Wave Personality & Sentiment · Lesson 6 of 6

ABC. The Corrective Phase.

After the impulse completes, the corrective phase begins. Three waves unfold: A, B, C. Each carries a distinct personality. A is denial - the first leg down, dismissed as a healthy correction. B is hope - the counter-bounce that pulls everyone back in, the textbook bull-trap. C is despair - the final capitulation that traps the late longs. The full ABC cycle reverses everything the impulse built, completing one degree of the Elliott Wave structure. This final lesson synthesizes the full sentiment journey across the cycle.

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Figure VI
The corrective cycle - denial, bull-trap, capitulation
Wave Personality
Wave 1
The First Move
Skeptical

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Rule violated: Wave 4 cannot enter Wave 1's territory
CORRECTIVE PHASE (after impulse): A - first leg down: DENIAL B - counter-bounce: HOPE / bull-trap C - final leg down: CAPITULATION Common forms: zigzag (5-3-5), flat (3-3-5), or complex W-X-Y After the impulse, the ABC correction unwinds. Three waves, three emotional phases - denial, hope, despair. A WAVE: DENIAL - "Just a healthy correction" - Bulls buy the dip reflexively - "Earnings are still strong" - Sub-structure: 5-wave (impulsive) A wave: the first leg down. Crowd dismisses it as healthy. Sub-divides as 5 waves - the first technical clue this is more than a dip. BULL TRAP B WAVE: HOPE / BULL-TRAP - "The dip is over, bull continues" - Permabulls re-enter aggressively - Bears who shorted A get squeezed - News: "Markets recover, fears ease" - Sub-structure: 3-wave (corrective) B wave: the counter-bounce. Most psychologically dangerous. Traps bulls who buy AND bears who short - the maximum confusion wave. PANIC VOL C WAVE: CAPITULATION - "Get me out at any price" - Margin calls cascade through retail - News: "Recession confirmed" - Panic volume spikes at the low - Sub-structure: 5-wave (impulsive) C wave: the capitulation. Final 5-wave impulse down. Volume spikes at the low - the moment of maximum despair = the bottom. FEAR RELIEF CONFIDENCE COMPLACENCY EUPHORIA DENIAL HOPE DESPAIR FULL SENTIMENT CYCLE: fear → relief → confidence → complacency → euphoria → denial → hope → despair The full Elliott Wave sentiment cycle. Eight distinct emotional phases - one full revolution of crowd psychology. SELL CROWD BEHAVIOR: - Retail FOMO buys the new highs - Inflows to risk assets peak - Smart money DISTRIBUTES quietly - Insider selling rises W5 traps the late crowd. Retail buys the top while institutions distribute their W1-W3 holdings into the strength. 38.2% (shallow) 50% (standard) 61.8% (deep) 78.6% (W1 territory) ABC FIBONACCI TARGETS: Standard zigzag: 50-61.8 percent Deep correction: 61.8-78.6 percent Shallow flat: 38.2-50 percent C wave often ends near W4-low support ABC correction retraces the impulse. Typical targets: 50, 61.8, or 78.6 percent. Confluence at W4-low support is common. ABC: the corrective phase completes the cycle. Denial, hope, despair - eight emotional phases, one full revolution. 1 2 3 4 5 A B C
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