyramid has 5 surfaces - four above the ground and the base. From its top, the
pyramid opens 8 lines, as shown in Figure 4.
Fibonacci was an Italian mathematician of the thirteenth century AD. At that time he was better
known as Leonardo de Pisa. He visited Egypt and Greece, and on his return to Italy he discovered
what is now known as the arithmetic progression (the Fibonacci sequence*). Here is the
sequence: 1 2 3 5 8 13 21 34 55 89 144…
The sum of any two adjacent numbers is equal to the next number, for example, 5 + 8 = 13. Any
number divided by the next gives a ratio of 0.618, for example, 8 / 13 = 0.618. Any number
divided by the previous one gives the reciprocal of 1.618 (the ratio of the numbers at the
beginning of the series is not entirely accurate, but close enough for practical purposes). For
simplicity, I'll refer to the first value as 0.62 and the last as 1.62.
Note that the first five numbers of the Fibo sequence 1, 2, 3, 5 and 8 are present on the detailed
pyramid chart.
The recently deceased Jay Hambidge, an American artist, traveled to Egypt, Greece and Italy and
wrote some very significant and interesting books. I will quote pages 27 and 28 of his book
entitled A Practical Application of Dynamic Symmetry.
“Botanists use the sunflower flower as one of the common illustrations of the law of leaf
arrangement. It is a phenomenon especially in two-dimensional form. Seeds are distributed
around the circle of the sunflower in diamond-shaped cells, and the combination of these cells
forms a pattern of interesting curved lines, somewhat similar to an old carving Sunflower.
Firstly. The arcuate line itself is a curve of a certain kind. In fact, it is exactly like the growth line
of a sea shell. It has a regular shape and has certain mathematical properties. These properties
are the necessary result of a single form of growth, as will now be shown.
Secondly. If the arcuate lines are counted, then on an ordinary sunflower five or six inches in
diameter, 89 such lines can be found. Twisting in one direction - 55 lines, and twisting in the
other direction - 34. That is, an ordinary flower shows 55 lines intersecting 34 lines. We write
down two numbers 34 + 55. Below the topmost flower on the stem, there are usually flowers of
the second level, smaller in size. As a rule, the number of intersecting lines they have is 21 + 34.
Even lower along the stem, flowers of the third level, which have grown last, can be located. The
number of intersecting curves they have is 13 + 21.
In Oxford, England, plants are fertilized to produce unusually large sunflowers, and the number
of crossed arcs has increased from 34 + 55 to 55 + 89. Professor Arthur H. Church, the new
leading authority on this fascinating subject, told us about the giant sunflower specimen grown
in Oxford, which had 89 + 144 intersecting curves.
In the classification of plants, along with many flower heads, flowers are adjacent to grains, in
which intersecting lines in the inflorescence are also visible. Usually their number corresponds to
5 + 8.
If we start counting the actual number of leaves on the stem from the bottom of the plant up to
the flower head, going around the stem, we will find ourselves bypassing a certain number of
leaves before we reach located directly above the first. This number of leaves and the number of
trips around the stem are constant between each pair of leaves directly on top of each other.
These numbers will be in the same sequence as the numbers shown by sunflowers and flowers.
The numbers that we mentioned belong to an arithmetic progression, since each member of the
sequence is represented by the sum of the previous members of the given series, in our case 2.
This series of numbers is: 1, 2, 3, 5, 8, 13, 21, 34, 55 , 89, 144, etc. Each member of this sequence
is obtained by adding the two previous numbers.
If we take any two (adjacent*) members of this progression and divide one by the other, say 55
by 34, then we get a certain coefficient, and this coefficient is a constant value for the whole
sequence; that is, any number of this series, divided by the number immediately preceding it,
will give the same coefficient. This coefficient is 1.618 with an infinite fraction. If we do the
reverse operation and divide 34 by 55, we get the number 0.618 with an infinite fraction.
Further, it will be noted that these two results differ by one.
In addition, it will be noted that when performing these two division operations, there is a slight
error. This is due to the fact that this sequence is not entirely accurate for integers. A small
fractional part should have been included. Despite this margin of error, in the case of plant
observations, integers are retained to facilitate comparison.
It is an exceptional coincidence that the ratio of 1.618 or 0.618 completely captivated the
ancient Greeks. Exceptional, because they might not have assumed that this coefficient is
related to the architecture of plants. They called it a special and excellent proportion.
In the Middle Ages, it was called the Divine Section, and more recently, the Golden Section.”
Through experience, I have found that 144 is the largest number of practical value. In a complete
cycle of the stock market, the number of Minor waves is 144, as shown in the table below and in
Figure 7 (Ch4):
Number of waves Bull market Bear market Total (complete cycle)
Primary level 5 3 8
Intermediate 21 13 34
Secondary level 89 55 144
All numbers belong to the Fibonacci series and the entire sequence is used. The wavelength may
change, but not the number. Pay attention to the Fibo numbers in the following areas:
-the human body follows the numbers 3 and 5. 5 branches depart from the torso - the head, two
arms and two legs. Each arm and leg is divided into 3 parts. The legs and arms end in five fingers.
The fingers (except the big toe) are divided into three parts. We have 5 senses.
- a monkey has the same structure as a person, except that her big toe is the same as on her
hand. In most animals, 5 branches depart from the torso - a head and four paws, only 5. In birds,
5 branches depart from the body - a head, two paws and two wings.
-Music: The best example is the piano keyboard. "Octave" means eight. Each octave consists of 8
white keys and 5 black keys, for a total of 13.
-Chemical Elements: There are about 89 basic elements.
-Colors: There are 3 primary colors. Mixing them gives the rest of the colors.
Various observations
The Western Hemisphere consists of 3 regions: North, Central and South America.
There are 21 republics in the Western Hemisphere, each of which is a member of the Pan-
American Union. There are 3 countries in North America: Canada, Mexico and the United States.
In South America there are many republics and three European colonies, 13 in total. In Central
America (the former Panama Canal) there are 5 republics.
The original United States consisted of 13 states. They are currently divided into 55
administrative divisions: 48 states, the District of Columbia, the Philippines, the Panama Canal
Zone, Puerto Rico, Alaska, the Hawaiian Islands, and the Virgin Islands.
The Declaration of Independence has 56 signatures. The original number is 55. The last one was
added later.
The main branches of the Federal Government: 3.
The largest salute in the Army: 21 guns.
Voting age: 21 years.
The Bill of Rights contains 13 clauses.
National flag colors: 3.
The Axis countries consisted of 3 partners. Germany swallowed up 13 countries in rapid
succession, but stalled at the fourteenth, Russia. Mussolini was dictator for 21 years.
in 1852 Squadron Commander Perry made a courtesy visit to Japan and urged the "Son of
Heaven" to break the absolute isolation. In 1907, 55 years later, Japan seriously threatened the
United States. In 1941, 34 years later (and 89 years after 1852), Japan attacked Pearl Harbor.
The Washington Monument in Washington, DC (the first stone was laid on July 4, 1848):
[For clarity, I will give here a photo from the Internet *]
Washington Monument.
The total cost is $1,300,000 (13 Fibo).
The height of the spire is 500 feet (5 Fib).
The height of the base of the monument is 55 feet (55 Fib).
The area of the base of the spire is 55 square feet (55 Fib).
The top of the spire is 34 feet (34 fibos).
Foundation steps - 8 (8 Fibo).
Windows (two on each side) - 8 (8 Fibo).
Chapter III. Human activity
The term “human activity” (1) includes such categories as stock and bond pricing, patents, the
price of gold, population size, population migration from cities to the countryside and vice versa,
commodity pricing, government spending, industrial production, life insurance, electricity
generation, gasoline consumption, fire damage, stock exchange membership costs, epidemics,
and real estate. The main category of interest to us is the price of shares. Everyone in this
category can be understood, at least to some extent.
Prepare for a "black day". For long-term growth, for example, in areas such as construction of
buildings, the preservation of residential complexes, roads, bridges, factories, houses, etc. a
cyclical downturn is to be expected with low prices for both workers and employers.
Fluctuations in economic well-being are inevitable like the rotation of the Earth.
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FOOTNOTE
(1) See the charts in the last chapter of The Wave Principle.
Chapter IV. Characteristic features of human activity
All human activity has three characteristic features - shape (pattern), time and proportion - each
of which adheres to the Fibonacci numerical sequence. Once the waves are recognizable, this
knowledge can be applied to any movement, as the same rules apply to the prices of stocks,
bonds, grain, cotton, coffee, and any other activity mentioned earlier.
The most significant of these three factors is the shape (model*, pattern). Some model is always
in the process of formation. As a rule, but not always, the researcher is able to imagine in
advance the appearance of the model. This possibility is provided by the type of the predecessor
model. See Chapter 8 “Alternating”.
The ideal cycle chart for the stock market is shown in Figures 5, 6, and 7. Initially, it is subdivided into
a bull market and a bear market. Figure 5 subdivides a bull market into five waves of the Primary level
(Major (1)), and a bear market into three waves of the Primary level (Major). The bull market chart in
Figure 6 subdivides the waves [1, [3] and [5] of the Primary level (Major) for five waves of the
Intermediate level (Intermediate) each. Figure 7 subdivides Intermediate waves 1, 3, and 5 into five
Minor waves each.
In Figure 5, the bear market is subdivided into three waves of the Primary level (Major), denoted by
the letters [A], [B] and [C]. In Figure 6, down waves [A] and [C] are subdivided into five waves of the
Intermediate level. The ascending wave [B] is subdivided into three waves of the Intermediate level.
In Figure 7, these Intermediate waves are subdivided into five Minor waves.
In other words, a bear market is an inverted bull market, except that a bear market has three Major
down waves while a bull market has five Major up waves. Corrections in both bullish and bearish areas
are the most difficult to study.
Since the discoveries described here have no analogues, it is necessary to introduce new terms. In
order to explain the patterns and the terms associated with them, the corresponding ideal charts for
various wave levels will be shown. Expression "wave levels" ("degree") has a related meaning here, so
to speak. For example, the “Primary” level (“Major”) is associated with the waves in Figure 5. The
“Intermediate” level (“Intermediate”) is associated with the waves in Figure 6. The “Secondary” level
(“Minor”) is associated with the waves shown in Figure 6. 7. See Chapter 2 for the number of waves.
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FOOTNOTE
