It appears the markets did not want to wait for non-farm to start moving. The GBP/JPY looks to be in a iii of 1 down. It just broke past crucial support of 231.88. That was the intial signal that we are headed much lower.

Well... as for what I think about this one - lets just say I bought it at 231,90... bottom of a range... after the breakdown, when the swift recovery came back into the range. I just happened to be looking at exactly this pair.

That's not a clear elliott wave trade, but it's based on elliottish reasoning though. When u look at a 4 hour chart... there's nothing but a choppy range going on between 234,6 and 231,9... and it's full of threes, not fives (they do of course subdivide into confusing 5s on the very small timeframes, but in a pair like GBPJPy, i do NOT like the very small timeframes cause it's sooo ). So, even though u can't tell exactly what's going on, I see this as corrective action in the range, because:
1) It's choppy;
2) It's consolidating at the upper levels of recent trading (the recent biggest move was from 227,5 to 235,5 and it has not fallen to the lower levels again);
3) It's in three wave moves;
4) It's completely sideways.

I do not even expect this to be a big winning trade... I just wanted to say that personally me - I dont see anything right now to get overall bearish.... The 4-hour technical studies came down to completely neutral at the lower line of the range, but the dailies are still looking upwards for a completion of the correction.

My stop is now at +0 pips and I feel very comfortable with that.

So far, Im not liking the wave count I see on the GBP/JPY. The only possible scenario I see for the bearish case is an expanded flat (irregular flat). You'll see this quite clearly on a 15 chart. The original 5 wave rally ending at 232.47 at 22:15 followed by a very shallow A at 232.89 (23.6 % retracement), then at rather steep B wave ending at the low of the day 231.75, followed by the Cwave ending at 233.15 which is 38.2 % retracement of the original 5 wave decline. (also where irregular flats like to end). The only thing is I can't seem to fit a decent count on that last C wave. Irregular flats are risky business so keep your stops tight. If at 8:am price is below 232.73, I will be more confident of this count as that will leave us with a 2 hour reversal candlestick or 1 hour bearish engulfment.

Well I didnt get the reversal 2 hour I was looking for but from the top we do have a 5 wave decline as well as a 30 min bearish engulfment and a 15 min reversal. (I guess ill have to take what I could get). Anyhow, A break below 232.64 without a new top is the initial signal that were going lower from here. You could choose to put an entry signal with a stop but be warned NON FARM is coming up.

This gbp/jpy is obviously very frustrating for all of us. Here's a thought as to where it might be. It looks to me like it is in the last stages of an abc correction that might see the price bottom at 231 or perhaps 228. Gold is inching towards 700 and the markets are also rallying, the dollar being the victim. This is how I saw it in my bullish scenario. I think we are in the last stages of a correction on the yen pairs with the diagonal that italm recognized as wave 1 and this current wave as a shallow wave 2. All the markets are insanely correlated to the dollar (currently and for the past several years). The carry trade as well; as it strengthens when dollar weakens and weakens when dollar strengthens. So anyway, to give heads up, when gold, silver, and equity markets correct (I believe after gold hits 701), we are going to get the last leg of the down move in the gbp/jpy (and other yen pairs).

Well it doesnt look like that was the top but we now have a valid 5 wave C count also at the 38.2% retarcement. (may be a double top) May give us a short play for non farm.

We've had a lot of action but there are still opportunities. One I think is in the AUDUSD. A diagonal in wave b from .8051 may have ended at .8308 and I am looking for wave c to unfold to at least .8027, which is the 100% extension.

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Hi Jamie,

The daily update only shows up the top summary for me, missing the rest.

Hi Jamie,

Looking at your analysis regarding AUDUSD, I do see a diagonal from .8051, however it looks to me like it subdivides into 5 waves (i.e. I don't see small a-small b-diagonal small c), which, even as a diagonal, can't be labeled b. Correct?

I'm thinking if the move from .8051 is complete, we may be looking at a truncated C wave of larger degree. This would complete the correction that started on Aug 17th and this morning's action (in all markets) would be kicking off the next leg down under .77, and we could be looking at a trade that has the potential to morph into a much bigger move than we bargained for.

Any thoughts?

p.s.
I appreciate the discussion here very much.

There are a number of things that the bigger picture holds for the Aussie. Even if the diagonal is a 5 waver that in the wave 1 position, the AUDUSD should come back to former 4th wave support at .8183 before another meaningful rally takes place. If it is the C wave interpretation as you proposed, it may not be truncated - and price could still exceed .8333. The best way to play the pair is probably sell a break of the day's low (.8227).

I'm glad that you are enjoying the dicussion.

Thanks for letting me know. I'll get it fixed asap.

I'll have a go at the aussie. I am seeing this as a possible 5th wave down, although the 2nd wave is suspiciously taking too long to develop. I agree as for it being a diagonal, a special type that is because the upward legs A, C and E have 5 waves to them. This occurence is described by Robert Balan in his book Elliott Wave Principle on page III-9. The only thing bugging me is I am not really sure if its OK to have a diagonal on wave 2........

Price rocketing thru 8333 will invalidate my count.

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Hey kcar1, your right about diagonals not happening in wave 2. They can happen in c of 2 but not in 2 as a whole so I believe your count is flawed.

First off, yes, where there were no rules broken for it to be a wave 4 from the July 24th top, like in the Yen pairs, the retracement is way too deep so chances are something else might be going on.
Second, Your wave 1 of 5 down is in 3 waves (look at the 4 hour chart). Third, diagonals, as you pointed out happen in wave 5s or Cs.

I do believe it may still be a diagonal and the move down will happen as early as Sunday. Heres a little clue why. Take the AUD/USD 4 hour chart and overlay the GBP/JPY 4hour chart. The chart looks virtually the same except for one thing. Every big move in the opposite direction started off with the GBP/JPY doing it first and the Aussie following suit a few hours later. The Aussie seems to be lagging the Yen pairs.

So putting everything together, my count for the Aussie is were are either in a wave 5 diagonal of 1 up (for the bulls). OR were in a 2 of extended wave 3 of a larger degree down (just like my count for the Yen pairs). Either way, that puts us in a wave 5 diagonal or C of 2 diagonal. If you missed the big diagonal move in the GBP/Jpy this week, Sunday may be your chance with this pair. (Although the Aussie diagonal looks about done so lets hope it does not open with a big gap down which I have a funny feeling it might)

This has been a volatile week to say the least. Thank God for Elliot Wave to make sense of things when you don't know what the heck is going on. The Diagonal I began rambling on about 2 weeks ago (post # 417) finally was confirmed Friday. Funny, Aug 28 was the beginning of the diagonal and it took 2 weeks to unfold, yet to get back to the beginning of it, it will take a whole 2 days. Now you know why we Ellioticians love this pattern so much.
Also the expanded flat that took place Friday morning which I also tried to take you through a play by play on (post # 468, 469, and 471...I hope you all capitalized on it as well) was a work of beauty. That diagonal took so long to unfold but the reward was and still is definitely worth it!

This week was Elliot Wave at its best. The media blamed Fridays Non Farm (job losses) for Fridays drop but we all know the decline began Tuesday evening with that 5 wave decline (post # 449 and 450). We all know Fridays drop was nothing more than a wave 3 of 3 that began Tuesday night. Classic! I believe this drop is the beginning of a melt down that not even we have ever seen, if this is indeed a wave 1 of 3 of an extended 3 down of a larger degree as I think it is. Sure we've all seen extended wave 3s before, but never at this large a degree. Perhaps we have in a bull markets but I don't EVER remember seeing one in a bear market and we all know that fear is a much strong catalyst that greed will ever be. Actually, come to think of it, we did see an extended wave 3 of a larger degree in a bear market before. Look at the USD/CAD daily chart. AN Extended wave 3 began March 4 2007 (1.1825) and ended July 24 2007 (1.0447). For anyone keeping count, thats about 1400 pips and 4 months later(and We all know thats the GBP/JPY doesn't move like the CAD does so 1400 pips for this pair is NOTHING!...In the GBP/JPY we moved 400 pips on Friday alone...when was the last time the Cad move 400 pips in one day?). Not only that but once wave iii of III of 3 hit on April 9, we had 19 days in a row of LOWER HIGHS. If thats not fear, I dont know what is.

Finally now for a more pressing matter. Ive been analyzing the Eur/USD from a larger degree. This is the week, it appears, a top may be forming. Ive been looking at it from the perspective of a double zigzag B wave on a weekly chart. If the is the case, we appear to be in a wave C DIAGONAL on a weekly chart. A diagonal that began Jan 7 2007 (thats right 8 MONTHS AGO! at 1.2864. ) Thats a whopping 1000 pips or so away. If I'm right, we may be able to catch a Major Top this week. I wish I knew how to place charts on this thing so I could should you what I see but I don't so for those of you who want to know, you'll have to follow along carefully. Looking at the weekly chart:

Wave 1: July 7th to April 22nd
wave 2: April 22nd to June 10th
Wave 3: June 10th to July 15th
Wave 4: July 15th to Aug 12th
Wave 5: Aug 12th to Present
Draw a trend line from the extreme of wave 2 to the extreme of wave 4. Thats the Line that needs to be broken for this diagonal to be proven correct.

Not only are we in a wave 5 of the diagonal (if it is indeed a diagonal) but were in the final leg of wave 5 so I will be looking for a top this week possibly the beginning. I think something big may happen Sunday perhaps early Monday. So when do I abandon my diagonal theory? Simple...we need to adhere to Elliot's famous rule WAVE 3 CAN NEVER BE TO SHORTEST WAVE. Going by this rule, if my count is correct, Wave 3 (Week of June 10th to July 15) is 589 pips. We add that to wave 4 extreme and we get a grand total of (drum role please...........) 1.3948. If the Euro passes 1.3948, I will abandon my diagonal theory. I'm looking for perhaps a double top at 1.3800 to 1.3850 or so. If this is the big one for this pair, I see the Euro going down to 1.0856 to 1.1500 or so. Then the dollar will be in real big dollar. I know, I'm getting WAY ahead of myself.

Until next time, have a good weekend and be well rested for the week, it should be a BIGGIE!

P.S Bring up the Weekly chart on the Eur/USD again and pull up an RSI. Look at the extreme of waves 2 and 4 using my count above. Wave 4 made a higher high yet on the RSI, it made a lower high. Does anyone see what I see...D-I-V-E-R-G-E-N-C-E!

Hey ital,

Your analysis of the eur/usd as a bearish view is interesting. As you know I'm long-term bullish of the pair so this could be an interesting exchange. So to offer a differing interpretation of the long-term eur/usd, consistent with my bullish view, here's what I'm seeing. (By the way, for about a year I was trying to interpret this pattern in a bearish perspective until quite recently when I changed to long-term bullish on the eur/usd because the bearish case just kept getting invalidated and was becoming too confusing for me.)

So here's what I see. There are 9 distinct waves up on the eur/usd weekly, which is a bullish count. It's clearer on the gbp/usd chart so I'm attaching that too. If this interpretation is correct, then this is a continuation diagonal rather than an ending diagonal and we would be going much higher.

I see fundamental support for this view too. The fed has already eased the fed discount rate, pumped a lot of money into the financial system, and with the non-farm surprise the markets are pricing in almost 100% chance of an easing of the fed funds rate on sept. 18, probably with more easing to follow. It's all bearish for the dollar. Also, spot gold broke through its previous resistance at 690-694 very strongly to touch 707, which is very significant if you're a bullion trader or follower.