Stocks Rally Strong Today, Still a Little Left Before a Top; Euro Correction May be Completing

Quite a nice surge for stocks today, and the internals suggest it was a solid move as the bulls had firm control today on the advance/decline ratio and volume ratio.  However total volume again remains light as today came in just under 1 billion shares.  So there are few folks jumping on the 2011 rally train at this point, despite the overwhelming optimism for a great year for stocks, yet those small amount of traders in the market seem to pretty much be mostly bulls right now.  So the market pushes higher.  Today's strong move suggests at least a little more upside before we can start looking for a possible top.  But those of you who have been around long enough know that when the market looks overextended to the upside, it can continue moving higher with that overextension for long periods of time.  So patience is key here.

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Today's push higher fits well as a 3rd wave of some small degree.  If correct, it means we still have a small 4th and 5th to complete before a top.  So tomorrow, and probably the rest of the week, may still be in the control of the bulls.  I think the 1300 level is going to act as a magnet for stocks as a psychological level to hit before giving way to sharp selling pressure.  So it wouldn't surprise me if we meander into, or around, that level the rest of the week or so.  But with the wave count this far developed, and the RSI diverging like it should in 5th waves, I would still not want to get caught long here.  Sure, the market can extend higher and higher, but trading isn't about being right 100% of the time, it's about managing risk and entering high probability trades when good opportunities arise.  And I don't see good opportunitites on the bullish side here.......too much risk right now and too late in the trade.  So I'm still waiting to get short.

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I'm unsure of the euro's larger wave count at this point so use my degrees of trend labels lightly.  I only placed the labels there to illustrate the impulsive decline we recently had that made a strong new low beneath the formidible 1.2970 area.  By breaking that strong support level, and doing so in an impulsive manner, it's not a surprise that we are getting a corrective rally here.  The slow, choppy, sideways start to this rally suggests it's correction, and the sharp move last night and today suggests it's probably a C wave within a larger correction.  Right now it's trading around the 50% fibonacci retracement level of the entire impulsive decline, so it should offer some resistance and even mark a possible turning point for the euro.  So bears should be ready to pounce if they haven't already nibbled on the short side already.

The bottom line is that with the impulsive decline to break through solid support levels it appears the euro's larger trend is firmly down.  I'd be shorting here and on further rallies and stop out some or all of my position on a break above 1.3433.

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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.