Monday, May 21, 2012
Stock and Euro Declines Take a Break
Stocks continued lower as expected, but have bounced a little lately in what is probably a small wave iv. Once complete, further selling to a new low will be achieved, probably toward the 1275 area at a minimum. The current rally seems to be just alleviating some of the severe oversold condition the market is in. I see nothing about this move that signals a significant bottom is in and that a new rally phase is underway.
Learn Elliott Wave Principle (EWP)
Looking at the 5 hour chart you can see two bullish candlestick formations suggesting the bears have run out of gas and that there is solid buying pressure keeping the euro afloat right now. Right now there are only 3 waves higher, which is a correction. This could mean that this rally will be short lived. But I doubt it. The euro has a bullish divergence with momentum indicators on the intraday charts, and overall was just deeply oversold. So I would expect the euro to subdivide higher in a 5 wave move, which means the rally will be much higher where we need to look toward previous open gaps for resistance levels. So euro bears beware here.
The Manic-Depressive Stock Market: What to Make of It
On the daily EUR/USD chart you can see the massive topping pattern around the 1.3300-1.3400 that has taken place over the past several months. This top and reversal doesn't look like a small hiccup, it looks the start of a major down-move well below 1.2600. So the short term may look bullish, but the long term looks bearish for the euro. There is a big open gap just below 1.3100, so if the current rally has some strength to it, we may see prices rise toward that level. There's no guarantee though, and I am not looking to get long. I merely lightened up my short position and will be looking for signs of weakness to put those short positions back on. The rally should be capped below 1.3284.
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.