I'd like to introduce Harmonic Elliott Wave. It is a small adaptation to Elliott's impulsive structure that provides more accuracy in forecasting. Basically, the big difference is that Waves 1, 3 & 5 do not develop in 5-waves but in 3-waves. From what I have seen extended waves do not exist and are a factor of the fact the 3-wave issue. More information is available on
www.harmonic-ewave.com.
Just as an example of how this all works I posted the analysis below earlier on FXCM DailyFX forums:
MONTHLY
Note here the swing lows from the 0.8225 low have not yet been broken - specifically the 1.1640 low. The decline from 1.6036 has come in a double zigzag. The relationships between each (a)(b)(c) are not the best but do have legs. I have counted the 1.6036 high as a Wave (III) being a 323.6% projection of Wave (I) and Wave (C) a 109% projection. (These are all Fibonacci ratios added to 100%, 200%, 300% etc.) Another weakness of the count is that 1.1879 low was a 66.7% retracement in Wave (IV). While that is seen from time to time, by biggest concern is that it is very, very close to the Wave (B) of Wave (III) which is not normally seen. Coupled with the fact that we have only seen a double zigzag - and could therefore turn into a triple three the risk is obvious...
WEEKLY
This merely highlights the double zigzag and a few ratios.
DAILY
The daily chart shows the expectation that the rally to 1.3333 was a Wave (i), retracement to 1.2586 (being just over 50% retracement) and rally in Wave (a). I have shown the ratios (which do have some small variances) which are normal for an impulsive wave. This ended just below an 85.4% projection in Wave -v-.
The pullback to 1.3696 came in 3 waves and therefore risked a complex correction. From there it did for a long while resemble a triangle. However, in the pullback last Friday it broke the bullish structure that would have been required to push this higher in Wave (c). Thus, this implied an expanded flat with prospect for a retest of 1.3696 and then we should be aware of the retracements in Wave (B) which were 1.3633 (33.3%) and 1.3557 (38.2%.)
HOURLY
Here is the move down from 1.4281. The basic expectation was a 5-wave decline that should reach 1.3696 at least. The ratios are all normal ones I see. An interesting point was that the Wave -a- of Wave -v- was at the 66.7% projection in Wave -v-. I had thought (without analyzing) that this may have finished the move. However, momentum broke down and it was then obvious that we still had further to go. A 76.4% projection in Wave -v- was at 1.3622 and this leaves the 85.4% projection at 1.3581. We should also consider the 85.4% projection in Wave -c- that is at 1.3562 - so 5 pips above the 38.2% retracement in Wave (B).
So as long as momentum begins to pick up - mainly the hourly this is a valid target and should be watched.
What can go wrong? Well, if this breaks below 1.3550 it's going to be quite weak. It's possible to switch the Wave (a) to the 1.4281 high although the projection in Wave (v) there is not so neat. A 50% correction is around 1.3434.
Much below there would begin to threaten the entire rally and may imply that we're going to see a triple three appear in the monthly charts...
I hope all this makes sense... It is how Harmonic Elliott Wave works.
Good luck
Ian
Edit/Delete Message