USDCAD Elliott Wave short-term view suggests that the bounce to 1.2942 high ended Intermediate degree wave (2). Then the decline from there is unfolding in an impulse sequence with an internal sub-division of each leg lower is showing 5 waves structure thus favored it to be an impulse. Below from 1.2942 high, Intermediate wave (3) remains in progress in 5 waves structure looking for 1 more push lower before a bounce in Intermediate wave (4) takes place.
Now let’s take a quick look at the short-term price action in the pair from 1.2942 high. The decline from there can be seen in 5 waves impulse sequence, where Minor wave 1 of (3) ended in 5 waves at 1.2744. Minor wave 2 of (3) ended 1.2818, Minor wave 3 of (3) ended in another 5 waves at 1.2543 low. And above from there Minor wave 4 of (3) bounce ended in 3 swings as a Flat structure at 1.2622 high. Below from there, the pair is expected to see another marginal push lower towards the inverse 1.236-1.618% ext area of Minor wave 4 at 1.2524-1.2493 area approximately to end the Minor wave 5 of (3) lower. However, in case of further downside extension pair can extend in Minor wave 5 of (3) towards wave 5=1 target area as well at 1.2418-1.2373 area before a bounce in intermediate wave (4) takes place against 1.2942 high. Which should then expected to fail in 3, 7 or 11 swings against 1.2942 high for further downside extension, so don’t like buying the pair into proposed bounces.
CL_F Elliott Wave short-term view suggests that the decline to 61.80 on 4/06/2018 low ended Intermediate wave (2). Above from there, Intermediate wave (3) remains in progress as Zigzag Elliott Wave structure. Looking to extend higher towards 70.43-72.47 area at a minimum. Up from 61.80 low, the instrument made a strong rally higher. And ended Minor wave A at 67.45 high in 5 waves structure.
The internals of Minor wave A unfolded in 5 waves impulse Elliott Wave structure where Minute wave ((i)) at 62.43, Minute wave ((ii)) ended at 62.09. Minute wave ((iii)) ended at 66.44 and Minute wave ((iv)) ended at 65.71 low. And Minute wave ((v)) of A ended at 67.45. The instrument then made a 3 waves correction lower in Minor wave B pullback as a Flat. Down from 67.45, Minute wave ((a)) at 66 low, Minute wave ((b)) at 67.76 and Minute wave ((c)) of B ended at 65.56 low.
Above from there, the instrument already broke to new highs confirming the next extension higher in Minor wave C of (3). Therefore looking for the extension higher towards 70.43-72.47 as noted above. Up from 65.56 low, the instrument is expected to end 5 waves in Minute wave ((i)) of C soon. And should see a pullback in Minute wave ((ii)) of C in 3, 7 or 11 swings before further upside is seen. We don’t like selling it.
Stocks Short Term Elliott Wave Bounce is Purely Technical
Stocks and ETFs follow the same code in the market same as the rest of financial instruments like Forex. Every 5 waves impulsive structure is followed by a technical corrective sequences which come in 3-7-11. At the end of the corrective sequence, usually the instrument will resume the move within the main trend or at least correct the previous cycle.
Recently , we saw a bounce taking place around the stock market in most of the sectors and the media as usual came out with all kind of explanation related to politics and economy. However, we at Elliott Wave Forecast understanding the nature of the market is ruled by the technical aspect and have nothing to do with fundamental news which comes in the second place to drive the price to a pre-determined direction.
Firstly, we will take a look at this chart of Caterpillar (NYSE: CAT) and Dowdupont (NYSE: DWDP) representing 2 different sectors. Both stocks declined in clear 3 swings ( red ) from January peak and specifically CAT did 7 swings ( blue ) if we count the internal structures.
Stocks Swings Sequence Count ( CAT & DWDP )
In the Classic 3 swings ABC zigzag structure, the Market does 5 waves move, then it corrects in 3 waves followed with another 5 waves move to the same direction of the previous 5 waves. DWDP did manage to finish the 3 swings around equal legs area $63.29 – $60.69 from where it started the bounce higher to at least correcting the previous cycle from January peak toward 50% area $69.17.
DWDP 4H Chart 04/11/2018 : 3 Swing ABC Elliott Wave Structure
In the 7 swing WXY double three structure, the Market does 3 waves move, then it corrects in 3 waves followed with another 3 waves move to the same direction of the previous 3 waves. In total, it has 7 swings which can be seen in the 4H Chart of CAT as the stock has been declining since January in corrective structures.
CAT 4H Chart 04/11/2018 : 7 Swing WXY Elliott Wave Structure Conclusion
We do understand the nature of market and how the One Market concept works, therefore the bounce which took place recently from blue box area was seen allover the stock market despite some instrument didn’t reach their perfect target to the downside. Our Blue Box in extension gets reached around 85% of the time and the represent the High-frequency areas where the Markets are likely to end cycles and make a turn.
Consequently, the short Term Bounce is purely an Elliott Wave technical move as stocks did a corrective structure from January peak before buyers show up around extreme area to provide support as expected.
Short-term EURUSD Elliott Wave view suggests that the pair remains in a sideways triangle range between 1.2554 and 1.2153 levels as mentioned in the previous post here. Until we break out of the range, we look for the sideways price action to continue. Triangle doesn’t have any particular trend, but it is generally a continuation pattern, thus the pair likely thrust higher to continue the previous bullish trend after the sideways action is over. If we take a look at the previous cycle from January 2017 low. The pair shows a higher high sequence thus the pair is favored to trade higher once triangle consolidation is complete. It’s important to note that the Triangle is labeled as A,B,C,D,E.
Currently, we can be in the final stage of triangle structure in Cycle degree wave IV where the decline to 1.2214 low ended Primary wave ((C)) of IV. Above from there, wave ((D)) of IV ended at 1.2414 high. The internals of primary wave ((D)) is unfolding as zigzag Elliott Wave structure where Intermediate wave (A) ended at 1.2396. Afterwards, Intermediate wave (B) pullback ended at 1.2298 low and Intermediate wave (C) of ((D)) ended at 1.2414 high. Down from there, Primary wave ((E)) of IV remains in progress as double three Elliott Wave structure looking to end Intermediate wave (W) of ((E)) in 3 swings at 1.2320-1.2301 100%-123.6% Fibonacci extension area of Minor A-B. Pair should then correct in Intermediate wave (X) of ((E)) and ideally fail below 1.2414 for another extension lower before a thrust higher is seen. We don’t like selling the pair.
Straits Times Index STI Supporting Stock Market Bulls
Straits Times Index (STI) is regarded as the benchmark index for the Singapore stock market. It tracks the performance of the top 30 companies listed on the Singapore Exchange. It is jointly calculated by Singapore Exchange (SGX), Singapore Press Holdings (SPH) and FTSE Group (FTSE).
Applying the One Market concept , we know that major world indices around the world are oscillating on the same cycles. In the following chart, we overlay STI with 3 different indexes from USA (SPX), Germany (DAX) and Japan (NIKKEI) still we notice STI is trading in the same direction as the rest.
Overlay of STI, SPX, DAX, NIKKEI
Since the 2008 Financial crises, the majority of indexes around the world recovered and made new all time highs and the cycle fro; 2009 is still in progress despite the media keeps calling for a big crash. In the next Chart, we’ll apply the Elliott Wave Theory on Straits Times Index to identify the current structure taking place.
STI Weekly Elliott Wave Chart
From 2009, STI did 5 waves move in a diagonal which ended on 2015 peak followed by 3 waves pullback into early 2016 low like the rest of the stock market. Up from there it started a new 5 waves impulse to the upside and managed to break above 2015 peak. This move created a bullish sequence to the upside and opened the door for the Index to trade higher toward equal legs area 4630 – 5120.
Ideally this move to the upside should be seen around the globe as major Indices are expected to continue their rally in the coming years before a major peak can take place on 2020 – 2022.
Switching to the daily chart of Straits Times Index, we can notice that the instrument seems to have ended the current correction from January and could have already resumed the move higher even there is still possibility of a double correction lower as long as it remain below January peak.
STI Daily Scenario 1 Elliott Wave Chart
After the index breaks to new highs, it will be looking to reach the 61.8% fib ext area 3826 – 4133 which would produce a 3 waves pullback before more continuation to the upside. However depending the on the speed & timing of the move, the index could have different structure taking place and can be labeled on different way.
A less aggressive scenario would suggest that STI is still looking to end wave III of (I) of the impulse from 2016 low which implicate another extra 2 legs to take place before it reaches the 61.8% and most likely will take more time into 2018.
STI Daily Scenario 2 Elliott Wave Chart Recap
Straits Times Index is showing an Elliott Wave bullish structure from 2016 low supporting more upside around the global stock market and despite the instrument still needs to break to new highs to confirm the next leg higher, there is still more scenarios can be taking place later on depending on the structure of the move.
USDX Elliott Wave View: Extending Higher As Impulse
USDX Elliott Wave view in short-term cycle suggests that the decline to 89.22 ended Intermediate wave (B) as Elliott Wave Zigzag correction. Above from there, Intermediate wave (C) remains in progress as Elliott Wave Impulsive sequence with extension looking for further extension higher. The internal distribution of each leg consists of 5 waves structure with extension in the third wave thus we favor the structure to be an impulsive sequence.
Up from 89.22 low, Minor wave 1 of (C) ended in 5 waves at 89.66, Minor wave 2 ended as a Flat at 89.45 low. Then above from there Minor wave 3 remains in progress. The internal of Minor wave 3 is unfolding as an Impulse Elliott Wave sequence with extension where Minute wave ((i)) ended at 89.72, Minute wave ((ii)) ended at 89.51, Minute wave ((iii)) ended at 90.47 high, and Minute wave ((iv)) ended at 90.21 low. Above from there, Minute wave ((v)) of 3 remains in progress looking to extend higher 1 more push towards 91.17 – 91.40 area approximately to end 5 waves in Minor wave 3. Afterwards, the index should do a Minor wave 4 pullback in 3, 7 or 11 swings before further upside is seen. We don’t like selling it into a proposed pullback.
NZDJPY Elliott Wave View: Impulse Sequence In Progress
NZDJPY Elliott Wave view in short-term cycles suggests that the bounce to 79.62 high ended Intermediate wave (X). Down from there, Intermediate wave (Y) remains in progress as a Zigzag Elliott Wave structure in which the first leg of the zigzag (Minor wave A) is unfolding as an impulse Elliott Wave structure looking to see another push lower before ending Minor wave A.
Down from 79.62 high, Minute wave ((i)) of A ended at 78.63. Minute wave ((ii)) of A ended at 79.06. Minute wave ((iii)) of A ended at 76.91 and Minute wave ((iv)) of A ended at 77.4 high. As an impulse, the subdivision of Minute wave ((i)), ((iii)), and ((v)) in Minor wave A has an internal distribution of smaller degree 5 waves. Minute wave ((v)) of A remains in progress as 5 waves structure towards 76.78-76.58, which is inverse 1.236-1.618% Fibonacci extension area of a Minute wave ((iv)).
Afterward, the pair can complete Minor wave A and end cycle from 4/13 peak, then it should bounce in Minor wave B to correct cycle from 4/13 high (79.62) in 3, 7 or 11 swings. As far as Minor wave B rally fails below 79.62 high, the pair should resume lower again in Minor wave C of (Y). We don’t like buying the proposed rally.
Longer term on monthly and weekly charts it obviously appears that Apple remains in an uptrend. I will try to explain where the instrument can reach in the expanded flat from the 1/18/18 highs. I will also provide an alternate scenario that will offer a similar buy zone before the next leg higher. Apple’s stock made new highs in January however we think that was part of a larger correction.
With the possible expanded flat from the January 18 highs, the Elliott Wave structure would be 3-3-5. That means the leg lower from the 1/18/2018 highs to the 2/9/2018 lows was three swings and not an impulsive five waves. From the 2/9/2018 lows, the same can be said for the three swing bounce into the new highs on March 13th 2018. From those highs, this leaves the incomplete structure still needing the wave three of the impulse to complete along with a relatively shallow bounce in wave four followed with a final wave five low that would show momentum divergence compared to the wave three. The conclusion is below the chart.
$AAPL Apple Daily chart
In conclusion.
The target area for the the expanded flat is shown in the blue box on the chart and is derived from a Fibonacci extension measurement using a chart platform Fibonacci extension tool. With the beginning point being at the 1/18/2018 highs, go down to the 2/2/2018 lows as point #2. From there up to the 3/13/2018 highs being point #3. That will give the extension area shown on the chart as the potential buy zone.
Finally as I mentioned in the first paragraph an alternative structure and target area will be a simple three swings lower from the 3/13/2018 highs. That would be a double three correction which counts as 3-3-3. This target area is not shown on the chart but I will tell you how to get it. Using the charting platform Fibonacci extension tool in the same manner as before. Begin at the 3/13/2018 highs as point #1 on down to the April 2nd lows as point #2. From there point #3 will be at the April 17th highs. That gives an extension area for a double three correction at the 159.66-147.74 area.
AT&T ticker symbol $T short-term Elliott Wave view suggests that the decline from 4/10 peak is unfolding as an Impulse Elliott Wave structure. In the impulsive structure, wave 1, 3, and 5 should show 5 waves internal subdivision.
Down from 4/10 peak ($36.39), Minor wave 1 ended in 5 waves structure at 35.02 low. Minor wave 2 bounce ended at 35.82 and Minor wave 3 is in progress with subdivision of 5 waves impulsive structure in the lesser degree. Down from 35.82, Minute wave ((i)) of 3 ended at 34.15, Minute wave ((ii)) of 3 ended at 35.33, Minute wave ((iii)) of 3 ended at 32.47, and Minute wave ((iv)) of 3 ended at 33.56 high.
Below from there, Minute wave ((v)) of 3 remains in progress. Minor wave 3 has reached the minimum number of swings and target, although a marginal low still can’t be ruled out towards $31.54 – $30.92. This is the 123.6%-161.8% Fibonacci extension area of ((v))=((i)). Afterwards, AT&T should end the 5 waves structure in Minor wave 3 and see a Minor wave 4 bounce in 3, 7 or 11 swings against 35.82 high before further downside resumes. We don’t like buying into the proposed bounce.
Gold short-term Elliott Wave view suggests that the rally to 4/11 high at 1365.24 ended Minor wave B. Below from there, the decline is unfolding as an impulse Elliott wave structure in Minor wave C of (B) lower. This structure forms a bigger FLAT Elliott Wave structure which starts from 1/25 peak. Internals of each leg to the downside, i.e. wave ((i)), ((iii)), and ((v)), shows a 5 waves structure subdivision in the lesser degree with extension in the third wave.
Down from 1365.24 high, Minute wave ((i)) of C ended in 5 waves at 1332.78. Minute wave ((ii)) of C ended as a Zigzag Elliott Wave structure at 1356.24. Minute wave ((iii)) of C ended in another 5 waves structure at 1301.5 low. Above from there, the bounce in Minute wave ((iv)) of C appears complete as a double three Elliott Wave structure at yesterday’s high at 1318.1. However, a break below 1301.5 low remains to be seen to confirm the next leg lower in Minute wave ((iv)) of C bounce. Until then, a double correction higher in Minute wave ((iv)) bounce can’t be ruled out.
The entire FLAT structure from 1/25 peak has reached 100% target at 1302.1, thus the cycle is mature and Intermediate (B) could end any moment. However, near-term, while bounces fail below 1318.1 high and more importantly the pivot from 1356.24 high stays intact, gold has scope to see another push lower. Potential target for Minute wave ((v)) of C, if it happens, comes at 1295.55 – 1297.92 which is the 1.236%-1.382% inverse Fibonacci extension of a Minute wave ((iv)). Afterwards, the metal is expected to resume the upside or should produce a bounce in 3 swings at least. We don’t like selling it.
Vanguard communication services ETF ticker symbol: VOX short-term Elliott Wave view suggests that the bounce to 88.35 on 4/24/2018 high ended cycle degree wave “b”. Below from there, the cycle degree wave “c” remain in progress as an Impulse Elliott Wave structure looking for more downside extensions.
Down from 88.35 high, Primary wave ((1)) is in progress as Impulsive structure where the internal distribution of each leg down is unfolding in 5 waves structure. Intermediate wave (1) ended in 5 waves structure at 86.93. Above from there, Intermediate wave (2) bounce ended at 88.21 as a Flat structure. Then down from there Intermediate wave (3) ended at 82.51 low. Subdivision of wave (3) unfolded as impulse structure of lesser degree where Minor wave 1 of (3) ended at 85.99, Minor wave 2 of (3) ended at 87.89, Minor wave 3 of (3) ended at 82.91, Minor wave 4 of (3) ended at 84.27, and Minor wave 5 of (3) ended at 82.51 low.
Above from there, the bounce to 84.23 high ended Intermediate wave (4) bounce as a zigzag correction. Intermediate wave (5) of ((1)) remains in progress in another 5 waves structure looking to extend 1 more push lower towards 81.45 – 82.11, which is inverse 123.6%-161.8% Fibonacci extension area of Intermediate wave (4). Afterwards, the instrument is expected to see a bounce in Primary wave ((2)) in 3, 7 or 11 swings to correct cycle from 4/24 high ($88.35) before further downside extension is seen. We don’t like buying it into a proposed bounce.
CADJPY Short Term Elliott Wave view suggests that the decline from 4/13 peak at 85.76 to 83.87 low ended Intermediate wave (2) as a double three Elliott Wave structure. The internal subdivision of the decline from 85.76 high shows an overlapping structure. This suggests the decline is corrective in nature. We label the correctin as W-X-Y.
Down from 4/13 peak (85.76), Minor wave W unfolded as a Zigzag Elliott wave structure. Minute wave ((a)) of W ended at 84.88, Minute wave ((b)) of W ended at 85.17 high, and Minute wave ((c)) of W ended at 84.27 low. Up from there, Minor wave X bounce also unfolded as a double three Elliott Wave structure. Minute wave ((w)) of X ended at 85.31, Minute wave ((x)) of X ended at 84.74 and Minute wave ((y)) of X ended at 85.74. The internal of Minor wave Y subdivided as a zigzag structure. Minute wave ((a)) of Y ended at 84.36, Minute wave ((b)) of Y ended at 85, and Minute wave ((c)) of Y ended at 83.87 low. The move lower to 83.87 also ended Intermediate wave (2) upon reaching 100%-123.6% Fibonacci extension area of Minor W-X at 83.91 – 84.26.
Above from there, the pair has made a strong rally to the upside in an impulse Elliott Wave structure. Due to the 5 waves impulse, it favors the continuation higher in Intermediate wave (3). However, a break above 4/13 high 85.75 is needed for the final confirmation of the next leg higher. Until then, a double correction lower in intermediate wave (2) still can’t be ruled out. Near-term, as far as dips remain above 83.87 low, expect pair to resume higher. We don’t like selling it.
GBPNZD short-term Elliott wave view suggests that the rally to 1.9758 on 4/26 high ended Intermediate wave (A). Down from there, Intermediate wave (B) remains in progress as a double three Elliott Wave structure. The internals of each leg in double three (WXY) sub-divides into 3 waves corrective sequence and usually is the combination of two corrective patterns i.e Flat, Zigzag, triangle etc.
Down from 1.9758 high, Minor wave W ended as a zigzag Elliott Wave structure (5-3-5) where Minute wave ((a)) ended at 1.9407, Minute wave ((b)) ended at 1.9582, and Minute wave ((c)) of W ended at 1.925. Above from there, the pair bounced higher in Minor wave X with internals also unfolded as a zigzag Elliott Wave structure. Minute wave ((a)) of X ended at 1.9472, Minute wave ((b)) of X ended at 1.9376 and Minute wave ((c)) of X ended at 1.9648 high.
Below from there, the pair is expected to resume lower in Minor wave Y of (B) as a zigzag structure. Minute wave ((a)) of Y is in progress looking for another extension lower towards 1.9261 – 1.9335, which is 0.618%-0.764% Fibonacci extension area of Minor wave W-X from Intermediate wave (A). Afterwards, the pair should bounce in 3, 7 or 11 swings in Minute wave ((b)) to correct cycle from 5/10 high before pair resumes lower again.
DAX Elliott Wave view in shorter cycles suggests that the rally from March 26.2018 low (11704) is extending higher in Impulse sequence with extension in the 3rd wave. It’s important to note that an impulse structure should have internal subdivision of lesser degree 5 waves impulse. And in particular, DAX’s case, Minute wave ((i)), ((ii)) and ((v)) within wave Minor degree should have an internal subdivision of 5 waves impulse Elliott Wave structure of lesser degree.
The rally to 12152.62 ended Minute wave ((i)) of 3 in 5 waves structure, Minute wave ((ii)) of 3 ended at 11792.29 low. Then the rally to 12639.73 high ended Minute wave ((iii)) of 3 in 5 waves and pullback to 12319.80 ended Minute wave ((iv)) of 3 as a Flat correction. Above from there, the rally is unfolding in another 5 waves structure in Minute wave ((v)) of 3. Near-term, although the index has a minimum amount of swings in placed already to end the Minor wave 3. But while dips remain above 12319.80 low index is expected to extend 1 more push higher towards 13276.55 area approximately. Afterwards, the index is expected to do a pullback in Minor wave 4 in 3, 7 or 11 swings before further upside is seen. We don’t like selling it.
CVR Energy (NYSE: CVI) is one of the best performing Energy stocks in the recent 2 years yielding +220% since November 2016 low. Despite the correction taking place in the stock market, CVI did manage to retrace the whole decline since January peak and it’s currently already up +7.9% year-to-date.
To understand further the technical structure of the stock let take a look at the weekly Elliott Wave chart:
CVI Weekly Chart Scenario 1
CVR Energy ended a double three 7 swings correction in 2nd November 2016 after it reached the equal legs area $12.04. Up from there, the stock is showing an impulsive 5 waves move to the upside and looking to reach the minimum target around equal legs area $42.14 – $50.78. That technical area aligns with the 50% – 61.8% retracement of the decline from 2013 peak. Down From there, CVI can see 3 waves pullback to correct the cycle from 2016 low and then it’s expected to resume the move to the upside.
In the next chart, we’ll take a look at a second scenario for the Energy stock:
CVI Weekly Chart Scenario 2
If the current move manage to extend higher erasing the divergence from January 2018 peak, then CVI would be trading within an extended 3rd leg and will be looking to reach higher levels above $51 area before finally breaking above 2013 peak $72. For this scenario to take place, CVI needs to remain supported above March 2018 low $28 and keeps finding buyers in 3 , 7 or 11 swings.
Recap:
The bigger picture for the Energy stocks remain bullish and they are expected to remain supported for a higher move during the coming years. CVI ,which is one of the leading stocks in the sector, is showing a bullish structure from the 2016 lows which is the first step toward new all time highs.
Holly Corporation and Frontier Oil merged in July 2011 to form HollyFrontier Corporation (NYSE: HFC). The company is a petroleum refiner and distributor of petroleum products, from gasoline to petroleum-based lubricants and waxes.
Over the past 2 years, Hollyfrontier Corp performed better than majority of its peers in the Oil & Gas Refining and Basic Materials sector. Its stock price is already up 34.4% year-to-date and still expected to see more gains as Oil price is also up 20% this year which helped the petroleum companies to perform well recently.
In the below chart, we can notice that HFC and CVR Energy (NYSE: CVI) are closely correlated together. They shared the same cycle from 2013 peak then the current one from 2016 low. However, in the recent 2 months, HollyFrontier managed to outperform with a strong move to the upside breaking to new all time highs despite CVI being one of the leading stocks in Energy sector in recent 2 years and showing an impulsive structure but failed to do the same.
Overlay of HFC and CVI
After spending 3 years in a corrective cycle to the downside (2013-2016), which took the form of a 3 waves Flat structure, HFC started a new bullish cycle advancing in 5 waves impulsive structure building a nest and looking to reach extreme area around $79.2 – $90.5. Down from there, the stock can see 3 waves pullback before resuming higher again as it’s expected to remain supported and find buyers in 3 , 7 or 11 swing.
USDCAD short-term Elliott Wave view suggests that the bounce to 1.2998 on 5/08 high ended primary wave ((2)). Below from there, primary wave ((3)) remains in progress as an Impulse Elliott Wave structure looking for more downside extension. In Impulse wave, the subdivision of wave 1, 3, and 5 is also an impulse structure of a lesser degree. On the other hand, wave 2 & 4 are corrective in nature i.e double, triple three, Flat etc. In the case of USDCAD, Intermediate wave 1, 3 and 5 are impulse with sub-division of 1, 2, 3, 4 & 5 in Minor degree.
Down from 1.2998 high, the pair ended intermediate wave (1) in 5 waves at 1.2725 low. Then the bounce to 1.2924 high ended intermediate wave (2) as zigzag and the correction against 5/08 high (1.2998). Below from there, Intermediate wave (3) of ((3)) is in progress looking for more downside extension as an impulse. Minor degree wave 1 of (3) ended in 5 waves at 1.2745 low and the bounce to 1.2911 high ended Minor wave 2 of (3) as a zigzag correction. Near-term focus remains towards 1.2733-1.2691, 100%-123.6% Fibonacci extension area of wave 1 & 2, to end the Minute degree wave ((i)) of 3 lower. Afterwards, the pair should bounce in Minute wave ((ii)) to correct the cycle from 1.2911 high before further decline resumes. We don’t like buying the proposed bounces.
GBPUSD Elliott wave view in short-term cycle suggests that the decline from 4/17/2018 high (1.4377) is unfolding as an impulse Elliott wave structure where bounce to 1.3607 high ended Intermediate wave (4). Down from there, intermediate wave (5) remains in progress as Elliott Wave ending diagonal structure. Ending diagonal usually appears in the sub-division of wave (5) of impulse or wave (C) of a Zigzag correction with internal distribution of 3-3-3-3-3 corrective structure. It also commonly shows a wedge shape and has overlap between wave 1 & 4 when wave 4 may or may not enter the territory of wave 1.
In the case of GBPUSD, the decline from 1.3607 high to 1.3450 ended Minor wave 1 of (5) as a zigzag structure. Then the bounce to 1.3569 high ended Minor wave 2 of (5) in 3 swings as a zigzag structure. Down from there, the decline to 1.3389 low ended Minor wave 3 of (5) as Elliott wave double three structure. Above from there, the bounce to 1.3492 high ended Minor wave 4 of (5) which shows the overlap with Minor wave 1. Near-term, below from 1.3492 high, Minor wave 5 of (5) remains in progress which can extend to 1.3333-1.3295. This area is where Minor wave 5 = Minor wave 1 or 100%-123.6% Fibonacci extension area to end the cycle from 4/17/2018 peak. Afterwards, the pair is expected to do a bounce in 3 swings at least. We don’t like buying it into proposed bounces.
Firstly the Hang Seng index larger bullish cycles has been trending higher with other world indices. In April 2003 it put in a huge degree pullback low. From there the index rallied with other world indices again until October 2007. It then corrected the rally as did most other world stock indices. It ended this larger degree correction in October 2008. From those 2008 lows, the index shows a 5 swing sequence that favors further upside. Price has reached and exceeded the area of 29410 – 32040 which is the .618 – .764 Fibonacci extension of the 2008 to 2015 cycle.
The way this is measured is as follows. Use a Fibonacci extension tool on a charting platform. Point 1 will be at the beginning of the cycle at the 2008 lows. From there on up to the 2015 highs will be point 2. The point 3 will be down at the 2016 lows. As previously mentioned, the index in January 2018 saw the .618 – .764 Fibonacci extension of the 2008 to 2015 cycle. In most cases a fifth swing will end in this Fibonacci extension area however this index has been a bit more bullish. Analysis continues below the chart.
Hang Seng Index Weekly Chart
In conclusion . Currently the Hang Seng pullback from the 5th swing high ended the cycle up from the 2016 lows. It did a 3 swing pullback to the February 2018 lows to complete the 6th swing. At this point it is favored to remain above there during dips. Worst case if it remains below the January 2018 highs it can continue a pullback in the 6th swing in 3 more swings. This would make a possible 7, or 11 swings to correct the cycle up from the 2016 low which should be similar to the 2nd swing pullback of 2011. Afterward of completion of the 6th swing pullback it should see more upside in the 7th swing toward 36314.
We wrote in our previous article that Canadian dollar may get a bid if NAFTA (North America Free Trade Agreement) is successfully renegotiated. The three countries under NAFTA (U.S., Canada, and Mexico) are all under pressure to reach a deal soon. The reason is because of Mexico’s presidential election in July as well as US congress procedural deadline and U.S midterm elections in November. Failure to conclude a deal will cause job loss and uncertainty, denting business confidence. Delay will also add to political unpredictability since some politicians may no longer be involved in politics next year. Mexico will have a new administration and US will have a new congress after mid-term elections. There’s also U.S. threat on steel and aluminum tariffs. The tariffs are scheduled to take effect in June 1, if the NAFTA deal doesn’t come through.
US House Speaker Paul Ryan gave a self-imposed May 17 deadline in order for US Congress to review and approve it. However, last week the deadline had passed and still the parties have not agreed to a deal. Mr. Ryan has since extended the deadline by 1 or 2 weeks to the end of May. He clarified that it still has enough time for voting provided that the U.S. independent body can analyze the new deal faster.
Last week, the failure to meet May 17 deadline combined with less than expected inflation data from Canada caused the Loonie to initially get sold. However, the Canadian Dollar has since reversed last week’s weakness and even extends higher against some currencies. This underscores the belief by market participants that a resolution will eventually come through. The high Oil price has also helped Canadian Dollar. The continued US/Iran geopolitical tension and threat of new sanctions underpin the support in Oil. There are also some progresses on the US – China trade war negotiation. Although a deal is nowhere close, but the two sides continue the talk and thus defusing the tension.
CADJPY 4 Hour Elliott Wave Analysis Favors Canadian Dollar and Nafta Deal
CADJPY shows a bullish sequence from 3.19.2018 low. The rally from there either is unfolding as an impulse Elliott Wave structure or a zigzag. Either way, as far as pair stays above 5/8 low (83.87) in the first degree, it should extend higher to at least 89.14 – 90.38 area. The technical view therefore is in favor of Canadian Dollar
GBPCAD 4 Hour Elliott Wave Analysis favors Canadian Dollar
GBPCAD decline from 3.19.2018 shows an extension (161.8%) in the third swing lower. If this interpretation is correct, then it has a chance to extend lower as an impulse. The characteristic of an impulse wave is an extension in wave 3 with 161.8% fibonacci extension or higher as the typical extension. As far as bounce stays below the proposed wave 2 at 1.809, the pair has a chance to extend lower as an impulse. This pair then also favors Canadian Dollar’s strength.
Conclusion
Despite failure to reach Nafta deal by May 17, Canadian Dollar continues to be supported due to the ongoing speculation that eventually a deal will come through. The elevated price of Oil has also been supportive of Canadian Dollar. Technical view of some Canadian pairs also look to confirm this view.
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