Thursday, March 18, 2010

Stock Market Picture Clearing Up; EUR/USD Looks Bearish

Bearish S&P Cash Count




The market flipped flopped around like a dead fish, AGAIN. But is looking very fractured and out of gas. I've know I've been saying that for several days now, but I have to call it as I see it still. The above count on the 5min chart shows a possible impulsive decline developing. I'm a bit hesitant in getting too excited about this count because the second set of 5 waves down in red look more like a 3 wave drop to me and I had to label wave v a truncation, and today's late day rally has come close to the "rubicon" for the bearish count at 1168. A break above that level will negate this count and put the bullish alternate count as my top count. So risk is clearly defined for the bears, and it's very tight at less than 3 points away.

Another thing to note is the Dow/NYSE indicator I've mentioned a few times many moons ago. In the last downtrend we had from 2007-2009 I noticed that when the Dow Industrials closed positive and the NYSE closed negative, the next day resulted in a big sell off. Well today we had a real divergence in prices between the two with the Dow closing up about 0.4% and the NYSE closing DOWN about 0.4%, and NYSE decliners outnumbered advancers, and down volume was quite a bit larger than up volume. So today was quite a negative day despite the Dow's strong showing. With my bearish count above still intact, we may have started another downtrend, and that means the Dow/NYSE indicator may be back on track for reliability again. We'll see if this divergence between the Dow and NYSE results in a sell off Friday.

With the EUR/USD appearing to have resumed its downtrend, options expiration tomorrow, and the Dow/NYSE divergence in place at the close today, we could be in for some real weakness tomorrow if 1168 can hold.


Bullish S&P Cash Count





On the flip side, there is a bullish alternate count that will become my primary count if 1168 is broken. By breaking above 1168 it will make the drop from 1170 a 3 wave affair and mean that new highs were on the way. I'm not sure I'd want to get long at this point, unless I was looking for a day trade or scalp, but it's a good level for the bears to watch. With 1168 less than 3 points away it brings about a great risk/reward for the bears to get short in hopes of a bigger decline developing. And even if the market surges higher, I'd still be on the lookout for a sharp reversal and opportunity to reshort on that weakness once it makes a new high on the year above 1170.


EUR/USD




As I mentioned earlier this morning, the EUR/USD really broke down today and made a nice 5 wave decline from the highs. The pair struggled to hold gains above 1.3800 twice recently and has now reversed sharply in 5 waves. This failure at 1.3800 has created a double top and the reversal being composed of 5 waves makes this pair highly desirable from the short side on any sizeable rally in my opinion.


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:

moola said...

Agree with your analysis that there is a good probability of market reversion at 1168-1170 level.

Todd said...

Well I hope we're both right then! :-)

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