Thursday, February 24, 2011

Bear Momentum Very Weak, Bulls Should Make a Comeback Attempt; Euro Headed Above 1.3861

The internals today show the momentum waning for the bears inside this market.  The bearish intensity continues to decrease with every passing day.  For example, here are the amount of decliners exceeding advancers on the NYSE:

Tuesday = 2364 more decliners
Wednesday = 897 more decliners
Thursday = 204 more ADVANCERS

Here are the percentages of selling volume out of total volume:

Tuesday = 89.7%
Wednesday = 64.8%
Thursday = 57.1%

So you can see the declining bearish strength as the week moves on, and with the wave count mature at a Micro degree level, it suggest the bulls have a chance to strike here and shoot this market higher short term.  Now this is merely a momentum analysis, and the above data along with the RSI show that momentum is waning, but that doesn't mean the bears can't come in and smack this market down.  Momentum is a backward looking indicator.  But it does offer us a clue as to how strong the current trend is and whether we should lighten up on our positions or not until the bearish momentum can re-enter the market.  My money often goes with the largest herd, as that herd gets smaller and smaller, so does my position size.  Right now the bearish herd has become quite small, from a momentum perspective.

This is my preferred count, although my alternate which I posted yesterday and below here is a very close second place.  The decline to new lows today was a surprise, but it was extremely weak and I never thought it had any legs to sustain the decline.  The rally into the close should be the start of a Micro wave ((2)) that should take us to around the 1320 level tomorrow and maybe Monday before topping.  Like I've said before, the risk/reward favors the bears here in my view, and any gains from here I'd look at as a good opportunity to get short with a stop just above last week's high.

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This is my alternate count, although it's still in very high contention to be my preferred count.  It suggests that today's new low was a Submicro wave (B), and that Submicro wave (C) is now underway and near complete.  Most likely (C) will top out around 1315 tomorrow, and either late tomorrow or Monday should bring even heavier selling to this market.  So I'm a seller on a move above 1315, and especially above 1320.

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The euro's break above 1.3743 yesterday confirms that the decline from 1.3861 was a 3 wave move, which is a correction.  Because of that, the euro shoudl move above 1.3861 fairly soon.  From there I'll be looking to get bearish again since I still see the long term trend for the euro to be firmly down.



Perthx said...

Sorry but your primary cont breaks all sorts of EW rules in the wave 1 as I see it. As for your secondary count, it is close to something i might agree with but allow me to bounce my count off you:
Same 1-2 of your second count but then the rest down to today's low was wave 3 for the following reasons:

within wave 3, 1342.91-1294.26

wave iii is just over 2x wave i,
and wave v is just about equal to wave i

wave ii was a 60% retrace{close enough to 61.8%}
and wave iv was 51% retrace (close enough to 50%)
this satisfies alteration between waves ii and iv

that would make the bounce off today's 1294.26 low a wave 4 with the following potential fib targets:

.382 1312.84, .500 1318.56, .618 1324.33, .786 1332.50
but since wave 2 corrected just over .786 (80% ish), I'd expect wave 4 to alternate and correct by one of the the smaller fibs values.

I am probably wrong but until I see more price action, this count makes the best sense to me.

PrincipleAnalysis_Blogspot_Com said...

Hey if you have your count already done up can you email it to me? It would help tryign to track your count:

PrincipleAnalysis_Blogspot_Com said...

I'm short! :-)