Ralph Nelson Elliott (1871–1948) developed the Elliott Wave Theory of stock market behav...

Ralph Nelson Elliott (1871–1948) developed the Elliott Wave Theory of stock market behavior. See problems 41 and 42. Many Internet resources are available for information, examples, and tutorials on the fluctuations in the stock market. Research the Elliot Wave Theory by using search keywords “Elliott Wave Theory” on the Internet. Write a report that explains the theory. Be sure to answer the following questions in your report. What are the basic concepts of the theory? How are the Fibonacci numbers related to the theory? Has the theory been useful in predicting stock market trends? What are the drawbacks of the theory?

Problem 41 & 42:

The Elliott Wave Principle was developed in the 1930s, when it was observed that the upward and downward swings in the stock market occurred in repetitive cycles linked to the emotions of investors. Elliott noticed the Fibonacci numbers generally occurred in the upward waves (impulses) and the downward waves (corrections). The basic pattern is that there tend to be five waves in one direction followed by three corrective waves in the opposite direction, and there can be waves within waves. For example, notice the Fibonacci numbers represented in the following waves. There are five impulse waves labeled 1 through 5, and there are three correction waves labeled a, b, and c.

41. Consider the following stock market cycle. Identify the Fibonacci numbers represented by the impulse waves, correction waves, and waves within waves.

42. Consider the following stock market cycle. Identify the Fibonacci numbers represented by the waves and waves within waves.