The Final Surge Higher? (Euro Update for Friday)

In looking for a top in equities I'm watching the euro closely.  The decline today can be counted as a 5 wave impulse move suggesting a top may be in.  Unfortunately it's not a very compelling structure since it can also be counted as an ABC as well due to the relative lengths of subwaves.  But it may clear up a bit as the session moves on.  But I just wanted to post the possibilities of a euro top here as I see it.

Today's move higher both in price and internally was impressive.  Total volume was high at 1.37 billion shares on the NYSE, up volume represented 90% of total volume, and advancers well exceeded decliners.  Moves like this often act as launching pads for sustained moves higher.  Only a close below today's low will negate the bullish outlook and suggest a top may be in.  Until then, expect higher levels.

My guess is that some folks shorted the market or stayed on the sidelines expecting a "sell the news" event after the Fed announcement yesterday.  When the market held stable after the announcement and into the global sessions overnight, the shorts covered and the sidelined folks jumped in with full force.  This is what I feel was behind the move higher today.  Is it just a capitulation move before a reversal?  Or the foundation of a sustained move higher in the coming months?  Hopefully next week we'll get our answer so we can trade accordingly.

The Next Major Disaster Developing for Bond Holders

Well the inevitable happened today as the blue chips followed the Nasdaqs to new highs on the year with today's surge.  The past week or so I've assumed this would occur since the uptrend remained well intact and the Nasdaqs had already made new highs on the year, and they tend to lead the overall market.

Today's rally to new highs was done on big volume with a move that closed on the highs.  Quite convincing indeed for a larger sustained bull run.  But we'll see.  The current rally that started in August has taken little breathers other than sideways chops, making it feel a lot like a 3rd wave.  But unfortunately for the bulls the rally certainly doesn't subdivide on the intraday charts well as a 3rd wave, nor do momentum indicators support this case well either.  So it could easily be a C, or a larger zig-zag forming in my view. 

The XLF (financials ETF) was on fire today, well exceeding the market's gains again.  It gapped higher and made a new high today as well.  If the XLF continues to outpace the S&P's gains higher for a long time it may catch up to it's rally the past few months, eliminated the divergence they've had, as well as some of the best evidence the bears have to a longer term bear picture.  So I'm watching the XLF closely.

With tomorrow being Friday, I doubt a heavy bear stampede will enter the market going into the weekend, but if early next week we can get a gap down reversal in the XLF creating an island pattern, and the major indices can close below today's intraday lows, then we'd have our first solid signs that Primary wave 2 has topped and that perhaps Primary wave 3 has started.  But until that happens, we must continue to understand that the market is showing no signs of stopping its push higher and that until the above action occurs, higher levels should be expected.

"Market Manipulation" Is Not Why Most Traders Lose

Of course the euro rallied, and the dollar sank, in conjunction with the stock market rally today.  I'm counting the euro as thrusting in a Minor wave 5 from a Minor wave 4 triangle right now.  Once its thrust tops and reverses, it should mark a major top and move down to parity with the US dollar eventually.  There are no signs of reversal yet htough, but when they arise I'll certainly mention them here.  A top in the euro and bottom in the US dollar should occur about the same time equities top and reverse.


DJIA Priced in Gold: What It Means for the Long-Term Trend

Of the many forward-looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold -- "the real money," as EWI's president Robert Prechter calls it. What implications might the present position of Dow/gold have for the long-term trend of the nominal Dow? In this video, Elliott Wave International's Steven Hochberg shows you several revealing charts that answer this question.
(Discover why deflation is the biggest threat to your money -- download your FREE 90-page eBook now.)

Download your FREE deflation eBook now. Newly updated for 2010, Prechter's 90-page eBook reveals why deflation is the biggest threat to your money right now. You will learn how to prepare for deflation, survive it, and maybe even prosper during it, so you'll be ready for the next buying opportunity of a lifetime when deflation is over. 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.

Fed and Elections Out of the Way; Back to the Basics Again

Well, the elections and the Fed QE2 nonsense are finally out of the way.  And the markets didn't really do much as a result, did they?  At least not yet.  The elections were a non-event.  I suspect this is because the outcome was what was expected, i.e. Republicans take back the House but not the Senate.  The result should be a gridlocked government attacking itself the next two years, leaving corporate America alone for a little bit.  I'm sure Wall Street likes that.  But it was already priced into the market.  So that's done.  Then the Fed's QE2 burning of $600 billion is now out of the way and also pretty much in line with what was expected, hence the virtually flat result at the end of the day in the markets.

Today's internals were modestly bullish, but nothing to do a cartwheel over.  The internals and price action the rest of the week, and probably into next week should be more telling about where we're at in the wave structure.  In looking for a top, I'd like to see a sharp rally, maybe a gap-up open, tomorrow morning and then a sharp reversal into negative territory closing on the lows.  That would be as good of time as any to get short and place stops above the high on the day.  If anything, the pure risk/reward of the trade is compelling enough to take the trade.

"Market Manipulation" Is Not Why Most Traders Lose

The uptrends remain intact and I see no reason to short this market, or to assume that a decline is coming anytime soon.  That of course can change in a blink of an eye with a break and close below these uptrend lines and lower lows.  But that hasn't happened yet.  What has happened is that the market has continued making higher highs and higher lows.  That's an uptrend.  Since at the moment, it appears the major indices are headed to new highs on the year, don't forget to check out my longer term bullish count I posted a couple weeks ago for my bigger picture perspective.  Until the evidence shifts away from the bullish view, this count remains valid, and my top choice. 

On another note, the XLF (financials sector ETF) has been consolidating in a triangle like pattern and today's candlestick looks bullish.  It exceeded the overall market's gains today by rallying 1%.  So we need to watch this sector carefully, and monitor its performance relative to the overall stock market.  If financials catch up to equities in their rally, then we'll know that it was the stock market leading financials.  But if the XLF continues to lag the rest of the market, then it still leaves a deadly bearish picture for stocks in the longer term.

I know the market is stretched and many folks are waiting for the top and big reversal.  And that certainly may happen now that the Fed and elections are out of the way.  But playing a top and bearish reversal at this point here is no more than a guess in my opinion.  And I rarely trade on "guesses".  The evidence currently suggests higher levels ahead.  Once that evidence changes to suggest the uptrend is broken, I'll analyze the downside potential from there.  One way we can determine the strength of the market and when a top in stocks may occur is in the action of the euro, or the US dollar.  The euro's count is clearer than stocks, and it appears to have finished up a triangle that led to a new high during its thrust.  That thrust should be quickly and completely reversed, marking a major top in the euro.  When the euro tops, so should stocks.

The Fed and "Plunge Protection Team": Are They Manipulating Stocks?

A triangle appears to have completed Minor wave 4, leaving Minor wave 5 underway at the moment in the form of a thrust.  Thrusts are finishing moves that are quickly completely retraced.  A euro break below 1.3733 would confirm a top and suggest it is moving aggressively lower towards parity in the coming months in my view.  It should also result in a top in stocks.


DJIA Priced in Gold: What It Means for the Long-Term Trend

Of the many forward-looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold -- "the real money," as EWI's president Robert Prechter calls it. What implications might the present position of Dow/gold have for the long-term trend of the nominal Dow? In this video, Elliott Wave International's Steven Hochberg shows you several revealing charts that answer this question.
(Discover why deflation is the biggest threat to your money -- download your FREE 90-page eBook now.)

Download your FREE deflation eBook now. Newly updated for 2010, Prechter's 90-page eBook reveals why deflation is the biggest threat to your money right now. You will learn how to prepare for deflation, survive it, and maybe even prosper during it, so you'll be ready for the next buying opportunity of a lifetime when deflation is over.


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.

Fed Manipulation? Buckle up, the Rest of the Week Should be Wild

Internals today were strong, matching price at the close.  I don't think much of the action one way or another the past week or so since it's all been leading up to expectations of the elections tonight, and more importantly QE2 tomorrow.  The market's uptrend remains intact, the Nasdaq Composite came within less than 1 point today of making a new high on the year to confirm the new high in the Nasdaq 100, and the rest of the market seems to want to go higher to probably make new highs on the year before topping as well. 

With the Nasdaq 100 making a new yearly high weeks ago, and the Composite poised to do the same very soon, it seems like the Nasdaq 100 was telling us something when it made that new high.  These Tech heavy indices tend to lead the market, but the new high to the bears was interpreted as a "non-confirmation" and therefore bearish for the overall market whereas I have mostly been cautious of the action.  I would have been much more bearish if it was the S&P or Dow that made new highs and the Nasdaqs lagged instead of the other way around. 

Anyway, the market is stretched to the upside and internally appears ready for a major decline.  But with the uptrends intact and new highs on the year in arms reach, we still have to leave room for the market to continue higher from here.  The volatility and action tomorrow afternoon should break this slow directionless action, and get us back on track to counting waves better on an intraday level.

"Market Manipulation" Is Not Why Most Traders Lose

Just because the Composite and the blue chips indices make new highs on the year doesn't mean all is lost for the EWP bears.  The daily chart above tells us a lot about the long term picture.  The financials continue to lag the overall market very badly.  The market cannot sustain a long bull market without the financials.  Our economy is not fueled by production or manufacturing, it's fueled by credit since all we really do is consume in the US.  So we're dependent on borrowing money from banks to live the American dream.  So what would fuel economic expansion when credit and bank balance sheets are contracting?  As long as financials lag the overall market, it paints a deadly picture for stocks over the longer term.

The Fed and "Plunge Protection Team": Are They Manipulating Stocks?

The latest down up move in the euro puts the bearish count as a much less likely possibility here.  The 4th wave triangle count is now top choice.  I'm looking for a thrust higher out of the triangle to make a new high which should be quickly and completely reversed.  That should be a good shorting opportunity with stops just above the thrust's high.  A top in the euro should translate to a top in stocks soon after.


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.

The Euro

The elliott wave count on the euro has two possibilities; one of which should be eliminated from contention by Wednesday at the latest. 

The above count is very bearish, suggest a Minute wave ((3)) is now underway.  If correct, the euro should be headed aggressively lower.  A break below the Minute wave ((1)) low at 1.3733 would put this count as top choice, and leave a great door open for monster gains for the bears in the months ahead.

The other count is just as likely in my view.  It has the euro in a triangle.  It's currently in Minute wave ((e)) of Minor 4th wave triangle which when complete, will lead to a sharp thrust to new highs before being quickly and completely reversed.  That new high the thrust makes should mark the end of the euro rally for a very long time.  Again, the bears should be in firm control from then on.  A break below 1.3733 would make a triangle count here very unlikely.

I'm not too concerned with stocks at the moment.  I want the elections and the Fed's QE2 announcement Tuesday and Wednesday out of the way before reading into anything to much.  The market surged higher this morning but has pulled back since.  It seems that the power players in the market don't want prices drifting too far away from current levels since selloffs and rallies keep getting reversed to a near flat market the past week.  So waiting for the news to pass seems wise.  But the uptrends in the major indices remain intact so I have to expect higher levels until those uptrends are broken.  An S&P close below 1172 would be a good start to breaking that uptrend, and a move below 1160 would  strongly suggest the trend has changed to down.  If anything of interest occurs in trading later today, I'll put up another post.  Otherwise, the information here remains unchanged.

DJIA Priced in Gold: What It Means for the Long-Term Trend

Of the many forward-looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold -- "the real money," as EWI's president Robert Prechter calls it. What implications might the present position of Dow/gold have for the long-term trend of the nominal Dow? In this video, Elliott Wave International's Steven Hochberg shows you several revealing charts that answer this question.
(Discover why deflation is the biggest threat to your money -- download your FREE 90-page eBook now.)

Download your FREE deflation eBook now.
Newly updated for 2010, Prechter's 90-page eBook reveals why deflation is the biggest threat to your money right now. You will learn how to prepare for deflation, survive it, and maybe even prosper during it, so you'll be ready for the next buying opportunity of a lifetime when deflation is over. Download your FREE deflation eBook now.

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.

The Week Ahead: Wild

There was no post on Friday since the markets didn't do anything that day.  As I said on Thursday, it was doubtful that anyone would take big bets going into the weekend prior to a big election and Fed meeting week.  That proved true.  Seeing the S&P futures up 10 points tonight and a gap higher in the euro that's been filled and is now pushing higher, I see a wild week ahead. 

Where the market's move Monday through Wednesday is anybody's guess.  But I think a well thought out strategy of entry and exit points employed with unflinching discipline, no matter whether you're bullish bearish, is a good idea here.  I think the market could get quite wild this week and those who try to play the market on short term moves might get quite burned versus those who think out the possiblities and calculate risk ahead of time. My opinion.

The uptrend the market has held for several weeks is still intact, yet has numerous signs of exhaustion.  Until the uptrend is broken, we should be looking for higher levels. We'll see if the elections and Fed announcement on QE2 leads to a reaction that breaks the bulls' back, and the uptrend in the process.

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.