Bears Showing up for a Fight; Euro Shorting Opportunity for Aggressive Bears

I'm very short on time but am posting this since some significant developments occurred today. 

Internals were very bearish again today, and on a Monday no-less, which has traditionally been owned by the bulls.  The internals weakness along with some small 5 wave counts on the smaller timeframes and the breaking down of 1312 at today's close make it an interesting play for the bears here.

1312 was taken out today at the close, erasing that big bullish surge last week and triggering a short position on my part.  Under this count above, a series of 1s and 2s are unfolding and should soon give way to a wave 3 at several degrees which essentially means a sharp almost straight line down.  As long as 1327.68 remains intact, I feel comfortable being short here, a break below 1294.26 will make me extremely comfortable.

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The alternate wave count that I'd like to see eliminated very quickly is the bullish triangle scenario above.  Under this interpretation we'll see more up-down action for a net sideways move that will result in a sharp thrust higher to new highs on the year.  A break below 1294.26 will negate this triangle and get me even more short this market.

EURO

As for the euro, today's reversal looks nice but didnt' really break any key levels or support.  But the action in the AUD/USD and GBP/USD on the other hand, looks very bearish.  I took an aggressive stance and shorted the euro on today's weakness against the recent highs.  With stocks looking poised to possibly fall hard and the euro overbought, I thought I'd take a shot.  But right now this is more of a calculated gamble with a very small position rather than calling a solid top and putting in a big long term position.


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.

Waiting for the Breakout in Stocks; Euro Still in Bull Mode

Thursday I said that the bears needed to get to work Friday if they wanted any chance to take over this market in the short/medium term.  They did in fact make an attempt and pushed the market down hard but failed to match the internal intensity the bulls had the day before, and failed to convincingly erase the bulls' gains or take out a key level.  So although the bears made a valiant attempt to roar back, so far it has failed to result in anything to convince me that they've taken back control of this market.

I want to see the 1312 level taken out and closed beneath in order for me to get short again.  That's the breakout level from Thursday that started the surprise bullish run up to a new high.  If the bears can get a close beneath 1312 it will tell me that the run higher was just a correction and that all that bullish momentum behind it was erased and that it was a failed push higher.  That would indeed get me bearish and short again.

However, if the 1332.28 level is taken out to the upside then that might get me bullish and long this market for a very short term trade.  The bears have failed to convincingly reclaim this market, and the bulls have really taken the reins and pushed this market higher so a new high above 1332.28 will erase all doubt in the uptrend in my view and get me long for the short term.

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The euro keeps pushing higher and I see no evidence of a topping process occuring.  So the euro's uptrend remains well intact.  One thing to be aware of is that the 4hr RSI is at a level that has previously marked tops as you can see from my chart above.  This doesn't mean that the euro will top right now though.  All it means is that it's starting to get a little overbought, and longs should be cautious and alert here.  Since the larger trend is still down in my view, I'm simply waiting for signs of a top to get short.

Breaking News Bulletin: News Is NOT the Main Driver of Stock Market Trends



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.

Looking for a close below 1312 to get short again.

Bulls Gut Punch Bears, Obtain Full Control of Stocks; Euro Looks Higher

The market rallied today as expected. But it rallied much stronger and higher than I expected. Does this look and feel like a Primary wave ((3)) decline folks? Not to me. But let’s focus on the short term since that’s the best strategy in my view. Internals on this rally were extremely strong, the bulls had full control from the start of the trading day to the end. Advancers and up volume crushed the bears today and total volume was also solid. It’s days like today that often put a floor in the market for days/weeks. So be ready for more upside if the bears don’t show up Friday.

The major indices made new highs today so I’m on the sidelines again. Only a big time bearish reversal to the downside Friday that erases what the bulls did today would get my attention again on the short side. But right now, the bulls have control. Tomorrow will be an important day for the markets.

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Since the market did not break above February’s high, the bearish count technically remains intact. However my experience tells me it’s extremely unlikely this count will pan out, unless the market tanks hard tomorrow to erase today’s bullish move. The correction for Micro wave ((2)) is now too long and deep for my comfort, and the fact that the bears flexed their muscles last week and created all kinds of bearish evidence and yet still could not defend this week’s highs tells me the trend is still up.

So it’s quite possible the decline last week was a Micro ABC, and this week’s action is part of a 1-2 sequence (i and ii). We’ll know soon which count is correct. I’m on the sidelines for the moment, but follow through higher tomorrow would probably get me in on the long side.

Last week I showed this chart with the big daily bearish engulfing candle. Today you can see that this bearish formation has now been erased. It blows my mind how many times the bears get great setups in wave counts, optimism, momentum, and basic chart studies and yet the bulls come in and erase them all with ease in short order. But hey that’s the market, and that’s also a sign that the trend remains firmly up. I’m not getting in this market’s way on the short side unless the bears can step up Friday.

Breaking News Bulletin: News Is NOT the Main Driver of Stock Market Trends

The euro has been flip flopping all over the place with 3 wave rallies and declines for the past several months now. The big strong moves the past couple days and new high this week leave me thinking 1.4250 will be challenged and broken soon as well. The decline from that area a few months earlier looks more like a 3 wave move than a 5 wave move, so I think that area is vulnerable to be taken out at the moment. With the longer term trend still down I don’t like getting long here, but I’m certainly not getting short here while it’s in full bull mode. So much like stocks, I’m on the sidelines for now.


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.

Stocks Correcting; Euro to Fall any Time

The market had trouble finding its legs today, but with 5 waves down possibly complete right now, the floppy nature of the price action and internals closing quite favorable to the bulls on a flat day, I’d have to say that we’re probably in a bullish correction sequence here, possibly for the rest of the week. Volume was a bit light at 1.02 billion NYSE shares, but despite the bulls’ lack of momentum and the flat close on the day, there were a lot more advancers than decliners on both the NYSE and S&P. Plus, up volume well exceeded down volume on the NYSE. Not exactly a show of force and control by the bears if the short term downtrend is still intact. The internals’ data suggest we’re probably in an upward correction right now that may last a day or two.

The wave count supports what the internals are telling us. With 5 waves down counted complete, we should get a series of 3 wave moves to complete Submicro wave (2). Right now the 3 wave rally that just completed is too small in price and time to make it likely to have completed Submicro wave (2). Plus with the internals still strong, it suggests more subdivisions higher. I’m projecting a “combination correction” in the form of at least a WXY at the moment. This should take us to the end of the week and possibly early Monday. 1332.09 remains the key level for the short term bears in my view. That level must remain intact for us to have strong confidence that a longer term downtrend is underway.

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The euro finally made a new high. I want to stand aside and wait for signs of a top and reversal before I attempt another short position. The larger term trend is still firmly down, but the short term trend appears to be up for the moment. Waiting for the short term bulls to give way to the long term bears again seems like the best option at the moment.


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.

The Evidence is Strong that the Stock Downtrend has Resumed; Euro Looking Vulnerable

The market fell hard most of the day suggesting Micro wave ((3)) is now underway. Volume was solid at 1.2 billion shares on the NYSE, but not jaw-dropping. Nonetheless, down volume crushed up volume, there were 1,574 more decliners than advancers on the NYSE, and 427 more decliners on the S&P. So quite a bearish day internally, and after a trailing off bullish push the past couple days, it looks like today’s action was a sign of a trend change to the downside now.

The S&P stopped just shy of the 78.6% Fibonacci retracement level I mentioned yesterday. The target level I wanted to get short was between 1315-1320, and anything above. So far, that call is in the profit. I would like to have my stop just above today’s high. But more conservative traders might want to keep their stops just above 1344.07 until we get a new low beneath 1294.26.

In reference to last week’s lows in stocks, Monday I said, “The Nasdaq Composite did not confirm the last new low in the Dow and S&P and the market has been in rally-mode ever since. I'll be looking for another such divergence, only reversed, to mark a top.” Today we got that divergence I was looking for. You can see from the red lines on my S&P and Nasdaq charts (blue lines mark the divergence at the low). Divergences like these often accompany reversals in trend. So here’s another check market to put in the bearish column.

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As you can see above, the Dow, S&P and Nasdaq Composite all topped out between their 61% and 78% Fibonacci retracement levels. These two levels are textbook EWP typical stopping levels for second waves. So again, the evidence mounts on the bearish side.

Lastly, today’s daily candlestick in the S&P created a huge bearish engulfing pattern where today’s high was above the previous candle, and yet today’s close was below the previous candle’s intraday low. This pattern often occurs at reversal points as well.

So there you have it, on a silver platter….ready for the bears to gobble it up. Nothing is guaranteed in this business though, it’s all about probabilities. And right now the probabilities definitely favor the bearish side. So I would still trade cautiously and with a solid risk management plan. No matter how good the setup is, it can still be wrong…..plan accordingly.


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Still no new high for the euro, yet the US dollar has made a new low. Looking at how weak the euro’s price action has been this week, supplemented by the diverging RSI on the 4 hour chart, it looks like this pair might not make that new high. But I don’t want to jump the gun here since I don’t have any evidence of a top in the euro. So I’ll wait for a close below 1.3700 before I get short again. But looking at the price action here and the overstretched rallies in oil, gold and silver, I think a close below 1.3700 will happen sooner rather than later.


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.