Medium Term Outlook for Stocks, Euro, Clearer than Long Term

Internals were flat today and volume was extremely low at 819 million shares on the NYSE, so enthusiasm to buy the rally here has waned.  I think that a small decline or some sideways action the next few daysmight be in order.

The S&P is now bumping up against a resistance line that has been in place for a long time.  Momentum for the current rally appears to be softening, so it might be tough to get through this resistance on the first try.  I expect some consolidation or pullback here before the market charges back up to break above this resistance.

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The Dow and S&P sport a lot of 3 wave moves, both up and down, over the past several weeks, making it difficult to get a good idea of a longer term wave count.  So I'm focusing on the short term, and keeping it basic.  The Nasdaq 100 is the only index that has a nice EWP pattern, which is a flat correction.  What the longer term count is, I'm not sure at this point.  But the series of 3 wave moves all over the place in the major indices are either flat corrections, or the making of triangles, or a combination of the two between the various indices.

Either way, I have no reason to abandon the bullish outlook for stocks in the medium term.  Aside from some sideways action or a small pullback at resistance here, I think the markets are in an uptrend and the bullish side should be played when opportunities arise.

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I'm being very speculative here by labeling the euro a triangle above, but until a new swing high or low is established, the price action is telling us it's consolidating which is oftentimes a triangle in EWP terms.  So I'll take a chance and follow this count.  Now this is a bullish triangle so a sharp thrust higher should get underway in the next few days once wave ((e)) ends.  So be ready.  But a break below the wave ((c)), and especially wave ((a)), lows will negate this triangle and open the door to further selling in the euro.

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 Should Get to New HIghs on the Year Soon; Euro Faltering

Keeping it simple and looking at the pattern of swing highs and lows earlier this week paid off.  Once the series of lower highs and lower lows was broken, the market has been surging higher and higher.  Those who followed that made a nice profit very fast.  So it looks like the recent decline was a 3 wave move, a correction which I labeled ((a))((b))((c)).  So stocks should be working their way to new highs on the year shortly.  It's possible we get another down leg to a new low if the correction decideds to turn into a double zig-zag, but it would still be a 3 wave move, giving us the clue we need to know the larger trend.  But seeing as this correction for a Minor wave 4 is already quite large compared to its brother Minor wave 2, I doubt wave 4 will materialize into anything larger. So look for the uptrend to remain intact in the coming days.

Although it it's a little late to get bullish here at these levels, it does seem the path of least resistance right now is up.  I'd be bullish, or on the sidelines.

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The euro might be running into trouble here.  It tends to follow stocks, more or less, and despite todays big rally in stocks, the euro is struggling.  In fact, it appears to be establishing a head and shoulders top with the right shoulder falling short of the the left shoulder's level, suggesting a lot of internal weakness.  When you combine that with the diverging RSI you have the potential for the euro to slide soon.  I'm bearish the euro here against this week's high.

How to Set Protective Stops Using the Wave Principle


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.