The S&P broke down the levels I cited in my last post, making the bigger picture look bearish. We've had rallies that failed to make new highs on the daily chart, and now a new low today. This suggests that the trend is now down in the bigger picture. There's a possible major head and shoulders top in place now, suggesting much further downside in the weeks/months to come.
With that said, the market quickly recovered after breaking down to a new low this morning, typical behavior when establishing a new extreme. So as long as we don't make a new high on the daily chart (around 1350), I see the larger trend as down, which means I'm looking to short rallies.
Using Elliott Waves: As Simple As A-B-C
In today's national news, as seen by http://www.drudgereport.com/, there is massive pessimistic news out there right now. Not the type of mood I'd expect to see at the start of a major selling phase, but more like what I'd expect to see at a bottom. So I still want to stick to the basics here with a disciplined shorting strategy. As long as a new daily high isn't reached (around 1350), I want to short rallies as I get them. With the market is oversold intraday and the news headlines so negative right now, it seems a sizeable bounce is due soon that should give me a good opportunity to enter short. With the markets almost even right now, entering a small short position right now also seems wise.
A solid shelf has been established in the euro at the 1.4170 area. It has tried several times to sustain a break beneath this level but has failed to do so and is now rallying sharply. This level is obviously important so I'll keep watching it. The bears must see the euro trade below 1.4453 in order to keep the short bias intact, and a sustained break below 1.4170 should open the door to further heavy selling.
The Single Most Reliable IndicatorIn this video excerpt, Elliott Wave Financial Forecast Editor Steve Hochberg explains one of the most important things to keep in mind when assessing a market, "Extreme opinions, shared widely, constitute the single most reliable indicator of an impending change of direction for a market." Enjoy your video excerpt.
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