Wednesday, July 20, 2011

S&P Set to Drop; Euro to Follow at any Time Now




The S&P's big move yesterday had no follow through today, and volume was at a pathetic 794 million NYSE shares.  Not what I'd expect on a Wednesday after a big rally the day before.  But the bears have failed to come in and control this market as well.  At the moment, the bulls look tired and are having a tough time getting volume in on their side with a sustained rally.  This could spell trouble for the bulls the rest of the week, if not longer.


I was tracking a 5 wave rally count that had recent weakness as a wave ((iv)).  But Monday's decline overlapped wave ((i)), violating an EWP rule and therefore rendering this bullish count invalid.  So we have more overlapping waves on our hands, making me conclude we're probably in some type of flat or triangle correction.  The other conclusion is that a much larger top is forming, and all the diverging behavior between indices and sectors along with sloppy overlapping price action is all just part of a large topping process.  Too early to tell right now, but it's definitely on the radar.

Using Elliott Waves: As Simple As A-B-C



Weekly momentum is not showing a bullish picture.  Looking at the RSI compared to the S&P's head and shoulders pattern you can see that the new high (the head) was not confirmed by the RSI.  Then the right shoulder on the S&P exceeded the left shoulder while that move in the RSI left a peak well under that of the left shoulder.  This, along with the bearish stochastics on the weekly chart as well, gives us more evidence to support that a head and shoulders top may completing, and the next big move will be to the downside.

Also of note is that the Nasdaq was much weaker today that the Dow and S&P.  Intel (INTC) closed slightly down on the day but posted a solid earnings report after the closing bell, yet shares are down over 2% after hours at the time I'm writing this.  The mood seems a bit sour in the market right now.  Watch for a sharp decline soon in the overall stock market.  How far or long it will last I don't know, but the market appears grumpy right now.

Nothing has changed for the euro.  I'd still be cautiously short against 1.4577.


The Personality of Stock Market Waves

Elliott waves don't merely reflect prices plotted over time. Each wave has its own "personality." Listen to this video by EWI's Wayne Gorman to learn more about the psychology behind the waves and how it affects your investment decisions.



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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.

2 comments:

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Adam Evans said...

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