# Elliott Channels on the USD Index | 21st July, 2017

The USD index has been trending lower for six months now. A simple wave count at the monthly chart level may indicate what is most likely to happen next.

Click chart to enlarge.

The Elliott channel (maroon) about cycle wave III is drawn using the first technique: a trend line is drawn from the end of the first and third waves, then a parallel copy is placed upon the end of the second wave. The fourth wave is normally contained within that channel. The fifth wave ends either mid way or at the upper edge of the channel.

If the fourth wave breaches the channel, then it is redrawn using the second technique: a trend line from the ends of the second to fourth waves, with a parallel copy on the end of the third wave.

For both techniques, after a possible fifth wave makes a new high (or is a complete structure which is occasionally truncated), a subsequent breach of the channel in the opposite direction is an indication that the whole structure is over and the next wave is underway.

The Elliott channel (maroon) about cycle wave III is breached. This indicates that cycle wave III may be over and cycle wave IV may be underway.

To determine how cycle wave IV may unfold the guideline of alternation and an eye for the right look is used.

This analysis is published @ 06:30 a.m. EST.

# Market Correlations – Statements and Assumptions | 20th June, 2017

Occasionally, members and visitors to this website make a statement along the lines of “market X is doing this, so how come you think Gold is going to go up / down?”.

Such statements are based upon unacknowledged assumptions that the markets have a correlation. The problem with assumptions is they can be wrong. So is there a simple mathematical technique to determine if two sets of data are correlated, either positively or negatively?

Click chart to enlarge.

Yes, there is: by looking at the correlation co-efficient range between two sets of data.

Correlation co-efficient ranges from -1 to +1. A perfect positive correlation will have a correlation co-efficient of +1. A perfect negative correlation will have a correlation co-efficient of -1.

Two sets of data which have a positive correlation will have a correlation co-efficient between +0.5 to +1. Two sets of data which have a negative correlation will have a correlation co-efficient between -0.5 to -1.

Any two sets of data which have a correlation co-efficient between +0.5 and -0.5 are not correlated.

Any two sets of data which have a correlation co-efficient that spends any time between +0.5 and -0.5 does not have a correlation which is reliable. This area of unreliability is shaded in the chart above for several markets which are often assumed to have a correlation to Gold price.

GDX, US Bonds, US Crude Oil, the US dollar index and even Silver do not have a reliable correlation with Gold price. All of these markets have correlation co-efficients which spend time in the shaded areas.

Even if these markets do sometimes exhibit a correlation with Gold, the point is that because this is not always true that when it is so it cannot be assumed to continue. The math shows that it does not.

To base an analysis of Gold on an assumption that another market is moving in a particular direction, and therefore Gold must move in a particular direction, is to base the analysis on assumptions and not data. Such assumptions are unreliable, and why you will not find them in my analyses.

To base an analysis of Gold on actual data and math is more likely to lead to accurate predictions and profitable trading. This does not mean the analysis will always be right, but it does mean the analysis will be based on facts and not assumptions.

This analysis is published @ 04:13 a.m. EST.

# Trading Room – 28th February, 2017

Today’s Trading Room looks at Copper, USD Index and DAX.

Trading Room will focus on classic technical analysis. Elliott wave analysis will be for support and for targets / invalidation points.

Copper

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

This analysis is overall neutral, neither bullish nor bearish. ADX is now declining after reaching extreme. Divergence with price and RSI (red lines) is bearish. Either a larger consolidation or a trend change is a reasonable expectation at this time, but no trend change has yet been indicated.

Volume is so far inconclusive. Sometimes at the beginning of a bear move volume can be light as the market falls of its own weight. However, light and declining volume does not support the fall in price so far.

TREND LINE ANALYSIS

Click chart to enlarge.

The long term green line was perfectly touched just three weeks ago. This may provide strong resistance. The lilac line has now been breached (this is seen more clearly on the chart below). However, this lilac line is too steep for reasonable technical significance. That is the risk at this time with this analysis.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

The lilac line has been breached and price has now turned up to find resistance there. If the green line holds, then this lilac line should too.

USD Index

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

This market so far is moving upwards as has been expected. I am publishing this chart again today because at this time it may be offering a good opportunity to join a trend in the relatively early stages.

ADX is below 15, so no trend is yet indicated. ATR is still declining. These two indicators together signal caution about a potential upwards trend.

RSI is neutral. MACD and Bollinger Bands are bullish.

I particularly want to draw attention to the long lower wicks of the last three daily candlesticks. These are bullish.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

This chart is the same as the last published daily Elliott wave chart for USD Index with the exception of the short term support line which is slightly redrawn. Notice the long lower wicks on the last three daily candlesticks and how they all sit neatly on the trend line.

DAX

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

Analysis of DAX is presented in response to a reader’s request and not because it offers a good opportunity at this time.

Some larger sideways consolidation or a deeper pullback here is a reasonable conclusion after ADX reached extreme and RSI exhibited double bearish divergence over a reasonable period of time. At this time, it looks like DAX is in a consolidation with an upwards bias. The risk here is a deeper pullback may develop.

VOLUME ANALYSIS

Click chart to enlarge.

StockCharts do not offer volume data for international indices. This is FXCM volume data.

Watch On Balance Volume closely over coming days. If it breaks out of the current range, that may precede the next direction for price.

Strongest volume of recent days is for downwards days. This is bearish.

ELLIOTT WAVE ANALYSIS

QUARTERLY CHART

Click chart to enlarge.

A Super Cycle fifth wave may be completing. Super Cycle (IV) may have been a large contracting triangle, or it may have been a more brief zigzag (alternate weekly chart below).

MONTHLY CHART

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The triangle fits, but it is not supported by MACD hovering about zero. This is not a requirement but does add confidence when it occurs.

WEEKLY CHART

Click chart to enlarge.

The weekly chart shows all of Super Cycle wave (V) to date. Primary wave 4 may not move into primary wave 1 price territory below 10,488.

DAILY CHART

Click chart to enlarge.

A correction for intermediate wave (4) may not move into intermediate wave (1) price territory below 10,807. Intermediate wave (3) may be over. This is supported by classic technical analysis. A deeper pullback may occur here, maybe to the 0.236 Fibonacci ratio about 11,527. That would see intermediate wave (4) end within the price territory of the fourth wave of one lesser degree.

It is my conclusion at this time that DAX does not offer a good trading opportunity. The upwards trend looks stretched at this time, so a pullback may occur. If it does, then at its end it may offer an opportunity to join the upwards trend.

ALTERNATE MONTHLY CHART

Click chart to enlarge.

The conclusion for the short term may be the same even if the triangle is wrong. Cycle wave IV may have been a quicker zigzag. Cycle wave V may still be within the final fifth wave up. The daily chart would be the same for this idea.

DISCLAIMER

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Accept that this analysis may be wrong. It is impossible for any analyst to predict with certainty what a market will do next.

This analysis is published @ 01:12 a.m. EST on 1st March, 2017.

# The Trading Room – 15th February, 2017

Today’s Trading Room looks at Natural Gas and USDJPY.

Trading Room will focus on classic technical analysis. Elliott wave analysis will be for support and for targets / invalidation points.

Natural Gas – NGAS

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

In the mid term, there is a new downwards trend for Gas. Use the Magee trend line for resistance.

In the short term, price may bounce up here from the 200 day moving average. The slight decline in volume for the last two days, along with small range days, looks like bears are temporarily exhausted. Expect a bounce as fairly likely.

This chart looks very bearish.

ELLIOTT WAVE ANALYSIS

WEEKLY CHART

Click chart to enlarge.

The trend channel about cycle wave b has been breached now at the weekly and daily chart level. This may offer some confidence in a trend change.

DAILY CHART

Click chart to enlarge.

Cycle wave b may be complete. A cycle wave c down may be in the early stages. This wave should last one to several years if the wave count is correct. The lower edge of the channel about cycle wave b is now breached by two daily candlesticks.

Look for bounces to find resistance at the Magee trend line.

I do have an alternate wave count, but it too is bearish at this time. Publication of it would add nothing to the analysis. If any member wants it, then please email me and I’ll send it to you.

USDJPY

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

Price has moved upwards, as expected, since last publication of analysis of this pair. There is now a full daily candlestick above the blue line, which previously provided resistance and may now provide support.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

This market is behaving as expected so far. Elliott wave targets may be used as profit targets.

DISCLAIMER

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Accept that this analysis may be wrong. It is impossible for any analyst to predict with certainty what a market will do next.

This analysis is published @ 12:35 a.m. EST.

# The Trading Room – 13th February, 2017

Today’s Trading Room looks at USDJPY, USD Index, NZDUSD, EURUSD and US Oil (by popular demand).

USDJPY

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

For the long term, assume the trend remains up until proven otherwise. The long term 200 day moving average still has a positive slope, and the short and mid term averages are still above it.

For the mid term, price has seen a relatively deep pullback. The question will be: Is this over and will the upwards trend resume?

Price is at support just above 111 (horizontal support and resistance lines are drawn after looking back 3 years). Resistance is just above 114 and next about 116.

There is some bullish divergence with RSI, but RSI did not reach oversold for this pullback.

The risk here is that the pullback may move lower and RSI may develop double divergence with price before price turns up.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

This wave count has excellent alternation and Fibonacci ratios. There are also some close Fibonacci durations for waves.

If intermediate wave (4) moves lower, it should find strong support at the lower edge of the best fit channel. Double zigzags are reasonably common structures. Triple zigzags (labelled W-X-Y-X-Z) are very rare. If intermediate (4) is correctly labelled as a double zigzag, then the probability that it is over here is very high.

VOLUME ANALYSIS

Click chart to enlarge.

Volume increased during the middle portion of the pullback, and now at the last low volume declined as price fell; the market fell of its own weight. This points to a tired trend. Price certainly could move lower here, but the probability of a low in place has slightly increased.

On Balance Volume is at support. If it breaks below the yellow line, that would be a bearish signal.

USD INDEX

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

Price has moved upwards since last analysis of this market.

The long term trend should be assumed to remain upwards until proven otherwise. This downwards movement should be assumed to be a pullback within a larger upwards trend.

Looking back at price behaviour in the last upwards wave from the left of this chart: price starts out slowly with choppy movement, generally trending, and it is not until the middle of the movement that Bollinger Bands widen and ATR shows a good increase. Then the trend quickly became extreme, yet price continued upwards while ADX steadily declined from about 45. So trends for this market can remain very extreme for long periods of time.

The current situation looks similar to that back in September 2016: ATR is declining as price moves up, Bollinger Bands are contracting, ADX is low and below both directional lines, and RSI is neutral. In the current day, Stochastics is also returning from oversold and exhibits single bullish divergence at last lows.

It is looking like USD index may be in the very early stages of the next wave upwards.

Unfortunately, neither BarChart nor Stockcharts provide volume data for the USD Index, so no volume analysis can be done.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

The structure of intermediate wave (3) and of primary wave 5 is incomplete. Price has found support and bounced up off the best fit channel. The short term yellow resistance line is breached. It is looking increasingly likely that USD index is beginning the next wave up.

NZDUSD

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

Since last analysis of this pair, which was very bearish, price has fallen and closed below the short term Fibonacci 13 day moving average. The long, red daily candlesticks look bearish, and the longer upper wicks on the first two are bearish.

RSI is now neutral and Stochastics is returning from overbought. There is room for this wave down to continue.

ADX was extreme. It has a long way down to go before it would again indicate a trend.

ELLIOTT WAVE ANALYSIS + VOLUME ANALYSIS

Click chart to enlarge.

The green support line has been fully breached.

The structure here is seen as a leading expanding diagonal. The fifth wave of minute wave v must be longer than minute wave iii to meet the rule regarding wave lengths for expanding diagonals. This gives the minimum target calculation.

A trend line is drawn about On Balance Volume, which has been tested at least three times before and is long held. It is now breached and OBV is coming up for a back test of resistance. If this line holds, it would be strengthened and more confidence would be had that price has turned.

The three red daily candlesticks in last week saw increasing volume. This supports downwards movement and adds confidence in a trend change here.

EURUSD

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

Support and resistance lines are added this week. Look for support next at 1.055.

This pair is not as clearly bearish as NZDUSD, but it does look like they may be turning downwards together. Look out for Bollinger Bands to widen as volatility returns to this market.

Stochastics is returning from overbought after exhibiting divergence there. If it reaches oversold while price reaches support, then this market will be carefully analysed for any weakness in downwards movement.

ELLIOTT WAVE ANALYSIS + VOLUME ANALYSIS

Click chart to enlarge.

On Balance Volume remains bearish. A back test of resistance for both yellow trend lines has happened and OBV has turned down from both giving bearish signals.

The best fit channel has been breached. A one day throw back occurred right after the breach, but price may still curve up and around for a longer back test of resistance. That is the risk here to short positions.

US Oil

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

US Oil entered a consolidation back in December 2016. Since then price has been fluctuating with typically choppy movement from resistance to support and back again. Resistance is about 54.15 to 54.35 and support is about 52.15 to as low as 50.70. During this long consolidation, it is now two upwards days that have strongest volume suggesting an upwards breakout is more likely than downwards.

On Balance Volume has last week given a strong bullish signal.

Prepare for an upwards breakout. This may happen this week.

A classic analysis target would expect price to travel at least the distance of the widest part of the consolidation after a breakout. That would expect a movement of about 4.53.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

The Elliott wave analysis is overall very bearish for US Oil. This is an alternate wave count that is published here because it aligns with the classic technical analysis today.

This wave count expects essentially that any upwards breakout may be false and short lived.

DISCLAIMER

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Accept that this analysis may be wrong. It is impossible for any analyst to predict with certainty what a market will do next.

This analysis is published @ 06:27 p.m. EST on 12th February, 2017.

# The Trading Room – 8th February, 2017

Introduction:

The Trading Room is a new idea that I want to test and develop over the next few months.

I find myself spending a lot of time writing and publishing analysis of Gold and the S&P500 (over at Elliott Wave Stock Market) when those markets are quiet and range bound and offer no good trading opportunities. This focus on inactive markets takes focus away from markets that are trending and do offer good trading opportunities.

What if the focus was on finding good trading opportunities over a range of markets rather than daily analysis of specific markets? What if the Trading Room can be the platform for publishing these good trading opportunities?

Therefore, this Trading Room approach will look over a range of markets to identify any possible trading set ups which may unfold now or over the next few days, and the focus will be on trading set ups and not on teaching and learning Elliott wave.

Analysis will be brief and to the point.

As always, it is essential that anyone using this analysis for trading advice manages risk carefully. Follow my two Golden Rules:

1. Always use a stop.

2. Never invest more than 1-5% of equity on any one trade.

Today’s Trading Room focuses on NZDUSD, EURUSD, USD, and GDX:

EURUSD

TECHNICAL ANALYSIS

Click chart to enlarge.

So far upwards movement should be assumed to be a counter trend movement, until proven otherwise. The prior wave down put ADX into extreme and upwards movement from the 3rd of January has brought ADX back down from extreme. There is again room for a trend to develop.

Single divergence with Stochastics on its own is not enough to indicate a high in place. A breach of a support line should be seen before entering short.

Stockcharts do not offer volume data for currencies, so this is analysed below with BarChart data.

ELLIOTT WAVE ANALYSIS + VOLUME ANALYSIS

Click chart to enlarge.

The best fit channel is slightly adjusted to be more conservative than the last published chart for EURUSD. If price can print a full daily candlestick below the lower edge of the yellow channel, that would offer further confidence in a trend change. When that trend line is breached, then it should offer resistance.

Stops may be set a little above the trend line offering a low risk high reward opportunity. Do not set stops too close to the line; allow the market room to move. Sometimes trend lines are overshot and this trend line is not perfect.

On Balance Volume has confidently breached a horizontal support line which offers strong technical significance. A retest of resistance at that line shows it holds. This is a strong bearish signal.

NZDUSD

TECHNICAL ANALYSIS

Click chart to enlarge.

Classic technical analysis of this pair is very bearish. The long upper wick on this last daily candlestick is bearish. This trend is extreme; it will end sooner rather than later.

ELLIOTT WAVE ANALYSIS + VOLUME ANALYSIS

Click chart to enlarge.

On Balance Volume has no trend line. Any trend line drawn would have too steep a slope to have reasonable technical significance.

If an expanding diagonal is unfolding, then minute iv must be either over now or very close indeed. There is almost no room left for it to move.

I have been analysing NZDUSD (because I’m a Kiwi) for years using Elliott wave and I will note that NZDUSD rarely offers good looking Elliott wave structures. Therefore, I place more weight in classic analysis of this pair than Elliott wave analysis. The Elliott wave analysis is supplementary.

I will wait for the green support line to be fully breached before going short here.

USD INDEX

TECHNICAL ANALYSIS

Click chart to enlarge.

There is not enough bullish indication here to go long yet. Upwards movement on this chart is a clear trend and downwards movement is choppy and overlapping, so downwards movement looks more like a counter trend movement. If that conclusion is correct, then USD should break out upwards.

The larger trend at the monthly chart level remains up and the 200 day moving average still has a positive slope.

ELLIOTT WAVE ANALYSIS

Click chart to enlarge.

Neither Stockcharts nor BarChart have volume data.

The short term yellow resistance line has been breached. However, the long upper wicks on the last two daily candlesticks gives some cause for concern.

Price may be bouncing up from the lower edge of the best fit channel. With another upwards day moving further away from the trend line, a long position may be entered. A stop may be set just below the last low.

GDX

TECHNICAL ANALYSIS

Click chart to enlarge.

Next resistance is at 26.0.

This chart is provided today mostly for members of Elliott Wave Gold and not because I see a trading set up here, because I don’t. (That doesn’t mean one does not exist, only that I don’t see it today).

Going long here risks entering at the end of the trend. ADX is nearing extreme and price has closed above the upper edge of Bollinger Bands now for the last four sessions.

Going short here is trying to pick a top. Before going short at least two of the following should be seen: a bearish candlestick pattern, a break of support by On Balance Volume, divergence with price from RSI while overbought, price to move below the short term 13 day moving average.

This analysis is published @ 02:59 a.m. EST.