Wednesday, November 30, 2011
Fading the Rally - Stocks and Euro
I was hoping the market would move as planned so I could go another day without posting something, but the market likes slapping me in the face every chance it gets, so here I am. If today's rally were just out of the blue, or based on some change in overall sentiment, I'd be concerned about the wave count and longer term bearish outlook. But the fact that it's due to some government bankers coming up with some nonsense plan to save the world for the 1000th time, I'm not concerned about the longer term bearish outlook at all. This rally is temporary and I'm fading it (shorting it), but will probably wait until today's close, or sometime tomrorow.
The rally does create some problems for the short term wave count though. Breaking above 1225 eliminates the wave count the way I previously had it. And I feel the best way to count the decline now is how I have it above. The problem is that wave (ii) is larger than wave ((ii)), and since wave (ii) is of a smaller degree then it should also be smaller than larger degree waves. But it's not. This structure does not violate any EWP rules, but it is a guideline and one that has served me well in the past to follow. But the fact that the break of 1225 was due to human banker/government manipulation does make the above count more likely since we can't assume a nice fluid and natural EWP pattern is unfolding when unnatural influences and manipulation have now interfered. So the fact that the waves are not unfolding perfectly in the face of the intervention today does give me a little more confidence in the above count, despite the guideline being violated. 1277.55 is my stop. Breaking above that level won't turn me bullish, it just means I have to wait a little longer to short again.
Prechter: "The Trend Is Exhausted"
In the short term 1 hour chart the euro rally looks amazing and it looks as if we should try to get long any chance we get. But looking at the daily chart you'll see that it looks more like just another bump in the road on the way toward lower levels. The fact that this rally didn't occur right at a bottom, and that Sunday's gap is still left open, have me wanting to short this rally. It should be fully reversed soon.
Learn Elliott Wave Principle (EWP)
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.