Elliot wave analysis is all about understanding the herd mentality. The graphical charting of all up and down moves(optimism and depression) in the stock market follow certain set patterns which are repeated over and over again in all time frames.
Elliot in formulating his thesis depended highly on Fibbonacci theory of numbers. These numbers or ratios are found everywhere in nature , and according to elliot , in the graphical patterns in the stock markets .
According to Elliot it is not just the stock markets but the whole physical existence along with the herd THINKING and its changing forms follow the above patterns. So in a way he included all happenings in the world as we know it (war, famine, pandemics, etc) in his elliot wave theory , in which the graphical display of any MASS followup of anything (eg:the stock markets), can form the barometer, thermometer or whatever analogy you want to give it, of the general flow of events in the world.
Whatever the veracity of above, the markets do follow the elliot wave theory WITHIN A RANGE OF POSSIBILITIES
Below is the simple display of the graphical representation of the elliot wave theory
Now the below 5 wave structure can form the part of another LARGER 5 wave structure as shown below. In this case the above 5 wave structure becomes the wave 1 of the new structure as shown below-
Now this 5 wave structure is part of a bigger wave 1 (encircled)
This LARGER wave will now correct in 3 waves A, B and C as shown below
Now from C we start the next impulsive 5 waves as shown below
Now from the encircled wave 3 we have another wave 4 (encircled ) down and then the final wave 5 . This process is repetitive and is shown below
Now consider the nifty structure below
Nifty is at present completed its 5 MAJOR waves and now is onto its corrections.
The huge move post covid is taken as a wave D of a 5 wave corrective triangle.
We have 3 alternative counts. The 1st two prefered counts are given in red and light blue.
The count in red assumes the top is already made and we should progressively move downwards
The count in light blue will have the markets move down in short term and then move up in the diagonal drawn has still to move near the all time time high before falling into the bear run.
There is a third count too. In this the diagonal up is taken as the start of the 5TH WAVE BULL RUN(Diagonal will be the 1st wave which will correct but not go below the low marked as ‘A’ in red . This possibility we can see later when the time comes.
Right now in all the 3 above possibilities, the markets will correct IN ANY CASE.
The minimum correction is till 14930 (This can happen after the thursday expiry)
The nature of the correction will show us which wave count to make the most preferred one.