Thursday, March 3, 2011

Bulls Gut Punch Bears, Obtain Full Control of Stocks; Euro Looks Higher

The market rallied today as expected. But it rallied much stronger and higher than I expected. Does this look and feel like a Primary wave ((3)) decline folks? Not to me. But let’s focus on the short term since that’s the best strategy in my view. Internals on this rally were extremely strong, the bulls had full control from the start of the trading day to the end. Advancers and up volume crushed the bears today and total volume was also solid. It’s days like today that often put a floor in the market for days/weeks. So be ready for more upside if the bears don’t show up Friday.

The major indices made new highs today so I’m on the sidelines again. Only a big time bearish reversal to the downside Friday that erases what the bulls did today would get my attention again on the short side. But right now, the bulls have control. Tomorrow will be an important day for the markets.

Learn Elliott Wave Principle

Since the market did not break above February’s high, the bearish count technically remains intact. However my experience tells me it’s extremely unlikely this count will pan out, unless the market tanks hard tomorrow to erase today’s bullish move. The correction for Micro wave ((2)) is now too long and deep for my comfort, and the fact that the bears flexed their muscles last week and created all kinds of bearish evidence and yet still could not defend this week’s highs tells me the trend is still up.

So it’s quite possible the decline last week was a Micro ABC, and this week’s action is part of a 1-2 sequence (i and ii). We’ll know soon which count is correct. I’m on the sidelines for the moment, but follow through higher tomorrow would probably get me in on the long side.

Last week I showed this chart with the big daily bearish engulfing candle. Today you can see that this bearish formation has now been erased. It blows my mind how many times the bears get great setups in wave counts, optimism, momentum, and basic chart studies and yet the bulls come in and erase them all with ease in short order. But hey that’s the market, and that’s also a sign that the trend remains firmly up. I’m not getting in this market’s way on the short side unless the bears can step up Friday.

Breaking News Bulletin: News Is NOT the Main Driver of Stock Market Trends

The euro has been flip flopping all over the place with 3 wave rallies and declines for the past several months now. The big strong moves the past couple days and new high this week leave me thinking 1.4250 will be challenged and broken soon as well. The decline from that area a few months earlier looks more like a 3 wave move than a 5 wave move, so I think that area is vulnerable to be taken out at the moment. With the longer term trend still down I don’t like getting long here, but I’m certainly not getting short here while it’s in full bull mode. So much like stocks, I’m on the sidelines for now.



jxxh said...

we have important resistance from 1333 (twice the low) but I have to agree with you the bears have once again failed to show up and need to do so tomorrow !

Perthx said...

nah, the way I see it, the oddds may be lower that this is the C wave up of a wave 2 ABC BUT it is possible....I espcially like that wave B was a nice fib 78% of wave A and that C=A at 1340.41 ...give it an extra couple pts run to fill that small gap and presto chango wave 2 retraces 98-99%.....still remains to be seen butstill possible.
And in wave C it looks like wave 1-4 may have completed to with a nice wave 4 sideways grind wave 5 ofC can equal 1.618 times wave 1 of C up and reach that same 1340-1343 area....

Ok call me a dreamer but I like the way these numbers work out. And besides, doesnt seem like we would have too long to wait to see if I am correct.

PrincipleAnalysis_Blogspot_Com said...

That's quite a deep correction but would be nice if there were some intermarket divergences right before the reversal.

PrincipleAnalysis_Blogspot_Com said...

The bears are trying this we'll see if they can follow through.