Thursday, March 10, 2011
1 Count Down, 2 Left; Euro is Bearish
The breakout I mentioned yesterday sure came true today as an across the board bloodbath took place right from the jump this morning. Headlines in some major financial media outlets said that poor US data was the reason for the slide, but I noticed the US futures were down big early last night, well before that data came out. Wavers didn’t need a crystal ball to predict this breakout, they just need to count the triangle and play the sharp move that was imminent. The breakout to the downside today broke through my key level of 1294.26 by just a hair which eliminates the bullish scenario calling the recent action a 4th wave triangle. Now there are only two scenarios left, both of them are listed below.
As for the internals, as one would think, they were very bearish today. There were 2,037 more decliners than advancers on the NYSE, and 447 more advancers on the S&P. 89.6% of total volume on the NYSE was to the downside, and total volume surged today compared to yesterday coming in at 1.15 billion shares compared to yesterday’s 870 million shares. So the market was solidly bearish and the momentum is in the bears’ corner right now. But the past several months this hasn’t led to much follow-through from the bears. The bears come in for a day or two and then the bulls easily takeover and push the market to new highs. So again we’re left with a test of the bears’ will. Knowing the preferred wave counts will help us determine what to look for to see if the bears have what it takes to control this market over indefinitely.
Above is the Minuette wave (b) triangle I listed yesterday. This is far from an ideal triangle so it makes this a big shaky as far as probability. The 5 wave decline we see is Minuette wave (c), and might have a little more downside movement tomorrow before it bottoms, most likely completing Minute wave ((iv)), then rallying to new highs to complete Minor wave 5 of Intermediate wave (C) of Primary wave ((2)).
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This next count is very aggressively bearish, but much like the triangle count listed above, this count here is not perfect either. Submicro wave (2) is shorter than Miniscule wave 2 which is one degree smaller. This is not typical for impulsive waves, so it makes this count a bit questionable. However the market doesn’t unfold perfectly, and this count does not violate any EWP rules so it still remains a possibility. Under this count, stocks are at the beginning of a major downtrend that will take the S&P down at least 50-100 points from current levels. If correct, there should be heavy selling in the next few days since this is a 3rd wave at 3 different degrees of trend.
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The euro’s upward correction last night was very weak, much weaker than expected, and it fell hard into today’s close making fresh new lows along the way. This could mean that the new downtrend starting is very strong where upward corrections will be short, and shots lower will be steep. I’m seeing a few 5 wave moves to the downside so that keeps me bearish.
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.