Monday, January 10, 2011
Stocks Weak, but Waiting for Confirmation of a Top
Stocks are finally showing signs of weakness this morning after being invincible the past few weeks. Perhaps the New Year euphoria is slipping away a bit. It's too early to tell if a top is in at the moment, but the series of lower highs on the 15min charts is the first step in confirming a top. For aggressive traders I can see shorting now and placing a stop above the recent swing high and then trailing that stop down as new swing highs are established. If a top is in, that short term aggressive trade may turn into a big longer term trade. For less aggressive trading I'd sit and wait to see if this decline can develop into a 5 wave impulsive move down before getting short. This may still just be part of a small 4th wave, so patience is important here. Without a 5 wave decline, we still have to leave open the possibility that higher levels will be achieved soon.
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As for the euro, it's not falling along with stocks and appears to be a bit exhausted to the downside; at least for the short term. With an impulsive decline to a new low on the table right now, it would not be a surprise to see a recovery rally here. I don't expect any rally to come even close to 1.3400, but if it does, it will open the door to much higher levels from there.
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.