Sticky Post: Forecast

Sticky Post: Fractals Status

Important: This is a permanent post. For my recent entries please scroll down this page.

This is a short version of the fractals records.

There is more information in the permanent Page titled “Records”, although I don’t update that Page as often as this post.

Last Update:  Wednesday September 09, 09   approx. 07:12pm UTC

Fractals Status:   page 1

 

   page 2

 

Fibonacci Ratios Status

Euro’s turn

The exotic butterfly in the USDCHF has a partner in the EURUSD chart, not so exotic but equally effective: a deep crab.

NOTE: The chart is in the 1hr timeframe. My mistake labeling it 4hr…

And here again the Schaff indi confirmed the reversal by crossing the 20-30 lines, and again with a lag from the fractal formation of about 17.7% off. But here as well it would have saved me from entering long in the 2 previous tries: in both attempts up of price action the Schaff line stayed muted, making an effective non-confirmation.

third time’s the charm

There is a third fractal in the USDCHF; however is not any of the usual patters. Let’s call it an “exotic” butterfly.

What makes it different from the other butterflies? The B point. While the regular butterflies have a B point ranging from 0.618-0.786-0.886 XA Fib, the “exotic” butterflies have this point in the 0.382-0.50XA range.

I know what you are thinking: “the regular bat barely worked, the alternate bat went the same way, so now He has to invent some other pattern to justify the eventual downswing lol” That may be, yes, lol. But the truth is that I have been following these and other ‘irregular’ fractals for some time now, and slowly integrating them into my trading arsenal, along with the “official” patterns. The fact that these shapes aren’t part of the orthodoxy doesn’t make them less effective, as the chart above clearly shows.

Continuing with the study of the Schaff indi, this time it FINALLY went down AND crossed the 80-70 lines, thus confirming the swing down. The only drawback is that when it crossed the lines, price action had already taken USDCHF to the 17.7% ret level, which in my new Entry System is kind of late. Still, it’s not bad for a lagging indicator; especially considering the two non-confirmations that it gave with the 2 bats, foretelling accurately they wouldn’t yield big retracements.

OK, where to from here? I think the downswing is not done yet, and expect more USD weakness in coming days, to between the 0.618-0.786 range, maximum 0.886, and then the bullish butterfly should take over the PA again. The Schaff indi is now below the 30-20lines, and unless it jumps back over 70-80 in the next 24hours I’m assuming it indicates a temporary “mini trend” down for now.

not yet

Well, the alternate bat fared just as its predecessor, the regular bat: it got only to the 23.6Fib ret before letting price move on higher.

The Schaff indicator made a lil move south, like insinuating the start of a downswing, but never got to cross the 80-70 lines and then straighten up and went horizontal for one more day. I’m gonna start paying closer attention to this indi; it may prove to be the lil helper I need to confirm reversals and strength of trends.

another metamorphosis

As we said in previous post, the bearish bat in the USDCHF  had a limited effect against the much bigger bullish butterfly.

I was expecting a lil deeper correction (0.382-0.50) but price stalled between 0.236 and 0.382 and reversed back up. Nonetheless, the fractal is successful by my new measuring standards (0.236Fib ret =  minimum success), and it fulfilled its function in creating the EW wave 4 of the current move up.

As you surely have noticed before, many times I attach some lagging indicators at the bottom of the chart, to give me a better feeling of the market’s moves and trends once a fractal is formed and hopely help me to confirm the new swing caused by the fractal. I have tried MACD, slow & full stochastic, RSI, CCI, %Williams and some others, and so far the results have ranged from mixed to disappointing.

Well, I’m still trying. This is my latest try: the Schaff indicator, which is still a lagging indicator, but as Asher (the creator of fxroom24) has said, it has a factor that makes it more responsive to changes and at the same time it filters out the false signals given by MACD. I think He has a modified and improved version of the Schaff, but for now I’m using this regular indi that comes with my charting software and will upgrade later. Thanks for introducing me to this indi, mate !

Well, for starters, I can see that the Schaff indi picked up the start of the current upswing (beginning of AB leg) and that it hasn’t come down since then, not when the bat was formed, neither when price went down to the 0.236-0.382 range low, so I guess that was my signal that the downmove would be limited, or in other words, the downmove wasn’t supported by Schaff and price shot up once more.

Going back to the fractal itself, it morphed from the regular version of the bat to the alternate bat:

I think this bat will fare better than its predecessor for various reasons. First, the upswing is in 5 waves now, so we should have a 3wave correction. Second, price has come down quicker than yesterday’s small downmove. Third, we have almost reached 0.236Fib ret. Lastly, the Schaff indicator hasn’t come down yet, but the horizontal line is getting long. I have no idea for how much time it can stay flat, just trying this indi for the first time, but I’m guessing it will start coming down today/tomorrow, thus confirming the correction.

EW charts update 5

Finally, we ended wave 5 of c of B, pheww; it took longer than expected, and it really stretched the limits of the zigzag. In spite of this, I still think we have a zigzag for wave B, and an expanded flat for bigger wave 4.

I’ll wait a few more days for the long term charts to clear out their counts a lil more. Right now I’m split between my original, normal expanded flat for w4, and a probable running expanded flat I’m considering.

Here are the charts for medium term:

 

 

lil bump on the road

There is a bearish bat in the 1hr TF USDCHF.

I don’t expect much of this fractal: a correction to the 0.382-0.50Fib ret area, due to the fact that is a fractal opposed to the much larger bullish butterfly that formed before it.

The CD leg was formed in a really steep slope. There’s the chance of price climbing again an touching the point X level of the bat before coming down. Being on the sidelines is recommended if you don’t want to mess with the bullish butterfly.

they came true

The possible fractals published 2 days ago did indeed finished forming. A deep crab for the EURUSD and a 1.618XA butterfly for the USDCHF.

Now, keep in mind that these are a deep crab and a crab-like butterfly. Patterns like these tend to make price to go sideways for very long before actually retracing, so be prepared for some tedious days next week. Also, an attack to the point D isn’t ruled out either, so precaution is advised.

the price of being newbie

I was saying in the previous post that the bearish butterfly in the monthly TF EURUSD has some personal history.

OK, here’s what happened last year:

During that summer I had just started learning Fibonacci fractals, and was naive (even more than now, if you can believe it, lol) and perfecctionist. I had seen the possibility of the butterfly to form based in this chart:

The Euro was introduced in 1999. For the previous years the German Deutschmark is commonly used as a proxy for the Euro (which speaks volumes about who’s the Boss within the Eurozone economy).

Taking the 1.4574 high from 1992 to the 0.8220 low from 2002, a new high of approx. 1.6300 at the 1.272Fib ret extension could have been plotted, as in next chart:

The only problem was that the Euro never got that far.

As a new student of Fibonacci theory, I was a die hard perfeccionist, and was expecting for Euro to be taken exactly to 1.63 before going short on the pair. No way the ccy pair would dissapoint me by falling short of my price target. You know the rest of the story, and after going briefly above 1.6030 the Euro hasn’t looked back since.

Here was the twist: Fibonacci retracements/extensions aren’t numbers to be met exactly to the last pip, but rather wide areas of possible reversal, with a leeway of several percentage points to both sides of the Fibonacci level.

Of course I didn’t know that back then, an paid dearly in the way of a wonderful trade missed.

As you can see in the Euro chart from previous post, the Euro did get up to the 122.2% level, 5% below the 1.272Fib ret I was expecting. 5% is the maximum margin of tolerance I usually allow now for drawing fractals, so this butterfly indeed finished forming there.

Since then I promised to myself not to be so damn perfeccionist and allow price action to do its thing, and be on the look out for “not so perfect” fractals that might give bigger rewards, instead of waiting for the “perfect” one to come along, that sometimes does come, but as I have seen many times before, ultimately fails, lol.

EUR/USD monthly chart 1

Two months ago I published a “quasi” fractal in the monthly USDCHF, and promised to publish its sister butterfly in the EURUSD.

Here it is, along with the Swissy pattern for comparison:

They aren’t exactly twins. For one thing, the Swissie pattern is a big smaller, spanning 13 years from 1995 to 2008, while the Euro butterfly extends within the 1992-2008 period, making it a 16year fractal, the biggest I have seen this far. Both of them are similar in that they ended within the 1.272XA range, but their point B is completely different: 0.886 for Euro and 100% for Swissie.

I chose to publish the bearish Euro butterfly today as a reminder to all Euro bulls that we are actually in a down trend since July of 2008, and while a retest of the 1.60 highs is possible, it is improbable imho. In my view we will have a high between 1.52-1.55 before year’s end, and down we go again.

Also, technically speaking, this fractal pattern is already successful, since it has made price to retrace beyond the 23.6 and 38.2 marks, and touched briefly 0.47 ret, which is already within the area of the 0.50Fib retracement. (This may have bigger implications in years to come, but only time will tell if what I’m suspecting will crystallize).

The story of this bearish butterfly has certain personal importance to me, but I’ll tell about it in next post.