Futures Market Intelligence Report

Currency Futures Information

US Dollar Alert!

November 21, 2011

NOTE: When reading our intelligence information reports the original text will be in white. Updates will be dated, formatted in a light blue and placed logically within the report. Significant changes will appear with a strikethrough. This preserves the orginal information yet allows updates.

Expecting a Sharp Decline in the US Dollar

On March 18, 2011, the Financial Police® put out the intelligence report titled Foreign Exchange Alert regarding a rare Elliot Wave diagonal triangle. Today, November 21, 2011, we are issuing another diagonal triangle alert except this time the triangle is bearish.

Intelligence Information Update 12.2.11

Our 11.28.11 forecast for both the Dollar and the Euro has been confirmed by the recent action in the Currency futures markets. The action in the Euro on 11.29.11 was historic. The forecast for the Euro to remain in a bullish intermediate uptrend to around $1.42 stands.

Take a look at Chart 7 of the Euro futures. As forecasted, the end of the triangle proved to resistance. Look at all the hourly readings stacked up against the upper trend line! Look how it pierced through momentarily only to be immediately retraced. Look how it sold down near the bottom trend line in classic wave two Elliot fashion. Then, when it finally turned up, it registered one last bump into the upper trend line, sold off, and within a few seconds of the hourly reading experience a historic rise!

Since that rise, it has consolidated in what looks like an hourly triangle that is completed. This information suggests an immediate rally thrusting up. However, the bigger picture still remains —the hourly correction is mild and should end shortly.

Hold your positions.

Chart 7 (click image)

Intelligence Information Update 11.28.11

It is as defining moment for both the US Dollar and the Euro.

It is not a perfect world and neither are we. As you can see from Chart 5, we have adjusted the trend lines. What is happening right now is the US Dollar index is trying to break through the lower tend line.

The biggest error we made was not analyzing the Euro for a triangle and putting that information in this report. Look at Chart 6. The Euro traced out and opposing diagonal triangle to the downside. It is trying to thrust through the upper tend line while simultaneously the Dollar tries to break through resistance of the lower trend line!

Stay tuned for new information and updates...

Chart 5 (click image)
Chart 6 (click image)

Intelligence Information Update 11.23.11

The “E” wave of the diagonal triangle has “thrown over” the upper trend line giving a classic Elliot Wave sell signal.

It may, or may not, hang out above the upper trend line for an hourly reading or two. It may even go a little higher. However, the signal is clear — be short the US dollar futures.

The reversal in trend should be swift and carry the index to the lower trend line where it will most likely run into resistance. It may even register a few hourly readings bumping into it. When it breaks through, the selling should be illustrated by smooth impulse waves to the downside.

Chart 4 (click image)

Intelligence Information Update 11.22.11

The diagonal triangle at 7:40 EDT 11.22.11 is close to piercing the lower trend line. This would indicate the “E” wave fell short of the upper trend line. For confirmation, the hourly chart needs to break through the lower trend line, not rally back up and register a reading inside the triangle and move lower swiftly.

It is possible the lower trend line may prove to be resistance for a short period of time. It may, or may not, take a few hourly readings to penetrate it.

It is also possible the “E” wave is not complete. From the looks of the chart, this does not look very likely. However, at this stage it is best to wait for confirmation. Keep in mind as the triangle reaches conclusion it narrows. The upper trend line comes through today around 78.700 and there is enough volatility in these markets to support this outcome.

Please read the rest of this intelligence information report to gain a full perspective on what Chart 3 is forecasting.

Chart 3 (click image)

How Rare are These Diagonal Triangles?

They are pretty rare. For example, we issued an intelligence report 3.11.11, 11.13.11 and one today, 11.21.11, for this type of formation. That is only three this entire year. By coincidence only, we found a possible diagonal triangle in the Silver market last week. In both prior instances, this rare Elliot Wave formation looked, felt, smelled and traced out textbook patterns but the market dynamics did not support the outcome. In other words, the market did what the market does best — not present anything easy to predict.

I would also add they are not as easy to spot as you may think. For example, I did not see the triangle in Chart 1 until this morning! Voilà, here it is in all its glory.

Chart 1 (click image)

Chart 2 (click image)

Triangle "E" Waves

As disscused in the Silver intelligence information report an Elliot trianlge "E" wave can do one of three things:

• Fall short of the upper trend line (anywhere in-between).
• Hit the upper trend line.
• Breach the upper trend line called "throw over."

When Chart 1 and 2 were made around 9:00am EDT, one could argue the “E” wave has already met one of the conditions in the numbered list above. At this juncture, we will know shortly (next few trading hours) whether the “E” wave will make a run at the upper trend line, pierce it, sell off and breach the lower trend line or whatever.

How to Trade an Elliot Triangle

The entire formation is a sell signal. Fine tuning that, in the event the “E” wave “throws over” it should not travel very far and should not stay above the hourly chart upper trend line for more than a few hourly readings. Above the upper trend line is a clear sell signal. Confirmation should be an immediate reversal of trend. Deviations from this would trigger getting stopped out.

If the “E” wave falls short of the upper trend line, like it is now, a sell signal would occur upon breaching the lower trend line. Once an hourly reading is registered below the lower trend line, it should not record another one above the lower trend line. Once it is out it should keep moving lower. Deviations from this would trigger getting stopped out.

The resulting post triangle thrust should take the US dollar index to a minimum level of where the triangle began. It began at approximately 74.80. The move should be swift as well.

What if it isn’t a Diagonal Triangle?

It looks, smells, tastes and feels like one. It is text book Elliot. Waves “A” and “D” overlap each other. The lower trend line touch points of the bottoms of waves “A”, “B” and “D” are almost perfect. We will ALL know very shortly if the market psychology and dynamics are in place for this formation to do what it is forecasting —a swift sharp sell off in the US dollar index futures.

Look for updates to this currency intelligence information report.

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Thank You

William Bonofiglo
Director of the Financial Police®
November 21, 2011