Thursday, September 8, 2011
Stocks Reverse, but on Light Volume; Euro Accelerates Towards 1.3800
Today's market reversal was nice, and also very predictable in real time. The market surged to get solidly positive after starting the morning sharply lower. So it seemed the bulls were back in control. However I looked at the euro and it was still trading heavy by blazing new lows still. And looking at the bank ETF (XLF), it was almost 0.5% negative while the major indices were surging well into the positive. That divergence was enough to get me to add to my small short S&P position. Immediately after that, the market tanked and didn't look back the rest of the day. Good news for a bear like me. But looking at the end of day data, I'm no longer impressed. Volume stood at only 945 million shares which tells me today's decline might just be some mild profit taking before Obama's speech, and I believe the Fed spoke today too. So I'm unsure if a top is in right now based on the volume I saw today, and the wave count isn't helping much either because it leaves the possibility for one more high before topping. So the door is still open for a short new high tomorrow or Monday.
Those Steely-Eyes of J.P. Morgan: Could They Help Us Today?
The rally from the Minuette wave (i) low looks impulsive. This means that it's probably just the first leg of a longer and larger correction. So today's decline is probably a "b" wave, and wave c will complete Minuette wave (ii). I'm not certian at all this will occur though since the correction is already quite deep. A top may already be in. Either way, the Minor wave 4 high should not be exceeded and the risk/reward favors the bears here shorting into rallies, in my opinion.
Learn Elliott Wave Principle
Ah, Mr. Euro finally does what he's told and falls hard from his consolidation earlier. The move to 1.3800 I've been calling for is near and should be accomplished quite shortly. Whether that level acts as a floor for the euro to bottom at, or just a speed bump it blasts through, I'm unsure of. But the path of least resistance now is still down in my view.
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.