Currency Market - U.S. Dollar Highlight #1
"Inversion Cycle Index" and "ascending diagonal triangle" chart pattern signal end to 8 year market rally the day after it peaks - if you can only reference one HIGHLIGHT, this is the one.
(COMMENT #s 454, 518)
UPDATED 19980616
COMMENT 1998-454
1. Turn to page 280 in "The 1998 $upertrader's Almanac - 1st Half Edition".
2. The chart which follows of weekly US Dollar Index prices updates that shown on the bottom of the page in the "BEST BETS" section.
3. The "III" wave shown in the chart below is moved back a little in both price and time from the "3" wave marked in the book.
4. We have been following the unfolding of this market for several years.
5. If the pattern as marked in the book and in the chart below is correct, the US Dollar Index peaked yesterday.
6. In support of this interpretation is the possible Elliott Wave "5th Wave Diagonal Triangle" marked as the "1-2-3-4-5" sequence in the chart below.
7. This sequence, of course, is the price movement since the end of the "IV" wave approximately one year ago.
8. The sequence implies that the "V" wave is complete.
9. To see what normally happens after the completion of such a "5th Wave Ascending Diagonal Triangle" sequence, see the price action from Point #s 7 to 8 in the chart of hourly DJIA prices at COMMENT # 419 after a similar sequence was completed on 980422 at Point # 7.
10. The completion of the "V" wave, if correct, further suggests the completion of the "A - B - C" sequence of the last 7 years.
11. Can you see this larger pattern (it is marked in the chart which follows by the "A", "B", and "C" points)?
12. (The "B" wave, as marked in the book, is comprised of an "a" wave which ended in late 1992, a "b" wave which ended in early 1994, and a "c" wave which ended in early 1995).
13. Note how the upper trendline of this entire sequence, drawn parallel off the "A" point to the up trendline formed by the 1992 and 1995 lows, has provided continuing and stiff resistance to "Wave V" of this move.
14. When we draw the upper up trendline off the "Wave V" highs on 970806 and 980403, we note that yesterday's closing price was right on this up trendline and that the pattern experienced the traditional "5th Wave Overthrow" by trading 22 or so ticks above the trendline yesterday (see also the "5th Wave Overthrow" at Point # 7 in the chart of hourly DJIA prices at COMMENT # 419).
15. Furthermore, Point # 4 in the chart which follows also experienced a very minor "underthrow" during the month of May of the up trendline drawn through Point # 2 and the low point just to the right of the "II" wave.
16. Such often happens in such formations.
17. Note that this market has been unable to penetrate the 1989 high, further suggesting that all price movement of the last 9 years has been corrective.
18. Finally, turn to page 129 in "The 1998-99 $upertrader's Book of Linear Time Cycles".
19. It would be a serious mistake to ignore the "Inversion Cycle" information listed on this page, even though it is not a monthly / weekly ALIGNMENT, especially given the implication suggested by the pattern shown in the chart which follows.
UPDATED 19980714
COMMENT 1998-518
1. I believe you will find it helpful to review the chart of the US Dollar in COMMENT # 454 of 980616.
2. Note that this market made a tiny new high in the cash market last Thursday/Friday.
3. These new highs were UNCONFIRMED by momentum oscillators such as RSI and Slow Stochastics (see pages 171-184 of "The $upertrader's Reference Manual").
4. Looks to me like they did nothing but run the public's stops.
5. There had been absolutely no follow through and the market is now trading below its "breakout" highs.
6. In the spot futures, a new high was NOT made (see pages 171-184 of "The $upertrader's Reference Manual").
7. DXU did trade higher, however.
8. Let's see if we can't get the entry technique on pages 205-209 of "The $upertrader's Reference Manual" to set up over the next few days.
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