Thursday, November 3, 2011
Stocks Pause at 61% Fibonacci, Euro at 38% Fibonacci....Are Tops In?
The market threw a head fake to the bears with the early morning decline then rally. Not to mention the futures and euro were down big in overnight trading. So it's been a wild 24 hours for the markets. All eyes may be on Greece and every little move they do, but we wavers could care less since we know that for the longer term, Greece moves mean nothing. We watch the wave count, and the wave count is very bearish.
Internals were mixed today as total volume kicked up to 1.05 billion NYSE shares, a slight uptick from yesterday's 955 million shares but still well short of the 1.3 billion shares traded on Tuesday's decline. S&P advancers stayed about the same at 455 from 448 yesterday, but only 85% of total volume was to the upside compared to 90% yesterday. So the market had solid internal strength, but nothing jaw dropping to suggest any momentum is being picked up on the move the upside. The rally still looks corrective.
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The S&P is primed for another decline as early as tomorrow (Friday). The S&P filled its gap at 1253.16, and has paused so far at the 61% fibonacci retracement level of the previous decline. Stocks can drop as early as first thing tomorrow morning. If not, then they may want to push towards 1276. Either way, the risk/reward here favors the bears right now. Again, as long as 1292.66 remains intact I remain firmly bearish and will continue to short rallies.
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The euro also did a head fake to the bears this morning but has not performed nearly as well as stocks have. You can see this clearly with the comparable fibonacci retracements of the two. Stock have so far retraced 61% of their previous decline while the euro has only retraced 38%. The euro usually leads the stock market so this lagging behavior in the euro might be telling. Here too the euro looks poised to fall hard again at any moment. Since stocks and the euro should fall together, and stocks are already at the 61% retracement level, I doubt that the euro's correction will go much past the 50% retracement level at 1.3925 if it decides to continue higher in the short term.
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.