Friday's Decline May be Sign of Significant Reversal

Although it is a laid back summer Friday, today's decline may signal a significant reversal is at hand.  I thought the major indices would march to new highs before any significan reversal but today's action may mean things fall a bit short of that target.  The Nasdaq 100 is the only major index that made a new high.  The Composite, Dow and S&P did not.  That in itself is a warning sign for the market since only the higher risk speculative tech stocks were able to make new highs while the big blue chip solid names failed to do so and dipped out of the rally early perhaps.

It is a Friday so I don't want to get too excited about the action today.  As always, the way the market closes will be important.  Closing on the lows would be a good sign a significant reversal is in place and that the bearish side should be favored for short term players, while a sharp rally into the close getting the indices to even or in the positive would favor the bulls.

Learn Elliott Wave Principle

The euro's triangle count is still well on track.  EWP states that "e" waves in a triangle are usually the result of a reaction to a news event.  Well, we had a poor jobs report this morning and the euro declined a bit, fitting well with the wave ((e)) interpretation I have above.  If the above count is correct, Monday should bring a very sharp rally thrust from the triangle to a new high.  But a break below wave ((c)), and especially wave ((a)), would negate the triangle and lead to further heavy selling.


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.

Medium Term Outlook for Stocks, Euro, Clearer than Long Term

Internals were flat today and volume was extremely low at 819 million shares on the NYSE, so enthusiasm to buy the rally here has waned.  I think that a small decline or some sideways action the next few daysmight be in order.

The S&P is now bumping up against a resistance line that has been in place for a long time.  Momentum for the current rally appears to be softening, so it might be tough to get through this resistance on the first try.  I expect some consolidation or pullback here before the market charges back up to break above this resistance.

Learn Elliott Wave Principle

The Dow and S&P sport a lot of 3 wave moves, both up and down, over the past several weeks, making it difficult to get a good idea of a longer term wave count.  So I'm focusing on the short term, and keeping it basic.  The Nasdaq 100 is the only index that has a nice EWP pattern, which is a flat correction.  What the longer term count is, I'm not sure at this point.  But the series of 3 wave moves all over the place in the major indices are either flat corrections, or the making of triangles, or a combination of the two between the various indices.

Either way, I have no reason to abandon the bullish outlook for stocks in the medium term.  Aside from some sideways action or a small pullback at resistance here, I think the markets are in an uptrend and the bullish side should be played when opportunities arise.

How to Set Protective Stops Using the Wave Principle

I'm being very speculative here by labeling the euro a triangle above, but until a new swing high or low is established, the price action is telling us it's consolidating which is oftentimes a triangle in EWP terms.  So I'll take a chance and follow this count.  Now this is a bullish triangle so a sharp thrust higher should get underway in the next few days once wave ((e)) ends.  So be ready.  But a break below the wave ((c)), and especially wave ((a)), lows will negate this triangle and open the door to further selling in the euro.

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.