Friday, September 2, 2011

Wave 5 Begins for Stocks; Euro Trying to Break Down

Minor wave 4 has gone on long enough to where this sharp decline from late yesterday and into today is enough for me to play a top being in.  Minor wave 4 is much much longer in time than Minor wave 2, making me a little uncomfortable with this count.  But it's the best count I have at this point, and we trade based on probabilities, not certainties.  Minor wave 5 should move rather quickly to break below 1100, and possible to around the 1050 area before a bottom should be considered.

Those Steely-Eyes of J.P. Morgan: Could They Help Us Today?
"The Panic of 1907" vs. the "Debt Crisis" of 2011
-Elliott Wave International

Above is my alternate count.  I know, you want to slap me and shake me violently to knock some sense into me.  But I'm not trading based on this count, I'm trading based on the more likely and more conservative count I mentioned all the way at the top of this post.  But this count here needs to be kept in mind as the market falls.  If the market falls very sharply with very bearish internals and high volume, then we need to give more respect to this count's possibility.  If this count is correct, then the market will be headed significantly lower in a hurry, and we don't want to miss that.  But we also don't want to blindly "hope" for this count to be correct and end up getting our faces ripped off on a monster rally if we're wrong.

This reason this count seems possible to me is because it would explain why the recent rally took so much longer than its corresponding rally I originally labeled Minor wave 2.  There isn't very good proportionality there.  And although it doesn't violate any EWP rules, it doesn't adhere to EWP's guidelines for a "right look".  But the big problem with this count is that Intermediate wave (1) looks much more like a 3 wave decline than a 5 wave impulsive decline.  So that's a big problem to overcome.  It's possible to get real creative and cram an impulsive wave count into Intermediate wave (1)'s subdivisions.  But I don't like to "cram" anything since doing so usually means the count is wrong and that I've fallen victim to my own biases causing me to force the count I want onto the market instead of letting the market tell me what the count is.

Anyway, I'm playing the market based on the count at the top of this post which means I'm expecting a move to at least the 1100 level.  I have a very small short position and will take profits on a break below 1100 unless volume and internals are so severely bearish that it warrants adhering to the other more aggressively bearish count.

Learn Elliott Wave Principle

The bearish side of the euro is looking good here.  After a tight consolidation pattern and false breakout to the upside, the euro is declining impulsively to the downside.  I favor the short side on this pair, which means I'm bullish the US dollar.



muyllea said...

I favor your alt count. If so then the next weeks will be a blood bath...

Aaa said...

why you cann't say that from may until mid jun is 1.
mid jun to mid jul 2
mid jul to start of aug 3
and to stat od sep is 4 ?

Jacob said...

I believe that the 4th correction has already occurred throughout August, around August 22 came the truncated fifth to end the A Wave of a zigzag. The obvious A-B-C from the end of the truncated fifth to the end of August, can be one of three things.
1: It could be the B wave of the larger zig-zag meaning the market is about to violently plummet again in the next weeks.
2: It could be the beginning of a larger flat correction, meaning the market will continue down to retrace at least 90% of the A-B-C at the end of August.
3: It could be the beginning of a triangle.

I personally believe it will be one of the first two. I also have this nagging feeling that for the next day or two the market will go into another A-B-C zigzag correction in the upward direction to partially correct the swift downward movement over the last few few days.

If you would like to discuss my opinions with me, leave a reply and perhaps we can get in touch.


PrincipleAnalysis_Blogspot_Com said...

Off to a good start :-)

PrincipleAnalysis_Blogspot_Com said...

Send me a chart if you can, so I can better visualize what you're saying?

PrincipleAnalysis_Blogspot_Com said...

You're actually right and I've been mislabeling my Primary wave (2).  Good catch