Internals today supplement the price action well. Price was modestly higher throughout the day, but the S&P and Nasdaq lagged the Dow's gains the whole time. At the close, only the Dow was up. So far, the stock rally is not firing on all cylinders, nor does it seem like the start of a large new uptrend. It looks more like a rally to relieve a severely oversold condition. It seem like a correction. Volume was light today, showing a lack of enthusiam to buy stocks overall, and despite the Dow closing up, NYSE down volume exceeded up volume. So a bit of a fractured unenthusiastic market here.
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The above count shows a different way to look at the decline and current bounce than what I've showed previously. But like I said before, no matter what the count, they're mostly all bearish for the longer term. Here we have Minor wave 1 complete, suggesting a sharp and deep rally for Minor wave 2. The "sharp" and "deep" element is not required, although according to EWP it is likely. The current action in the market suggests a pullback is coming. Most likely it's a ((b)) wave. Once complete, a sharp ((c)) wave rally should unfold higher to the 1375-1400 area before topping.
This outlook is highly speculative. What's important right now is that a clear 5 wave decline has occurred from the high on the year. It can subdivide further like the counts in my prior post suggest. But the bottom line is that the larger trend is down. So without getting too caught up in the fine details of each and every move, I want to keep the core thesis in mind which is that the stock market's larger trend is down and I want to find opportunities to align myself with that trend.
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The EUR/USD did in fact bottom and reverse strongly last Friday like I suggested it would. But the intraday charts suggest the rally is in trouble. At the top, the 4 hour chart shows that price made a new high and reversed with the RSI confirming that new high. That's toppish and bearish. Also notice the 5 hour chart formation suggesting a top is forming if the pattern holds. You can see I circled a bullish candle, followed by a dragon fly candle (indecisive signal) followed by what might end up being a big bearish candle if it holds. This type of formation shows a lack of interest in buying the current rally and that the bulls see this and are starting to sell. This formation, along with the RSI divergence, are often seen at market tops. Whether this is a short term top or long term top is unknown right now. But either way, I established a small short position a couple hours ago with a stop just above 1.2625. With the potential for a major downtrend to be resuming here and a nice tight stop level in sight, I think it's well worth the risk to short here.
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.
