April 27 - GBP USD Delta Update

Not much update today other than my consideration that ITD 8 low as most likely already arrived on April 22 at 4395. Intermediate Term trend (ITD 9) is therefore UP until around May 5.

There are still two possible scenario from this point:

1. If MTD 11 has arrived at ITD 7, then ITD 9 around May 5 would be below 5067.

2. If MTD 11 will arrive at ITD 9, then ITD 9 around May 5 would be above 5067.

Considering that we still have several trading days to ITD 9, and looking at Daily and Weekly USD Index Elliot Wave count, I'd say that there's a real possibility that 5067 may be taken out. However, instead of going long here, I would prepare to set up a medium term positioning by shorting around May 5. Be careful on this Wednesday during FOMC rate decision. There could be another potential significant market moving news here.

April 23 - GBP Delta Update Part 2

GBP strength in US session today is quite interesting. I said in my previous post today that I think MTD 11 was already IN at 5067.

However, if we could get a daily candle close above 1.4684 today or tomorrow without making new lows, there is a good chance that ITD 8 low has arrived at 4397. This is 2 trading days earlier than the April 27 average turn which is considered fine by Delta. If ITD 8 low could be confirmed IN this early, the ITD direction is then UP until around May 5, and there seems to be enough trading days to topple out 5067 if we could close above 4684 as early as possible.

Therefore, it seems that I have prematurely dismissed this scenario as unlikely before, and i need to bring this possibility back again. I presume if this scenario is to happen, it is going to inflict a lot of pain and eat lots of stop loss from people who are shorting earlier at 4700 - 4800

In any case, I am looking to build a short position regardless of GBP level (whether above 5067 or below) around May 5 after confirmation of ITD 9 arrival.

April 23 - GBP USD Delta Update

Attached is the count and possible scenario that I am currently following.

MTD 11 seems likely already IN with ITD 7 at 5067, although Delta rules allow it to be due at ITD 9. If it's due at ITD 9, then ITD 9 should be higher than ITD 7 (higher than 5067). However, we have only around 7 trading days between ITD 8 and ITD 9, so at this point it seems unlikely that ITD 9 would take out 5067 within 7 days, and thus MTD 11 seems to be IN already at 5067.

LTD 15 could also have been due at MTD 11 and ITD 7 too (part 2 of my post on April 18), but based on some other chart observations (part 3 of my post on April 18), for now my working assumption is that it's not yet due here, but will be due later with MTD 1. What this mean is that the Long Term direction is still UP and 1.35 may not be broken lower yet.

April 20 - GBP USD Delta Update

April 20, 2009

ITD 7 low (4580) is taken out today. This means we can rule out Part 1 Chart that I posted last weekend, and we are now moving according to Part 4 Chart. Since 4580 is taken out, this means that we have confirmation ITD 8 / MTD 11 has arrived, and they arrived early compared to the average turn date.

So then as Part 4 chart shows (I attach it again here), we are now moving towards MTD 12 which is due around end of May and it should not break lower than MTD 10 (no lower than 3650). It should not break lower than MTD 10 because my working assumption is that LTD 15 is not IN together with ITD 8 / MTD 11. You can read my PART 3 post for the reason why I think so.

However, another possible scenario is that I mess up the ITD count. I attach here an alternative chart which is more bullish than PART 4 chart. You can compare the ITD count differences between the two. In this alternative count, we are moving down to ITD 8 due around April 27 and it should not break lower than ITD 6 low (no lower than 4110) as the MTD direction is still UP. For this alternative chart, the line in the sand therefore is ITD 6 low at 4110.

But as you can see, whether you prefer Part 4 Chart or this alternative chart, both charts are telling us that the Intermediate Term direction is down at the moment, at least until around the end of this week.

GBP USD Update - CONCLUSION (PART 5)

April 18, 2009 - PART 5

This is the conclusion from part 1 -4. You need to read them in sequential order before this.
Taken into consideration everything I posted, here's my personal conclusion:

1. Intermediate Term trend - Neutral / Could be bullish or bearish.
ITD 8 / MTD 11 could be due last Thursday on April 16, or it is also equally possible to be due around average turn day of April 27 . Part 1 of my post shows this chart.

2. Medium Term trend - Bearish if 4580 is taken out
If ITD 8 / MTD 11 was due last Thursday, then we should go lower to MTD 12 which has to be at least lower than ITD 7 (4580) but no lower than MTD 10 at 3650 because I believe LTD 15 is not yet IN. Part 4 of my post shows this chart.

3. Long Term Trend - Bullish
As I believe LTD 15 is not yet IN even if ITD 8 / MTD 11 has been due on April 16, I am bullish with GBP USD in long term time frame. It's unlikely that 1.5067 is LTD 15 turning point. An important turning point like LTD turning point usually has a crucial level or a very important level. 1.5067 to me looks like a level that is not particularly important, and thus I believe it will be toppled out again.

So my conclusion is that either part 1 chart or part 4 chart will happen, but not part 2 chart.

In case PART 4 chart happens: IF we indeed go down to MTD 12 below 1.4 and many FX analysts start to freak out and saying we will go lower than 1.35, I am here saying that we most likely will not go lower than 1.35 and will go up higher than 1.5067 after MTD 12 is complete.

Have fun trading and till the next ITD update.

GBP USD Update - Part 4

April 18, 2009 - PART 4

This is a continuation of part 1 -3. You need to read part 1-3 in sequential order to understand this part.

In part 4, we will address the question of how GBP will move assuming that:

A. ITD 8 / MTD 11 was due on April 16 at 1.5067.

B. LTD 15 is NOT DUE together with ITD 8 / MTD 11

C. SLTD 2 is ALREADY IN at LTD 14.

Here's Delta rule and logic with the three assumptions above:

We should expect the end of MTD 12 to be at least lower than ITD 7 low (lower than 4580), but NO LOWER than MTD 10 (no lower than 3650). The reason it can't be lower than MTD 10 is because LTD direction is still UP, and so we must have higher MTD highs, and higher MTD lows in between LTDs.

Attached chart shows possibility of what could happen in medium term (MTD) time frame. Remember Delta does not predict price level, so MTD 12 for example may not end that low per my chart. Delta rule only states that price has to be lower than ITD 7 low and it has to be higher than MTD 10, but it doesn't predict price. It however gives us an idea of general price movement and key price level.

GBP USD Update - Part 3

April 18, 2009 - PART 3

This part is a continuation from previous 2 parts. You should read them first.

In this part, I want to present some charts to support my theory that IF ITD 8 / MTD 11 is DUE on April 16 at 5067, LTD 15 is NOT YET DUE with them, and that SLTD 2 COULD HAVE BEEN DUE with LTD 14 last time.

Again, the assumption here is that ITD 8 / MTD 11 is already DUE on April 16 at 5067.

The charts I want to present are:
1. GBP USD Elliot Wave Chart
2. USD Index Monthly Chart
3. GBP USD Monthly Chart

1. Chart 1: GBP USD Elliot Wave Chart.

As far as I know, attached is the most commonly used Elliot Wave count for GBP USD from the Ellioticians. So I will just go with them. What Ellioticians say is that GBP USD has not completed 5 waves from the high of 2.116 in Nov 2007, and that we are now in the process of completing wave C of 4, then after wave C of 4 is complete, we will go down breaking below 1.35 in wave 5.

So the question is whether it's possible that 5067 is the end of wave C of 4. If it is, according to this EW count, GBP will then break lower than 1.35. This to me sounds very similar to Delta theory that LTD 15 is DUE together with ITD 8 / MTD 11 and SLTD 2 is not yet due.

We have determined that Wave A of 4 has 3 subwaves, Wave B of 4 also has 3 subwaves, and Wave C of 4 therefore must have 5 subwaves (3-3-5 corrective pattern).

So let's take a look at current Elliot Wave count attached. Although we could count 5 waves up from the end of wave B of 4 like I propose in the chart, we could observe that wave 1 and wave 4 of C overlaps, and also the 5 wave structure of Wave C just doesn't look right and complete to me.

So a daiy Elliot Wave chart observation does not really convince me that we have reached the end of wave C at 5067. I thus favor the idea that 5067 IS NOT THE TOP of wave C of 4.

2. Chart 2: USD Index Monthly Chart

As spectacular as USD rally in recent days, in USD Index Monthly Chart attached, we observe a monthly bearish engulfing candle suggesting that USD is topping off. On top of that, we also observe a monthly bearish divergence between price and RSI.

To me, this suggests that new lows in GBP USD (or other currencies like EUR USD, AUD USD) in the coming several months are not likely.

3. Chart 3: GBP USD Monthly Chart

From GBP USD Monthly Chart, we see how RSI is so in deeply oversold region. We observe it starts to turn up, and most likely we will finish the month of April in positive candle. Taken together, this may signal further bullish potential, instead of breaking lower than 1.35.

We also observe in the past between year 2000 - 2002 how price fluctuates around 1.4 for 18 months. This is a reference point to check how fast we should break lower than 1.35, especially considering that we are still in very deeply RSI oversold region

Taken together, these three charts above suggest to me a more probable outcome of long term bullishness in GBP USD. And thus, I would argue that even if ITD 8 / MTD 11 has been due on April 16, the long term direction is still UP even though the medium term direction will be DOWN.

GBP USD Update - Part 2

April 18, 2009 - PART 2

This part is a continuation from part 1 that I posted before. You should read part 1 first.

In this scenario, I want to discuss about GBP long term direction from Delta perspective as a result of what happens if ITD 8 / MTD 11 has arrived on April 16 at 1.5067. So in this scenario, let's assume that ITD 8 / MTD 11 has arrived on April 16 at 5067

If this happens, the more important question to ask is whether LTD 15 is also IN together with ITD 8/ MTD 11, and whether SLTD 2 low is already IN at LTD 14. This is such an important question because it concerns the long term direction of GBP. Is GBP heading below 1.35 in the long term? Or is GBP heading above 1.5067 in the long term?

So here first of all, I want to specifically address the long term direction of GBP purely from Delta system perspective first, then later I will add some more observation from other trading methods to determine to the best of my ability the most probable outcome.

Assuming ITD 8 / MTD 11 is IN on April 16, Delta rule states that LTD 15 could be IN here with MTD 11 OR LTD 15 could also be IN later with MTD 1. Delta rule also states that SLTD 2 could be IN with LTD 14 last time, or SLTD 2 could also be IN later with LTD 16.

To answer that question, I attach Delta - LTD chart. As you can observe from the chart, in previous 2 cycles, LTD 15 was due on March and April. And in previous 2 cycles, SLTD 2 was due together with LTD 16 on June and July.

The whole idea of Delta is that pattern tends to repeat again. So at first glance, Delta - LTD chart observation may seem to support the idea that LTD 15 is DUE here and SLTD 2 LOW is not yet due IF GBP USD's pattern this year is to repeat like previous 2 cycles. If that is the case, then we should expect GBP USD from this point to go progressively lower and breaks below 1.35 in coming months.

Attached is another Delta chart to show what will happen using these assumptions:

1. ITD 8 / MTD 11 was due on April 16

2. LTD 15 was also due on April 16 together with ITD 8 / MTD 11

3. SLTD 2 was not yet IN.

Using assumptions above, we would never see in the coming months price level above 5067, and will trade progressively down and break lower than 1.35 per my chart.

But again, the pattern this year doesn't really have to repeat previous 2 cycles as I already said the Delta rules allow LTD 15 to be due on MTD 1 later and SLTD 2 to be due on LTD 14 last time. In fact, in the next part, I would argue that even if ITD 8 / MTD 11 is already due on April 16, it's more probable that LTD 15 is NOT due with ITD 8 / MTD 11 and that SLTD 2 WAS probably already due on LTD 14. In other words, in the next part I will argue that SLTD 2 WAS already IN, and LTD 15 will not be due until MTD 1 later (around May - June).

GBP USD Update - Part 1

April 18, 2009 - PART 1

GBP USD is currently at the crossroad. It has finally broken 1.5, albeit very briefly and swiftly reversed back and closed at 1.478 last Friday.

The natural question after last Friday's close is:
Has ITD 8 high arrived on April 16 at 1.5067?

Delta logic tells us that if ITD 8 has arrived on April 16, that would mean that MTD 11 MUST have arrived as well, because we will already have 3 ITD highs between MTD 10 and MTD 11 (ITD 4, ITD 6, and ITD 8).

The average turn date for ITD 8 should have been April 27, and April 16 seems to be too early. However, it is not totally impossible that ITD 8 has arrived.

For those interested in statistics, here's the statistics of Delta turning point:
- 51% of the time, actual turning point happens within 2 days of average turning point
- 68% of the time, actual turning point happens within 3 days of average turning point
- 81% of the time, actual turning point happens within 4 days of average turning point

In other words, there exists a possibility (around 20%) that actual turning points is more than 4 days of average turning point. Furthermore, since the credit crunch crisis happened in 2008, Delta turning point has been pushed and pulled to the extreme due to extraordinary circumstances, which probably skews the average statistics.

Delta Logic only tells us that since MTD 10 low and LTD 14 low were confirmed IN, MTD 11 must be higher than MTD 9 (must be higher than 4985). Now that GBP has actually broken 4985, there's no Delta logic which gives us 100% confidence to say that GBP MUST continue to go higher than 5067 from this point. And thus, there's a possibility that ITD 8 / MTD 11 COULD INDEED HAVE ARRIVED on April 16.

However, it's also equally possible that the market is trying to shake people's nerve and confidence and in this case ITD 8 / MTD 11 SHOULD STILL BE DUE AROUND the average turn day of April 27 or even later than this. If this is what is happening, I expect GBP to rally next week to higher than 5067. If you are a trader who is bullish in the Intermediate Term, you should attempt to go LONG in this retracement with the line in the sand at ITD 7 low at 4580.
In chart 1 above, I illustrate what GBP should do if this scenario happens.