If we look back to 1985 there should be no doubt that we can see that the British Pound had a huge single spike to the downside. 1985 was an important year for many of the currencies to make major turnings. All the currencies inside the USD index act inversely, so our wave counts have to do the same thing. Thinking upside down with the wave principle has to be pretty normal if we want a decent wave count. The last thing I have is a decent GBP wave count. What I want and what the market is going to give me are two different things. If the GBP gets close to the 1985 bottom will it be at a Cycle degree wave 5 bottom? I have my doubts at this time as the 2009 bottom may be the “A” wave in Primary degree location as well.
If a new low is going to happen then a plunging zigzag could be in progress. Below the commercials have been switching to the bullish side, while the speculators have done the opposite. Speculators are believing the bearish fundamental news, as they think this bearish trend is going to continue.
All fundamentals come in the form of “news” as the government shutdown clearly demonstrated to me.
These visual COT reports give us an idea as shorts and longs are clearly visible. The red lines are the long positions so I would be hesitant to take any position in the short term. Brexit remains the problem and until that gets resolved the GBP could be stuck in no man’s land for a little while longer.
Last week I still received one more Market Vane sentiment report that ranged between 34%-40% bulls, which are not some readings I can jump up and down about. Now if there were only 14% bulls in the survey, then that would be a different story. I refuse to give any long drawn out fundamental commentary as 1000’s of other analysts are paid full time to do that. Every time the GBP makes a move analysts will jump in and find you a reason why it moved.
All this looks very bearish as the British Pound futures imploded this morning again. Sure the GBP can still crash and if this is just a bear market rally, then the 2017 bottom will never hold. The commercials do not support the public bearish view as they have very large long positions open with the GBP.
It would be something if the pattern is a 1-2, 1-2, 1-2 wave count. This wave pattern can produce an impulse move that is pretty rare and one more small 1-2 wave structure should appear. 3 sets of 1-2 wave counts after the wave 2 in Intermediate, is about the maximum that we can see, as they will be pretty small after Minuette degree. Either way betting against the commercial hedgers is a futile activity, as it would only give out short-term gains at best.
When markets go down, bearish fundamental stories come out. I look at it from a contrary perspective and when I read bearish stories on the British Pound, I quickly flip to the COT reports to see if the COT report supports any of the bearish rhetoric. Take a quick look below and as the commercial traders see a rosy picture, while the speculators follow the crowd and believe the bearish BS! In early 2017 the British Pound hit a major bottom and has since been holding. It sure looks like a wave 2 correction has completed, with the next wave 1-2 also completed.
This is also where I use the 1-2 wave count and since I’m at an Intermediate degree bottom, I can only have 2 lower degree extensions. It might be a bit early for Minor degree wave 1-2 to be completed, but that can be easily adjusted. I’m sure some diagonal wave structures will be thrown in to keep us guessing, but when this bullish phase does something different, it will force a review each and every time.
This is the simple British Pind COT report where the commercials sure are looking bullish to me. Those are net long positions, while the speculators are bearish. Speculators are chasing the perceived trend and always get into a trap. Look into the past and we can see major shifts in positions and I would not look for a bearish wave count until the commercials start to turn net short again, or at least close to it. Are the COT reports classified as “Fundamentals”? With the EWP, all sentiment readings are important as they make charts go up and down.
The mainstream media always quote the speculators like they are the experts, but the commercial hedgers are a different group, as they deal more with people closest to the industry.
To help confirm this bullish trend, then higher highs, and higher lows must form.
The COT report you see above is for the British Pound which shows that the commercials or hedgers have a massive long position, and then on the flip side, the bottom shows all the managed money positions or large speculators with a bearish opinion. Two massive opposing views in which way the market is going to go. I watch COT reports for over 18 years and I know that it is the hedge fund money speculators that “always”get into a trap of one type or another. Any wave analysts that is still bearish on the BP will have the wave positions trashed all the time.
It is futile to count bearish wave counts when the numbers are so skewed against the GBP bears.
This daily chart I added 100 bars, keeps the Primary degree “B” wave bottom in view. What follows the “B” wave bottom should be 5 waves up in Intermediate degree. 1985 was a pivotal year for many currencies that made a wave 4 bottom in Cycle degree. A short description would be, “it’s a bull market”!
Elliott Wave is much easier to figure out from the idealized vision, and I ask the same group of questions before every turning. Where am I, and what do I need to fill the entire “C” wave in Primary degree? In this case, 5 waves up in Intermediate degree is the only idealized pattern. When a pattern does not happen, then it should always force a complete review.
When was the last time that a wave analyst has shown you a complete Cycle degree update, with the 1985 bottom visible? 1985 ended in massive moves making those spikes stand out like a sore thumb. If I see 1985 ignored then those analysts have no clue where they are. Anyone can flip numbers and letters around inside a computer, but get them to count it out on a big monthly chart with pen and paper, they will not be able to do it.
The correcting phase may still be in effect so wave 2 would still have to be adjusted in the future.
So far the British Pound Death Cross has already happened across all three important time frames.(daily, weekly, monthly ) Some of my indicators are already turning bullish but I want to see 80% of my indicators turn bullish, not just 20% or so.
We can see that the commercials are long the GBP already by a substantial amount. The speculators are betting the opposite way and if they keep on turning bearish then they will be in a big bear trap. Commercials traders do not assume the same type of risk the speculators do as they work closer to the business than any speculators ever will.
If only 20% of my indicators are present then this is not nearly enough to cause a major reversal at this time. New record lows in the GBP should still happen but, after that all bearish bets would have to be off the table.
Every Tuesday I get the Market Vane report and it had a low of only 33% bulls present. This is also decent, but it could sink to below 10 yet. The GBP is inside the US dollar basket so it’s not going to fly while the US dollar is still bullish. I’ve seen these setups before and extremes can become more extreme, before they reverse and soar the other way. We have 5 months left this year and these indicators should stiffen up as the months go by.
In some of my past updates I didn’t go back far enough to see the big picture, but with this monthly chart and an additional 1000 bars, we can go back to 1979 and start another count. I have a very high degree of confidence that the GBP is in one big Elliott Wave triangle, and if I keep the wave count as I had it, we may be too early for the 4th wave in Cycle degree to be completed. From my Cycle degree perspective all my work is based on 3 degree levels.
Primary degree, Intermediate degree and Minor degree, in sequential order is what I have to find to make a better fit. Constantly looking for a better fit is the only way to eliminate the bad wave counts, which “every” wave analyst constantly has. This wave count position change also does not impact the wave count I presently have posted, as the short term target is still the same. Wave 3 in Minor degree still needs to get completely retraced, but does not have to fall below the 1985 lows. That 1979-1985 crash is just one single zigzag, followed by another completed inverted zigzag. This only gives us a count of two zigzags that have completed. This means we still have 3 Primary zigzags to go which still could be many years away. Sorry folks, but I have no SC or GSC degree wave counts that I can give you. I could give you nothing but SC and GSC degree bullshit if you want, as I spent a decade or more counting everything in GSC and SC degree levels.
Flipping big numbers and letters around is actually time traveling on paper, as one degree is the same as jumping forward or backward in time by 60% or more. This is a structural change and not a “cosmetic” change. Cosmetic wave counts never last and they always make us miss major bear and bull markets.
The commercials are net long by a small amount, but they carry far less risk. The speculators carry all the risk, who have”shifted” to the to the long side. The mass media always report what the speculators are doing. Speculators are the trend chasers which always leads them into a trap sooner or later. I have been using the COT reports for close to 20 years, which always work best when we see extreme differences between the two groups. If net positions get close to a 4 or 5:1 ratio, then I consider this as a substantial extreme. It also puts our wave counts, at risk of being wiped out.
I will be posting more GBP charts, but mostly from daily or weekly charts and Minor degree turnings. I think this picture above will show much better as we head into the fall time period. Those that think that the British Pound is going to soar are in a bull trap, so they eventually will have to pull the ejection seat and bail out.
With my last posting I did not go back far enough, but once I did a big triangle started to make a better fit. It’s always about finding a better fitting wave pattern with my wave counts, as it makes no sense to replace any wave count that is as crappy as the last one. Anybody can come up with a wave count, but maintaining that wave count is the big task. So far the GBP is still on a bearish decline which should take it to new record lows.
Any new record low, even by the slimmest of margins will help to confirm that this wave count is valid. Of course it could be very choppy on the way down, but we should get 5 waves in Minute degree which should finish this Cycle degree GBP bear market.
I have a large following from Britain, so this wave count is just for you. With it comes a warning, as I had little time to really work on the big picture. 1980 is as far back as I could go. I had to manipulate this June contract to keep that 1980 peak in view. It takes a very long time to build a good wave count as you have to go over it hundreds of times before you might see a pattern that is recognizable. Then you have to count it all out to try and confirm what you think you are seeing.
Wave counting is a secondary act, as we have to see the pattern first, before you can count it. If this wave count doesn’t work, but the Pound keeps soaring much higher then this wave count must be trashed and the entire thing has to be counted again.
One wrong move in Minor degree is enough to instantly start a review going back as far as we have to. In this case the 1980 peak could be the location for a Cycle degree wave 3 top and what followed was an implosion where you can only see very small wave patterns. We are looking at a potential zigzag bear market in a Cycle degree 4th wave correction, that is still far away from completing. Mind you the speed at which the Pound has crashed in the past, sure can speed up the final move. The British Pound also made a strong peak in 2008, but that only matches up a Primary Degree “B” wave top. The little move in Minute degree can be removed as it can be part of the diagonal bullish cycle leading up to it.
Between 1992 and the 2008 peak we had another huge H&S which end up being a very bearish H&S. Since the 1985 bottom the Pound would be in the mother of all Head and Shoulder patterns that would be extremely bullish, even if the Pound crashes below that 1985 bottom again.
A big zigzag crash can have a very steep “A5” wave, but then the declining “C5” wave turns into a wild 5 wave run including a triangle in the 4th wave position. In flats this is usually reversed where the “C5” wave crashes dramatically.
The commercials are short the British Pound so that just adds to the bearish outlook. There are many asset classes with this type of a 4th wave, so something rather big is going to happen during the rest of this year, which will force a major reversal onto all the investors that are leveraged in the wrong direction.
So far I have a rough list of about 16 asset classes that can have Cycle degree peaks already completed or still in progress.
The single little down spike we had in the last few days, is enough to force an entire wave count review, as far as I can go back in chart history. Wild, huge and overlapping waves do not make a good bull market, and the physical size of these waves sure can fit into a Cycle degree triangle. We could be crashing down into an “E” wave in Primary degree after which the GBP could go on rocking bull market, that nobody would be expecting at this time. Looking up or down any idealized wave count, gives wave counters the edge, but if we have no clue how to draw even the basic patterns from memory, the forecasting power of the EWP is moot at best.
I believe that the US dollar has already begun its Cycle degree trip north and the GBP will follow. This may still take the rest of the year or more, and when we are getting close to the end, the GBP bears will dominate the news headlines. Do not let that fool you when the time does come, as it will be a classic bear trap of humungous proportions.
Take any Cycle Degree IV wave bottom and we should get five waves up in Primary degree. Of course our visions of 5 waves in Primary degree all differ between analysts. I always use the wave 3 extended version first. Being prepared far ahead of the crowd is what the EWP is all about. I have to do a bit of hunting for a good idealized triangle chart, but many, if not all of them are online already.
In the last 8 days the GBP has made a rocking recovery and has started to charge up. Now where is the GBP going, if a major bottom has completed? What the decline was is the big question, as that will determine where it can go. I can fit the decline into a single zigzag to the bottom about 8 days ago. This zigzag has a pretty clean first 5 wave set, but the “C” wave decline is diagonal all the way. I see these many times, just like this with the Diagoanl5 traveling down the “C” wave.
Now keep Brexit in mind, how bearish that was for the British Pound. You would figure if everything got worse the GBP will only head down. It would not surprise me to see the exact opposite happen, and that the GBP will rally. Of course the million dollar question, is how high can it go? If the zigzag scenario is a true pattern, then this would be just like any other “ABC” correction. Technically zigzags should get completely retraced back to, where the zigzag originally started from.
We may get a Diagoanl5 or another zigzag, but they both should clear new record highs just the same. If I see a potential zigzag, then I have to be bullish, until this GBP clears that mess of sideways waves that started in 2009, including the peak of July 2014. Only time and the next move can confirm this zigzag, so it will take some time. Either way the GBP has to keep pushing upward, beyond all expert bearish opinions.
I cannot keep up with the intraday GBP charts as I have too much on my plate as is, but the big picture needs lots of work before I am satisfied with a wave count. Everybody is bearish on the GBP, but the commercial traders are not. This sends me on a review and it would not surprise me, if the GBP did not crash to a major new low, but actually start to rally again.
After all, the Canadians want to go shopping in the UK. They will go shopping anywhere they think they can get a better exchange rate. Or that is how the story goes. Many times when we hear people rushing to a country because of a better exchange rate, the targeted currency can stop and then reverses, beyond anything even imagined today. Look how fast the GBP has rallied in the past, so if it happened once before, it can always happen again.
Right now there is a wicked Head&Shoulder pattern showing, which has very little to do with great looking pure impulse waves. It may sound strange but from my perspective impulse waves are always the perfect 5 waves, but the diagonal 5, are definitely not. The diagonal5 is a location indicator, so I consider them more important than any impulse.
The GBP has already been in an 8 year bear market, so why should any GBP bear market just get going or keep going?
This is the GBP which I see as a big triangle in Cycle degree, but what we are seeing is an “E” wave decline in Primary degree, which contains three moves in intermediate degree. Chances are good that our present “C” wave decline in the GBP is a diagonal pattern as well, so I will be talking about the diagonal for a long time to come.
My Euro wave count is a work in progress and needs constant reviewing to figure out where we may be in the big picture. I have mentioned it may times with my wave counts that the Euro still has to decline and make new lows, below what looks like a 4th wave decline. In the aftermath of Brexit, the only thing left for safe-haven may be gold.
This US dollar is the key to what is going to happen to gold. It may be a safe-haven along with gold as the USD and gold spiked together. It looks like an inverted zigzag is still to complete, but if this diagonal pattern is real with the US dollar, we should see that 92 price level broken. The US dollar would have a battle if another huge leg to the upside were to occur, but this Brexit is also a currency battle as all currencies have been affected.
Again, I would like to see more US dollar bearish evidence as that would support the new gold wave count perfectly. I show an all time high as a Primary degree 4th wave top, so if this is true, then there may be a very good chance that the US dollar will see a major decline, but with diagonal waves being the dominate pattern. Five waves down in Intermediate degree would be the technical description.
This is the GBP before any Brexit vote and the trend was down already! I’m showing a big Cycle degree triangle and the last part will be the “E” wave in Primary degree. I consider the “E” wave as one move, with three parts to it. This divides into 5-3-5 patterns.
A week or so later, after the Brexit vote shock wave has crashed the GBP, what has changed? Not much, as the trend was confirmed by the news. In the end the GBP is going to end up at the same place. Remember this is just the vote, the real deal is yet to come until the GBP crashes at a potential 4th wave bottom.
After a 4th wave bottom the GBP should go on a massive bull market that will surprise everyone. We are still a long way from any major bottom so patience is required.
I thought I would add last nights gold move, as it was a pretty impressive move. I will talk more about gold later as I want to review many more charts today.
From the June 15th bottom the GBP has soared, but it also has now come to a screeching halt, and has started to reverse, or it sure looks like a reversal. I don’t like to use the word “reversal’ very much, as it sounds too much like a conventional description and lacks in detail of where a reversal is going to.
Markets always reverse, so what type of reversal is more important to understand. Reversals contain retracements, and an inverted “ABC” can retrace by 100% or more.
Todays secondary peak did not head to new highs, but fell well short. This could be the start of an impulse move right back down from where it came from. About halfway back down, we have a huge gap that I am sure will get closed off in due time. With the Brexit hype machine in full swing any gut reaction could happen by the end of this week.