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.

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.