Thursday, April 28, 2011
Stock Uptrend Remains Solid; Dollar Decline Today Looks Suspicious
Internals were similar today as to what they were yesterday, i.e. strong bullish bias on volume just under 1 billion shares on the NYSE. The market's float higher continues with no end in sight here. The bears are simply non-existent and have no purpose or will right here.
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The S&P count I have for a WXY combination correction is getting quite elongated here. But so far it seems the most likely candidate in my view if we look at present data, or perhaps simply an ABC flat correction. At this point, it doesn't matter. You'll notice that so far we have two 3 wave moves on our hands with an abc decline and rally, so far. The reason I'm skeptical of this rally being an impulse wave where it's currently in a 3rd wave of that impulse is because volume and momentum indicators (RSI) are at overbought levels and showing a bearish divergence. This is definitely NOT the characteristics expected at the early stages of 3rd waves. There are certainly other potential wave counts, but with 3 waves down and then 3 waves up on weak volume and momentum, it suggests it's part of a correction.
The other possibility is that it's a very weak 5th wave that might end up truncated at some point, or perhaps it's an ending diagonal. If the market holds up a few more days then this current WXY count I'm tracking is going to get bumped by a count suggesting a truncated 5th wave, or ending diagonal pattern forming. But all-in-all, there are no signs of a top here. So I expect higher levels ahead.
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The US dollar is still dribbling lower into what will eventually be a substantial bottom and resultant monster rally. There's been a sharp increase in volume the past week or so, a big part has to do with the Fed meeting this week of course. But there was more volume on the dollar index today than there was on yesterday's "Fed day", and more than there's been in several months. There was also a modest reversal bar in place today. Nothing really convincing unfortunately, but still, something to be aware of. With sentiment towards the dollar so extremely bearish right now, today's strong uptick in volume that's the result of a seemingly endless slow choppy dribble lower, may be a sign of capitulation and that a bottom is at hand.
I'm waiting for confirmation. The evidence today is not nearly enough. I want to see a sharp 5 wave rally and some swing highs broken. Until then, I'm neutral.
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.