Stocks Pause at 61% Fibonacci, Euro at 38% Fibonacci....Are Tops In?

The market threw a head fake to the bears with the early morning decline then rally.  Not to mention the futures and euro were down big in overnight trading.  So it's been a wild 24 hours for the markets.  All eyes may be on Greece and every little move they do, but we wavers could care less since we know that for the longer term, Greece moves mean nothing.  We watch the wave count, and the wave count is very bearish.

Internals were mixed today as total volume kicked up to 1.05 billion NYSE shares, a slight uptick from yesterday's 955 million shares but still well short of the 1.3 billion shares traded on Tuesday's decline. S&P advancers stayed about the same at 455 from 448 yesterday, but only 85% of total volume was to the upside compared to 90% yesterday.  So the market had solid internal strength, but nothing jaw dropping to suggest any momentum is being picked up on the move the upside.  The rally still looks corrective.

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The S&P is primed for another decline as early as tomorrow (Friday).  The S&P filled its gap at 1253.16, and has paused so far at the 61% fibonacci retracement level of the previous decline.  Stocks can drop as early as first thing tomorrow morning.  If not, then they may want to push towards 1276.  Either way, the risk/reward here favors the bears right now.  Again, as long as 1292.66 remains intact I remain firmly bearish and will continue to short rallies.

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The euro also did a head fake to the bears this morning but has not performed nearly as well as stocks have.  You can see this clearly with the comparable fibonacci retracements of the two.  Stock have so far retraced 61% of their previous decline while the euro has only retraced 38%.  The euro usually leads the stock market so this lagging behavior in the euro might be telling.  Here too the euro looks poised to fall hard again at any moment.  Since stocks and the euro should fall together, and stocks are already at the 61% retracement level, I doubt that the euro's correction will go much past the 50% retracement level at 1.3925 if it decides to continue higher in the short term.


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 Form Major Top, Destruction Just Beginning; Euro Topped, Headed Much Lower: plus Wednesday's Addendum

Wednesday's Addendum: I've posted my thoughts on where we're at in the market in yesterday's post below, but right now I just wanted to put up a quick update on today's action.  Although the rally was fairly strong as far as price is concerned, internally it did not exceed the intensity of yesterday's decline.  For example today's S&P advancers were 448 vs. yesterday's decliners at 479, today's up volume was 90% of total volume while yesterday's down volume was 93%, and most importantly in my view today's total volume was a weak 955 million NYSE shares vs. yesterday's 1.3 billion shares.  So this rally has the internal makeup of a correction, suggesting the larger trend remains down and this week's lows will be broken soon.  This corrective rally either finished at the high today, or might do so with one more leg up to a new a brief new high.  But either way, 1292.66 should remain intact, giving the bears a clear risk level.

Tuesday's Post:

Usually I refrain from making bold statements like that in today's title since usually when I do it the market does the opposite of what I say, stamping the word "fool" on my forhead.  But I want it to be crystal clear what my outlook is now for the market looking ahead.  I will try to analyze the short term movements of the market in the coming weeks/months, which means anticipating relief rallies, but I want to drive home the "bottom line", which is the big picture.  And the big picture tells me that as long as 1292.66 remains intact on the S&P cash index, stocks are extremely vulnerable to a major selling phase in the coming months which could result in over 50% of value lost.  And although the greedy little monster in my head will whisper in my ear constatnly to leverage every penny I have in derivative-type trade shorting stocks, I also need to always keep in mind that no matter how sure I am of the market's direction, I could be wrong, and I need to always protect myself.

Now to the markets.  So another failed attempt for a "man-made" stock market recovery from the government....this time in Europe.  Last week the Dow popped 400 points on government intervention.  Some common investors I know were giving me jazz because the day prior I suggested they protect their retirement accounts by putting them in all or mostly cash.  But with a rally based on government intervention it was nothing more than a sell signal for me, and I told them that.  This week now has me giving those same people jazz back, lol.  It's all in good fun.  Governments around the world will attempt to stop the implosion, and will cause short term pops only, and in the end they will all fail.  Primary wave ((3)) will do what it wants to do and only stop when it is done destroying almost everything in its path.  There's nothing any person or government can do to stop that.  The crowd is in control, and the crowd always overpowers governments and individuals, i.e. Warren Buffet, et al.

The internals today were very bearish in that 84% of NYSE stocks traded lower, 479 S&P stocks traded lower, and 93% of total NYSE volume traded to the downside.  Total volume was just under 1.3 billion NYSE shares, which is not jaw dropping, but volume should increase as Intermediate wave (3) progresses downward.  So overall, a very bearish day in price action and internals.  When combined with the wave count and other technical indicators, it looks like a major top is in.

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Updating the S&P chart I've been posting the past few weeks, we can see that this top is a major one as far as EWP is concerned.  This week's declines should be the start of Intermediate wave (3) within Primary wave ((3)).  So a 3rd wave within a 3rd wave is now underway.  This is a Waver's dream trade here.  And what it means is that this market should move lower in a hurry, destroying support like it's paper thin.  And since 3rd waves tend to do whatever they want to do and ignore most technical and fundamental indicators, it's wise to ensure I don't get in its way.

With that said, the hourly charts show that the S&P probably has to make one more new low to complete a nice 5 wave decline from 1292.  This will probably occur tomorrow morning.  It's possible a sharp recovery rally will then take place.  But as long as it stays below 1292, I will be aggressively shorting that rally, IF IT EVEN OCCURS.

Bottom line: if the above count is correct, it means that over 50% of the value in the stock market should get erased in a very short period of time.  Needless to say, I'm short.  My stop is just above last week's high at 1293.

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The euro is getting destroyed.  The European "save the day" news only lasted about a day.  And now, as usual, the markets realize the financial system as we know it is still doomed.  So the dollar is back on fire again, crushing the euro in a 5 wave move as you can see in the above chart.  Here too I will be aggressively shorting rallies as long as last week's high remains intact.

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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 Go Flat After Big Rally Last Week; Evidence of Euro Top Mounts

Nothing has really changed since my last post as you'll see the same daily chart above that I've been posting for quite a while now.  Stocks are in the targeted reversal zone between the 61% and 78% fibonacci retracement levels, a common place for second waves to top.  What's important, aside from stocks having trouble gaining ground inside my reversal zone, is that after Thursday's monster rally from europe "saving the financial world" is that Friday was flat, and today is so far negative........meaning there has been abosolutely no follow through to the great save the world news and big rally last week.  Now today's trading isn't over and we could sure see a monster rally into the close.  So I'm not getting too excited here, nor am I calling a top at this moment.  All I'm saying is that so far we've had no follow through to the big rally last Thursday, and stocks are stalling in the reversal zone I've cited, two bearish signs.

The action into the close will be telling.  And keep in mind, it's the last day of the month so end of month trading can make things a bit whacky.  I have a feeling this week could get pretty wild as November gets underway, and it's a month that has been particularly brutal to the euro in past years which could be reflective of what will happen to stocks.

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And speaking of the euro, here she is.  On the daily chart you can see the top from last week took place at a very convenient spot, the 78% fibonacci retracement level.  If the big bearish candlestick on the day holds into the close, I will definitely be taking another stab at the short side on this pair.

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In addition to the reversal right at 78%, the euro declined from the high in five waves.  This in-and-of-itself is enough to get EWP bears in on the short side in my opinion.  I'd like to get a nice bounce from here to give me better positioning on the short side though.  And when you combine this with the fact that November, and especially the Thanksgiving US holiday, tend to be very bearish for the euro, it definitely has me salivating to short this pair soon.

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.