Elliott Wave & Hurst Cycle Analysis of the U.S. Dollar Index (DX) by Sid from ElliottWavePredictions.com. Click on the charts twice to enlarge.
Using a combination of Elliott Wave and Hurst Cycle analysis sometimes provides expectations that are not widely accepted. For instance, if my interpretation of the narrowing sideways chop in the US Dollar Index from January 2012 through July 2014 is correct as an Elliott Wave triangle, the strong, relentless upshot in the US Dollar over the past 6 months is a terminal thrust. Thrusts from triangles are almost always destined to be completely retraced. To say that this view is not widely held at this juncture is an understatement! The financial media has propped up one talking head after another for months on end now, almost all jawboning about how to best position portfolios for a relentlessly strengthening dollar. The attached charts show that based on my unique form of technical analysis (combining Elliott Wave with Hurst cycle analysis), I cannot agree with that expectation, especially now that the thrust from the triangle is nearing several important targets.
Elliott Wave includes a method for estimating how long the thrust from a triangle will be. I’ve shown that methodology on the attached weekly chart. Notice that the triangle boundary line connecting pink waves A and C of the triangle is extended backward, as is the line connecting waves B and C (pink) of the triangle. Then, at the start of wave A (pink) of the triangle, I’ve measured the distance between those two lines as 1284 ticks (shown in red on the chart). 1284 ticks is the expected distance that the thrust from the triangle will travel. (This technique has produced amazingly accurate results many, many times, although it is not considered an Elliott Wave rule.) I made a copy of the 1284-tick measuring tool, and placed it at the end of the triangle., starting at the blue B (pink e), end-of-triangle low. This leaves a thrust target in the US Dollar Index of about 92.58 (shown best on the attached daily chart).
There are two additional price targets very near the 92.58 thrust target. One is at 92.63, the extreme of wave 4 at one lesser degree. (In this case, the November 2005 high, as shown on the monthly chart). Also, within the thrust from the triangle (starting July 1, 2014), there are 5 clear internal waves (1 through 5 pink). Many times, wave 5 within a thrust from a triangle is extended, and extended 5th waves are most often equal to the net traveled by waves 1 though 3. Pink wave 5 equaled the net traveled by pink waves 1 though 3 at 91.48. That target was reached today.
Additional evidence of an imminent top in the U.S. Dollar is provided by Hurst cycle analysis via Sentient Trader software. Utilizing an analysis commencing at the November 2005 high, the current 21.1-week cycle was due to crest (top out) between Nov 24 and Dec 30. We are just slightly past that expected topping window now. Also, today’s price action featured an opening gap higher, followed by a strong upward continuation, but then an equally strong retracement back to the opening level. On the daily chart, this created a long-wick doji candle. Hmmm . .