Still Waiting for at Least one More Pop in Stocks; Euro Rally Impressive but Overdone

I'm not impressed with today's decline at all.  It was a choppy grind lower on very light volume.  Granted, there was no follow-through higher from yesterday's big rally which the bears might call a victory, but today's pullback just feels like a pause before that uptrend continues.  Internals and price action suggest another move higher tomorrow and/or Monday.

Nothing new to add to the wave count.  A series of 5th waves are playing out and once finished, we'll have another shot at a major top being established.  But patience is key here.  Extremely aggressive short term traders could continue to play the long side when opportunities arise.  But outside of that, the risk is to the downside for everyone else in my view.  Patience is the trade right now for the rest of us.

Learn Elliott Wave Principle

The euro rally today was very impressive, and unexpected.  It puts the current wave count I have here in jeopardy.  The lack of a clear wave count on the downside move the past few weeks is concerning.  Usually when that happens it's because I'm expecting it to be an impulsive move, but the lack of clarity means it's probably a correction.  I have that concern here, and today's continuation higher elevates that concern.  The euro has probably ran too far too fast and the RSI is overbought on almost every intraday chart, so a pullback might be in the cards soon.  The strength and structure of that pullback should tell us more about the euro's future prospects.  I'm not getting long here, I still would like to be short, but I'm extremely cautious and managing risk tight on this one right now.  1.3433 is key for the bears but it seems that it's going to be taken out soon.  Doing so won't eliminate the bearish potential, especially if it's reversed in quick order because it may mean it's a wave C of a flat correction.  If 1.3433 remains intact, and a sharp impulsive decline occurs, it will mean the bears are back in control and shorting should be favored.

Understanding the Federal Reserve Bank



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.

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.

Earnings Drive Stock Prices? See This Chart Before You Answer


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.

Learn Elliott Wave Principle

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.

Download a copy of the 33-page Market Myths Exposed eBook today


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.

Stocks Stay Afloat, but Volumes are Light; Euro Correcting

Market participants remain uninterested in stocks this year as volume on the NYSE again held under 1 billion shares today.  I'm one of those "uninterested" folks since the market is quite boring and uneventful lately.  Great for long term investors, but horrible for swing traders.

The S&P, and especially the Nasdaqs, keep pushing higher.  The S&P appears to have just traced out an overlapping wave structure to the downside earlier as part of a correction (maybe a 4th wave).  Now the market is moving higher for a third test of the highs.  As I've said many times before, triple tops are extremely rare, so don't plan on them.  This means higher levels in the near future.  But how long those highs remain in place is anybody's guess.  I'm a bear lying in wait for his chance to strike.

The Dow appears to be lagging the S&P and especially the Nasdaqs.  It MAY be part of a fracturing of various indices, or it could just mean that it's "risk on" right now and people are dumping boring blue chips and going with higher risk names.  The latter scenario is good for the bulls, the former scenario is good for the bears. 

The bottom line is that I think the market is overextended right now and there's too much risk to the downside to get long here.  But with no solid evidence of a top in place yet, I can't get short either.  So I wait.

Earnings Drive Stock Prices? See This Chart Before You Answer

On the other hand the XLF (financials ETF) sports a nice 5 wave decline and 3 wave rally topped off with a nice sharp reversal candle in wave ((C)).  If this count is correct, expect financials to fall hard real soon.  The overall stock market should soon follow.

Learn Elliott Wave Principle

The euro fell just shy of giving a perfect 5 wave decline, but the Australian dollar did give us that 5 wave decline against the USD.  This suggests that the larger trend is down, and although the euro decline is not a perfect 5 wave move, it still looks impulsive.  And with the current upward-to-sideways choppy action looking corrective, I'd be looking to short, or add to short positions, on rallies here.  The euro bears and US dollar bulls appear to be in firm control here.

Download a copy of the 33-page Market Myths Exposed eBook today.


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.

Market Whacky....but Might Just Be a Small 4th Wave; Euro Unchanged

I wish I had something interesting to write about today but I don't.  The market continues to wander around, giving no real definitive signs of reversal, or continuation for that matter.  Today's volume was light at just under 1 billion on the NYSE, and other internals were basically flat, along with market price.  So today tells us nothing really about the bigger picture.  A top MIGHT be in right now with a series of lower highs, but the internals don't suggest any capitulation or massive selling volume or pressure from the bears coming in to reverse the trend.  So let's look at the wave count.

I've mentioned a few times that we might just be in a small 4th wave and so today I labeled it Minuette wave (iv) above.  You can see that this would leave us with one more surge to a new high before forming a major top.  Now this is not required, and the series of lower highs on several indices and markets may be the first sign of a very quiet reversal.  But I would have a tight stop, preferably at the previous swing high, if I were to short here.  The light volume and meandering nature of this market fits more with a 4th wave, not a reversal in trend.  I would imagine a top at the degree wavers are projecting (Primary wave 2) would be a much more violent affair, and one accompanied by solid volume as well.  So we continue to wait.

As for the euro, it was practically unchanged.  It's possible a short term bounce capped well below 1.3400 will occur in the coming days which would align itself well with a stock market pop for Minuette wave (v) as well.  But neither bounces are required, and although it seems like the higher probability at this point, it wouldn't surprise me if at any time both the euro and stocks just fell off a cliff.  But until I get some kind of confirmation or certainty of a trend reversal, trading now would just be a guess.  And I don't trade on guesses.

Learn Elliott Wave Principle


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.

Stocks Weak, but Waiting for Confirmation of a Top

Stocks are finally showing signs of weakness this morning after being invincible the past few weeks.  Perhaps the New Year euphoria is slipping away a bit.  It's too early to tell if a top is in at the moment, but the series of lower highs on the 15min charts is the first step in confirming a top.  For aggressive traders I can see shorting now and placing a stop above the recent swing high and then trailing that stop down as new swing highs are established.  If a top is in, that short term aggressive trade may turn into a big longer term trade.  For less aggressive trading I'd sit and wait to see if this decline can develop into a 5 wave impulsive move down before getting short.  This may still just be part of a small 4th wave, so patience is important here.  Without a 5 wave decline, we still have to leave open the possibility that higher levels will be achieved soon.

Learn Elliott Wave Principle

As for the euro, it's not falling along with stocks and appears to be a bit exhausted to the downside; at least for the short term.  With an impulsive decline to a new low on the table right now, it would not be a surprise to see a recovery rally here.  I don't expect any rally to come even close to 1.3400, but if it does, it will open the door to much higher levels from there.

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.