Thursday, October 28, 2010

Euro Correction May be Complete, Aggressive Selling Just Around the Corner

Market internals were quite flat, well in line with the finishing action in the markets.  Nothing stands out to me here.  Again the bears tried to push this market lower but by the end of the day the bulls rallied the market back.  It seems that those in control of the market right now want it at current levels going into the important week coming up with the elections and Fed announcement on QE2.  I'm not sure we'll get much movement until those events are out of the way, but the market loves to surprise us.  There's a fair amount of economic data coming out tomorrow, but seeing as that it's a Friday, and the week ahead could be very volatile, I'm not sure we'll get big volume wild moves going into the weekend the way the market has been trading. 

Bob Prechter's New Report: The Next Major Disaster Developing for Bond Holders

As far as the elliott wave structure goes, the S&P seems like it's in an ending diagonal or 4th wave correction since a series of 3 wave moves are ruling the market on an intraday basis.  I highlighted the 3 wave declines, but rallies have also been in 3 waves, or some combination of 3 waves, making it look like one big mess the past 10 days as the 15min chart shows.  To me, it looks and feels like the market is on pause, with neither the bears or bulls willing to let the market move too much in one direction until next week.

As a side note, financials continue to lag and are still moving sideways despite the major indices grinding higher the past couple weeks.  Also, the VIX is trying to shoot higher and is making higher highs and higher lows, suggesting it may have bottomed all the way back on October 13th.  This of course would be deadly for stocks.

The one thing that makes me hesitant in being so complacent about equities holding up until next Wednesday is the euro.  The euro traced out 5 wave decline recently, and has so far rallied in 3 waves to just above the prior 4th wave as you can see in the above chart.  There are bullish alternates, but I want to be mindful of the bearish ones here since the evidence suggests the next big move for the long term should be a decline to at least parity in the EUR/USD.  The above count suggests that a turn lower in the euro here would result in a very strong and aggressive move for Micro wave ((3)) coming soon.  With the stock market count unclear, I'm watching the euro for signs of a top in equities.  As long as 1.4079 holds in the EUR/USD, the bears have a great opportunity here to stick it to the euro, and as a result put a lot of pressure on equities.

DJIA Priced in Gold: What It Means for the Long-Term Trend

Of the many forward-looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold -- "the real money," as EWI's president Robert Prechter calls it. What implications might the present position of Dow/gold have for the long-term trend of the nominal Dow? In this video, Elliott Wave International's Steven Hochberg shows you several revealing charts that answer this question.
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1 comment:

Jem said...

Yeah I hear ya!
I am already short futures from the highs back on the 15th, so if we drop from here I'm certainly prepared :)

I know what you mean about everyone suddenly expecting more upside, but I find it so hard to gauge what that means anymore. These days every second blog post is like "well everyone's doing this so this will happen", "well 3 people said triangle so that must mean it's and ED" etc. Lol.
When everyone's a contrarian who is left to contradict?!

Jamie Saettele said in his video tonight that he's weighting his views on what he's sees as imminently bearish in gold and AUD. That's interesting because AUD and EUR look like perfect completed flats, but gold shouldn't have a lot more upside here - not more than about 1360...hmmm.
AUD is always a trickster. The patterns on that pair since April are a total mind-fuck so I consider that one the unicorn and don't base major decisions around it!
We shall see. It all gets interesting from here, but I do wish it would all hurry up. And it would be nice to get one more move up so the currency patterns look great and provide some nice short entries...we can dream eh?