Stocks and Euro Should Continue to Work Lower (Also, Prechter Talks About the Safest Banks)

The wave count and internal structure of the decline is not ideal for the above wave count to hold true.  But just because it's not ideal doesn't mean it's not accurate.  Markets do not like to unfold into perfectly well rounded packages that fit our anaysis methods 100%.  And there are several factors that can explain away the fact that wave (ii) is much bigger than its larger degree wave ((ii)), volume overall is still light, and the market is holding up quite well for what should be a wave 3 at various degrees.  And those factors are that there was a lot of European government interference in the markets the past month, and December tends to be a light volume month anyway.  Now I don't want to try and fit a square peg in a round hole here by imposing my own personal biases onto the market instead of just viewing the market objectively.  So  I'm still cautiously bearish here with stops firmly in place at comfortable levels should this wave count be wrong.

Despite volume being so light, you'll notice a slight advantage for the bears in volume action.  The S&P SPDR's (SPY) volume decreased in the early stages of the previous rally, and now volume is slightly increasing as the market moves lower, with volume exceeding the 20 day MA left by the rally.  Perhaps another sign that a sharp selloff is just around the corner.  So volume is light, but it's all relative.  Also note that the action in the euro is very bearish, and should be very telling of what stocks should do in the near future.

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Above is the daily EUR/USD chart.  I see nothing here that is bullish.  The structure and behavior of the euro is very bearish here, and I'll continue to be short this market until it proves to me a bottom might be in, i.e. a big reversal day, new daily swing high, etc.  You can see that a major support level in the euro has been broken, and closed beneath, with a daily bar yesterday.  It's possible we'll get a test of the underside of this support level, which is now resistance, around 1.3150 in the near future, but I'm not betting on it.  Only a strong close above 1.3150 would get me to cover some of my short positions and start looking to see if a bottom might be in.  But for now, this thing is pointed lower. 

One last note, I said weeks ago that I was bearish the euro and one of the reasons was that a gap up was made, and left wide open, on a Sunday.  Those gaps almost always get filled within a few weeks, if not a few hours.  The euro's gap was left open for several days, only strengthening the bearish view in my opinion.  Well it finally closed that gap Monday, just as expected.  Okay, here's my Hannibal from The A-Team line, "I love it when a plan comes together."

What Is Backing Your Deposits in the Bank?


December 9, 2011
By Elliott Wave International

Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe.

We invite you to watch the interview below. Then read Robert Prechter's free report, Discover the Top 100 Safest U.S. Banks.




 
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 and Euro Topped

I'm short on time today and can't do a full post, but I wanted to say that it looks like a top is in and a major selling phase is underway, i.e. wave (iii) down is just getting started.  To recap from last week, I was looking for a decline Friday and/or today which would be either corrective or a resumption of the larger downtrend, depending on its strength and structure.  I said I'd probably need to see Friday's and Monday's action to get a better idea of which of the two options it was.  Well today's action and internals suggest that the downtrend has resumed, putting my top count way up front, suggesting that wave (iii) down is now getting underway (see prior post below for chart and details).  Keep in mind that oftentimes when I make bold predictions like this the market likes to make a fool out of me and move in the opposite direction hundreds of points.  So as always, I'll be managing risk appropriately.

The euro is in the same boat as stocks and appears to have topped and is heading lower as well.  Last week I said the euro's bearish outlook was a big reason why I liked the bearish stock count since stocks often follow the euro, and today we can see why I put so much emphasis on the euro.  Look for the euro to continue lower, with bumps along the way.

Hopefully I can get a full post in tomorrow.

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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.