The market traded very sideways all day making it look and feel like a 4th wave which fits perfectly into the wave count I have on the 15min S&P cash index chart above. If this count is correct, wave C has a few more up-down sequences to be complete. A poke above 1105, the prior 4th wave, is a likely target at this point. Today, and yesterday, had very light volume, just as most of the rally that started over a week ago has had. Again, the conviction of the market is to sell as declines have been accompanied with stronger volume than rallies have. And the fact that after yesterday's big rally there was very light volume today with little upside is not encouraging for the bulls. Now this can easily change with a very strong rally on big volume tomorrow, but as of right now the components of the market are telling us that this rally has little conviction from market participants.
I'm looking for possibly some further rallying to complete wave C, perhaps to around the 1105 area, before a top and reversal occurs. A rally above 1110 would make me consider adding to my short positions.
EUR/USD
The EUR/USD executed an interesting pattern the past couple days. As you can see from my 30min chart, the pair looks to have completed an ABC correction with wave B being a triangle. EWP states that after thrusts from triangles, which in this case was the wave C, the thrusts are immediately and completely retraced to at least the apex of the triangle. Well this is exactly what happened to this pair. The corrective nature of the EUR/USD makes me believe the pair MAY have resumed its downtrend. But only a break beneath 1.3533 would confirm that, which does us little good at this point. However, if the pair charges higher tonight or later this week toward the 1.3788 level, I would consider getting short with a stop at 1.3800.
EUR/USD Trade Setup
With the structure of the EUR/USD unfolding as it did, and the GBP/USD's rally extremely choppy, it's possible their downtrends have resumed and the US dollar is starting to rally again. I'm not totally convinced of this trade working as the stock market appears to have higher to go, so I'm playing these GBP/USD and EUR/USD trades a bit conservatively at the moment and am risking very little by entering with a small position size. As the EUR/USD chart above shows, I want to get short the pair at 1.3570 and will have a stop loss at 1.5800. This is a wide stop so my position size is very small and I plan to lower the stop loss as soon as possible. The logic behind this trade is that a drop to 1.3570 would confirm that the rally from 1.3531 was a 3 wave affair, which is a correction, and that the pair is probably chugging downward to new lows and perhaps much much further.
My GBP/USD sell stop is still in place at 1.5555.
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.
6 comments:
It feesl more probable as you describe it tonight whereas for the last week, stock market took every opportunity to not cooperate with any bearish interpretations
the dollar looks to be ahead of stock market and has as may or ore fundamental reasons for its move
You didn't mention but maybe implied that SPX has a B wave triangle that coud also be reversed quickly)potentially at end of C as in dollar today???
JD
Florida
Yeah over the years I've learned that the longer a market doesn't behave in accordance with my count, the more likely I'm wrong.
Thanks for posting,
Todd
JD, great point. I wasn't looking that far ahead. That really does look clearly like a triangle which means a reversal to AT LEAST the apex will occur once the thrust is complete. So short term traders can get short with a target at the apex of the wave B triangle once they see signs of a top. I still want to see a break below 1059 to confirm the downtrend has resumed though; because it's possible the next decline to the wave B apex will just be an "X" wave of a WXY combination, which means a new high for the month before a top.
But regardless, you're right, once this thrust upward is over we should see a quick reversal to at least the wave B apex. Then, a break below 1059 will confirm the larger downtrend has resumed.
Thanks for posting,
Todd
amazing similarity between this SPX chart and the EUR/USD chart below. A-B(triangle) thrust and C...and BIG down after the C for the pair...SPX is very close to slide down to the 1060 apex triangle level...
amazing...
Yeah it is amazing, and the EUR/USD is giving us an idea of what's in store for the stock market soon.
Todd
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