Monday, March 21, 2011

What are Stocks Doing? Euro to Break 1.4281 Anytime Now

I just wanted to add the internal data to today's market.  You can see that the bulls had pretty good control of momentum, but far from stellar.  Volume was just shy of the 1 billion share market on the NYSE.  And if you remember, or look at my internals postings the past couple weeks, the bears got volume well above 1 billion shares during selloffs.  So volume lightens up on rallies and increases on declines, a bearish behavior.  Advancers vs decliners was strong today but up volume was only about 74% of total volume, so again not a stellar performance from the bulls on today's big surge. 

Although I'm not convinced yet this is an impulsive move lower, it's still quite possible that this is at least a WXY correction lower with wave X completing now, and wave Y down will be getting underway shortly to below 1200 on the S&P.

The S&P broke the proposed wave ((i)) at 1294.26 this morning, making it less likely that an impulsive wave down is forming.  It's possible a series of 1s and 2s are unfolding, but I usually don't put money on that since it's usually just an excuse wavers use to label a correction as an impulse.  But as long as 1332.28 stays intact, it remains possible it's just a series of 1 and 2 waves unfolding.  So I'll watch it, but won't trade on it quite yet.

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What do I mean by a series of 1 and 2 waves?  Glad you asked.  Above is a chart illustrating what I mean.  You'll see that there is a 1 and 2 wave at Minute degree labeled ((i)) and ((ii)), and another set of 1 and 2 waves at Minuette degree labeled (i) and (ii).  As long as 1332.28 remains intact then this count remains in play.

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With 1294.26 broken, and then taking the above chart at just face value it looks clearly like an ABC 3 wave correction.  I do think this is probably what's taking place now however I'm not convinced the correction is over.  If anything I think we're in an X wave rally and then another ABC decline will ensue taking the S&P below 1200.

To be honest, of both these counts, I'm really not sure which is correct.  So I'm neutral here, waiting for more evidence of the medium term trend.

The euro's decline from 1.4281 never looked impulsive to me so I didn't label it as such.  In the short term I saw some 5 wave moves so I focused on those only.  I know a lot of wavers were labeling this as a 5 wave decline somehow, and perhaps it was because some of the other majors had cleare structures, but to me that's like shoving a round peg in a square hole.  Sure you can cram it in there with enough force and cleverness, but it doesn't really belong there.  Looks like I was right in that respect, but I was wrong in trying to short based on short term moves.  At this point it's quite clear the euro is still correcting higher on the long term count, and a break above 1.4281 should be coming real soon.  From there, we can then look for another real top and reversal.



DennisP said...

An observation on the EURO, if you look at the weekly chart, you can draw a trend line from the highs in 2008/2009 and 2009 and see that the current price is just below that line. If that line is important, it should turn there. You can also draw a line from the low in the first of 2007, to the low in 2008 and 2010. If the top line means something, maybe the bottom line, projected into 2011/2012, might be the stopping point.

Ender2012 said...

I think the overlapping wave confusion is the result of the Fed's POMO activity. The PDs are likely pumping their daily Treasury sales money into equities driving up a false rally which throws off the wave counts. I expect to see unusual wave overlaps while they are pumping $100B per month into the market. The wave counts since August 2010 are all messed up.

Notice there are no wave overlaps from Feb 22nd when viewing the S&P in gold:

Then look at the S&P in $USD since Feb 22nd and see the waves overlap constantly:

I trust the gold count and not the dollar count.

However, the Fed has its POMO pedal to the metal with $35B in purchases from March 22nd to March 28th. This might trick the automated trading computers to go back into rally mode ending the current correction. The direction will be more evident in a few days.

PrincipleAnalysis_Blogspot_Com said...

Good job looking at the S&P valued in gold vs USD. I didn't even think of that as a way to help filter the Fed's POMO. Thanks for that.

PrincipleAnalysis_Blogspot_Com said...

EWI is reporting sentiment extremes right now in the euro and USD, so a turn here soon is probable.