Sunday, August 23, 2009

Dollar Hits 2 - 4 line to the penny and ideal expanded flat C wave projection.

Dollar Hits 2 - 4 line to the penny and ideal expanded flat C wave projection.

Swedish krona loves to make wave 5's that are 1.618 or .618 of 1...especially that just slightly undercut the wave 3 low. Guess what happened friday...

miracles of miracles...

.618 of 1. Therefore, I will not be surprised that the bottom is in for SEK...and the dollar.

Also the expanded flat for the dollar...has hit the perfect retracement level for its wave C projection of A - which is 1.618 of A. You can see this in the chart above. If my 2 labeling is correct then the C wave of the flat projected exactly 1.618 of A...and hit the 2 - 4 line to boot.

A few references to ending diagonals are popping up now. While I would like the ending diagonal pattern for this wave 5...and its my favorite bottoming pattern to trade...i am not sure if we are playing a game of pattern slip here or not. EWI changed their forecast - seeing down for Euro and likely down slightly for dollar and everyone runs looking for a new way to explain the dollar wave structure - including myself. And I have to admit I always felt that this wave 5 could look short on the currency - so why not play shuffling EW patterns?

The current pattern is not broken yet, so, its best to keep it simple IMO. Given the FDIC report coming out next week and what is about to happen to the dollar for the long-term - should it be surprising if we get a .5 retrace of wave 1 for wave 5 rather than .618 or 1 or 1.618 retrace of wave 1 for the wave 5 projection. Additionally, I have never seen a substantial divergence like EWI is postulating about with the normal Dollar/EURO relationship. If the EURO is down...dollar will be up that's it.

For example...i do not like the silver chart at all - Silver should be leading a rally here if its going to bounce. I need to have a lot of imagination to be able to place a count on silver that is strongly up...especially to new swing highs.

Gold is possibly in the ending of a triangle that could break to the upside but volume patterns are not great and the amount of energy required to break Gold out to its logical target of 1050 to 1080 measured from its triangle will not likely come from an ending diagonal in the Dollar. We need 6 to 8 points down in the dollar for that. I just don't see that as likely in the dollar pattern. Also, the stock market could get an inflationary kick up 150 to 200 points on the SP500 if that were to playout. I have difficulty seeing more than another 50 points, let alone a 200+ PE for the SP500.

The Yen rebounded huge and broke its 2 - 4 line on Friday. Five wave patterns in the yen that coincide with 5 wave patterns in the dollar often precede interesting price movements. Additionally, the Yen has been in an increasing correlation with the dollar recently...possible that the breakout in the Yen could be pointing to some timing in the dollar.
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