Sunday, September 26, 2010

Let's Look at the EURO

With Friday's big surge in stocks, their close on the highs, and strong uptick in volume breaking above 1 billion shares on the NYSE, it has me looking for higher levels Monday.  In addition we have end of quarter maneuvering that should occur this upcoming week that should also lift stocks at least early in the week.  The key for the bears is spotting a reversal that may signal a great opportunity to get aggressive and roar back.  But as of right now, I see no signs of a top or reversal at the moment, so I'm looking higher. 

Looking at the euro daily chart it sports a nice 5 wave decline from the November 2009 high, and so far has a 3 wave rally recently that's now bumping up against fibonacci resistance levels Elliott Wave Tutorial, 8.1 that are common reversal areas.  But according to Prechter and Frost's "Elliott Wave Principle: Key to Market Behavior", as a guideline, wave 2 usually retraces 66% to 81% of the preceding wave (p. 88).  So much like the stock market, it appears the euro might have more work to the upside to complete before taking on a reversal.

What's interesting here is the fact that the euro made a nice 5 wave decline from the November 2009 high which suggests the larger trend is still down.  That means new lows on the year will be achieved before November 2009's highs are exceeded.  This is basic EWP here, and this also my thesis for stocks in looking for a new S&P low beneath 666 whether it's a wave 3 or C.  With 5 waves down, new lows will be achieved.  So the setup for the euro is quite similar to what many of us wavers are looking for with a primary wave 3 down in stocks.  I think it's important we look at all markets at this juncture and have our "financial market superhero" senses set on hyper-sensitive since any signs of a top, no matter how small or short term we see them, might turn out to be a major primary wave 2 top and lead to an outstanding trading opportunity.

So the euro is definitely at minimum levels expected for a top.  The stochastics as shown above look overbought and ready to start a descent, and right when the currency pair is bumping up underneath a key fibonacci retracement level.  But the MACD on the other chart shows a strong uptrend and has no indications of reversing downward.  The key to the euro topping may be the key to when stocks and even commodities will top.  So we watch.......and we wait.

So what do you think about this post, the charts, or anything going on in the markets right now?  We'd like to know.  Please share you thoughts, questions, comments and analysis known in the ELLIOTT WAVE FORUM.

And for some of you who may be long term investors, I thought the Credit Crisis Survival Kit might be of some use as we are looking for a major top to form soon.  Just one of many of the free pieces of information I want to push on this site, and will continue to do so for the indefinite future.



A_tizzy2004 said...

MY fear is that the A wave is about 1500 pips, usually you expect equality or a 1.618 relationship for a C wave, meaning that we are looking at about 1.44 with a 61.8% Fibonacci retracement for a wave 2 which unfortunately, makes sense with wave A and C equality. That could mean a wait till late November before we resume the downtrend.

Besides I was concerned that the corrective wave took 9 months for a 6 months rally in 2009, how could it be just 2 months this time.


PrincipleAnalysis_Blogspot_Com said...

Yeah it does seem like it will go higher, especially well into the 1.40s but unless there's a significant pullback to releive the extreme bullish sentiment and momentum extremes, I think it will have a hard time getting that high. And I'm sure you know how currencies can really turn on a dime, unlike stocks. So I'm not fully short the euro yet, I'm about 40% short what I want to be, and will add as it gets into the range you cited.

agnes1938 said...

When? Well, If we don't collapse in coming weeks, I seriously will have doubts if this "charade" will ever collapse.

I just hope we don't collapse in one day....but over a couple of weeks.

A_tizzy2004 said...

On another note.......I think one of the best trades out there right now is the USDCHF. if you look at the chart going back to 2001/2 there is a five wave decline with a decending wedge. With wave 1 of 5 starting in 2006.

If 2006 Feb was the start of wave one of 5 (which looks likely partly because of the shallow retracement) We have just made a throwover on wave 5 of five going back to a decade.

At the very least, the thing is oversold having dropped relentlessly since June 2010.

I could be about to explode. However I have trouble seeing how it can do that with the EURUSD and the NZD and AUS still ooking like they might go higher. Also the AUS and NZD look like they could take our their 2007 highs.

Whatcha think?

A_tizzy2004 said...

BTW does anyone have sentiment polling figures for the CHF to see if it backs up the 5th wave theory?