How to Use NEoWave’s Rule of Reverse Logic

UPDATED ON 9/9/24: Glenn Neely presented 2 educational webinars on Wave forecasting for Bitcoin. He focused on teaching viewers how to use the Rule of Reverse Logic to review multiple scenarios and select the one, most probable, wave count. This article follows his first webinar, presented on March 12, 2023. He continued this discussion and presented his updated NEoWave forecast for Bitcoin in his July 21, 2024, webinar. CLICK HERE to watch this highly informative webinar ($19), which addresses NEoWave’s Rule of Reverse Logic, diametrics, symmetricals, expanding triangles, monowaves, the Middle Markings concept, and more!

Follow these steps to learn how to use the Rule of Reverse Logic – a useful NEoWave technique to review multiple Wave counts and determine the most probable forecast.

In early 2023, I presented an in-depth webinar showing how I arrived at Bitcoin’s long-term forecast using NEoWave (advanced Elliott Wave). In that live webinar, hundreds of attendees watched in real-time as I evaluated multiple wave counts – some bullish, some bearish – to determine the most probable forecast.

If you conduct Wave forecasting, you know it’s not unusual to arrive at conflicting bullish and bearish forecasts. How do you drill down to the ONE most likely scenario, so you can trade that market? Using a NEoWave-specific technique, there’s a way to manage this challenge, which I’ll discuss in a just a bit.

In the webinar, I reviewed 16 different counts, eliminated those with structural issues, and culled to the point of having ONE solid forecast.

Elliott Wave & Bitcoin: An odd couple – or a match made in heaven?

Let’s step back just a bit. I avoided doing Wave analysis on Bitcoin for years, because the Wave structure was extremely complicated. Until fairly recently, it seemed almost impossible to figure out. I actually wondered if Bitcoin would not follow Wave theory. I wondered if it was one of the rare markets that simply would not adhere to Wave theory concepts.

This nagging thought was somewhat surprising to me. When I first heard about cryptocurrency I thought this could be the best market in the world for Wave theory, because it was manmade and purely psychological. However, from a Wave forecasting standpoint, this market has been mercurial. I could not figure out what was going on.

In the last year or two, evidence started to emerge that some complex, unusual Wave patterns were developing. So, I got more comfortable with applying Wave theory to Bitcoin – the world’s largest cryptocurrency – and I now have a fairly clear idea of what’s going on.

Due to Bitcoin’s complex structure, I came up with multiple Wave count possibilities. In fact, I came up with more than 16 scenarios for four different timeframes: half-yearly (six-monthly), monthly, weekly, and daily. It’s rare to have that many different counts, and it makes Wave forecasting a lot more complicated. Worse, the counts contradicted each other, because some were bullish, and some were bearish!

How to make sense of it all? Use NEoWave’s Rule of Reverse Logic

In order to arrive at the ONE most accurate count, I needed to apply the Rule of Reverse Logic, an extremely useful NEoWave technique I developed years ago. (You can read about this in Chapter 12 of my book, Mastering Elliott Wave.)

I’ve implemented this technique many times over the decades. I believe it’s one of the most important concepts in my book, because it’s an effective tool that enables you to keep your counts on track.

In the Bitcoin webinar I presented in early 2023, I showed – in real time – how to apply the Rule of Reverse Logic to the 16 different Wave charts. A first step in using this technique is dividing your bullish and bearish scenarios into two groups. Next, you will link all the best counts together from the half-yearly timeframe down to the monthly, weekly, and daily timeframes. (It’s important to begin with the longest timeframe and work your way down to the daily timeframe.)

Next, I applied the Rule of Reverse Logic and used something I call Middle Markings to home in on the best counts. For example, I started by evaluating a half-yearly bullish count. That particular Wave chart showed a possible contracting triangle. However, the problem with this count is that the D-wave’s low did not overlap the B-wave’s high, and the pattern drifted up very strongly. Overlap is a crucial ingredient of good triangular development, so that was a major strike against this count. In addition, the X-wave was unusually small. Given the structural issues of this bullish scenario for Bitcoin, I removed this scenario from consideration.

Looking at another six-monthly count, I critiqued this chart’s bullish scenario, which featured a zigzag pattern and contracting triangle. I commented on waves-A, B, and C and noted the X-wave’s drift upward, which would suggest a lot of power when the X-wave concludes – and that would explain the violent rally depicted on this chart. I found no structural issues with this count and put it aside for later consideration.

Webinar participants watched, in real-time, as I evaluated the merits of each of the 16 counts, working from the longest timeframe (six-monthly) to the shortest timeframe (daily). In the process, I discussed contracting triangles, expanding triangles, diametricals, symmetricals, monowaves, and other Elliott Wave and NEoWave patterns. I removed any counts with structural issues and retained those that seemed plausible. (The counts you retain must follow NEoWave rules.)

This high-level review of each count was an important foundational step. During the process of reviewing the 16 Bitcoin scenarios, I ended up eliminating all the bullish counts, which left only the bearish possibilities.

Next, webinar participants watched as I applied the Rule of Reverse Logic to identify a single good count for each of the four timeframes. Remember, whenever you have two or more scenarios, you will want to use this rule.

There are three key points to the Rule of Reverse Logic: You will end up selecting the count that (1) is closest to the center, (2) takes the longest to finish, and (3) is the most boring. Yes, you read that right! You will end up with the least exciting count – the one that produces the least eventful outcome.

In the webinar, I marked the middle of the structure for each chart with a red dot. Next, I took a closer look at the remaining six-monthly charts (the longest timeframe) and identified the single chart that followed the above three points and, of course, followed all the rules.

My next step in using the Rule of Reverse Logic was to link the six-monthly timeframe to the monthly timeframe. I looked through the various monthly counts and, using the process of elimination, I selected the count that aligned with the three key points mentioned above, had no structural problems, and fit the long-term structure the best. As I stated in my webinar, this count finished the G-wave at the earlier high, created a nicely designed diametric that contracts and expands slightly, and presented five waves similar in time.

Next, I identified the only weekly chart that fit both the six-monthly and monthly charts, met the three-point criteria, and followed all the rules. Finally, I did the same thing with the daily timeframe. This left only one count, where wave-G was at the low, wave-A finished at the high, and it appeared to have a contracting triangle with reverse alternation.

How is the Rule of Reverse Logic like a roadtrip?

Here’s an analogy I use in my Advanced Wave Analysis courses. Let’s say you want to drive from California to New York City. You leave California and head east. Soon, you realize you have more and more choices of roads you can take. For example, you could end up driving through North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, or Texas. Eventually, though, you’ll work your way onto the ONE highway that leads to your specific destination in New York City.

When conducting Wave analysis, you will often have multiple scenarios that are confusing, contradictory, and obscure. It can be challenging to identify exactly where you are going. The Rule of Reverse Logic always works when you have multiple counts. As you get toward the end, you will get down to one count, and it becomes obvious what’s going on.

I have found that the Rule of Reverse Logic works 100% of the time. At the end of this process, all the alternate scenarios will disappear. You won’t have five or ten counts – you will have just ONE good count.

Written By Glenn Neely

Glenn Neely is the author of Mastering Elliott Wave. Founder of NEoWave. Trading Advisor & Market Forecaster.

NEOWAVE BITCOIN FORECASTING

CLICK HERE to watch Glenn Neely’s webinar ($19) featuring his Bitcoin forecast, recorded July 21, 2024. Don’t miss this highly informative discussion on advanced Wave analysis, which addresses NEoWave’s Rule of Reverse Logic, diametrics, symmetricals, expanding triangles, monowaves, the Middle Markings concept, and more!

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