Elliott wave analysis of the week - December 12, 2009

Let’s first look at US dollar index. This is daily chart:


It is now clear that the dollar is rebounding. Most people that are dollar bearish may still be skeptical about the sustainability of this spike. If you pay attention to the details of the current rebound, it clear shows an impulsive nature of the wave (1, 3, and 5:up trend. 2 and 4:downtrend). Now that the impulsive structure of this initial rebound looks complete, we may see dollar decline, but not going lower than the low of Nov 26, towards the end of the year.

With the dollar index’s progress in mind, let’s look at AUDUSD and EURUSD.

First AUDUSD. This is 30min chart:


I am seeing two slightly different scenario. First one says the purple wave .i is over and AUDUSD is on purple .ii wave. This case, we could enter short as  soon as the next downtrend in 30min chart emerges. But be careful because I am seeing the second scenario.

The second scenario (labeled with parenthesis) is we are black iv wave that is a substructure of purple .i wave. In this scenario, AUDUSD continues to decline on Monday, but the downside potential is limited before the rebound.

Either case, I am expecting that we will soon see mighty downward trend once purple .ii is over, and it should bring AUDUSD down to 0.8884 or lower. Given the downward distance potential, I think there is no need to trigger our short right at the turning point of the market. I would rather wait until 0.9000 breaksdown.

So, I put stop sell order at 0.9000. I would take loss at0.9097 in this trade.

Now take a look at EURUSD. This is 60 min chart:

In this case too, I am seeing two scenarios. First scenario is that we are almost finishing purple .5 wave, thus finishing blue underline 1 wave, and EURUSD is due one rebound towards 1.4950.

The second scenario (labeled with parenthesis)  is we are in black 1 wave that is a substructure of the purple .5 wave. The distance of purple .1 wave (Nov 25 to 27. Not shown in this chart) was 320 pips, and we could use this distance to expect the distance of .5 wave measured from .4 label (=1.4777). So in this scenario, EURUSD may reach to 1.4457. And it is just a few pips away from the low of August 5th, 2009!

Of course I hope for the second scenario, and I am 60% betting towards this scenario. We will see in a few days. With this 1.4457 target in mind, I would just stay back for now and see how the wave develops.

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Current risk exposure:

Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

Capital growth

From recent 100 trades (%) The growth right before the 1st trade is set to 0%.
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From recent 100 trades (%)
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Total returns

Since inception
(Aug 10, 2009)
Year-to-date Quarter-to-date
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This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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