Monday, September 17, 2012

Stocks May Have Put in Quiet Reversal; Euro Kisses 78% Resistance

Right now, the evidence supports the bulls for higher levels, i.e. the series of higher highs and higher lows remains intact, rallies are sharp and declines are choppy and/or sideways, the Fed is bullish and assisting the market's ascent higher, and most of the major indices have confirmed the S&P's new high.

With that said, many wavers are perma-bears, like me, so we are always looking for pullbacks.  So that's where I sit today.  I'm simply looking for a top in this market so I can take another shot at getting short.  I don't really see an opportunity to get short here, but it's worth taking into account the apparent 5 wave rally into a subtle reversal formation in the major indices (see above chart).  Could this be a quiet top?  Possibly.  I'm definitely watching the market closely this week in case it is.  Consensus on financial media seems to be that you can't fight the Fed and that the obvious path of least resistance is up.  Well, that to me tells me I should be looking for a top soon.  Be on the lookout for a top, perhaps one was put in last Friday, but it's way too early to confirm, and the evidence to support the bulls is still far superior for right now.

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This analysis here on this chart is basically an assumption on my part since I can't link it directly to a specific wave count, nor do I wish to.  I have not had success accurately counting corrections beyond an ABC zig-zag.  So I simply don't get too caught up in counting corrections.  There are just too many variations and they tend to morph into one another where you can go broke counting them.  The key for me is to look for the directions of smaller degree 3 wave and 5 wave moves, a topping bar or candlestick pattern, and a break of the series of higher lows.  These things help me determine tops.

Anyway, the above chart is just something I noticed when glancing at the S&P 1hr chart.  It looks like a series of 4th and 5th waves are occurring.  Today's weakness wasn't too convincing on the hourly chart to call a top (although it looks toppish on the daily chart), but overall this type of behavior suggests this market is topping.  Once this series of 4th and 5th waves runs its course, it will top and reverse very sharply.  Like I said earlier, I don't see a shorting opportunity here yet because the bullish evidence is far superior to the bearish case at the moment.  But just a word to the bears.....be ready.

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The euro made minced meat out of my 50%-61% fibonacci reversal zone I posted last week by shooting right through 61% in just a couple days.  Although the euro has put in no signs of a top, it's interesting and worth noting that it's ferocious surge higher halted right at the 78.6% fibonacci retracement as you can see in the above chart.  This is the maximum comfortable level for a 5 wave retracement, so if the EUR/USD plans on topping soon, this would be a great spot for it to do so.  Again, bears be ready.


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.

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