Wednesday, October 17, 2012

EWI's Forex Freeweek is Here

I'm taking some time off from the markets so this is perfect timing.  I always recommend taking advantage of free resources from reliable sources.  Now you can access all the charts, analysis, videos and forecasts from EWI's trader-focused Currency Specialty Service right now through noon (EST) Wednesday, Oct. 24.
 
Happy trading!
 
Todd

Wednesday, October 3, 2012

Stock Momentum Pointing Down; Dollar Bottomed

Since my last post, stocks have pulled back modestly, but there is no 5 wave decline yet so it's tough to call a top here.  Using the simplist of momentum indicators, the MACD has a double top and the averages are trending down, suggesting at least the short term should result in further stock weakness.  Until we get a 5 wave move, it's tough to make a call either way here.  But the sum of the evidence seems to favor the bearish side slightly since the gains over the past few months seem extended, the VIX is extremely low, and two topping price bars have been put in place on the daily chart.

Note: I always recommend taking advantage of free resources from reliable sources.  An Elliott Wave Principle website, WaveTrack, is offering free access to their Elliott Wave Compass report until October 7th, 2012.  Take advantage, wavers!



I normally focus on the euro and not the other majors, but the euro is not giving me a clear signal here and the British pound is.  On the daily chart you can see a big outside reversal candle followed by daily candles with long top-wicks suggesting a lot of selling pressure.  Today the pound has faltered so far suggesting the bears are taking control.  Now I know the outside reversal candle did not occur at the absolute top so some people may disagree with me here.  But with all the selling pressure coming in after the formation, it's close enough to the top for me to get me to short.  I'm short the euro and the pound right now since the evidence supports that a US dollar bottom has occurred which should put pressure on these european currencies.  A 5 wave decline soon, in either the euro or the pound, would be welcomed even more.

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PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Tuesday, September 25, 2012

Stock Top Holding; Euro Top Holding....Bears, Wake Up!!

The VIX is sitting around its lowest levels in the past 5 years as seen on the above weekly chart.  The amount of complacency and optimism for higher stock prices is becoming crowded, and this screams at us that a reversal is at hand.  There should be a sharp pop in the VIX soon which will result in a sharp drop for stocks.  The pressure built up on the overly-optimistic and complacent side of the bulls should result in a sharp and sustained move lower in stock prices that should last at least a few weeks.

Note: I always recommend taking advantage of free resources from reliable sources.  An Elliott Wave Principle website, WaveTrack, is offering free access to their Elliott Wave Compass report until October 7th, 2012.  Take advantage, wavers! 


The subtle reversal bar I cited in last post has held its high.  Although the resulting action after the reversal bar (2nd green circle) has been sideways, suggesting it might be another 4th wave, I do think the bears should wake up and start getting positioned for a selloff.  The MACD has pinched as well, suggesting at least a short term pullback is at hand, although there's usually a divergence between momentum indicators and price when major tops occur.  So as I said earlier, there may be one more quick pop to a new high before the reversal occurs.  Either way, bears get ready.  Once a top occurs in the S&P, it should head to the 1300-1350 area in a hurry.

A Two-Bar Pattern that Points to Trade Setups


The euro may be leading stocks slower as the currency's pullback from the 78% fibonacci retracement level has been much larger and pronounced than the pullback in the stock market high.  I am short the EUR/USD with a stop just above the 1.3172 high.  I will add to my short position on rallies.  Stocks should soon follow the euro's descent.

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PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Monday, September 17, 2012

Stocks May Have Put in Quiet Reversal; Euro Kisses 78% Resistance

Right now, the evidence supports the bulls for higher levels, i.e. the series of higher highs and higher lows remains intact, rallies are sharp and declines are choppy and/or sideways, the Fed is bullish and assisting the market's ascent higher, and most of the major indices have confirmed the S&P's new high.

With that said, many wavers are perma-bears, like me, so we are always looking for pullbacks.  So that's where I sit today.  I'm simply looking for a top in this market so I can take another shot at getting short.  I don't really see an opportunity to get short here, but it's worth taking into account the apparent 5 wave rally into a subtle reversal formation in the major indices (see above chart).  Could this be a quiet top?  Possibly.  I'm definitely watching the market closely this week in case it is.  Consensus on financial media seems to be that you can't fight the Fed and that the obvious path of least resistance is up.  Well, that to me tells me I should be looking for a top soon.  Be on the lookout for a top, perhaps one was put in last Friday, but it's way too early to confirm, and the evidence to support the bulls is still far superior for right now.

Big Advantages of Trading with the Wave Principle


This analysis here on this chart is basically an assumption on my part since I can't link it directly to a specific wave count, nor do I wish to.  I have not had success accurately counting corrections beyond an ABC zig-zag.  So I simply don't get too caught up in counting corrections.  There are just too many variations and they tend to morph into one another where you can go broke counting them.  The key for me is to look for the directions of smaller degree 3 wave and 5 wave moves, a topping bar or candlestick pattern, and a break of the series of higher lows.  These things help me determine tops.

Anyway, the above chart is just something I noticed when glancing at the S&P 1hr chart.  It looks like a series of 4th and 5th waves are occurring.  Today's weakness wasn't too convincing on the hourly chart to call a top (although it looks toppish on the daily chart), but overall this type of behavior suggests this market is topping.  Once this series of 4th and 5th waves runs its course, it will top and reverse very sharply.  Like I said earlier, I don't see a shorting opportunity here yet because the bullish evidence is far superior to the bearish case at the moment.  But just a word to the bears.....be ready.

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The euro made minced meat out of my 50%-61% fibonacci reversal zone I posted last week by shooting right through 61% in just a couple days.  Although the euro has put in no signs of a top, it's interesting and worth noting that it's ferocious surge higher halted right at the 78.6% fibonacci retracement as you can see in the above chart.  This is the maximum comfortable level for a 5 wave retracement, so if the EUR/USD plans on topping soon, this would be a great spot for it to do so.  Again, bears be ready.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Tuesday, September 11, 2012

Stocks Push Higher; Euro Enters Reversal Zone



Stocks continue to levitate, and annoy me, as usual.  It's tough to keep posting "waiting for stock reversal" in every blog post every day.  So I'm spreading it out a bit between posts.  I know some of you want posts everyday, even if the Dow moves 3 points.  But I it just becomes too repetitive unless something new and significant develops.  I have Sept puts on the SPY that are all but lost at this point, but losers have been a recurring theme for EWP stock bears for quite a while. 

You can see on the above weekly S&P chart that the uptrend of the past few years is still well intact.  So getting aggressively long term bearish does not seem wise here.  On a short term basis, I'm still looking for a top and reversal.  It will take long time, and a lot of S&P points lower, to convince me that this uptrend is broken.  But that doesn't mean we can't try to profit from short term pullbacks.  So I'm just looking for short term moves at this point.

Looking a the weekly chart above you'll notice in 2011 there was a divergence between price and the RSI right before a head and shoulders top occurred.  What followed was a 300 point S&P drop that occurred fairly quickly.  Right now a similar divergence between price and the RSI is occuring as well.  But the setup is not confirmed until price turns down and the RSI starts heading lower.  So I'm not jumping in with more short poisitions just because of this setup here....no way, it's not even complete yet.  What it means is that it's something to keep an eye on if stocks do head lower near current levels.  But to be honest, right now I see this as just a waiting game for the bears.  The uptrend, both short and long term, remains intact.

When an Over-Ripe Market is Ready to Spoil

I know many of you wavers out there are as frustrated as I am.  But it's important to keep our sanity and not let the markets dictate our moods in life. So for those of you bummed out like me, check out this puppy:


Cute little guy huh?  If you don't smile when you see this, check your pulse and make sure you're sill alive......bottom line: don't let these markets take control of you, keep your sense of humor and focus on the things that are really important in life.




In my last post I said the EUR/USD would try to rally back to the 1.2800 area before reversing.  This area is just above the prior 4th wave (not labeled) and is in between two common retracement levels (50%-61%).  It is trading in that zone now.  There are a lot of news events this week so be on the lookout for a reversal pattern in the euro.  I will be watching closely and looking for an opportunity to get short.  I may even start establishing very small short positions right now, and add on if continues rising.  But the bottom line is that the euro should be nearing an end to its rally and giving way to shooting towards new lows beneath 1.2000.

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PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Wednesday, August 29, 2012

Stocks Flat, but Staring Down a Cliff; Euro Might Push Higher Before Collapse


Stocks haven't done anything in several days.  Although this may seem like an overall neutral event, I see it as bearish.  The S&P made a new intraday high while most other major indices did not.  Instead of resolving this divergence with a surge higher to bring the other indices to new highs as well, the market has instead gone flat.  It's not good to reach a critical level, diverge, then go flat.  In addition, there is no volume at these levels.  I can't calculate government tinkering, but on the surface, the evidence I just listed combined with the daily MACD, and other momentum indicators, rolling over and a subtle reversal candle that has held for over a week tell me the next big move in stocks should be down.

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In my last post I projected that the EUR/USD would return to the apex of a triangle at 1.2469 in about 24 hours.  I was right that it did return to that level, but I was off on the timing by about 4 trading days.  So hate me or love me, or both :-)

U.S. Economy: The Financial Tectonic Plates Are Shifting Once Again
Financial changes can happen with lightning speed
-Elliott Wave International



After the EUR/USD completed what looks like a 5 wave drop to 1.2000, it has been correcting upward for several weeks.  It looks like a combination correction according to EWP, which means some short term pullback now and then another surge higher to complete wave ((y)).  There is a confluence of resistance at 1.2800 since it's a 50% fibo retracement and the area of the prior 4th wave.  That doesn't mean it will hit 1.2800 and reversal exactly on that point, it just means that if it surges higher it should reach the 1.2800 area before reversing.

With stocks staring down a big cliff, the EUR/USD may not make that final push higher.  Afterall, the EUR/USD is sitting on another fibo retracement of 38% which a good place to reverse as any.  I have no position in the EUR/USD at the moment since I'm not highly confident the euro has much left gas in the tank for another short term rally.  I want to wait to see what stocks will do, and the price action in the euro in relation to that, before I take a short position again.  But the bottom line is that the euro's rally is corrective, and so I'm looking for shorting opportunities.

Sentiment Measure Shows No Fear of Major U.S. Stock Decline

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Wednesday, August 22, 2012

Quick Euro Trade


The consolidation and thrust on a news event (the Fed), suggest the previous EUR/USD structure is a triangle with the current thrust as the result of that triangle.  EWP suggests that once the sharp thrust is over, it will return to near the apex of the preceding triangle.  That area is 1.2469.  So I'm shorting into this rally, adding more as it surges higher but keeping my overall position manageable since there's no clear risk level to put a stop.  I'm just watching it closely.  The reversal to 1.2469 should happen soon, within a day.

It will be very interesting to see how the euro and stocks close today.  A nice reversal on a Fed announcement is usually a good trading opportunity.

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PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.