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.
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.