Bear Momentum Very Weak, Bulls Should Make a Comeback Attempt; Euro Headed Above 1.3861

The internals today show the momentum waning for the bears inside this market.  The bearish intensity continues to decrease with every passing day.  For example, here are the amount of decliners exceeding advancers on the NYSE:

Tuesday = 2364 more decliners
Wednesday = 897 more decliners
Thursday = 204 more ADVANCERS

Here are the percentages of selling volume out of total volume:

Tuesday = 89.7%
Wednesday = 64.8%
Thursday = 57.1%

So you can see the declining bearish strength as the week moves on, and with the wave count mature at a Micro degree level, it suggest the bulls have a chance to strike here and shoot this market higher short term.  Now this is merely a momentum analysis, and the above data along with the RSI show that momentum is waning, but that doesn't mean the bears can't come in and smack this market down.  Momentum is a backward looking indicator.  But it does offer us a clue as to how strong the current trend is and whether we should lighten up on our positions or not until the bearish momentum can re-enter the market.  My money often goes with the largest herd, as that herd gets smaller and smaller, so does my position size.  Right now the bearish herd has become quite small, from a momentum perspective.

This is my preferred count, although my alternate which I posted yesterday and below here is a very close second place.  The decline to new lows today was a surprise, but it was extremely weak and I never thought it had any legs to sustain the decline.  The rally into the close should be the start of a Micro wave ((2)) that should take us to around the 1320 level tomorrow and maybe Monday before topping.  Like I've said before, the risk/reward favors the bears here in my view, and any gains from here I'd look at as a good opportunity to get short with a stop just above last week's high.

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This is my alternate count, although it's still in very high contention to be my preferred count.  It suggests that today's new low was a Submicro wave (B), and that Submicro wave (C) is now underway and near complete.  Most likely (C) will top out around 1315 tomorrow, and either late tomorrow or Monday should bring even heavier selling to this market.  So I'm a seller on a move above 1315, and especially above 1320.

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The euro's break above 1.3743 yesterday confirms that the decline from 1.3861 was a 3 wave move, which is a correction.  Because of that, the euro shoudl move above 1.3861 fairly soon.  From there I'll be looking to get bearish again since I still see the long term trend for the euro to be firmly down.




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 Continue Lower but Losing Momentum; Euro Should Go Higher

Internals today were fairly weak suggesting the bears still have good control of the market.  However, they are not nearly as intense as yesterday’s.  Yesterday had 2364 more decliners than advancers while today had only 897, and down volume yesterday was 1 billion shares (89.7% of total volume) while today had only 862 million shares (64.8% of total volume).  So the intensity of the decline sure waned from yesterday, suggesting today was a 5^th wave, and ending wave.  We may get a little follow through to the downside tomorrow, but I wouldn’t be surprised if we get a pop higher soon.  I definitely wouldn’t get long here, but a pop higher would be a good opportunity for the bears to get short at better levels with a stop just above last week’s high, in my opinion.

I am not in love with the wave count, believe me, but it’s the best shot at what I think is unfolding that makes sense with both the internals and momentum which has started diverging after my posted Submicro wave (3).  Looking for diverging momentum is a good clue of where to look for labeling the end of 3^rd waves.  As the above count shows, any rally from here would be a great shorting opportunity with a stop just above last week’s high.  The risk/reward is very desirable, especially considering the potential move lower that should get to at least 1275 short term, 1190 medium term, and possibly much much lower over the long term.

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I left you all a Valentine’s Day present on my February 14^th post in the form of a wedgie.  And I don’t mean for anyone to get any high school flashbacks here, I’m actually talking about the ending diagonal-like structure that comes in the form of a wedge.  It’s not textbook, but the slow choppy grind higher at the latter end of a long uptrend suggests a quick and sharp selloff to occur once the formation is complete.  Well, this wedge has appeared to have completed.  At the time I originally posted this last week I stated, “Once the uptrend breaks down, the move should be sharp and deep, at least initially.”  Well a 40 point S&P drop in two days classifies as “sharp” and “deep” I’d say.  Although not technically an ending diagonal structure according to EWP, if it’s to follow the basic tenants of the structure then we should see a quick move toward the 1275 level.

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Above is a chart documenting the trendline I’ve been following lately in order to get clues that a top may be in.  It connects Minor waves 2 and 4 (not labeled).  Today you can see that price respected the trendline as it hit it and then retreated higher.  With the evidence suggesting a move to 1275 soon, after this current little correction higher is over, I expect a strong close beneath the trendline once the bears can regain their strength, which shouldn’t take long at this point.  Doing so would put another checkmark on the board for the long term bearish count to play out, i.e. Primary wave ((3)).

Lastly, keep an eye on my longer term chart I posted last week (click here).  If last week’s highs are taken out then a push to the 78.6% Fibonacci level at 1377. 

The euro surged above 1.3743 without a problem.  Doing so has made the recent decline a clear 3 wave affair, and therefore a correction.  I now expect a move above 1.3860 soon.  After that we can then look again for a top and resumption of the downtrend. 

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 Collapse

Stocks tanked today and the internals suggest it was broad based and ugly.  The bears were in full control today and the bulls didn't even really attempt to enter this market after this morning's mild push higher failed miserably.  News headlines suggest Libya's unrest is the cause for stocks falling but as extreme and overbought this market has been the past few weeks, it could have been knocked over by Paris Hilton announcing a new BFF. 

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The count from the high is ugly if it's an impulsive decline, but imperfection this early in a trend change is not unusual.  I'm unsure where Submicro wave (5) should be placed, but at this point any meaningful rally would get me on the short side with a stop above last week's high.  Sure this could be another fakeout, we've seen plenty, but the risk/reward here is way too desirable.  Whether it's Primary wave ((3)), or just a correction in a bull market, an S&P move of 100-150 points lower is likely in my view once we can confirm a top is in fact in.  So whether it's Primary ((3)) or not, there's money to be made on the short side.  A close beneath 1275.10 would confirm that a top is in.

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My forex software is not cooperating with me today but nothing has really changed from yesterday's post.  Things looked good for the bears last night but this morning we saw most of those bearish gains taken back by the bulls.  The wave structure is unclear but with the long term trend still down, I favor the short side as long as it trades beneath 1.3743.



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 Extremely Stretched, Intently Watching for Opportunity to Strike

Only 1 billion NYSE shares were traded on Friday which is extremely light for an options expiration day.  But the market continued to float higher and there were no real signs of a top so there's nothing much to say or do for us wavers other than to wait on the sidelines for now.  Optimism as reported by EWI's services is at an extreme, momentum as shown by the RSI above is also at an extreme and diverging from price, and the wave count suggests the rally will end at any time.  But look back through the past few weeks of my posts and you'll see that these statements are nothing new.  The market has been extremely resilient and is probably trying to squeeze as many shorts out as possible (if there are any left) and suck in the last of the last of the sidelined folks to the bullish side before giving out.  This process, as usual, is taking quite long.  This is why I haven't recommended shorting into strength the past few weeks.  I feel that the downside will be great enough to where we can patiently wait for solid evidence of a top before we attempt to get short.  Anything other than that would just be "guessing".  And guessing will lose you money in the long term.

Above is a long term S&P count.  I wouldn't be surprised if this market pushed toward the 78.6% fibonacci level at 1377.55 before topping, although I wouldn't bet on the long side that it will happen.  The RSI tells us the whole picture, it shows an overbought and diverging market.  When stocks top, the reversal should be sharp, deep and fast.

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Drilling down to the 3min intraday charts you can see a nice 5 wave decline from the highs established Friday with a 3 wave corrective rally into the close.  EWP would have us conclude that the larger trend is now down and that hard selling to new lows will occur Tuesday and also maybe Wednesday at a small degree 3rd wave.  But these small timeframes are not reliable enough for me to get short right now.  If the trend in fact turned down on Friday, this decline will be part of a larger 5 wave move down to where I can get short later on with better evidence to suggest a top is in.  Without a sharp move down Tuesday, the count above would be extremely doubtful and we should look for higher levels.  But if the market does shoot lower on Tuesday, then needless to say it would certainly get my attention to track the count and structure closely.

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The euro is not looking good from neither the bullish or bearish side right now.  We have a bunch of 3 wave moves flip-flopping all over the place.  I still lean toward the bearish side because the long term trend is still down, but for the medium term 1.3743 needs to hold or it will confirm that the recent move lower was only a 3 wave drop and a new high above 1.3860 will be acheived.


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.