Here's a 30min chart of the Dow showing a very clear 5 wave decline from the highs. Also remember that this 5 wave decline occurred after failing twice to close above the 200 moving average on the daily chart, and then broke through key support at the 12,730 area I mentioned earlier. This chart actually shows a bullish divergence as seen by the MACD (orange lines) so a very short term bounce is due. Seeing as that it may have just completed a 5 wave decline, this divergence is expected. So this chart shows that in the short term, a rally is due, but it will not make a new high above 13,136.

With the larger trend down, the upcoming rally will allow for the establishment of short positions, with a stop loss just above 13,136, allowing for a good risk/reward trade as I feel the Dow is headed to a new low well beneath 11,634.

This should cause the unwinding of risk, and strenghthen the JPY (weaken JPY pairs). The USD/JPY has been lagging the other dollar pairs in its dollar decline, but I feel that is creating a rubber band affect where once the pair does give way, the drop will be fast and fierce and it should reward the bears handsomely.

So my strategy is to short equities, precious metals, the USD/CHF and USD/JPY while being long the GBP/USD and EUR/USD (all currency positions are short the dollar).

Best regards this trading week!
American-T

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Hi AT,

Did you ever close out your short gold from 906? Are you still holding? Where is your fail safe point if indeed there needs to be one? :-) Thanks, Diver

Maybe i am a dissenting voice on this respected Forum, but my argument is that EURUSD will see 1.45 sooner than another 1.60
Based on Elliott Wave, we must go back to the terminus of the triangle (FEB 11) before making another high in order to complete wave 4 before another attempt at 1.60+ in the form of wave 5.
Sorry, guys, if I am pouring cold water on your arguments. But, truth must be told and as elliotticians we have to respect the theory, otherwise we could be just an average nameless sheep.
Further, the B correction should not be deeper than 75% of wave A, which is shown by my blue line at around 1.585

(Disclaimer: I do not have a short position in EURUSD at the moment, so i have no vested interest in trying to convince anyone)

Mike

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I'm putting my money on you. :-)

This is my daily gold chart and 4h gold chart and my count. Something not comfortable.

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Thx! If i labeled bullish triangle, the time to create W4 no enougn in alternative relation with W2. Can u post yr chart?

Hi Mike,

While the pair may drop down to the level you cited, I disagree with your interpretation of EWP. I see that the proposed triangle you have has violated one of EWP's rules, according to "Elliott Wave Principle: Key to Market Behavior" by Frost and Prechter it states that wave D cannot exceed wave B (see first chart, red circle). I know some bring up that there's an exception for when it's on a closing basis. But I'm unaware of this exception in the text, in fact the book is quite clear when talking about the rules for contracting triangles. If anyone's aware of this exception being cited in the text please let me know where to find it. Until then, I must adhere to what I understand, and that gives me the conclusion that the correction has to be a flat, not a triangle (see second chart).

I am not confident in the bullish potential of the EUR/USD, but I am in the overall bearish dollar view. And the wave count does suggest the EUR/USD will exceed 1.60 to a new high before returning to the wave prior wave 4 area. But the main reason I posted this was to further the discussion on EWP, and we differ on our interpretation of the defining elements of a contracting triangle. For this, I guess we must agree to disagree.

Regards,
American-T

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Hey Diver,

No I have not closed my gold or silver positions yet. But I have highly leveraged bearish dollar positions which have been more than covering the losses from my gold and silver ETF positions. I'm only shorting the ETFs for gold and silver, so I'm not using high leverage and therefore I'm able to allow the positions to run their course. As bearish as I am the dollar, I guess it's possible for the metals to eek out another minor high (gold $1033), however I doubt it, but if they do it should be insignificant and quickly reverse. With that in mind, I'm holding my short positions and will watch the price action, especially in relation to the dollar, looking for the direction of the five wave and three wave moves to determine when it might be the right time exit the positions and wait to re-enter short at a better price. From what I can see though, gold traced out a 5 wave rally ending Friday, so if anything it's due for some declines in the short term. Whether that's a correction, or a resumption of the downtrend we'll have to wait and see.

If you're using a high amount of leverage, you probably wouldn't want to do what I'm doing. Unfortunately, I don't have enough confidence in the short term outlook to give you a "breaking point". But overall, I am very bearish the dollar and precious metals in the medium term. Sorry I had to beat around bush there and not give you an exact answer. But I just want to be fully up front with you on the type of positions I have have and how I'm playing them right now.

Do you have a wave count on the metals?

American-T

AT,

I am posting 2 charts, both daily. One is the gold and the other the Euro. The Euro peaked on 4/21 while gold peaked on 3/17. The Euro bottomed on 5/07 while gold bottomed on 5/02. The Euro has since retraced between .618 and .786 of it's decline while gold has not even retraced 50% of it's decline.

There obviously was a correlation between the two at the original high and low. So now has the correlation been broken? I think not. Therefore, either gold has to make up a lot of ground to keep pace with the Euro or the Euro has to come down to meet gold OR you interpret the "corrections" as just that and view it as a complete non-confirmation all together and they both are coming down without making new highs.

Given the position of the RSI and stochastics it seems an unlikely place to begin a major rally from. More likely an area to top in. So, my money is on the topping of both.

From a strictly EW perspective it all "looks" corrective to me. Although a case could be made either way I suppose. Sometimes I need to look at other points of view when EW is just not that clear.

The other point that I also see as telling is that crude has been making new highs since the peaks of the Euro and Gold in March and April. In fact, it's substantially higher now and yet neither the Euro nor gold has been able to get past their correction highs so far. What's up with that? I know we say that we need to see each market individually BUT, I still see relationships. When those relationships change dramatically I question why. Sometimes (not always) there is meaning to be found in these changes.

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I already short XAU and expect close my position at 915.

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Hi Gizmo

I had a long weekend here with the hols in the UK, back in the pit now. I see that EURGBP has rallied , however this could be a great shorting opp if we have the right count!! Wave 4 cannot cross into wave 1 so stay with it..

What is Texas's thoughts he is trading this as well!!


REgards

Ray

I for one , am with Mike on this one. I see the Euro in wave 2 down and believe it ended last night at 1.5820 between the 61.8% and the 78.6% of wave 1. I did post my bear count last week along with my ending diagonal count for the Aussie which has yet to be violated. The dollar in my opinion is about to take the world by storm and get a big boost which does not look good for gold. Also notice if this is indeed the right count, wave 2 ABC is alot clearer than wave 1and has played out in a clear and decisive channel very typical for correction. That is one of the characteristics I look for when trying to decipher if its an impulse or a correction. Impulses break through channels, corrections stay within channels.

Hi everone,
how we (member of forum) see this decline of cable , corrective and resume MT bullish trend or short trem top 1.9850 and headed toward 1.9450/400. share your views .
thanks.

Everyone once in a while, the markets throws us a gem with perfect elliot wave structures and targets it almost looks like a work of art. Eur/chf is quickly becoming my favorite pair because all rules conform to every wave with such precision, if one were just starting out in Elliot wave and wanted my advice on how to trade it, this is the chart I would direct them to.

Wave 1 is a perfect 5 wave structure (although I haven't looked into the fib levels of the subdivisions of wave 1, Im pretty sure they're perfect as well)
Wave 2 is a beautiful 3 wave structure and ends at the 78.6% of wave 1.
Wave 3 another beautiful 5 wave structure which ends at the 1.618% of wave 1
Wave 4 another beautiful 3 wave structure ending at the 38.2 % of wave 3.
wave 5, although not perfect in subdivisions nor fib levels, its contribution to the 5 wave decent is irrefutable.

Then you have that beautiful ABC up in wave 2 structure which if it plays out as beautifully and the wave 1 impulse down did, you could almost time the correction over to the pip. How perfect would it be if the correction ended with one more push to the upper trend line of an ending diagonal! With the perfect entry, position traders can be in this one for a long time as wave 3 down is to follow.

P.S BTW, for those curious as to a target for wave 3 here goes...
wave1 = 1494 pips.
Wave3 = 1.618% of wave1
=2417 pips
=1.6400 - 2417 (assuming wave 2 ends near the upper trendline of ending D)
= 1.3983
This is also on the assumption that the abc is a completion of wave 2 and not merely an A of 2. Because the correction has come so deep, one can assume that wave 2 would indeed be over. However, theres no shame in taking profits along the way ad getting back in. As long as you know which direction its going, it would only be a matter on getting back in at the proper time once profits were taken off the table. If the pair continues to show such perfect EW structures, that shouldn't be too difficult.

P.P.S Eur/Chf has also become very correlated with stocks as of late , so it cold also be used as a reference of where stocks indexes might be within their wave structures if they become unreadable. Eur/JPY does not look so clear right now, but I have a feeling it will start its decent at the same time as Eur/CHF which happens to be alot more clear. Only time will tell.

AT, Mike;

AT, I agree with you on the statement that the area that has been called a triangle many times, was not. But, I have a slightly different count. This count would cause me to agree with Mike that the correction of the move up has begun or is about to begin.

At 5818, wave 5 or the current move up is about equal (about 90% ) to wave 1 (your label). Since, I think we all agree, Wave 3 was extended, wave 5 should be about equal to wave 1 and is likely to be less than wave 1.

Another problem I see with your labeling is both wave 2 and wave 4 are complex. The rule of alternation would require one, wave 2 or wave 4 to be simple.

Good Luck.