Structure

• W5 will always have 5 sub-waves
• W5 is prone to truncation.  
  • When truncated, W5 fails to push beyond the pivot of Wave 3.  This happens more frequently when W3 was particularly strong.
  • Truncated W5 are actually pretty rare.  It is far more likely that you either have mislabeled wave 3 (it is actually wave 5 and you are currently in wave B of the correction) or that you have a complex W4 ongoing and you are in Wave X and have not yet reached W5. 
  • Truncation typically appears as 3 waves then a  sideways movement, which can help differentiate if from a complex correction. 
• When wave 5 is extended, expect a double retracement.  First is over the extended portion, down to around W4 of the extended wave then the second retracement over the rest of the previous wave, down to the primary W4.
• Indicator Divergence -- Wave 5 almost always presents with indicator divergence. One costly error is to close a trade because of indicator divergence when it is not confirmed by price. You must let price, and perhaps an MA cross over signify when the move is done.

Prediction

• There are numerous methods to project the length of the 5th wave. Using clustering of them all provides some much needed insight into the probabilities.:
  • Wave 5 = Wave 1
  • Wave 5 = .618 or 1.618 of Wave 1 + Wave 3
  • Wave 5 = Wave 1 (100%)
  • Wave 5 = 1.382 or 2.00 of the Wave 4 move
  • Wave 5 = 1.382 or 1.618 of the swing prior to W1.
• When truncation occurs it signifies that the market is ready to move in the opposite direction, and early.  There is a sharp, swift, move in the opposite direction.  Almost a straight line.   As one might expected, truncation usually predicts a much longer Wave A in the correction.
• When wave 5 is extended, the most common multiple for its length is 1.618 times the length of wave 1 through wave 3.

Notes