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Major trend is tiie overall long-term direction of the market. In Illustration 3-7 we used the Dow Jones weekly chart to give an idea of a long-term trend. In Chapter Four we will give an explicit rule and examples on how the Symmetry Wave Method determines the major trend. For now, we wish to contrast the retracement wave to the irenrl waves. trend is never straight up or straight down. Ihere are intervening retracements that adjust for any excess in price and allow the market lo stabilize. A small retracement could 1 for only a few minutes, and a large retracement could last for many months. This is an adjustment in time. The magnitude of a retracement is the adjustment in price. THE SYMMETRY WAVE METHOD CONCENTRATES ON THE MAGNITUDE OF PRICE ADJUSTMENT, THE RETRACEMENT. THE SIMPLICITY AND ELEGANCE OF THIS METHOD IS IN SINGLING OUT RFTRACEMENT WAVES OF SIMILAR MAGNITUDE AND GROUPING THEM UNDER THE SAME HEADING. The Symmetry Wave Method only attempts to group retracement waves; it is not important to group trend waves, nor does the method attempt to do so.

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Labelmgof VVfayes

Among so many waves in a trend, the purpose of the Symmetry Wave Method is to lift out the same size retracement waves and group ihem together - to match apples to apples and oranges to oranges.

Four levels of hierarchy, or grouping of similar-sized waves, is usually the most a trend will develop. Therefore, four levels of hierarchy have been created. If a market develops in more than four sets of symmetrical waves, then more labels couldbe created as needed All the labels for the different sets of symmetrical waves are numerical. The bigger waves are labeled with the higher hierarchical numbers, level one being the highest.

These are the labels to be used for grouping similar magnitudes of iGlracemeni waves:

Level One (D, (ID, (HI), (IV), (V), (VI), (Vil), (viii), (IX), (X), (XI) level Two I, II. Ill, IV. V, VI. VII, VIII, IX, X, XI Level Throe (1), (7), 0), (4), , (6), (7!, (8), (9). (10), (11) Level lour 1, 2, 4, 5, 6, 7, 8, 9, 10, 11

rhe grouping of waves and the beading under which a set of retracement waves are assigned is relative to the other sets of symmetrical waves. The set of symmetrical waves in Illustration 3-2 has been assigned 1,2,3, 4, 5, and 7, I hry could have been assigned any of the other labels to indicate that these waves are similar in magnitude. The important point is the proper grouping of retracement waves and not the labels assigned to identify them.

As a market unfolds, waves will expand and subdivide causing reassignment of hiearc hy, but the grouping of the waves will remain the same. Lbing the same charts tn illustrations 3-2 and 3-3, we will subdivide wave 3; this will compel us to assign the lowest hierarchy labels to the newly created set of symmetrical vaves. The second level hierarchy label is assigned to the bigger set of symmetrical waves (see Illustrations 3-8 and 3 9).

Symmetry Waves

Illustration 3-8

Symmetry Wave.s

Illustration 3-9

Waves of any degree in any series can be subdivided and re-subdivided into symmetrical waves of lesser degree. In Illustration 3-1 OA, an uptrend starts with a big retracement. In anticipation ofsmaller sets ofsymmetrical waves developing, we assigned to the first retracement hierarchy Level Ttiree, which is I and II. Later the market develops a smaller retracement wave (2), which then is followed by even a smaller retracement wave 2, At this juncture three sets of different-sized symmetrical waves are developing. As the market unfolds, each set has a corresponding symmetrical wave (see Illustration 310B).

ustraiion 3-1 OA

Symmetry wave pattern with smatier symmetry wave patterns in between.

Illustration 3-10B

Ju St as markets can subdivide into smaller sets of symmetrical waves, conversely a market can expand into bigger sets of symmetrical waves. As the chart in Illustration 3-1 OB continued to develop and the previous three sets of symmetrical waves were completed, the market (>xpanried into a bigger set of symmetrical waves (t), (II) and (III) (see Illustration 3-11).

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Illustration 3-11

In this section we are not trying to illustrate the proper labeling of the waves, but rather to eslabi ish the proper way to group waves, in the next few illustrations we will not label the waves using the Symmetry Wave Method. Note that waves that are groirped together do not have to be exactly the same size, but they need to be similar in size. The rule that applies here Is that for two waves to be considered symmetrical, their magnitude must be within 20% of each other. The next two examples illustrate how this rule can be misused.

Assume the first retracement wave in Illustration 3-12A is 40 points. According to the 20% rule, if the next retracement is 32 points, we have symmetry between the first and second retracement- Now, look what happens to the third retracement if we make it 20% bigger than the first retracement {see illustration 3-12B). This entire pattern, even though it is within the limits of the 20% rule, is not symmetrical; therefore, we need to establish more rules in order to make the Symmetry Wave Method more scientific. To make itfully scientific, however, would require too many rules. The key Is building in enough structure to strike a balance between the art and the science. The art aspect will be conveyed to you by numerous examples over the next few chapters. However, on the next page are two more rules to help us group retracements more scientifically. Remember, the guiding scientific principle is to match the same magnitude of • waves, while the art is to train your eyes to see the matching waves without calciJIating.