The S&P did nothing today, perhaps it's exhausted as it should be if it's in a 5th wave at various degrees as projected above. Right now I'm counting the entire rally from 1044 as a 5 wave impulse rally. But my confidence in doing this is low since the initial move from 1044 to 1080 looks like a 3 wave affair. But the fact that the preceding decline barely looks like a 5 wave drop, but very easily looks like a 3 wave drop, makes me think it's possible that the current rally all the way from 1044is a 5 wave move. Plus a lot of the smaller indices have made new highs on the year, even though the S&P and Dow have not. So the bullish underpinnings are possibly there for the medium term, but in the very short term I think we're in for a pullback to 1120 at least.
If the structure of the upcoming decline looks like an impulsive 5 wave drop, and the internals and technicals supporting it, along with other various markets, look like they can support a big down move, then I'll consider changing my medium term stance to bearish again. But I'll wait for the market to prove to me it's bearish before I jump on board. Right now I only see a high probability for a short term decline that should take us to at least the 1120 level no matter what the larger wave count and trend are.
EUR/USD Bearish Setup
The bearish side of the EUR/USD is looking nice as it made a nice 5 wave decline and has rallied in 3 waves before finding resistance. This makes a nice setup to short this pair with a stop around 1.3710 or 1.3740 depending on risk tolerance. I just thought this was a nice setup and wanted to share it with you all. I don't plan on tracking this trade, but if anyone has any questions or comments on it please feel free to email me (toddsblog@comcast.net) or just post a comment. My main focus is on the AUD/JPY trade at the moment.
AUD/JPY
The AUD/JPY has hit resistance and is now showing signs of weakness. Oftentimes this pair mirrors the stock market and the fact that it couldn't stop out my current position to make a new high above the start of the preceding 5 wave drop, and that the S&P is setup to decline in the next day or so, makes this trade look a little better despite how deep the correction has gone. With that said, there's little wiggle room to allow much more upside on this pair. If the count is correct, it needs to get moving to the downside now. My stop remains at 82.90.
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.
8 comments:
I had the euro count like yours but after looking at the last decline from last night to mid day today, it looks like a 3-3-5 decline. In that case, we should move up. Please advise your thought.
Hi,
I agree that's what it looks like but oftentimes the starts of new trends do not unfold perfectly, especially when grinding down to the smaller timeframes, so i will not hold out for a perfect wave formation if the evidence strongly suggests the current count is correct. You can call that last failed EUR/USD attempt at a new low a "truncated" 5th wave. This is especially likely because the GBP/USD did in fact decline in 5 waves on the smaller timeframes, suggesting the dollar's push down on the majors has been re-ignited.
It just can't violate any EWP rules. Keep in mind that the preceding decline was a clear 5 waves down and the start of that decline has not been broken yet, so a bearish bias is still warranted in the bigger picture. If the current decline IS a 3-3-5 correction (which usually is a flat correction, and this definitely isn't), then we have to assume a new high above 1.3705 will occur. But there is very little room for this pair to make a new high and not exceed the start of the previous 5 wave drop around the 1.3740 level. So I'm not sold this will happen; and my ultimate stop would be just above the 1.3740 level anyway, which is only 35 pips away from the current high so I'm not going to leave a good opportunity on the table to try and get a few pip better entry (but that's just me).
These are just my personal thoughts and logic on how I approach currencies. I know some folks want to see almost perfect EWP patterns all the way down to the smallest time frame. And that's absolutely fine. But I take the approach of trying to find the highest probable outcome and count that violates no EWP rules, and I trade based on that.
What are your thoughts?
Todd
Thank you Todd. I love EW but can't call myself an expert. This is a wave 4 correction with various overlapping waves. With that said, I totally see your point. I guess I will have to see more price action to get comfortable with trading based on EW. Thank you very much for your explaination.
Your welcome, good luck!
Todd
Euro just had a ABC correction as a potential minor wave 2. It did not make new low, so wave 2 didn't exceed wave 1. If we keep bouncing and break the pivot of 1.3642 from wave b of minor wave 2, this up move most likely to be minor wave 3. Is my assessment correct? What's your thought, Todd? I am still learning. Any comment is very welcome.
Hi,
I believe you're saying that you think the rise from the 1.3530 area is a 5 wave advance making minor wave 1 and the current pullback is minor wave 2. And that a break above 1.3642 would signal that minor wave 3 was underway. If I understand this correctly then it's certainly valid and plausible and I would favor this count myself if not for the previous 5 wave drop earlier that I labeled. In my opinion, I want the market to prove to me what the trend is, I don't want to get caught up trying to geuss the trend. So with 5 waves down earlier not invalidated with a break above the 1.3740 area, I feel I should remain bearish. But a break above 1.3740 would certainly put the count you suggest up front on my radar.
There is no "right" or "wrong" count as long as both counts adhere to EWP rules and as many guidelines as possible. So I feel both our counts are certainly quite valid, but it's just a matter of trading style and approach as to which one someone should use.
Did I answer your question? I hope I interpreted your count right. If not, feel free to email me chart.
Todd
You were right Todd. Euro did sell off overnight. The 3 wave decline was wave 1 of some sort. How often do you find the imperfection in EW analysis?
Very often in smaller time frames in forex.
Post a Comment