Monday, December 13, 2010

Is Today's Late Day Reversal Meaningful? Euro Bears Beware


Just a note: with the holidays upon us, my posting schedule will be a bit light until after the New Year.  If something significant happens then I’ll make sure I post something.  But for the most part, posts should pretty much be from Monday –Thursday and a bit short until something big happens.
And on that note, we go into the analysis of another flat closing day.  Gee, what a surprise, a do-nothing day, at least as far as price goes.  Volume was light as it came in under 1 billion shares on the NYSE, yet despite a steady float higher all day in price by all the major indices, the NYSE decliners beat advancers at the close on the NYSE.  Up volume still exceeded down volume, but the fact that more stocks participated in the downside reversal this afternoon MAY be a very quiet sign that a top is occurring.





My patience is running out for the wave count I’ve been tracking to be held with a high degree of confidence.  The Minute wave ((iv)) is getting quite long compared to Minute wave ((ii)), especially since Minuette wave (c) hasn’t even started yet.  The other problem is that when I count it like I am above, then Minute wave ((iv)) is quite small compared to Minute wave ((ii)).  So, neither of these counts are very appealing here.  The market won’t unfold perfectly though, so I want to remain flexible.  At this point in the market’s rally I’d be very cautious if I were a short term bull though.  And short term bears should be gearing up for opportunities to get short this market.  Today’s sharp afternoon selloff MAY be a sign of further selling coming up this week, so be ready.  Depending on the speed and strength of the decline coming, I’ll be able to put one of these counts as top choice over the other.  But for the short term, no matter what the count is, the market looks very toppish at the moment.

Learn Elliott Wave Principle


Another thing to note is the action in the higher risk markets like the Nasdaqs, XLF and the Russell 2000.  These two have been shooting straight up lately, well exceeding the S&P and Dow’s rallies.  But today they showed weakness, and sharp reversals greater than that of the Dow and S&P.  Just look at the daily chart on the XLF how it shot higher to a new high during the day, but then closed lower than Friday’s close by the end of the day.  That mildly bearish indicator may be a whisper in our ears of a top in place.  It obviously can’t be confirmed yet, but it’s something to watch. 
I don’t like to short the S&P when I see high risk indices still in full bull mode, but I do like to at least think about getting short when I see high risk markets reverse and/or show weakness. 

 



As for the euro, it rallied sharply, in an almost straight line up, breaking the trend of lower highs and lower lows.  More importantly, it broke above my key level at 1.3430.  If the euro is in a Subminuette wave (ii) like I have it labeled, then it will be extremely large in comparison to Minor wave 2 which is two degrees larger.  So this is unlikely in my view and it makes the bearish stance on the euro much less desirable at this point.  The euro needs to embark on an extremely sharp decline real soon to get me short term bearish again.  But right now I’d like to be only half short for long term trading, or have no position at all.    


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.


No comments:

StatCounter