Stocks Close Back Above Support; Euro Finishing up Flat Correction

Internals were strong as far as advancers vs decliners although volume was light at 881 million NYSE shares, much less than yesterday.  Regardless of total volume, the strength seen internally today suggests further upside.  But we'll see.

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I like to keep things simple.  My philosophy is that when I start overcomplicating analysis it's usually because I'm trying to justify my current bias.  In other words, if I'm bearish and have a short position I will push aside bullish evidence and continue to grind down the charts and indicators until I get a bearish view, which often includes make things more and more complicated.  This is done to convince myself that I was originally right by going short.  So a long time ago I removed this basic human emotion of always wanting to be right by just using the simplist conclusion as top choice.

This thinking applies here.  EWP is centered on the fact that 3 waves are corrective (counter trend), and 5 waves are impulsive (with the trend).  Looking at the above chart it's quite clear that there are only 3 waves down from the high, and that it's a choppy mess to boot.  Looking at this chart alone, and keeping things simple, it tells us that most likely this decline is just a correction and may have completed.  There is a lot of bearish evidence out there right now on the larger timeframe charts, but because they're on such larger timeframes it is easier for those bearish indicators to remain in place for many days, or weeks, while the market moves higher.

If we're keeping things simple, then we should conclude that we're in a downward correction that probably has ended, and the market's uptrend is now back in force.  This goes strongly against what I thought earlier in the week.  But I have to call it as I see it.  I don't want to get too caught up here with a decisive bullish or bearish stance since the picture is a bit mixed here.  So I'll wait until tomorrow and see if today's rally has any follow through before I take a definitive stance.

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In addition to what I just mentioned, the S&P reclaimed the previous support level convincingly, confirming that it was just a false breakout before.

So the longer term evidence is bearish, the short term evidence suggests a bullish bias.  I'm not getting long here though, I want to see what happens tomorrow, and see if the rally has follow through first.

The euro appears to be in a flat correction.  Wave c should finish shortly after it exceeds the wave a high.  Once it does so it will be open for a sharp reversal to the downside.  Risk is wide here since wave (ii) can retrace up to 100% of the entire previous decline so proper money management should be followed here to make sure you don't get blown out in case this pair moves against you to the upside.

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.