Friday, November 27, 2009

Post Turkey Day Update





I hope everyone who celebrated Thanksgiving had a great holiday with family and friends and got as full as I did on great food and wine last night :)

Well I said I wouldn't post anything unless something significant happened and that's exactly what occurred. A state run firm in Dubai essentially is defaulting on a big debt. Just a small taste of what's to come as wave 3 or C takes effect and ravages these markets. However, despite Asia and Europe selling off over 3% in some indices, the US market has spent the entire morning rallying since the big down open. I'm not surprised. With the very light volume and the US taking the latter end of the week off, I don't want to read too much into the action because things tend to get wild when Wall Street is gone on holiday. However that doesn't mean we should sweep under the rug the action that's occuring.

First, the AUD/USD (Australian Dollar/US Dollar) declined in a nice 5 wave pattern which I showed in a previous post (see post here). Thanks to Elliott Wave International's Short Term Update and FXCM curreny analysts for bringing this count to light. The pair rallied to one more new high above where I previous projected and has since declined sharply in an impulsive manner to a new low. See attached AUD/USD chart illustrating this. It appears the pair is a large wave (3), which is bullish for the US dollar. The EUR/USD is also reversing Wednesday's big gains, but the AUD/USD count is much clearer so I'll be following that a little more closely. Again, a dollar bottom and rally will be extremely bearish for the stock market. (a bullish dollar move would equate to AUD/USD and EUR/USD declines).

Also notice on the attached S&P cash chart that earlier in the week the Dow eeked out a new daily high essentially all by itself, creating a bearish non-confirmation. The same type of non-confirmations occurred in several other indices on larger timeframes as well. Then the S&P declined beneath the previous swing low at 1086, solidifying the bearish non-confirmation with the Dow. This action is very bearish.

Monday's have been notoriously bullish the past several weeks and this is also when a lot of investors/traders will re-enter the market from the holiday to sort out the action from this week. So the beginning of next week will be more telling of the short term structure than this week. The action this week is overwhelmingly bearish if the 1114 level on the S&P continues to hold, and it keeps me short term bearish as well.

Also, we had some good comments to my last post by Rob and Gustavo, so feel free to check them out (click here) and offer comments, questions and insights if you'd like. Thanks as always guys for posting good insightful stuff to help us all get an edge on the markets!


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.

3 comments:

JD said...

Could we call the Monday-Wednesday action in the DJIA an island reversal?

DJIA gapped up Monday well above Fri Nov 20 close and gapped down Friday Nov 27 leaving an island of top ticks over 3 days. See a 5 day intraday chart and all that stranded DJIA movement. It's an island;(gaps on both sides)not connected to prior or later action

Todd said...

Thanks JD, I posted some charts in a recent post to illustrate what you were talking about.

Thank you for sharing this with us :)

Todd

bbbaaawww said...

Thanks for pointing out....you are the first one to do it as far as I know.
BB

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