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.They are almost always zigzags (single, double or triple); occasionally they are double threes that begin with a zigzag.Sideways corrections include flats, triangles, and double and triple corrections.They usually include a new price extreme, i.e., one that lies beyond the orthodox end of the preceding impulse wave.In rare cases, a regular triangle (one that does not include a new price extreme) in the fourth wave position will take the place of a sharp correction and alternate with another type of sideways pattern in the second wave position.The idea of alternation within impulses can be summarized by saying that one of the two corrective processes will contain a move back to or beyond the end of the preceding impulse, and the other will not.Figure 2-1Diagonal triangles do not display alternation between subwaves 2 and 4.Typically they are both zigzags.Extensions are an expression of alternation, as the motive waves alternate their lengths.Typically the first is short, the third is extended, and the fifth is short again.Extensions, which normally occur in wave 3, sometimes occur in wave 1 or 5, another manifestation of alternation.Alternation Within Corrective WavesIf a large correction begins with a flat a-b-c construction for wave A, expect a zigzag a-b-c formation for wave B(see Figure 2-2), and vice versa (see Figure 2-3).With a moment's thought, it is obvious that this occurrence is sensible, since the first illustration reflects an upward bias in both subwaves while the second reflects a downward bias.19Quite often, if a large correction begins with a simple a-b-c zigzag for wave A, wave B will stretch out into a more intricately subdivided a-b-c zigzag to achieve a type of alternation, as in Figure 2-4.Sometimes wave C will be yet more complex, as in Figure 2-5.The reverse order of complexity is somewhat less common.Figure 2-2Figure 2-3Figure 2-4Figure 2-5Lesson 11: Forecasting corrective wavesDepth of Corrective Waves (Bear Market Limitations)No market approach other than the Wave Principle gives as satisfactory an answer to the question, "How far down can a bear market be expected to go?" The primary guideline is that corrections, especial y when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.20Example #1: The 1929-1932 Bear MarketThe chart of stock prices adjusted to constant dollars developed by the Foundation for the Study of Cycles shows a contracting triangle as wave (IV).Its lows bottom within the area of the previous fourth wave of Cycle degree, an expanding triangle (see chart below).Example #2: The 1942 Bear Market LowIn this case, the Cycle degree wave II bear market from 1937 to 1942, a zigzag, terminates within the area of Primary wave [4] of the bull market from 1932 to 1937 (see Figure 5-3).Figure 5-3Example #3: The 1962 Bear Market LowThe wave [4] plunge in 1962 brought the averages down to just above the 1956 high of the five wave Primary sequence from 1949 to 1959.Ordinarily, the bear would have reached into the zone of wave (4), the fourth wave correction within wave [3].This narrow miss nevertheless illustrates why this guideline is not a rule.The preceding strong third wave extension and the shallow A wave and strong B wave within [4] indicated strength in the wave structure, which carried over into the moderate net depth of the correction (see Figure 5-3).21Example #4: The 1974 Bear Market LowThe final decline into 1974, ending the 1966-1974 Cycle degree wave IV correction of the entire wave III rise from 1942, brought the averages down to the area of the previous fourth wave of lesser degree (Primary wave[ 4]).Again, Figure 5-3 shows what happened.Our analysis of small degree wave sequences over the last twenty years further validates the proposition that the usual limitation of any bear market is the travel area of the preceding fourth wave of one lesser degree, particularly when the bear market in question is itself a fourth wave.However, in a clearly reasonable modification of the guideline, it is often the case that if the first wave in a sequence extends, the correction following the fifth wave will have as a typical limit the bottom of the second wave of lesser degree.For example, the decline into March 1978 in the DJIA bottomed exactly at the low of the second wave in March 1975, which followed an extended first wave off the December 1974 low.On occasion, flat corrections or triangles, particularly those following extensions (see Example #3), will barely fail to reach into the fourth wave area.Zigzags, on occasion, will cut deeply and move down into the area of the second wave of lesser degree, although this almost exclusively occurs when the zigzags are themselves second waves."Double bottoms" are sometimes formed in this manner.Behavior Following Fifth Wave ExtensionsThe most important empirically derived rule that can be distilled from our observations of market behavior is that when the fifth wave of an advance is an extension, the ensuing correction will be sharp and find support at the level of the low of wave two of the extension.Sometimes the correction will end there, as illustrated in Figure 2-6
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