Stocks Indecisive, but Price Action Looks Corrective; Euro Resumes Downtrend

Internals today were fairly bearish and volume hit the 1 billion share mark on the NYSE, no doubt options expiration played a big part in puffing that number up  The first and last 30 minutes of trading pushed the market down towards the triple digit level on the Dow, closing barely in double digits at -93.  The first and last 30 minutes are usually when options expiration factors are the strongest.  Outside of those two timeframes, the market was fairly flat.  Tough to get any solid conclusions from this action in my view.

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The S&P, and especially the Dow, sport structures that definitely look corrective right now from an EWP perspective.  Sure, a sharp decline can easily give us wavers some creativity in our pens to start an impulsive wave count to the downside.  But right now, as it sits at first glance and keeping it simple like I talked about the other day, this decline over the past few weeks looks corrective.  A break of 1351.05 in the S&P and 12,718 in the Dow will confirm that it is in fact a correction.  Until then, the possibility that we're in the early stages of a large impulsive decline after a major top on the year is still on the table.

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Wednesday I said, "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."  Well that's exactly what happened.  When the price action fits the forecast it usually means we're on the right track in wave labeling.  I'll stick with the count above so expect sharp selling in the near future for wave (iii), with today's high remaining intact.

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Also worth noting, the euro had a very choppy and sloppy slow grind higher, typical corrective behavior, which led to today's big and sharp impulsive looking decline.  Today's action formed a nice bearish engulfing formation where the high exceeded yesterday's high but then closed well below yesterday's intraday low.  This is bearish and a good signal that a top is in place.

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 Failing to Follow Through to the Upside; Euro Looking Vulnerable

Internals posted above.  You can see there is light volume today suggesting a lack of enthusiasm towards moving the market higher after yesterday's surge.  But closing higher on the day has kept me on the sidelines from getting short.  The short term has a slight bullish bias to it while the longer term indicators are slanted to the bearish side (especially momentum).  Below is what was posted mid-day today.

Stocks so far are failing to follow through with yesterday's rally.  A sharp reversal and new swing low would be a welcome sign for the bears, but right now we don't have it.  Still watching, waiting.

The euro on the other hand is looking very weak and vulnerable to a selloff as you can see from the above chart.  The price action is choppy and starting to struggle significantly.  The RSI reflects that struggle as it is now diverging from price on the hourly chart.  I like shorting this pair on a break below 1.4200 and then placing a stop just above 1.4300.  I think that breaking down below 1.4200 would be a good enough sign that the pair is probably breaking down to where I can put some money on it and potentially get some huge gains real quick with minimal risk.

EUR/USD: Falling on "Risk Aversion"? Let's Look at the Timeline First


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 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.

Stocks Should Continue Lower; Euro Finding Support, but Should be Short Lived

Internals today don't tell me much.  Volume was farely quiet at under 1 billion NYSE shares, and the rest of the internals were slightly bearish just like the overall market was.  What is of note is the fact that the Dow took the biggest hit today and closed with the biggest losses of the major indices.  The S&P and Nasdaqs didn't do nearly as bad, so looking at the Dow alone for overall market performance today would not be wise.  It was basically a flat day with a slight bearish slant.  Whether the S&P and Nasdaq strength is a sign of a just a temporary relief rally, or the start of a more established floor and resultant rally is yet to be seen.  The evidence is still overwhelming that at least a decline of a few more weeks should be underway though.  I still favor the bearish side right now.

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The S&P is looking like a choppy mess.  Tough to label this impulsive at this point.  Right now it's looking more corrective in nature.  But a lot of big impulse waves often start out imperfectly, so I'm not going to hold this too much against the bearish scenario right now.  But it is on my radar.  As a waver, I'd like to see a sharp drop lower soon so I could label it a 3rd wave and see how the rest of the waves fit in from there.  But right now, I'm seeing only a choppy grind lower on the 30min chart.

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The S&P easily brokeout to the downside with its convincing move, and then close, below 1329.51.  Now I know that it basically closed right on that support level, but technically it did close just below it.  The S&P shot through the 1329.51 level sharply, and then did a slow choppy rally back near that level again where it closed today  That tells me the breakout to the downside has some conviction, and the move higher was just the typical retest of prior support before it turns lower.  So I expect more selling tomorrow to follow through with this downside breakout.  But if I'm wrong, and the market moves higher and closes well above 1329.51 then it was probably just a "false breakout", which would have bullish implications in the coming days.

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The euro is finding support around the 1.4200 level, but the bulls have so far been unable to sustain a rally or even make a new high.  Until that happens, the trend is still firmly down in my view.  Making new highs and rallying sharply here wouldn't necessarily remove the bearish bias I have, it would just lessen my conviction of it a little.

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.

S&P Gives us Clear Breakout Levels; Euro Topped

Internals posted after the US session ended.  The rest of this post below was posted around midday through the US trading session.

Hello all, it looks like the market listened to me for once and sold off the past week or so.  Now the big question is, "where to from here?"  Well we wavers have been faked out so many times the past year or so that we've learned to be more cautious in our calls for Primary wave ((3)).  I think even the professionals in EWP have done the same.  Today is no different.  I want to focus on the short term action and play everything as a short term trade while leaving the possibility open to let profits run indefinitely just in case Primary wave ((3)) down is underway.  What I mean by this is that I normally like to place stops at strategic EWP levels and trail them down with the market, being stopped out automatically by the market when it violates my aggressively bearish wave count.  By having the market take me out, instead of me doing it manually, helps eliminate the human emotion which might destroy some wavers if they use wishful thinking to keep themselves in the market on every downturn as they expect Primary wave 3 is underway.

With that said, I see some big picture signs here that may mean that this downturn is more than just a simple one or two week event.  For the short term I posted the breakout levels I see are important to watch.  A solid break above 1359.44 should signal a shot higher to new highs on the year soon after.  But a solid break below 1329.51 should signal an acceleration of the current downtrend for at least a few weeks.  And by "solid break" I mean a break that lasts more than a few hours and with strong internals.

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Earlier I mentioned bigger picture signs that something big might be unfolding to the downside.  One of the reasons I said this is because of the weekly momentum picture as seen here through the RSI and stochastics.  Both diverged from price at the latest high, the stochastics have now crossed and are trending down nicely, and the RSI has turned down as well.  The larger the time frame, the more reliable I see these indicators, and right now, both of these indicators have lots of room to run to the downside on their weekly charts before reaching oversold.  So the market is sure primed for a selloff to last at least a few more weeks.

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Also of note, the Nasdaq 100 and financials ETF (XLF) have dipped out of the stock market rally early. The NDX has already broken out to the downside, and normally the blue chip indices like the S&P 500, follow the higher risk Nasdaqs.  If so, the NDX's price action suggests that the breakout for the S&P will be to the downside.  So look for 1329.51 in the S&P to get taken out soon.  It's also worth noting that the financials dipped out of the stock market's rally months ago, perhaps an even more deadly sign for stocks.

So the market hasn't yet given us any conclusive signs of a major top that will last several months or even years, but the door is certainly open for that to occur in the coming weeks.  As a trader, until that happens I'll continue to the play the short term as I see it.  That means I'm watching the breakout levels I posted above and will play the market accordingly to what happens to those levels in the coming days.

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The euro top is looking good here.  We had several daily dojis occur that was followed by sharp selling in an impulsive manner that suggests a major top might be in.  I'm playing the short side every chance I get.  Today's rally allowed by to start getting my feet wet on the short side.


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.