By Clivewaverider

30th September 2012

Any opinions, news, research, analyses, prices, or other information contained in this report are provided as general market
commentary, and does not constitute investment advice. I will not accept liability for any loss or damage, including without
limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Introduction

Van K. Tharp, Ph.D: I always say that people do not trade the markets; they trade their beliefs about the markets.

Welcome to my weekend report on the EURUSD currency pair, Lines in the Sky. I endeavour to provide a linear explanation to my
completely discretionary trading approach, most definitely for my own reference, but also with a view to sharing the journey. All that I have
learned, has somehow managed to make its way to my computer screen and note pad by way of others who have shared their knowledge,
albeit not always for free! As such, I hope to continue that circular tradition of learning then teaching, learning some more and then teaching
some more..

I am known as, and write under the guide of Clivewaverider, as a constant reminder to myself, that that is my modus operandi. I have spent
many years now creating visual representations of the My-Waves that I trade, following in the footsteps of the likes of Daryl Guppy and
Linuxtroll, underpinned by those very broad shoulders of Fibonacci, Elliott, and Hurst and many other contributors. As such, my reports
may include different studies from week to week, although over time, this process is becoming more selective as common confluences appear
between various methods, diminishing the need to repeat through different lens. This report is therefore presented in the way that I trade
and to me, that is all that matters as I have learned to build my own thesis as no one else ever offered to pay me when I followed their work
and lost. It is a tough nut to crack but a lesson learned the hardest way possible with my pride tucked very firmly behind my legs!

Van K. Tharps quote has been a source of calm for me in challenging that somewhat inc0mprehensible anguish over the need to always be
right. This latter pursuit had led me into episodes of disaster, cash flow wise, daring the market to prove me wrong and losing the dare.
Remaining a full-time trader has thus far been grounded in the requirement to get paid and to do that I have needed to learn, the hard way,
to bank my profits at regular intervals. Therefore, I remain a short term day trader who keeps an eye on the developing longer term picture,
joining up the dots as I go along. Any forecasts of the future are completely driven by the need to trade my short term My-Waves for a profit
and I am extremely comfortable with the need to change my longer term thesis when market action requires me to do so. So, for all readers,
let us be clear: I use the short term waves to build my longer term picture and not the reverse and I only trade those intra-day waves and
nothing else.

Email address for all enquiries: lionmaine@gmail.com

Short term picture

As of Friday close, My-Wave had
seemingly formed fully to the
downside in an impulsive move,
without forcing the rolling daily
low (thin single green line at
bottom) to a new low and in fact
had printed a higher high and low
in the New York session, around
the daily pivot S1 and the hourly
Bollinger bands. Note also, how the
daily 50% retracement band had
shunted up a little in response,
above pivot. The wave is not
showing compression or cross over
at present but the distinct higher
high, just after 5pm, and the
probable 3 wave pull back, suggests
the next move is up and I was glad
to have banked my shorts earlier in
the day.

Short term picture

Moving out slightly in timeframe, we
can see how price has been peppering
the red line all week. This is the 50%
retracement zone of the rolling
monthly high and low prices, which
also became the weekly low as well
(blue line just underneath the red). The
daily Hull Moving Average ended the
week pink, for bearish or down, but as
in the last chart, I think this will be
tested to the upside first. Of interest is
how the 3week (brown) 50%
retracement zone capitulated during
the weeks action, moving quite quickly
from support to overhead resistance.
We now have the daily, weekly and 3
weekly all stacked in a bearish
formation, but the 2week (white line) is
remaining aloof at present, at the
weekly rolling high and upper Bollinger
band. Unfinished business upside I
think, to a pull that 2week down,
before pushing through the red line, if
it is going to happen at all

Short term picture

So, this is my short term Elliot wave
count, given the 60min smi & macd
positions and the previous charts. I
think we saw an expanded flat for
the first abc to make up the blue
A wave. We then saw a blue B on
Friday and now I expect a blue C
wave up to complete an ABC
retracement for the yellow B wave
or a Wave 2. This makes the initial
move down from 1.3171 a leading
diagonal as higher degree A wave
of Wave 1. I intend to look for
reversals in the My-Wave in chart 1
and am targeting the 1.62 extension
of the blue abc which is also the
61.8% retracement of the move to
yellow A. There are a variety of
Fibonacci Fan (85.4%) targets to
aim at drawn off the lower lows,
but for any of this thesis to get
started, I need to see the My-Wave
in chart 1 twist & turn
confirmation first please! The blue
channel methodology is discussed
later in the Intermediate section.

Intermediate term picture

The 2 week My-wave is obviously under
pressure but thus far has not
succumbed. As I wrote last week, the
visual difference in the impulsive move
up in comparison to this laboured chopchop, continues to suggest this move
downhill is corrective in nature and not
an intermediate term trend change. If
we see a very strong move down, then
Ill reassess. As such, I have labelled the
2week wave up as a red A and the likely
move down as a red B wave. The failure
thus far to move through the monthly
50% retracement zone adds weight to
the same argument, although the repositioning of those inter-month 50%
zones is on my mind, but may only
support the yellow C wave down to
come. I have the initial target zone for
the yellow C down as 1.2740, being a
38.2% retracement of the whole move up
from 1.2041, but believe we will go to the
50% area at 1.2606.

Intermediate term picture

This is the 2month My-Wave and
again on this scale, it can be seen
that the wave up has not been a
particularly clean one and given it
follows a very impulsive wave (on
left) I am surmising this has been
an A wave up to 1.3171. I have
drawn in a 50% retracement for B
before we go up in C. It could be of
course that the A wave was in fact a
wave 2 already completed, from the
prior move down, but again, Ill
wait for something a bit stronger
downhill before concluding that
and changing my thesis.

Intermediate term picture

Notwithstanding the possibility of any near
term upside, my Fibonacci Fan study from
the 1.2041 low is quite useful, I think. The
standard deviation bars are born of the first
pivot high and the 85.4% fib.fan line,
which runs through the middle of the
channels. Unlike Alan Andrews Pitchfork
methods and various possible points of
reference, my method forecasted the first
pivot low in advance, as it is drawn
immediately off the top of the first pivot
high, aligned with the SMI top. This same
line has provided a pathway ever since and
its parallel deviation bar, an excellent zone
to work a short strategy. We are obviously
testing this fan line now, but again, I
believe one more reprieve at least before
pushing through and taking out the 50%
monthly retracement line from earlier
studies shown. The lower cluster of green
fan lines provides the true retracement
zone in my opinion and the next one down
marries with the channel perimeter and
the 50% retracement of the whole move up
from 1.2041, seen earlier.

Intermediate term picture

In this next study of the same
chart as the last, I have added a
red channel. This is the deviation
study of the 85.4% fan line of the
3rd pivot high. Note how this
provided a useful confluence
target with the 2nd channel line
of the first pivot. Utilising the
concept of action and reaction,
there is enough to keep me
focused on a deeper retracement
to come, in testing that 1.2041
low at the very least. The
positioning of the 240min SMI,
seems to support the argument
for one more test of the pivot
high and then a drop lower. Now
look at the next chart.

Intermediate term picture

Now this chart is not pretty, I must
admit, but it may be useful in the
future. This time, I have
extrapolated deviation bands from
the last high at 1.3171 and its 85.4%
fib fan line (which is in the same
zone as all the other lines!!!!) and we
may start to see why I follow the
short term waves. If the 1.3171 high is
taken out, the price movements to
date are telegraphing 1.4200 as the
topping area, or in the other
direction, 1.1300 or 1.0300. Note how
the red channel from the last chart,
marries up almost exactly with the
drop to 1.1300 after a test of the high,
maybe a slight new high. Not
concerned either way at this stage,
other than those cluster of fib.fan
lines in green. Whichever way it
goes, this is the truck stop as far as I
am concerned.

Intermediate term picture

Last week, the price action was
testing the middle median line of
the regression channel running up
from 1.2041 (thin grey lines). I
suggested that the bottom of the
channel would make an initial
target where the monthly 50%
retracement zone sat (red lines)
and so it has been. I have drawn in
the fib.fan lines from the last charts
in here in pink for comparison and
guidance. Note how the 3month
and 6month 50% retracement
zones sit in the 1.2600 ish area
again marrying up with the
Fibonacci 50% retracement of the
whole move from 1.2041 to 1.3171. A
continued push down would also
force the regression channel lower,
which does not have enough touch
points on perimeters to warrant
complete in my mind, and test back
the cross over of the weekly and
monthly, retracement bands of the
3month and 6month, back in
August. The yearly 50%
retracement zone sits invitingly up
top at 1.3290 and for me, makes a
good initial target after this
retracement is complete.

Long term picture

Overall trend of the orange regression
channel since the 2008 high is down.
Price has just reacted to the median line
of this channel, and the top of the one
year My-Wave, which itself is still
formed to the downside. The 2 day SMI
is also currently overbought and
although price has broken out of the
regression channel (from the 1.4939
high in 2011 to the July 2012 low of
1.2041), it is likely to need to let off some
pressure at the very least. It is notable
that the My-Wave has not collapsed or
rolled over at this stage and therefore
any retracement might be deeper than
the obvious initial target of the channel
perimeter near 1.2600. For now, I am
working on the premise that the move
up from 1.2041 is an A wave and now we
are in a B wave down before a C wave up.