Currency Market - Japanese Yen Highlight #5

Extensive ALIGNMENTS from "The 1998-99 $upertrader's Book of Linear Time Cycles", "The 1998 $upertrader's Almanac - 2nd Half Edition", and "The $upertrader's Reference Manual" all combine to suggest long positions in the Japanese Yen - this is one of the more educational COMMENTS you may wish to spend some time on.

(COMMENT #s 609, 612, 629 [# 11 to # 20])

UPDATED 19980827

COMMENT 1998-609

1. Let's turn to pages 294 and 298 in "The 1998 $upertrader's Almanac - 2nd Half Edition".

2. Can you see that the long term seasonal chart in the middle of the page is telling us that, historically, some of the largest gains of the year in these markets have occurred during the month of September?

3. Wasn't that easy?

4. Now that we know what to expect on a SEASONAL basis, let's see what the cycles are projecting.

5. Turn to page 339 in "The 1998-99 $upertrader's Book of Linear Time Cycles".

6. Here we see that the MONTHLY cycles are CONFIRMING the upward expectation suggested by the seasonal tendency.

7. Now turn to page 341.

8. Here we see that the WEEKLY cycles are CONFIRMING both the monthly cycles and the seasonal tendency.

9. In other words, the monthly and weekly cycles AND the seasonals are in ALIGNMENT.

10. Now we turn to page 169.

11. This page summarizes various events which are occurring this week in all the markets.

12. Focus on the "Inversion Cycles" listing in the middle of the page.

13. As we have repeatedly stated in these COMMENTS, the "Inversion Cycles" are among the finest of timing tools I have ever had the occasion to observe.

14. Hence, we always want to pay particular attention to their projected turning points.

15. Now look at the weekly listing (i.e., those markets following the "WIC" listing).

16. Look at the 1st, 2nd, 5th and 6th of the seven markets listed on page 169.

17. Are these markets all from the same complex or not?

18. Now look at the first market of the "MIC" listing (this is actually a listing for September as discussed yesterday in COMMENT # 602).

19. When most of the markets from a given complex "cluster" as these are doing on page 169, we have to expect that a MAJOR change is ready to occur (and not just an interruption in an ongoing trend).

20. Now let's look at the daily information.

21. We can turn to page 339 in "The 1998-99 $upertrader's Book of Linear Time Cycles" and see that the last monthly "Inversion Cycle Index" projection was listed for July.

22. This projection occurred as the market made new 5 year lows.

23. These 5 year lows are marked by the 980709 low price shown in the chart at the end of this COMMENT.

24. The next weekly "Inversion Cycle Index" projection was listed on page 341 of the book for the week ending 980731.

25. The high price in the chart marked by the "1" occurred on Thursday of that week.

26. The weekly "Inversion Cycle Index" thus marked the end of the first "surge" upwards.

27. The linear time cycles and seasonals, as previously discussed in this COMMENT, suggest more to come on the upside and thus allow us to characterize the move upwards to the "1" high as the first surge up.

28. The manner in which the LOW has occurred at the longer-oriented MONTHLY "Inversion Cycle Index" and in which the HIGH has occurred at the shorter-term WEEKLY "Inversion Cycle Index" and at the high of the first surge upwards suggests that it is the
weekly projection which is but an interruption in what is now a major trend change to the upside AS DEFINED BY THE longer-term MONTHLY "Inversion Cycle Index".

29. Having this important information in our hip pocket, we now turn to more sensitive timing devices.

30. For example, we can now "fit" an Elliott Wave interpretation into our expectation (see pages 282-293 of "The $upertrader's Reference Manual" for orientation on what we are expecting the Elliott Wave to show us).

31. Such is done in the chart of daily December Swiss Franc prices which follows at the end of this COMMENT through yesterday's close.

32. Note that the movement from the monthly "Inversion Cycle Index" LOW to the weekly "Inversion Cycle Index" HIGH is marked in the chart from the low to point "1".

33. Can you see how we are anticipating that the "1" is an Elliott Wave "1" wave to the upside?

34. The "1" wave would suggest that this is but the first of five total waves to the upside which will evince themselves before the upward price movement is complete many weeks from now.

35. If the "1" wave interpretation is correct, the suggestion is that we should now be looking for a "2" wave.

36. "2" waves are usually "simple" (as in A-B-C type affairs) corrections (see #6 on page 290 of "The $upertrader's Reference Manual").

37. In the chart, it's pleasing and proportional for all the price movement since the assumed "1" wave high to be marked as an "A-B-C" "simple" movement.

38. This "A-B-C" correction or PATTERN is labeled as such in the chart.

39. When the "A-B-C" correction is complete, we expect the 2nd Elliott Wave to be complete.

40. The correction APPEARS to have ended on 980819.

41. Note the horizontal line in the middle of the chart.

42. This line marks the .618 retracement level of the "1" move up (see pages 185-7 of "The $upertrader's Reference Manual").

43. In the spot September contract, price briefly traded a tad below this level a few days ago and then closed higher.

44. Can you see how this price break made a new 4 week low, took out the stops, and then quickly reversed?

45. There are a lot of trend followers who use this 4 week approach who just liquidated long positions and initiated new shorts.

46. Know where their stop and reversal point is?

47. It's all the way above that "1" point!

48. Perhaps you, at one time, have used this approach (which IS the correct approach for SOME people).

49. We can thus proceed in the assumption that the "2nd" of 5 waves up is now complete.

50. If so, this places us right at the beginning of the "3rd" wave up.

51. "3rd" waves are the ones we want to play.

52. They are the most violent, experience gaps, panic moves, few to no corrections against the trend, and so on.

53. When identified, they are also the ONLY periods when one should construct a pyramid (see pages 232-5 of "The $upertrader's Reference Manual" for more pyramiding tips).

54. So IF our analysis is correct, what should we do with the information?

55. Well, for one, we now know that we are "SET UP" for a HUGE move up IF our homework is "on point".

56. We thus now try to use a PATTERN RECOGNITION technique so that the market must FORCE us into a position.

57. As an example, let's look at the PATTERN on pages 205-9 of "The $upertrader's Reference Manual".

58. Can you see that this very simple technique is now "SET UP" to provide a market entry signal?

59. Traders should be particularly sensitive to market reversals to the upside in this market and should employ approaches that provide long entry with tight stops against recent highs in the December contract.

60. The very short term trading system presented on pages 96-101 of "The $upertrader's Reference Manual" is such a "system".

61. A close above the open over the next few days will cause a "black" candlestick which should be sufficient to provide a short term entry signal.

62. Can you see where the buy point for the "ALMANAC VI" trading system is (the "ALMANAC VI" trading system is presented on page 370 of "The 1998 $upertrader's Almanac - 2nd Half Edition" - this market is not listed as one of the 10 presented in the book
for the "ALMANAC VI" trading technique - nevertheless, the trading technique is still valid and may be applied to this market in this situation)?

63. The reader should observe that trading is simply the process of identifying a number of situations such as this one which have a chance of working out quite well if the analysis is correct but which involve very little risk to capital if wrong.

64. It is irrelevant whether or not this particular position works.

65. The risk : reward potential is so huge that our only concern is to find other such positions and make sure we do what we're supposed to do (i.e., put the orders in).

66. Enough will work that overall our equity will expand and cover the VERY minor losses which occur when they don't work out and we look foolish in our endeavors.

67. SUCH IS THE PROCESS OF TRADING!

UPDATED 19980827

COMMENT 1998-612

1. As you may (or may not) know, we recently recommended the market on pages 335 and 337 of "The 1998-99 $upertrader's Book of Linear Time Cycles" and on page 296 of "The 1998 $upertrader's Almanac - 2nd Half Edition".

2. Can you see how the trading technique presented on pages 115-6 of "The $upertrader's Reference Manual" provided two clear entry signals on Monday and, again, yesterday?

3. The chart which follows shows monthly prices in this market over the last 20 years or so.

4. The horizontal line in the chart marks the .618 retracement level of the entire upward move you see in the chart.

5. Note the vertical lines in the chart and how price has tended to reverse every 40 months or so.

UPDATED 19980901

COMMENT 1998-629

11. You may recall our conversation at the beginning of this Edition in COMMENT #s 488 and 491 on 980701 and 980707 about the importance of Astro Point "clusters".

12. The message was that experience has suggested that major trends end at the end of Astro Point "clusters".

13. Such an example of an Astro Point "cluster" is presented in the "A&P Points" discussion in the "Almanac" ad which can be accessed from the main page (just follow the links) at the August 25, 1987 stock market peak.

14. In similar manner, this "cluster" began with a major "A Point" (the first of the second half, 1998), 2 calendar days later experienced a minor "A Point", and then 2 more calendar days later experienced a "P Point" (see COMMENT #s 600 of 980826 and
617 of 980830).

15. During this period, the stock market declined sharply each day.

16. The bond market rallied each day.

17. Each market reversed the day after the "cluster" ended (today).

18. The US Dollar also cracked during this period.

19. Currencies exploded.

20. The Japanese Yen's been up every day since the 25th (see COMMENT #s 557 of 980804, 588 of 980818 and 612 of 980827).

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