Wednesday, April 27, 2011

Stocks Traded Well Today; Dollar Downtrend Remains Well Intact


Stocks traded very well today.  They started off floating higher and continued a slow methodical and healthy move higher without much volatility during and after the Fed action today.  This is either a great stepping stone for the bulls, or a big fakeout made to lull the unsophisticated bulls to sleep as the bears pull the rug out from under this market tomorrow.  I see no evidence of that happening though, so saying it will happen would simply be a guess.  Right now the evidence suggests the uptrend is still intact and higher levels will be achieved.

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With diverging momentum on the RSI, weak volume, and fairly optimistic sentiment, it's hard to think that the S&P is at the start of a 3rd wave higher which the bullish count might suggest.  Instead it still fits well with the combination WXY correction I've been tracking the past few weeks.  The X wave is a flat correction that will give way to a sharp 3 wave drop for wave Y.  But with the market looking strong at the moment, I'm not going to gamble on a short position here though.  I'd rather be long here with a VERY tight stop if I absolutely had to take a position.  But I don't, so I'm neutral at the moment. 

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The dollar's slow choppy grind to new lows the past several weeks has been quite tidious to watch since I'm waiting for a major dollar bottom and reversal.  But as you can see here, there are no signs of reversal at the moment.  Today's big volume was a result of the Fed action, and a nice sharp rally tomorrow might be a sign that today's decline was a capitulation move, meaning that a bottom is in place.  So a sharp rally in the dollar (sharp decline in the euro), would get me long the dollar and/or short the euro.  Until then, I'm neutral the buck.

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.

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