The is not a model or a tool -- it's a psychological phenomenon. It's the product of the behavior of a population of people reacting to an event (or series) and its unfolding. Therefore, it's the way markets move. It's the assertion that markets are moderately predictable because markets are made up of people, and people are predictable. (Events are generally not predictable, however!) It asserts that the market isn't about to move out of step -- an overnight drop to $175 -- unless a major new event occurs.
The following chart is by request. It shows the basic wave count of the major move since August from $620~.
I've used the tools developed by (New Trading Dimensions, Trading Chaos 1&2) to give a basic demonstration of how to count the wave. His methods and tools are the "training wheels" version of wave counting. The main two tools used are THE and the .
TYPO: First five WAVES finished at red-line cross (3 impulse, 2 corrective)
BOOKS: The Wave Principle (Frost & Pretcher), Trading Chaos (both editions--which are very different) ( ), New Trading Dimensions ( )
For what it's worth, here's another bit of info that might be useful: I follow the corrective waves of this badboy. We're currently at the tail end of the B wave. The following C wave will be an upward move of roughly $100. (I'm going to work it out and post a chart soon.)
Hope that helps ;)