10/22/2017 – pound smacked into a wall of China resistance area. this one is tough … as you can see below, we did NOT work the triangle correctly and the rally continued into the polarity zone. the reason it’s tough is because of the very nice and basic time cycle shown below. it’s almost perfect and, for roughly 30 years, this cycle has caused the pound to explode higher … the ‘middle cycle’ in the time of 2000-2002 based for a while before exploding. so, do you trust POLARITY of the CYCLE? Call me crazy but I’m in favor of the cycle for now and will be looking for a BUY opportunity over the coming weeks/months as the ENTIRE WORLD has stops right above the Polarity Wall of China resistance area ….I’ll just try to look for a pattern.
it will work or it won’t … a very interesting time indeed.
CLIFF NOTES: in the past posts we have shown parabolic arcs UP and now, w/in the context of the intra-day world we have a culminating/parabolic move DOWN into the .786 and/or the .866 region. (hint hint – the POUND likes the .886) When we reach this parabolic structure to the downside it’s “usually” the limit of the downside…expecting a 3 leg correction from levels shown in the blue box.
also, not that it matters, I do find it interesting that 710 hours ago we were in/around the top area at the 1.7180’s …(hint hint: 710/656 hours are moon cycles)
we have discussed in former posts the importance of the 1.68179 ratio and it’s relationship to the equal octave scale of music and how, at times, the .68179 price projection technique is very helpful. in a triangle, you have 5 waves – a,b,c,d,e and they are “normally” w/in the .618 relationship. well, in the case of the Pound you can see .68179 and .886 have been very strong ratio’s. so, this entire triangle thesis is about 50 pips from become a reality or getting blow out of the water. I tested a small short last month and was stopped out … since then, I have been waiting for 5 waves at a lesser degree (time frame) to support the thesis. It hasn’t happened ….so, this final level as shown in the chart above will be my line in the sand. this has been one heck of a fight …
so, where do we sit now? below you will find a daily chart of the GBP vs USD and, well, nothing has really changed. let’s focus on a couple things:
the target we had “hoped” for is, quite frankly, still out there and rest at 1.6330. it is conceivable for one more push into that short zone.
the analysis of a multi year triangle completing (big blue 4) is still alive.
the move from 4 (big blue) down to the 1 (green) represents 1 0f 5 in a 5th wave decline that “should” take out the 2009 lows.
most recent price action is viewed as a 2nd wave correction in a-b-c fashion. the 1.618*a = c level is at 1.6297 (never hit)
here’s the most important part – the 2 month consolidation is either is 1) corrective and an advance to our long standing target will occur OR 2) the most recent high yesterday is “it” and we start down. I don’t know which is which but I do see a more favorable foldback than the one originally presented on 11/05.
the foldback can be seen here …
here is the 4 hour chart w/ a little more granularity …
will be trying to get short (again) on this potentially MAJOR move … our risk will be anything “closing” on a 4 hour – daily basis above our long term target OR above the 4 (big blue one). at that point I will ERASE everything an go back to the drawing board…
Foldbacks are amazingly accurate patterns … they occur on anytime frame and basically give us the “mirror image” of a move … the theory is as they come into an inflection point they will go out of the inflection point the same way. for those still versed in geometry, it’s basically the angle of incidence equals the angle of reflection.
here’s one of many pictures that I have of long term foldbacks in process … it’s a long term chart of JEC (Jacobs Engineering). The first chart shows the geometry of the parabolic move up, the second chart shows price action around the foldback and the third chart shows the result.
if you go back and study the Silver posts you’ll see that the most recent all time high on silver was just like the above … a mirror image foldback. IF (the big IF) you find the correct balance point then you can watch movement w/ a leading understanding of what to EXPECT (again, only PROBABILITY) Here’s a quick review of the Silver Chart … everything based on the FOLD BACK.
so, much like JEC and SILVER we find a nice POTENTIAL FOLD BACK occurring w/in the Great British Pound Chart ….
only time will tell if have the fold back working … the great thing from a risk management perspective is they USUALLY only FAIL at the inflection points so a little bit higher on the Pound will tell us a lot.