1.6250 min target

The current run up should make it to at least 1.6247 as min target. It is quite possible it could go as far as 1.6325 before it finishes this {iii} wave long.

A Poem for the new year.

I would like to send you all into the new year with this poem. A poem with a fractal at its essence, so appropriate for what we do here.

So the soul of immensity dwellss in minutia
And in narrowest limits no limits inhere
What joy to discern the minute in infinity
The vast to perceive in the small what divinity

Johann Bernoulli 17th century matmatician

Primary count was correct!

Well it looks like my primary count was correct. Now the question is "is the long over." well structurally, at this momemt, it could be but based on the current structure of the dollar index I doubt it. I believe you will see three more motive waves long to complete the C wave. The current wave {ii} which is still in prgoress will stop around 1.6150 amd then the long will resume. I think the entire movement will finish up around 1.6500. I will keep tabs on that projection and let you know if I think it will change. Structure is more important than any ratio so we will have to watch it unfold in relation to our ratio target. At the moment, I believe a break of 1.6108 will be a good first signal that the long is over and the short has resumed.  That is your critical support level. HAPPY NEW YEAR to all! I hope the depression of 2010 yields great profit for us all.

One more thing

If this pop long is not the ending fifth and is a new leg of the trend the likely stopping zone would be 1.6200 to 1.6300. I know that is kinda large but that is what the math says. Once again, I have a headache and I will sort it all out in the morning.

Alt Count

It is also possible that the pop long we are getting right now is the finishing fifth of the long move from this morning. If that is the case we will move into the short corrective now. It will probably last all night if not all day tomorrow as well. End of the year and all. Im going to bed. I'll sort it out in the morning.

Long trend to continue. But how long?

The GBP is in corrective mode on multiple degrees of scale. Since I am still fairly new to this it will make labeling diffult until the movement is complete. One of two things is currently happening. Scenario #1 is that it is currently making a flat of some sort. If this is the case then it should slowly move long until it pokes its head above 1.6090 and possibly making a new high above 1.6094 once that movement is complete it will most likely fall below 1.6055 and perhaps as far as 1.6030 before taking off long for 5 waves (please keep in mind that a running flat would negate the neccesity of it making a low beneath 1.6055 but this is the lowest probablity scenario). Scenario #2 is that it is making out a triangle of some sort.  The retrace will be almost nonexistant and then it will take off long for 5 waves. I will try and give a projected end zone for the long when I am condfident that wave {b} or B is finished. Also please note that the extended 5th possibility in my last post did not play out so that info is not a factor in this analysis.

Ext 3rd and 5th of (c) ?

Well the GBP hit my minimum projection and then some. At the moment it looks like the long move labled (c) has an extended 3rd as well as 5th wave. I think this long move has a bit further to go but when it stops if the 5th is indeed extended I expect it to retrace back to 1.6002. This will likely be a 38% retrace of the long move. From there, I think it is possibile for some sort of triangle to form but it is too soon to call that.

Moving long to 1.6004

The C part of this flat correction is under way. It should take it up to at least 1.6004 to enter the price territory of subwave ii of (v). Once that movement is complete one of two things will happen. We will get and X wave which will retrace at least 90% of the movment long that began at 12/29/09 at 08:30 or a triangle will start to form. There is no way to know which but from the area of 1.6004 to 1.6022 it will make a short correction. I will try and identify which as soon as i can.

Alt possibility

Please keep in mind that even though I think the short is over. It is still possible for the short to continue to subdivide becoming more complicated before it actually ends.

Minor Wave 1 complete

Let me start by saying I do not recommend any long trades in the current environment. The GBP is going to be trending short for many months. I will just try and advise of good spots to jump in short and advise of potential major retracement points.  Based on today's movement, I am quite sure that the short movement that began on 11/17 is in retracement mode. The last push short on the chart labeled (v) appears to be an extended fifth. This should mean an ultimate retracement to at least 1.6004. The movement long from (v)appears to be in 3 waves (on a 5 min chart) so far. this means the current short move will hit at least 1.5873 wtih the potential to make a new low before it retraces to 1.6004. Once this plays out or if something materially changes, I will post another chart.

Maybe Wave {iii} isnt over.

Now that a few more hours have passed and more structure has revealed itself, It looks like there may be more short to come before we start wave {iv}. It is probably making some sort of double or tripple correction. It won't be possible to make any predictions until this correction is over. So, no targets for now but I think there is a bit more potential for a down side move.

Wave {iii} of 5 over?

It looks like it is at the moment. The short missed my target by 23 pips. I attribute that to Christmas week. Right now it looks to be making a messy long correction that will end up being {iv} of  wave 5 when finished. I place the target zone for the end of this wave retracement in the 1.6028 - 1.6100 zone. Once this zone target is achieved, I would expect the short move to resume for {v} of 5. Being that it is 2 days before christmas it might just trend long in a slow sloppy way. Just a guess but we will see. I will post a chart when things start to clear up structurally.

Triangle over? Take short position

I can count 5 zigzags and that should be enough. I took a short position at 1.5954 and I will take profit at 1.5900 unless it looks like it is going to run farther. If it pops up a little longer that is just a chance to get in better or dollar cost average your position.

Alt Possibility - Triangle?

There is also the possibility that it is in the process of tracing out a triangle. If that is correct, then we should get the wave sequence up, down, up with the fifth wave likely breaking the up side barrier. If this plays out, when it breaks the trend line to the long side on the fifth wave will be the time to get in short.

Correction Over ?

It looks like the correction is over and the (v) has begun. It will make a new low and then look to retrace.

Short trend still in place

The short trend is still in place. The Sterling is in retrace mode right now. I expect the pair to reach the zone of  1.6024 - 1.6100 before the short resumes some time tonight. . I favor the shallower end of that zone I will try and call the top of the retrace when I canmake it out tonight.

Still moving short

No chart right now. The short trend is obviously not over. It had the potential to be complete structurally but it needed to go at least one more leg short. It may continue to subdivide in the short direction. I will try and identify a bottom when it looks to be in place  

Did the news "work" ?

Looking at the movement I would have to say no. The news came out at 02:30 PST. The GBP had been trending short for 2.5 hours before the news came out. The forecasted news was worse than expected which should push the currency shorter,  yet it went into a sidesways/long corrective movement. The reason? Simple wave 3 was over and it was time to make wave 4. Once wave 4 was over it could continue on with its existing short trend to make wave 5. Download the free ebook and see what other myths are wrecking your trading.

Does the news matter?

You will notice that the banner at the top advertises about 10 market myths exposed. Tuesday in England news will be coming out. It will be interesting to see if the "fundamentals" move the market in the "correct" direction or if the wave shows us what will transpire. We will talk about it tomorrow.

Looks like the short is over

I keep looking at the run down from 11/17/09 and I very much believe that the short move is over and we will begin the corrective phase of that month long move. I would expect a fairly strong move tonight probably to at least 1.6200 and perhaps as far as 1.6300. It is very difficult to predict right now. I expect the entire movement once complete to most likely take us back to 1.6600 before the short move resumes. Right now that is just speculation. We will see how it plays out. I am posting a 240 min chart so you can see the short move that I believe has ended.

ALT Count possibility - Be carefull

Please be aware that I also have an alt count that would have the entire minor degree 5th  wave (which began on 11/17/09) over now with a serious long retrace begining tonight. The more I look at it the more I think this is quite possible. Either way the multi month short trend is in place and after a couple weeks to maybe a month of retracing the short should resume

Ending Diagonol? I think so

Based on what happened over night I think we have completed wave {iii} of 5. It looks to be doing it as an ending diagonal. This will be difficult to call but I think price will trend back long to the zone of 1.6120 to 1.6140 and stop right about there before moving short again below 1.6030 to complete wave {v} of 5. Once this happens there is the potential for a serious long corrective move over the next couple of weeks. I'll discuss that once we are there.

Part of my ending diagonal preferred count takes into consideration what is going on with the $DXY (dollar index) wave count. Just FYI.

Still Correcting

Looks like we are still in a corrective phase. The current structure suggests a zigzag. I would expect it to move long now to about 1.6200 to complete {ii} before the short resumes.

Alt Possibility for minor long move

See the chart below for another possibility that has the count in a (b) triangle in the middle of wave {ii}. If this alt count turns out to be correct price will not be able to exceed 1.62485. If it does then another count is afoot. If you are in short close out when price breaks even for you or when it breaks the triangle trend line on the short side.

Either way I very much expect the short to continue even if it does make one final push long to complete the (c) leg of {ii}. If this is the case a likely stopping point would be 1.6192 which is the .618% extension of wave (a)

Take a short position

Looks like the pair created a small first wave down of over 50 pips. Get in short and ride it to at least 1.6043

URGENT UPDATE!

I feel like a fool for not noticing this as it was happening. The internal wave 5 of minute wave {i} was extended. PEOPLE this is a gift from God!!! When the fifth wave is extended it always retraces back to the lesser 2nd wave of that 5th wave quite swiftly and with tremendous precision, as you can see from the chart below.  I got in short at 1.6150 even before I realized (it must have been subliminal). I dont know if the market is going to open way down on Sunday. If it opens near where it closed you should jump in short immediately!

The minimum target zone for this wave {iii} will be from  1.6044 to 1.5969. The 1.6044 is a likely target in the event of and ending diagonal scenario and 1.5969 if this minor degree fifth ends up being impulsive in structure. I favor the impulsive scenario. Im just pissed i didnt go 30's (heavely leverage short position) before the market closed. I went in with my normal 5% position.

Individual Investors Have Jumped Into Another Fire

 By Robert Prechter, CMT

The following article is an excerpt from Robert Prechter's Elliott Wave Theorist.

First they bought into the “stocks for the long run” case and got killed. Then they jumped on the commodity bandwagon and got killed. Many investors are buying back into these very same markets, but others are running to what they perceive as safe “yields” in the municipal bond market. So far this year, individual investors have “poured a record $55 billion” (Bloomberg, 11/12) into muni bond funds, with the pace running $2b. per week in August and September; many other investors are buying munis outright. These must be the people who tell us that they can’t live without “yield” and also cannot imagine their city, county or state government going bust. But as Conquer the Crash warned and as The Elliott Wave Theorist has reiterated, the muni bond market is heading for disaster.

Municipalities have borrowed more than they can repay, they have pension liabilities that they cannot meet (up to a trillion dollars’ worth, according to Moody’s), and tax receipts are falling. The only reason that states haven’t failed yet is the so-called “stimulus package,” which took money from savers, investors and taxpayers—thereby impoverishing the people who live in the various states—and gave it to state governments to spend so they would not have to cease their profligate spending. But political pressures will eventually cut off this gravy train. In the 2010-2017 period, the muni bond market will become awash in defaults. The leap in optimism since March, which has shown up in every financial market, has fueled a retreat in muni bond yields to their lowest level since 1967 and narrowed the spread between muni bond yields and Treasuries.

This rush to buy municipal bonds is occurring right on the cusp of a dramatic decline in their values. While many individuals are loading up right at the peak so they can participate in the next major market disaster, smarter investors, such as insurance companies Allstate and Guardian Life, are getting out. Subscribers to our services, we trust, own not a single municipal IOU. Our recommendation for investors is 100 percent safety, and such a program does not include muni bonds. If you are a recent subscriber, please read the second half of Conquer the Crash as a manual on how to get your finances safe.

Get Your FREE 8-Lesson "Conquer the Crash Collection" Now! You'll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more. Learn more and get your free 8 lessons here.

--------------------------------------------------------------------------------
Robert Prechter, Chartered Market Technician, is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

Wave {ii} Retracing over?

Looks like three solid waves long may be just about finsihed. May finish up around 1.6150. The question is, "will that be the end of {ii} or will it become a more complex correction longer" Don't know. Only time will tell but I am comfortble getting in short at 1.6150. That will let me take profit from a short B wave retracement or I am willing to let it go against me with the confidence that it will turn short soon begining wave {iii}.

Wave {i} Retrace underway

Looks like wave i (circle) of minor degree 5 is complete. iii (circle) should resume Sunday evening late. I will try and make a post when I think the corrective wave ii circle is complete or near so.

Being that this is a 5th wave, There is the possibility of overlap between all the waves to create an ending diaganol. It is not required just a possibility of which you should be aware. If it does, play out that way it will look volitale and choppy when viewed from a 30 minute chart.

Minor Wave 4 complete

Looks like that was it for wave 4. Wave 5 has begun. if it reaches wave equality. We should be looking for 600 pips in total whcih gives a target of  1.5648

Revised points

Minor wave 3 was over at 03:00 this morning with the low at 1.6080. I expet a three wave retrace  a, b, c to complete minor wave 4 some where in the range of 1.6380 to 1.6420 before the short trend resumes to begin minor degree 5th wave.

This basically revises my last post. I seem to be a little behind the curve. In real time I'm missing some of the internal subdivisions. I'll have to be more deligent.

Ready, Set, Go!

Okay, I believe the sterling is very near the end of its current correction. It will probably just break above 1.6185 and then be ready to turn short. I believe it will get at least below 1.6080. perhaps as far as 1.5980. Use your technicals indicators to guide you.

Oops! Serious reassesment of the Count

I hate to admit this but when I reconsidered my last post I found a potential error. If what I was considering wave 5 reached the target I suggested, that would have left wave 3 the shortest which can NEVER happen. So, with that said, I have to believe we are still in minor degree wave 3 which became longer than wave 1 this morning when it reached 1.6120.  I can currently count 4 waves down within the last leg of this current minor degree 3rd wave. So if all that is correct I expect one more push down to make a new low below 1.6079 and then it has the potential to go long to the 1.6400 retracment I have mentioned previously. Please keep in mind this target is a minimum. It can definitely go further short before retracing the short trend that began 11/17/09

This goes into the "it aint easy working with incomplete info" file

Short Target

We are currently in a corrective move that is near an end. I believe the target where the short moving 5th wave will end is 1.5800. This number coincides with the short side trend line (day chart) and wave equality where 1= 5. Once we reach this area i Would expect a swiftly retracing A wave which I think will likely move to 1.6400

Revised New Count

Well as you can see the GBP just kept pushing down. That is why, in previous posts, I cautioned against trading long. I prefer to just look for places to take profit and get back in short. I have revised my count. I had previously said that 5 waves down were complete. This now does not look to be the case. It looks like we are still on the left side  (motive side) of the movement that began on 11/17/09. We are in wave 5 but it has not quite finished yet. When  it is complete the most likely retracment point is 1.6410. From there we will discuss next moves. I will do my best to call the bottom of Wave 5 when I see it.

GBP in Correction

At the moment it looks like the Pound is correcting the long move of Last night. The long is (i) of the current C wave the short movment should be (ii). I expect the retrace to end somewhere around 1.6280 before resuming the long move that will become (iii). Please not that a break of 1.6229 before making a new recovery highs is the point of ruin for this count. A break of 1.6229 would signal that (2) was complete and (3) had begun. I will try and identify a good minimum end target for wave (iii) once (ii) is compelete.

More Long to come?

Well, sterling completed its 5 wave triangle and continued long just as predicted. Now the question is "how much further long will it go." In a purely technical sense it has done enough to call the retracement complete and move short but I do not think that is the case. It looks to have completed 5 waves long wtih the bar at 06:10 this morning. I believe that is the first leg of something that will become more complex and retrace the short movement even further. I will give another update as soon as the pattern provides more clarity. I still think a likely stopping point is at the trend line that is now a little under 1.6600.

Triangle for B?

As I watch this B wave develop it is starting to look like there is a possibility that it will play out as a triangle. If that is the case, it may not even meet my minimum expectation before taking of long.  At this time a break of 1.6280 would confirm the long is in place. That point may be lowered as the structure develops. You can probably see the structure best on a 30 or 45 min chart.

Addendum to GBP Next Move

One thing I forgot to mention in the last post was the minimum short expectation., I gave the max expectation of 1.6140 but should have also mentioned that a minimum expectaion would be that of 1.6205. Once it moves into this zone(1.6205 to 1.6140) I would expect it to run nicely long. My maximum expectation for the long move would be about 1.6600. I will try and identify the end of wave (2) as soon as i can.

GBP Next Move

I believe we are still in the B retracement of the 5 waves short that ended on 12/13 at 20:00. I expect this trend to continue short till about 1.6140. From there we should begin a series of 5 waves long to complete the C wave that can then be labled the greater degree (2). I expect this (2) wave to go long past the end of A at 1.6317 once it gets past this point or if something materially changes I will make another update. Remember the predeominat trend is short on a long term basis.

Popular Culture and the Stock Market

December 11, 2009

By Robert Prechter, CMT

The following article is adapted from a special report on "Popular Culture and the Stock Market" published by Robert Prechter, founder and CEO of the technical analysis and research firm Elliott Wave International. Although originally published in 1985, "Popular Culture and the Stock Market" is so timeless and relevant that USA Today covered its insights in a recent Nov. 2009 article. For the rest of this revealing 50-page report, download it for free here.

Popular Culture and the Stock Market

Both a study of the stock market and a study of trends in popular attitudes support the conclusion that the movement of aggregate stock prices is a direct recording of mood and mood change within the investment community, and by extension, within the society at large. It is clear that extremes in popular cultural trends coincide with extremes in stock prices, since they peak and trough coincidentally in their reflection of the popular mood. The stock market is the best place to study mood change because it is the only field of mass behavior where specific, detailed, and voluminous numerical data exists. It was only with such data that R.N. Elliott was able to discover the Wave Principle, which reveals that mass mood changes are natural, rhythmic and precise. The stock market is literally a drawing of how the scales of mass mood are tipping. A decline indicates an increasing 'negative' mood on balance, and an advance indicates an increasing 'positive' mood on balance.

Trends in music, movies, fashion, literature, television, popular philosophy, sports, dance, mores, sexual identity, family life, campus activities, politics and poetry all reflect the prevailing mood, sometimes in subtle ways. Noticeable changes in slower-moving mediums such as the movie industry more readily reveal changes in larger degrees of trend, such as the Cycle. More sensitive mediums such as television change quickly enough to reflect changes in the Primary trends of popular mood. Intermediate and Minor trends are likely paralleled by current song hits, which can rush up and down the sales charts as people change moods. Of course, all of these media of expression are influenced by mood changes of all degrees. The net impression communicated is a result of the mix and dominance of the forces in all these areas at any given moment.

Fashion:

It has long been observed, casually, that the trends of hemlines and stock prices appear to be in lock step. Skirt heights rose to mini-skirt brevity in the 1920's and in the 1960's, peaking with stock prices both times. Floor length fashions appeared in the 1930's and 1970's (the Maxi), bottoming with stock prices. It is not unreasonable to hypothesize that a rise in both hemlines and stock prices reflects a general increase in friskiness and daring among the population, and a decline in both, a decrease. Because skirt lengths have limits (the floor and the upper thigh, respectively), the reaching of a limit would imply that a maximum of positive or negative mood had been achieved.

Movies:

Five classic horror films were all produced in less than three short years. 'Frankenstein' and 'Dracula' premiered in 1931, in the middle of the great bear market. 'Dr. Jekyll and Mr. Hyde' played in 1932, the bear market bottom year, and the only year that a horror film actor was ever granted an Oscar. 'The Mummy' and 'King Kong' hit the screen in 1933, on the double bottom. Ironically, Hollywood tried to introduce a new monster in 1935 during a bull market, but 'Werewolf of London' was a flop. When filmmakers tried again in 1941, in the depths of a bear market, 'The Wolf Man' was a smash hit. These are the classic horror films of all time, along with the new breed in the 1970's, and they all sold big. The milder horror styles of bull market years and the extent of their popularity stand in stark contrast. Musicals, adventures, and comedies weave into the pattern as well.

Popular Music:

Pop music has been virtually in lock-step with the Dow Jones Industrial Average as well. The remainder of this report will focus on details of this phenomenon in order to clarify the extent to which the relationship (and, by extension, the others discussed above) exists.

As a 78-rpm record collector put it in a recent Wall Street Journal article, music reflects 'every fiber of life' in the U.S. The timing of the careers of dominant youth-oriented (since the young are quickest to adopt new fashions) pop musicians has been perfectly in line with the peaks and troughs in the stock market. At turns in prices (and therefore, mood), the dominant popular singers and groups have faded quickly into obscurity, to be replaced by styles which reflected the newly emerging mood.

The 1920's bull market gave us hyper-fast dance music and jazz. The 1930's bear years brought folk-music laments ('Buddy, Can You Spare a Dime?'), and mellow ballroom dance music. The 1932-1937 bull market brought lively 'swing' music. 1937 ushered in the Andrews Sisters, who enjoyed their greatest success during the corrective years of 1937-1942 ('girl groups' are a corrective wave phenomenon; more on that later). The 1940's featured uptempo big band music which dominated until the market peaked in 1945-46. The ensuing late-1940's stock market correction featured mellow love-ballad crooners, both male and female, whose style reflected the dampened public mood.

Learn what's really behind trends in the stock market, music, fashion, movies and more... Read Robert Prechter's Full 50-page Report, "Popular Culture and the Stock Market," FREE.

--------------------------------------------------------------------------------


Robert Prechter, Chartered Market Technician, is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

Other possible Alt Count

Please keep in mind there is also the possibility that Wave 5 is not complete yet and the low on 12/13/09 at 20:00 was simply wave i (circle) and we are now in wave iii (circle). Structurally, it works either way. As long as you dont over leverage, short postions will come right eventually.

ALT Count Prevails

Looks like I was too aggressive in my assesment of the retrace structure. What I was calling i and ii (ciclre ) turned out to be a wave and b wave. The peak on 00:00 at 12/15/09 was c wave marking the greater A wave. It appears that B wave is still in progress and will likely make a new low below 1.6189 before turning and making five waves long to complete C wave which should then end the retrace with the complete structure labeled (2). From there a serious short should insue.

Please keep in mind that my overall anaysis for the GBP is that it is in a multi month short trend. In my opinion long positions are the risky ones. Even very short term long positions as these long retraces are difficult to predict.   

Many months from now i Expect the GBP has the potential to go below par at 1.0000

GBP still correcting short move

The GBP looks to still be in a iii (circle). I expect the general long trend to continue to at least 1.6350 before it has any type of retrace. If wave iii (circle) extends it could be further. Once wave iii (circle) is complete I expect something like a 38% retrace of that move that began this morning at 03:00 am. From there I would expect another five waves long. My overall trend direction bias for the night is long. I'll try and make additional updates as conditions warrant.

Update 06:17 am

Just a quick update. I believe the short pull back that happened overnight was a second wave ii (circle) of the long move. I expect wave iii to reach at least 1.6352 before it decides to correct in wave iv (circle).

Intersession update

The GBP achieved my minimum short target of 1.6195 making a low of 1.6189. It looks like that is as far as it is going to go short for now. Once it breaks 1.6308 that will confirm the long retracement that I predicted in my last post. I expect the long retrace to take at least a week and peak out  close to 1.6500. Stay tuned.

GBP getting ready for serious retrace?

It looks like the sterling is coming to the end of a minor degree 5th wave. After two days of sideways trading that eventually formed a perfect contracting triange. The GBP finished the session  in what appears to be the  iv (circle) leg of  minor degree wave 5. So what does this mean. The short trend will continue just a bit longer. My minimum target for this would be below 1.6195, which is the end of iii (circle) and likely maximum target would be at 1.6120 which is the trend line that connects the ends of waves 1 and 3 on the daily chart.  I think it is quite possible that iv (circle) could enter in to the price territory of wave ii before completing this short move. If so, then that means it is an ending diagonal formation. A break of 1.6308 before reaching my minimum target would negate this outlook and mean minor degree 5 was already complete. Once price does break 1.6308 the Sterling will be in for a decent retrace of the short move that began on 11/17 at 04:00. I would say at least a 38% retrace but perhaps as far as 66% percent.

I will keep you posted on the retrace as it develops with an eye to picking a good point to get in short.