Wednesday, February 24, 2010

S&P Signs Mixed; GBP/USD Short Position Established

S&P Cash Index




As I stated in last night's post, we needed one more drop to a new low to complete a nice 5 wave decline from the highs in order to suggest that the trend has turned down again. That didn't happen today. The market gained almost everything that it lost yesterday, creating what looks like a 3 wave drop from last week's highs now. Also, the rally today looks like a 5 wave affair unfolding and will be confirmed with more high above the one established today which would tell us the larger trend is up and the sky's the limit until signs of another top emerge. Looking at the MACD histogram you can see that the moving averages have now crossed up by the red bars shown, suggesting that momentum is the upside, although it's quite muted. I'll be watching this indicator on the hourly charts again for a cross down which will give us a blue bar that should signal the next selling phase has approached much like it did at the start of this week. But right now, the market is left short term bullish until the market proves to me it's not. Tomorrow may do that, but it needs to get going.

A break to a new high may not be significant if it's immediately reversed with a clear impulse pattern and weak internals. But a rally to new highs with follow through in the days after would probably mean this year's highs are in jeopardy of being broken as, in my opinion, the wave 2 rally will have gone on way too long and too high to consider it a high probability. So the action the rest of this week should prove to be quite important for the medium term picture.


GBP/USD




My sell stop order executed for the GBP/USD at 1.5390 so I have a protective buy stop at 1.5485. The break below 1.5394 confirms that the rise from the 1.5350 area was a 3 wave correction and that new lows will probably be acheived. It's possible that the current rally from the 1.5350 area is going to morph into a WXY correction which would have wave Y surging higher in the coming days. But I will make the market prove to me that's going to happen before I assume that it will. The correction upward can count nicely right now as complete so I want to be short. If the pair rallies to take out my stop I'll simply wait for signs of a top again to re-enter short. This pair is head lower in the short to medium term in my view and I want to be positioned to take advantage of that move.


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.

2 comments:

Eisa Sulaiman said...

I salute you for the trade setup of GBP/USD, more than 120 pipes till now
very good job.

Todd said...

Thanks for the kind words Eisa.

Todd

StatCounter