Ending Diagonal

An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast," as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B-C formations. In double or triple threes (to be covered in Lesson 9), they appear only as the final "C" wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.

Ending diagonals take a wedge shape within two converging lines, with each subwave, including waves 1, 3 and 5, subdividing into a "three," which is otherwise a corrective wave phenomenon. The ending diagonal is illustrated in Figures 1-15 and 1-16 and shown in its typical position in larger impulse waves.

Figure 1-15

Figure 1-16

We have found one case in which the pattern's boundary lines diverged, creating an expanding wedge rather than a contracting one. However, it is unsatisfying analytically in that its third wave was the shortest actionary wave, the entire formation was larger than normal, and another interpretation was possible, if not attractive. For these reasons, we do not include it as a valid variation.

Figure 1-17

Figure 1-18

Figure 1-19

Although not so illustrated in Figures 1-15 and 1-16, fifth waves of diagonal triangles often end in a "throw-over," i.e., a brief break of the trendline connecting the end points of waves one and three. Figures 1-17 and 1-19 show real life examples. While volume tends to diminish as a diagonal triangle of small degree progresses, the pattern always ends with a spike of relatively high volume when a throw-over occurs. On rare occasions, the fifth subwave will fall short of its resistance trendline.

A rising diagonal is bearish and is usually followed by a sharp decline retracing at least back to the level where it began. A falling diagonal by the same token is bullish, usually giving rise to an upward thrust.

Fifth wave extensions, truncated fifths and ending diagonal triangles all imply the same thing: dramatic reversal ahead. At some turning points, two of these phenomena have occurred together at different degrees, compounding the violence of the next move in the opposite direction.

Figure 1-20

Figure 1-21 shows a real life example of a leading diagonal triangle. This pattern was not originally discovered by R.N. Elliott but has appeared enough times and over a long enough period that we are convinced of its validity.

Figure 1-21

The single most important rule that can be gleaned from a study of the various corrective patterns is that corrections are never fives. Only motive waves are fives. For this reason, an initial five-wave movement against the larger trend is never the end of a correction, only part of it. The figures that follow through Lesson 9 of this course should serve to illustrate this point.

Corrective processes come in two styles. Sharp corrections angle steeply against the larger trend. Sideways corrections, while always producing a net retracement of the preceding wave, typically contain a movement that carries back to or beyond its starting level, thus producing an overall sideways appearance. The discussion of the guideline of alternation in Lesson 10 will explain the reason for noting these two styles.

Specific corrective patterns fall into four main categories:

Zigzags (5-3-5; includes three types: single, double, and triple);

Flats (3-3-5; includes three types: regular, expanded, and running);

Triangles (3-3-3-3-3; four types: three of the contracting variety (ascending, descending, and symmetrical) and one of the expanding variety (reverse symmetrical);

Double threes and triple threes (combined structures).

Figure 1-22 Figure 1-23

In a bear market, a zigzag correction takes place in the opposite direction, as shown in Figures 1-24 and 1-25. For this reason, a zigzag in a bear market is often referred to as an inverted zigzag.

Figure 1-24 Figure 1-25

Occasionally zigzags will occur twice, or at most, three times in succession, particularly when the first zigzag falls short of a normal target. In these cases, each zigzag is separated by an intervening "three," producing what is called a double zigzag (see Figure 1-26) or triple zigzag. These formations are analogous to the extension of an impulse wave but are less common.

The correction in the Standard and Poor's 500 stock index from

January 1977 to March 1978 (see Figure 1-27) can be labeled as a double zigzag, as can the correction in the Dow from July to October 1975 (see Figure 1-28). Within impulses, second waves frequently sport zigzags, while fourth waves rarely do.

Figure 1-26

Figure 1-27

Figure 1-28

R.N. Elliott's original labeling of double and triple zigzags and double and triple threes (see later section) was a quick shorthand. He denoted the intervening movements as wave X, so that double corrections were labeled A-B-C-X-A-B-C. Unfortunately, this notation improperly indicated the degree of the actionary subwaves of each simple pattern. They were labeled as being only one degree less than the entire correction when in fact, they are two degrees smaller. We have eliminated this problem by introducing a useful notational device: labeling the successive actionary components of double and triple corrections as waves W, Y, and Z, so that the entire pattern is counted "W-X-Y (-X-Z)." The letter "W" now denotes the first corrective pattern in a double or triple correction, Y the second, and Z the third of a triple. Each subwave thereof (A, B or C, as well as D or E of a triangle — see later section) is now properly seen as two degrees smaller than the entire correction. Each wave X is a reactionary wave and thus always a corrective wave, typically another zigzag.