Sentiment in the Forex Market: Indicators and Strategies to Profit from Crowd Behavior and Market Extremes

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c07 JWBK195-Saettele June 5, 2008 19:52 Printer: Yet to come

Explanation of Elliott Wave and Fibonacci 179

the probability of a successful outcome is greater and risk is clearly defined

(the origin of the rally). In this way, you are working from the bottom up

with the wave principle in order to confirm what the top down (big picture)

is telling you.

The fractal nature of markets makes this a logical approach. Remem-

ber, the patterns that occur at smaller degrees of trend will bond together

to form the patterns at larger degrees of trend. Once you see five waves in

one direction on an hourly chart, then probability is high that at least one

more five wave move will occur (in the case of an A–B–C correction) and

possibly two more five wave moves (in the case of a 1–2–3–4–5 impulse).

MULTIYEAR FORECAST FOR THE

U.S. DOLLAR

Of course, it is still tempting to examine long-term charts in an attempt to

forecast what will happen over the next several years. There are always a

number of potential outcomes; therefore, there is always more than one

valid wave count. The goal of the Elliottician is to find the highest proba-

bility count. There are certain guidelines, or characteristics of waves, that

make one count more probable than another. Study the resources listed in

the Notes in order to familiarize yourself with the guidelines.

Regarding the U.S. dollar, the peak in 1985 appears ...