The Euro continued lower but stopped well short of our target for wave (x) green.
We present two hourly wave counts today with invalidation and confirmation points which may provide us with a higher probability wave count once the confirmation point is triggered.
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Today the pound reached the specified target of the updated main count and exceeded it by 27 pips.
From an abstract point of view and aside from main and alternative counts, we have to ask ourselves the following questions:
1- Is the recent upwards movement motive or corrective in nature ?!
2- If we agree that it is motive in nature, is it an impulse or an ending diagonal ?!
3- If we agree it is impulsive, is the five waves rise mature and structurally complete ?!
4- If the impulse is mature, what should we expect next from the pound ?!
There is only in essence two scenarios :
A- The five wave impulse completes the first wave (or A wave) in a bigger bullish structure, and in this case we should expect a correction towards the downside to correct the whole impulse (either the second wave or B wave).
B- The five wave impulse is part of a bigger bearish structure, and in this case we should expect an impulse towards the downside.
In light of the above, the following is an excerpt from Frost and Prechter`s book “Elliott Wave Principle” regarding the personality of second waves in bullish markets. To adapt this excerpt to the pound case we should substitute the word “bear” by the word “bull” and the word “selling” by the word “buying”and lastly the word “sink” by the word “rise”.
Second waves — Second waves often retrace so much of wave one that most of the profits gained up to that time are eroded away by the time it ends. This is especially true of call option purchases as primums sink drastically in the environment of fear during second waves. At this point investors are thoroughly convinced that the bear market is back to stay. Second waves often end on very low volume and volatility, indicating a drying up of selling pressure.
We have been calling for a top in the past couple analyses, and we prefer to keep our members aware of the -highly probable- change of trend beforehand instead of being caught in a rally against us, while -in the same time- keeping an eye on the possibility of a mid-tern uptrend alternative.
With that being said, let`s move on to today`s main and alternative counts.
N.B.: An update for “GBPUSD Historical Analysis” with an alternative count will be available by the end of the week.
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All the wave counts presented with our last analysis remain valid and the Euro did continue lower as we expected.
The second alternate hourly wave count from yesterday has become less likely and is therefore not included with today’s analysis.
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Upwards movement has invalidated the main count on the hourly chart. Below is an adjusted wave count.
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Today the pound moved towards the downside, highly suggesting that the pattern we have been following is complete.
We can now add short-term targets on the hourly charts as well as applying tight invalidation and confirmation points. It should be mentioned that the alternative count presented has lower probabilities as it does not provide the best fit.
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Both the hourly wave counts were invalidated as the Euro moved lower earlier than our wave counts expected. We have made a slight adjustment to the wave count which may now better explain what is happening with the pair.
We present a number of possibilities below with most expecting that we will be seeing more downwards movement within the pair, at least within the short term.
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