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Now, Iím a currency trader. Thatís my specialty, thatís what the firm does, and thatís always
been my favorite market because of the way they trend. Hereís a forecast that I made
for the dollar. And I know thereís no cash currency vehicle to trade, but there is a
futures contract out. And we look at the dollar index because itís a basket of many different
top currencies. And it does provide a guidepost for our overall strategy.
Back in 2001, the dollar top had a nice Wave 1, first wave down; Wave 2 pullback; and then
this big Wave 3; then a Wave 4 pullback. So again, Wave 3ís the biggest, and even Wave
3 subdivides. 1, 2, 3, 4, 5. Wave 4 pullback should go to the old Wave 3, or possibly to
the Wave 4 high.
Hereís the thing I want you to know. I made a forecast on August 6th, 2004, that the market
would do one of two things. Either go up in this direction, which is not my preferred
wave count; or it would pull back, bottom in 2005, and then have a nice sustained run.
Which it did. So right in here, either here or here on this forecast, we just experienced
this low. Within the next few days, weíre going to tell whether this forecast is going
to be good for the next 3 to 12 months. And thatís really what weíre going to get into
tonight. So this really gives you an idea that the dollar should strengthen ñ whereas
everybodyís talking about the euro going much, much, much higher. But I donít think
itís going to do so just yet. And I donít think the dollarís going to crash just yet.
But there is one caveat which Iíll share with you.
So I believe the best preferred wave count, is what I call it, is that weíre, somewhere
either in this low or in this secondary low within the U.S. dollar, against all the world
major currencies, and that weíre going to experience a nice counter-trend move that
will take it back to the previous Wave 4, or possibly a Wave 4 here of what we call
lesser degree. So weíre looking for a move back to 85, or possibly as high as 98. But
more likely about 92 in the dollar index. And you can take a look at that in futures,
the symbol is DXM5 would be the June futures, or DXY is the dollar index cash. And thatís
like stockcharts.com has that.
Hereís what happened. Here was where I made the forecast for a little rally and then a
selloff and then another rally and possibly one more selloff. Hereís where we were as
of Friday or Sunday early a.m. Letís go back to the forecast. Here was the low, and then
the rest of the forecast. I forecasted a bounce, a selloff, and then another bounce, and hopefully
this rally. And then hereís what happened. The low, the rest this was all forecasted,
almost identical to what happened, because of my knowledge of Elliott Waves and other
aspects.
Hereís where we are. Weíre at the 50 week moving average, and some trend lines. So the
dollar right now, for all you self-traders out there ñ and for people interested in
our program ñ itís at a real critical juncture. From here, itís either going to take out
this low, below 82, and hopefully go no lower than 78. 78-41 to be exact, and then experience
a major rally. Or it will just have a slight pullback in here, and then begin a very nice,
substantial correction up into the 90s, possibly as high as 98. This old fourth wave pullback
high. 1, 2, 3, 4, 5, and then a bigger Wave 4, and finally a Wave 5. So this still allows
for one more new low on the dollar index, but it doesnít have to. This would be Wave
1, 2, 3, 4, maybe a failed fifth wave.
Hereís the final alternate count on the dollar index. If it rallies here, which it did, and
it happens to take out 78-41, thereís a remote possibility that the dollar could crash. Which
I ultimately expect it will, but not just yet hopefully. So you can take a screenshot
of that if you want. Dan can send you this. But hopefully that scenario will not play
out, and this scenario, instead, will play out, will give us a lot longer to take advantage
of this moves.
OK, recent examples. This chart was taken from Friday, or possibly very early in the
morning Sunday. So either April 1st or April 3rd. And this is a monthly chart of the Australian
dollar. Weíre going to go in alphabetical order and cover some markets. This is a 1986
low. So this is an 18-year Andrews Median Line. So what I do is this: I find a known
bottom, and the next alternating known high, and the next alternating known low, and Iíll
draw a line from here across, and Iíll bisect it. Iíll show you a better example here.
And this line will pick the trajectory of the market. And it picked this top, and it
picked the most recent high.
Now I can tell if my analysis is correct, because you see how here at the bottom, in
í01, I drew the lines, literally I started drawing these lines back then. But when it
reacts, takes a rally, and then holds on that line ñ remember, this is a hypothetical line
the markets donít know about ñ but if I could have drawn this line right here at the
bottom in 2001. And this was valid because it tested the line, and I say it held market
structure. So my analysis was supported by the market structure or contained the market
structure, which is extremely powerful. And I had a good idea that once this low held
and took out this high, that I could have a move that ultimately would take the Australian
dollar from 50 all the way up to the 78 and 80 area. Which is amazingly powerful. Thereís
nothing like it.
So Iíll show you greater ideas of how you can utilize that for your own mutual fund
portfolios or whatever else. Or to tell if weíre doing our job properly.
Hereís a weekly chart of the Australian dollar. And we have a double top, and a little wedge
formation, and what else do we have? Well, weíve got a nice five wave pattern. 1, 2,
3 the biggest, 4, 5, and thatís this big Wave 3. Starts here, 1, 2, big Wave 3, 4,
and Wave 5. And even Wave 5 goes 0, 1, 2, 3 the biggest, 4, 5. And even this little
wave goes 1, 2, 3, 4, 5. So our system, recognizing this pattern, sold the Australian dollar short
right up here at like 78, 80. This is a weekly chart. And we covered our first little profit
projective at 77 and change.
Ultimately I think the Australian dollar should go back to the fourth wave of lesser degree,
back into May lows of 69. So weíre expecting a nice move down here. As long as it doesnít
take out the old highs, weíll be trading this continually on the short side. Even though
we might get a little bounce here.
Hereís a daily resolution. Again, Wave 1, Wave 2, 3 the biggest, 4, and finally 1, 2,
3, 4, 5 waves up. Now notice weíve got a nice wedge pattern, and a rising wedge is
bearish. So not only do we have a nice 1, 2, 3, 4, 5 Elliott Wave structure, this fifth
wave is very low momentum; weíve got divergence on the indicators, which means the marketís
making a new high; the indicators are not making new highs; here are the Stochastics
and Commodity Channel Index. CCI did not make a new high. Matter of fact, it made two lower
highs, which is very bearish. And hereís right where we sold the market, right here,
like two, three days after the high. Covered it right over here with our profit objective
on our trading system. And now, a little rally. If it breaks this low here at 76-50, more
or less, this pattern projects down to 72-50, 72-20. So thatís about $5000 a contract or
$4500 per contract, which we would expect our system to catch probably about half to
two-thirds of that move.
Hereís a long-term forecast on the British Pound. Now I give three examples of what it
should look like. Not that Iím throwing darts here at all, but depending on what the market
does, I will have a very good idea of which forecast is going to be the most likely. Right
now, weíre expecting a pullback in the euro currencies. And I actually think the pullbackís
more likely to look like the secondary forecast here. So a nice pullback in the European currencies
to this previous fourth wave, and then a blast off in the pound against the dollar, the euro
against the dollar.
It may be that the forecast goes the opposite with this other forecast. But when it gets
there, and when I have the new high and low swing points, I can draw my Andrews Line,
and I create something called a market structure map, which gives us a very strong gauge for
which way the market should go and what it will look like. But thereís no other way
that I know of that will allow us to make these kind of extraordinary forecasts by not
having all this information, both the Elliott Wave and these Andrews forecast.
Again, hereís a known low, hereís a known high, hereís a known low. Draw a line through
that, bisect it, and create upper and lower parallel channels, and bingo! I know thatís
a good analysis because it held right on that channel, and fantastic takes off. Very, very
powerful.
OK. Just what happened recently. The European markets topped in December, and some in January
I believe, but right around the beginning of the year youíll notice if you look at
the foreign exchange charts, they tend to make major moves either in December or January.
For some reason they change trends right around that time. Weíve been watching that for years.
Hereís an analysis technique that was drawn, possibly indicating a top at 93 area, at the
intersection of whatís called a midpoint line, and that is ñ hereís a low, alternating
swing high, and an alternating swing low, and yet I donít expect it to make a new high.
So I take the midpoint from these intersecting lines, this is called a midpoint line, there
is the midpoint of this swing, and I draw a line through this next swing right here
ñ this is done by the computer, by the way ñ and it gives me the forecast for a corrective
move. The marketís not going to make a new high, and if itís a correction, itís going
to stop on the midpoint line. Which it does, almost to the tick.
And also from this new dark Andrews box, which is made off this high, this low, and this
swing, and itís bisected through this imaginary line. So when the market tagged those two
points, we had a very strong resistance, and a forecasted move down to 87, or possibly
down to 82. And letís see what happened. We also had divergence on the indicators here.
So here was the forecast of a major resistance point. Again, midpoint line going from the
midpoint of this swing to the midpoint of this swing, capturing this particular high.
And then we were immediately able to draw a new Andrewís Pitchfork; the market held,
market structure right here, and then 1, 2, 3 the biggest, 4, 5. And then hereís probably
another level for correction.
So we actually sold this with our systems, sold this market, caught this short; we went
long right here. It didnít reach our profit objective, which was actually 91-70, I think
it is. Stopped on this median line, which is high, low, high, swing right to the middle,
stopped right on it. Sold off. So weíre still long, and we actually may get stopped out
on this one, but we caught a very, very nice move there. And almost caught the low for
our profit target.
We wonít catch every single move with this system, but itís highly accurate relative
to most systems. Most system are 45-50% accurate. Our system used to be 45-55% accurate. Now
itís running at 60-80%. Matter of fact in February, I just checked one of our larger
accounts, 72% accurate for our trades.
Hereís a big picture of the euro. Monthly chart going back to 1986. Last known swing
low, last known swing high, last known lowest swing low, draw a line through the middle.
Bingo, it picks the top at 1.35, 1.36 area, which we just had. Thatís a very strong resistance.
Why do we think thereís a top here? Well, letís try to look at the market logically
and very objectively. Hereís a Wave 1, Wave 2, then a gigantic Wave 3, which subdivides,
1, 2; 1, 2, 3, 4, 5, another Wave 4 pullback to the top of Wave 3 or the bottom of Wave
4 area; and then 1, 2, 3, 4. So this is either a Wave 4, or this is a fifth wave top.
At no time now in the next year would I expect the euro to go above 145. And preferably weíd
like to see it go to 1.26 first, which is this median line here; again high, low, high,
draw a line through the middle, which is this 1.2460 area target. Or possibly down to this
lower line, which would be 1.16-1.14 area. So thatís really what weíre looking for
right now, and that has the highest confidence level for a forecast for us right now.
Notice how on this area, youíre rallied right from this low, tested this lower pitchfork,
rallied again, tested it again, very strong support and very high confidence that the
market would run all the way from .88, .86 where this low was, all the way to 1.36, 1.35
area.
Thereís one thing I want to add. Thereís one lower swing low point way back here I
think in 1985, í84, that actually has a line going up to 1.45. And I do expect that to
eventually be hit after this pullback. I think there will be one more major rally in the
euro.
Here we are in the weekly charts with the euro. Again, this is Wave 1, Wave 2, you can
see 1, 2, 3, the biggest; 4, 5. Even this ñ 1, 2, 3, 4, 5; and you even look at Wave
5: 1, 2, 3 the biggest, 4, 5 low momentum. Where should it pull back? To the fourth wave
of lesser degree or the top of Wave 3. So it pulls back to the top of Wave 3, and where
this one pulled back, it pulled back to the Wave 4 area. Itís amazing how this works.
Hereís another one. The recent top: 1, 2; 1, 2, 3, 4, 5, and it pulls back. And a little
correction, we may make one more high right here, but weíre at that same place in the
dollar index, where weíre at real critical support and resistance in all the markets.
So here we are at Friday or Sunday morning, and whether it breaks here or rallies back
up and makes a new high, weíll know very shortly. Weíre actually going to get a bi-signal
here on our system probably tonight.
Hereís what it looks like on a daily resolution: last known high, last known low, last known
high, line through the middle, and this was Friday night, Sunday morning. Looking for
a pullback to a final target in here somewhere in the 1.28 area. Thereís some other lines
here that you cannot see. Which the euro just tagged below 1.2780, or something like that,
and rallied. So we think that thatís probably a good low for now.
Couple other markets. Hereís a monthly chart of yen. Again, more teaching for you. Hereís
a Wave 1, Wave 2, Wave 3 the biggest, Wave 4 to the old Wave 3 pullback or Wave 4 high;
1, 2, 3, 4, 5. And then finally, the final Wave 5 low, which is less steep; Wave 3 is
very steep; Wave 5, less momentum. Lots of divergence on the indicators compared to his
low. And then a big A, B, C correction.
And what do we expect here? Since this is a gigantic move, the market still has potential
to make it up to 160, which would be a gigantic move. And itís supported by this Andrews
line, this Pitchfork here. If the end takes out this low below 100, then this forecast
will move to possibly 130 to 150 will be negated, and then weíll look for much, much lower
lows at the dollar end. But for now, we have reason to believe it will go from 108.50,
110 ñ I think it hit there today, actually ñ to possibly 130.