Elliott Wave 2 Theory

Elliott Wave (2) is the first correction against the new trend

Elliott Wave (2) corrects wave (1), but can never extend beyond the starting point of wave one. Typically, the news is still bad. As prices retest the prior low, bearish sentiment quickly builds, and the crowd mentality reminds all that the bear market is still deeply ensconced. Still, some positive signs appear for those who are looking: volume should be lower during wave (2) than during wave (1). Wave (2) usually unfolds as a simple 3-swing abc pattern.

As such, Wave (2) is the first correction following the initial swing off an importnat high or low.