Minuette wave (c) Down to Start Soon; Euro Still Correcting in Minute Wave ((ii))

Internals today showed a very strong bullish bias but volume was a bit tame at just over 1 billion shares traded on the NYSE.  So the big volume numbers that came in on the last selloff have not been matched by the bulls.  But the bulls have still pushed the market significantly higher nonetheless.  Although the internals don’t suggest any bullish exhaustion, the wave count does suggest a reversal to the downside soon.

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Minuette wave (b) should be complete now, or very soon, as it’s at the tail end of my target range of 1210-1220 right now for the triangle scenario to remain valid.  I expect the market to fall immediately in Minuette wave (c) now.  As long as it falls short of breaking below the Minuette wave (a) low then the triangle count for Minute wave ((iv)) is still well intact.  But a break below the Minuette wave (a) low in the 1174 area would negate the triangle count and suggest that some type of zig-zag or combination correction is occurring.  A rally higher would suggest Minute wave ((iv)) is unfolding as a “flat correction” and that once Minuette wave (b) exceeds 1227 then it should reverse sharply in Minuette wave (c) down quite soon.

So unfortunately there are still a lot of options on the table.  The “flat correction” and triangle counts for Minute wave ((iv)) remain my top choice.  So for short term aggressive traders I see an opportunity coming soon on the short side.

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The XLF financials ETF has been on fire this week as you can see from the chart.  The ETF did not break below the extreme low of the previous triangle and has rallied hard once returning to the apex of the triangle earlier.  Also notice that the congestion area I labeled with the blue lines has been broken to the upside as well.  I’m not a buyer of this rally just yet, it’s just too much too fast, and probably based on just news headlines and/or Fed data that’s come out recently.  Neither event tends to start trends, they tend to preface the end of one.  And in this case I’m expecting a fakeout breakout to the upside that will soon be reversed with a shot lower to the downside.  I’m not trading this sector right now as I don’t see a clear entry and risk level that’s appealing, and a reliable wave count eludes me at the moment.  However I think the action and behavior in financials is extremely important to the overall stock market.  As long as the financials lag the overall market on a daily/weekly basis like they have been, I highly doubt a long term rally in stocks as a whole can be sustained.

 

As for the euro, I’m labeling Minute wave ((i)) complete at the 1.30 area and Minute wave ((ii)) underway right now.  The choppy overlapping nature of the rally so far supports the view that it is in fact just a correction.  It can certainly push higher since it does seem a bit small so far, but if it’s in a Minor wave 3 down right now, then rallies could easily be very shallow and weak.  I still feel the longer term trend is firmly down here and I would short rallies as long as it stays below the Minor wave 1 high.

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.