Elliott Wave Forex

As expected the euro moved towards the upside, reached our first target, and exceeded it by 12 pips.

The market is now showing 3 signs of bullish weakness: 1) divergent momentum, 2) minimum price reach, and 3) non-impulsive movement. And when we add the fact that the wave pattern puts the market in a “fifth-of-a-fifth” wave position, it’s logical not to expect any serious upwards thrust — although the rally is not necessarily over just yet.

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While I was expecting a small additional decline, there are now several indications that suggest price may have already formed a temporary bottom.

On the one hand, we now have two consecutive, fairly bullish bars on the daily, accompanied by several momentum indicators’ showing an oversold situation on both the daily and hourly charts. On the other, the current wave count sees that a fourth wave has retraced 38.2% of its preceding third wave, which is a very common retracement value in this wave position.

So while I’d still like to see price move above the confirmation point on the daily chart to have full confidence in the updated count, it objectively makes more sense now to shift our focus towards the upside.

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The market moved much more closely in line with the alternate count than with the main one. It started the day by forming a complex correction towards the downside, and ended it retracing exactly all of that decline.

I find that the pattern is becoming a little clearer now, but unfortunately the possible counts are still increasing, due to the corrective nature of the developing pattern. And since it’s unreasonable to present all of the possible counts of which I’m keeping track at the moment, I’m choosing to go with the one that has the highest probability, even though it doesn’t provide low-risk scenarios.

Hopefully the market will present better opportunities by the end of this week, or early next week.

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The market moved below 1.1730, thereby invalidating our main daily count and promoting the alternate count.

Now we can count 5 distinct, non-overlapping waves from 1.1911: 3 waves down and 2 waves up. Ideally this constitutes a regular impulse, so I’m led to present this as the main count. Alternatively, and with a virtually equal probability, we may be looking at a developing double zigzag.

Both counts expect similar outcomes, but they differ slightly in their time horizons and targets. We have to track this one by ear as it unfolds, until we have enough data to make a more conclusive decision. As it stands right now, this is a somewhat ambiguous situation, and this ambiguity is reflected in the soft confirmation and invalidation points.

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Yesterday the market moved slowly upwards as expected. So far it’s gained about 100 pips, nearly 61.8% of the most recent decline. Our count, therefore, remains the same.

This advance looks too jagged to label with confidence, but my impression is that the move from 1.1730 to 1.1814 is the first wave of a larger move. And since price has already made a slightly higher high above 1.1814, the second wave is likely forming an expanded flat correction.

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