Wednesday, November 16, 2011

Thursday Should Eliminate One of the Two Top Counts; Euro Trend Remains Down

Internals flipped bearish with the declines today and volume increased as well.  915 million NYSE shares traded today which is a strong increase from when the market was pushing higher, however in the big picture this is still fairly weak.  It instills confidence in that in the longer term picture, the trend is still down, but for the short term I'm not sure this lends itself to the start of a wave 3 at various degrees.  But we'll see.

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Again, the top count above is very bearish.  It suggests wave iii of (iii) of 1 of (3) of ((3)) is underway.  Unfortunately, I wouldn't expect to see such deep and long lasting corrective rallies for this structure, and I'd also expect volume to be surging with the declines.  Perhaps the holiday season malaise is already kicking in, but who knows.  The alternate triangle count comes in a very close 2nd but could be eliminated early tomorrow on a break below 1225.  If the triangle is eliminated, then this count above holds strong footing and will be used as a basis for all my trades for the foreseeable future.

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The alternate triangle count is listed above.  You can see that it's fitting quite nicely into a good consolidative triangle pattern that should be finishing up right now.  The result of this triangle is of course a sharp surge higher to a new high which will then be quickly and completely reversed.  Another strong piece of evidence for this count is how prices reacted to the news that came out about US banks worried that European problems might affect them.  The market sold off sharply in conjunction with this news.  EWP states that E waves of triangles often are the result of some news event, but are the last move of the triangle and result in sharp reversal thrusts to new extremes.  Well the news event about European and US banks led to a decline that fits well for wave ((e))'s placement in the triangle count and it means that early tomorrow the market will undergo a large and sharp thrust higher to above 1300 at a minimum.

A sharp move higher on solid volume would put this count as top choice and give wavers a good opportunity to start establishing short positions above 1300 in my view since thrusts from tirangles are finishing moves are quickly and completely reversed.

A break below 1225 would pretty much erase this count from contention and put the first bearish count post at the top as the best viable count.  For those of you who subscribe to EWI's Short Term Update you saw what Steve Hochberg had to say about the triangle scenario and I feel it's very compelling myself.  It's also a big reason I have the two counts listed the way they are.

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After a nice clear ABC rally with a B wave triangle in the middle and a C wave that stopped around 78% fibonacci, the euro did what was expected, it fell to a new low.  The euro continues to decline impulsively and rally correctively (3 waves).  I see no reason to abandon the bearish stance here.  I remain short this pair.



mavrich said...

Did the EWI short term update prefer the alternate triangle?

Perthx said...

I am reading things slightly differently.
Take your primary count and instead of (2) being complete at 1292, perhaps that was only wave {A} and then we have a wave (a}1215 and {b} 1276of {B} and will now see a 5 wave {c} to complete {B} down 50% to around 1184....then  solid Christmas {C} wave rally up to 1320-1340 .What d'ya think?

PrincipleAnalysis_Blogspot_Com said...

Not necessarily, they mention it as a good possibility but offered a strong piece of evidence that the triangle outlook has become pretty mainstream to where a contrarian outlook might be warranted.  I can't get into any more details unfortunately because it's proprietary information given to their paid subscribers and I don't want to step on their toes in that respect.

PrincipleAnalysis_Blogspot_Com said...

I think it's certainly possible.  The correction as you describe it would end up becoming very elongated, but it won't violate any rules so it remains valid.  But I'd need to see a strong move, small impuslive moves up, with accompanying internal strength to give the count more preference.