Thunderdome Back on Today

Shortly after my morning post the S&P accelerated lower to break beneath 1080 a couple times to which it rallied significantly later in the trading day. Again, Mr. Market is whispering in our ears that the 1080 level is very important. If you just look at the long term S&P daily chart you'll see the heavy support there the past few months. But more importantly you'll see that once that support gives out, there's nothing left to hold it up until the 1030 area. You can see in the above chart that the S&P rallied sharply after slightly breaking through 1080 a couple times, but the rally turned out to be a series of overlapping waves that were ferociously reversed late in the day. This suggests the rally was a correction. If so, the market should charge lower soon and break through 1080. A strong close beneath that level should confirm that wave [2] or B is complete, and that a large and power wave [3] or C is underway. The only thing that is not so encouraging for the bears is that today's internals were not as weak as I'd expect after seeing today's action, volatility (VIX) spiked only 2.6%, and volume was quite low; the characteristics of which are usually that of a B or 5th wave. Regardless of the short term ups and downs, I'm keeping my eye constantly on the bigger picture which I feel is firmly downward. I'm not playing every up and down move in the market, but I do plan to add to my short positions if a large rally ever occurs. We'll see. Watch 1080 in the S&P.



One other thing about the S&P I wanted to point out was that even though the index did not close beneath the all important 1080 level, it did make its lowest close during that consolidative period pack in late 2009. This action, combined with the actual slight break beneath 1080 intraday, creates a large wedge in the floor support at this level. This bullish support floor is wearing down, and it's just a matter of time before it caves in and the decline accelerates again.



The XLF financial sector ETF did what I thought it might do and bounce off the $14 level after closing almost right on it a couple days ago. Just as the 1080 level is important to the S&P, the $14 level is important for the XLF. I assume the outperformance to the upside in the XLF today was mainly because people know that bankers will benefit from having Bernanke continue to give them billions of our hard earned dollars at almost no interest. But that euphoria will fade soon as all signs point to this sector plummeting lower. Watch the $14 level; when that breaks down, so will the sector.

As for the GPB/USD, it did a huge reversal this morning but had little follow through, keeping it in a consolidative phase. I'm hesitant to move my stop down any lower because the pair may continue this up/down sideways action for a while, and I don't want to miss a break lower as it should be fast, fierce, and big. So my stop will remain 1.6295 for the foreseeable future.


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 Just Declined in 5 Waves on 5min Chart

Well yesterday I was wrong in stating we'd have a rally continuation in the coming days. That still may happen as this current sell off isn't that convincing internally as the VIX barely spiked 4% so far, volume isn't stellar, and the NYSE internals are bearish but not jaw-droppingly bearish. However, the decline this morning has traced out a clear 5 wave drop, so any crazy bold bulls in this market might want to observe the market here. Just above 1100 is key to the short term bearish case at this point. A strong close below the long held support of 1080 would be deadly to the S&P.

I was also wrong on the GBP/USD tracing out a triangle that was going to thrust lower. The pair actually thrusted higher, but did not hit my long held stop of 1.6295 and ended up reversing sharply this morning. This pair is still severely lagging the decline that the EUR/USD is undergoing so I would like to lower my stop in the near future.

I almost feel I shouldn't have posted anything yesterday, lol!

Stock Market is in a Wave 2 Rally; GBP/USD Points to a Sharp Thrust Lower

The market bounced all over the place today, and tanked hard in the morning but recovered into and after the Fed announcement to close positive. This can easily complete a 5 wave decline in many of the major indices to include the attached S&P count. The XLF financial sector ETF did in fact bounce hard off the $14 support I mentioned yesterday, again suggesting the downtrend needs to take a breather.




The above S&P hourly chart shows a potential stopping point for this wave 2 rally. The 1115 level has been significant in both resistance and support over the past few months. I suspect this will provide another barrier for this current rally, and perhaps may cap the rally altogether. What's also of interest is that the 1115 level is very close to the 50% fibo retracement of the entire decline from the high. So this level should act as a good barrier for the market's rally in the coming days. I highly doubt this year's highs will be broken, but this is a wave 2 rally so it should be strong and feel "euphoric" in that the worst is over and this recent decline was just a hiccup that is now over and the return to the bull run is on. I doubt this will be the case at all. The market should halt shy of this year's highs and reverse very sharply in a very strong and fast wave 3 down. I'll do the best I can to identify the turn when I see it.




As for the GBP/USD, it appears to be forming a triangle that is complete, or near complete. I have the entire decline from the recent highs as an A-B-C affair, with the B wave as the triangle. This isn't preferred in the bigger picture because I feel the GBP/USD has formed a major top and is in a downtrend, but the structure this pair is tracing out is quite clearly a triangle. Triangles can only occur in X, B and 4th waves according to EWP. So this is why I think it's a B wave at the moment. Regardless, this consoldition should eventually lead to a sharp continuation of the most recent trend, which is down. That means that at least a break of 1.6076 is on the horizon, but should carry much further. I'm saying this because once I see the thrust underway I will probably trail my stop until stopped out because thrusts are sharp affairs that are immediately reversed. So I have my finger on the trigger ready for thrust to close my short position. My stop is still currently at 1.6295. It's possible that instead of a triangle, it's a series of 1s and 2s, but I'll make the market prove that to me by not hitting my stop as I trail it down.


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.

VIX Buy Signal Executes; Stock Market Count Reworked

Another day in Financial Thunderdome with the markets raging to a Dow up over 80 points only to see it reverse sharply into a negative close. There's numerous ways to count this market as you may have already seen some of the options I've laid out here in the past few trading days. But I have to chose one and hold it as my primary count. I'm posting the above S&P cash index count as my top count, despite the fact that the 3rd wave is not perfect looking and appears to actually be a subdivision of smaller waves. This may turn out to be true, but for now I'm leaning toward this count I have above. One of the reasons is that the VIX buy signal executed today:



As you can see on the above chart, the VIX's daily close landed beneath the upper bollinger band after closing above it for a couple trading days. This issues a buy signal for the stock market. That doesn't mean it has to turn higher immediately Wednesday, but it probably means we'll be in for a meaningful rally in the very near future. So with that in the background, it has me looking at wave counts that might support a large rally for a few days. The S&P might fall to a new low tomorrow completing its 5 wave drop from its high this year, and then rallying in a wave 2 for a few days. Also, look at my Russell 2000 chart:



The Russell 2000's subdivision are unfolding a bit differently that the S&P. As you can see it appears to be completing a wave v of (iii), which is a little behind the S&P. So this index can rally for a while as well in the near future, as what's indicated by the VIX buy signal. Lastly, let's look at the XLF:



As you can see, the XLF has lagged the major indices for the past several months and failed to make a new one with them this year. It's now breaking down significantly, and today was no exception as it was down 1.75% with the S&P down only 0.43% and the Dow closing almost flat. The $14 level appears to be an important level for the bulls as it has acted as support for them since September of 2009. Today it closed right on that support at $14.01. A solid break and daily close beneath $14 should result in accelerated declines to at least the $12-$13 area in quick fashion. However, oftentimes such tough and long lasting support levels take a while to break down and result in a test and rally before falling again to break through it. So it's possible that today's close on that support will result in a big bounce tomorrow off this meaningful support line. This too would coincide with the S&P, Rusell 2000 and VIX data I mentioned earlier.

Tomorrow is the Fed announcement so the market may have a wild day tomorrow, especially after the announcement later in the day. Since financials are so tied into what the Fed does, it's possible that this may be a definitive moment for the XLF. So watch the $14 level in the coming days/weeks.

To sum up, the larger trend is clearly down as the major indices are having trouble mounting a sustained rally. Counting the very short term waves can be tricky, but I'll do the best I can. The evidence right now suggests that a short term bottom might be building but that is no certainty. If we are in fact in a wave 3 or C as I suspect we are, then the selling forces will be so strong that rallies can be very hard to come by, and when they do come they can be very short in both price and time.

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 Futures Completed 5 Waves Down; VIX About to Issue Buy Signal

Looking at the S&P futures it appears that 5 waves down may have been completed in last night's session. This has come to the forefront after today's market action failed to continue to the downside, the market is now accelerating higher, the AUD/USD structure looks poised for a big rally, and the daily VIX is about close beneath the upper bollinger band and issue a buy signal at today's close. This can all change in a heartbeat as the market is still trading, but I wanted everyone to know that this is what I'm watching today, and that the evidence for the short term is moving toward a bottom being in the stock market, and a corrective rally being underway. The highs of the year should not be broken, but it appears a multi-day/week rally phase could be underway 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.

I Closed my AUD/USD Short Now at 0.8945

Although I'll probably regret this as it seems like the dollar is about to soar and the stock market is about to tank, but I can't get the clear 5 wave structure out of my head that the AUD/USD has formed by making new lows last night, including the apparent 4th wave triangle which leads to the thrust we just had to new lows, but also leads to an immediate reversal. So to protect profits on my trades, I closed my AUD/USD position. I originally entered this short trade at 0.9060 and closed it at 0.8945 for a 115 pip profit. My GBP/USD remains open as it just completed a 5 wave decline from yesterday's highs and is about to make a new low which might be the start of a wave 3 so I'm hanging on.



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.

Stock Market Should Work Lower; AUD/USD Stop Lowered

The stock market attempted a rally today, as it has many times before on Mondays. And it succeeded most of the day. But the bears came out roaring into the close and pushed this market down by the time the bell rang at the end of the day. I count today's action a small wave iv. which in the S&P it's a bit wide compared to its wave ii. I show attached. However, the Dow did not make a new high late in the afternoon like the S&P did so it's sporting a much better proprotioned wave iv. to its wave ii. With that said, it's important for the market to surge lower in full force in the short term if my count is correct because we're now embarking on a wave iii. of iii of (iii). It should be virtually a straight line down affair. If the market doesn't plummet lower tomorrow or early Wednesday, then this count needs to be reworked.




The AUD/USD has worked to a new low, making it a possible 5 waves down completed soon as you can see from the attached 1hr chart. I'm lowering my stop to .9090 from .9285 at this point. A break of that level will mean the series of lower highs has been broken, and may mean that a larger rally is underway that I want to get out of the way of. I'd like to see the AUD/USD's decline accelerate in perhaps an extended 5th wave, or even a wave 3 if my count attached is incorrect. Normally I would exit this trade with the new low, but with the stock market possibly on the verge of sharp move lower tomorrow or Wednesday, I want to hand on to my long dollar positions as the dollar should benefit from a stock market sell off. My GBP/USD stop is still at 1.6295.

More tomorrow.


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.

Welcome Back to Financial Thunderdome.....Two Man Enter, One Man Leave, Two Man Enter, One Man Leave....

For those of you who don't know what I'm talking about when I mention "Thunderdome", check out this 8 minute clip of the classic movie "Mad Max Beyond Thunderdome". The financial markets appeared to have formed major tops and have now reversed in a huge and power wave [3] or C. If correct, it's about to get crazy ugly and nasty. Watch the clip and you'll see the parrallel between Thunderdome and what we're about to enter in the financial markets....




Okay, enough silliness, let's get down to business. The market is breaking down at numerous levels. So many that I'm not going to discuss them all here, but will illustrate the ones I feel most significant. First, let's take a look at the weekly S&P cash index wave count to get a clue as to the bigger picture, and where we're at right now as I see it:



As you can see, with last week's decline it has created the wave Z of [2] or B top. Meaning that a huge and monstrous wave [3] or C is at its very early stages right now. Both 3rd and C waves are very powerful and deliberate waves, so it's of little importance at the current time which one we've started. But the above chart should give you an idea of the magnitude of the decline we're about to embark on. So now let's look at an S&P daily chart that shows up close what happened this week:



This week's decline took us to about the same levels we were at on October 14, 2009. So in just 3 days, the S&P knocked out 3 months of progress! That's amazing, and is just another sign that the trend has changed from up to down. What's also signficant about this chart is that we easily broke right through 1115, which was the upper channel that held the market for several weeks, and even broke and closed beneath the important 1100 level as well. This is huge. It shows that a lot of folks are throwing in the towel who would have normally offered some kind of resistance at these levels. With that said, we still have the all important 1082 level that has really given the bears problems the past few months. Remember my chart from a few weeks ago citing key levels to be broken (click here for chart). So, will the S&P break and close beneath this level to basically put a nail in the coffin for the bullish case? To help us with this answer, let's look at how the short term wave count is unfolding right now with the 15min chart below:



As you can see I modified my 15min chart S&P count to the much more aggressively bearish counts I had on the Nasdaq and Russell. Friday's continuation and acceleration of the downtrend has forced me to alter my count this way. It appears that a series of 1s and 2s have unfolded which when complete, should lead us to some sideways down action as we get a series of 4s and 5s unfolding which should happen next week. With this count on track, it seems like it should be no problem at all for the S&P to break and close beneath 1082 some day next week. In my view, that will leave little doubt at all that a major top is in and the big daddy wave [3] or C decline is underway that should last many months. So, now let's look at the RSI momentum indicator on the weekly S&P chart:



Here you'll notice that the RSI momentum trendline that has held this market up the past 10 months has been significantly broken. Now this isn't an hourly or even daily chart, it's a weekly chart. So this is a very reliable indicator that the market's momentum has now turned south. The only thing I see as a potential warning sign to the bearish case is that we had a decline nearly identical to this one a few weeks ago as you can see in blue circles on the chart. Last time it led to the market reversing the downtrend and rallying to new highs. A red candlestick to new lows next week will negate this similarity. Now let's look at the RSI divergences on the weekly chart:



Take a look at what the RSI did leading into the March 2009 low. The S&P made a new low, but the RSI did not. This bullish divergence eventually led to the 10 month 72% rally we've just encountered. Now look at the recent behavior of the RSI and S&P. We now have the exact opposite occuring. The S&P grinded out a new high while the RSI did not. This bearish divergence was confirmed with a turn and close lower this week. This is signficant on a weekly chart, and combined with the other plethera of evidence suggesting a top is in, it adds even more importance to this indicator. The last divergence led a 72% move in the market, will this current divergence do the same to the downside? or more? Lastly, let's look at the VIX real quick:



The VIX did the 2nd option I mentioned in last week's post (click here for entire post) in that the market kept falling lower and the VIX kept surging higher, forbidding it to fall and close beneath the upper bollinger band (red circle) which would trigger a buy signal. This is due to the huge amount of fear and put buying sparked from enormous complacency in the market's rally up to this point. Once the VIX does close beneath that bollinger band, it will signal that the short term decline will likely end very soon and the market will rally. I expect this to happen when the first large wave 2 is ready to get underway. But that hasn't happened yet, and the wave structure suggests the market will subdivide lower next week to break new ground to the downside.

As for the AUD/USD and the GBP/USD, the pairs should work themselves lower to at least one more new low. The stops remain the same as recent updates with the GBP/USD stop at 1.6295 and the AUD/USD stop at 0.9285.


See you all next week!

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.

Secondary Indices/Sectors Showing Much More Bearish Potential

One reason I don't want to get too cute in trying to get long, or take a lot of profits off the table right now, is because other sectors and indices show alternate wave counts that are extremely bearish in the short term. These can also be translated well over to the Dow and S&P as well, especially because the slope of my proposed waves 2 and 4 are quite different. Notice in my S&P chart (click here for chart) that the wave 2 is long and wide while the wave 4 is short and narrow. This may mean that it's actually a series of 1s and 2s, like what I have labeled in the Russell 2000, Nasdaq Comp., and XLF (financial sector) in the attached charts.

I need the market to play out some more here to get a better idea of which counts are correct, but all the top counts I have right now point to lower levels overall, with this week's highs remaining intact for a while.


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.

I'm Lowering Stop on the GBP/USD; Stock Market Dropped in 5

I just wanted to make known that I lowered my stop on the GBP/USD short trade from 1.6470 to 1.6295, making me risk only 60 pips now. The wave count possibly has this pair in a wave 3 right now as you can see from the attached chart, so the 1.6295 level should not be exceeded any time soon. If this pair does not tank hard in the coming days, I will exit the position; hopefully at a profit.

On another note: the stock market shot to beneath yesterday's lows this morning, completing a nice 5 wave decline off the highs. This is just more evidence to support that a significant top is in, and perhapst THE top. However, with 5 waves down possibly completed right now, it's possible a sharp snap back rally can ensue any time. But this week's highs sould hold though. I do not want to get cute and try to play the long side here as the evidence strongly suggests there has been a major trend change at this point. The wave count can easily morph into a series of waves 1s and 2s leading us to a wave 3 of 3, or even that this 5th wave becomes extended. Both scenarios would have this market accelerate lower. The trend is down, so I'm aligning myself with that trend only.

More later...

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.

Stock Market on Track with Recent Projections; Look for 5th Wave to New Lows Soon

The stock market finally had some continuation and acceleration after an initial sell off. We haven't had that in a while. However this only leaves us with a 3 wave drop as you can see from the attached S&P chart. So we need to see at least a new low beneath today's in order to call the count complete for the short term, and to add further evidence that a major top is in. The VIX spiked big today creating a set up for a short term buy signal. Once the index closes beneath the upper bollinger band on a daily basis, the actual buy signal will be issued. So this sets up a couple scenarios for the bears:

1) the market will tank again tomorrow to new lows, completing the 5 wave drop from the highs earlier this week, and then reverse in a strong wave (ii) rally either late tomorrow or early next week causing the VIX to close beneath the bollinger band issuing a buy signal, and allowing for some more corrective rallying in the following days;

or

2) the market will just continue to fall off a cliff, causing the VIX to spike higher and higher to where it doesn't close back underneath the bollinger band for a long time.

The bad situation for the bears would be if the market does not make a new low and rallies enough to drop the VIX to close beneath the top bollinger band, leaving a 3 wave decline in the S&P and a short term buy signal issued. So tomorrow might prove to be quite important.

I see the S&P in a wave iv now, or just completed, and we're heading down in a wave v at the moment; or we'll have a pop rally early tomorrow morning to complete wave iv which will then quickly reverse to beneath today's lows. If the market pops in the morning, it can only be a wave iv by the count I have here if the market stays beneath the wave i low at 1129.25. So if the market does not break beneath today's lows and then rallies above 1129.25, then my count is wrong, and if the market rallies above 1141.58 then it will leave a 3 wave drop in the S&P and probably mean that new highs for the year are coming 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.

Market Continued, and Accelerated, this Week's Downtrend; The Bearish case is off to a Good Start

So today the stock market finally showed some continuation to the selling pressure from the day prior, and has accelerated that trend, unlike previous fakeout sell offs we've had in the past. It will be interesting to see the market action into the close though; about an hour from now. I'm looking for a strong close in the S&P cash index below the 1131.39 level I cited in a previous post (click here for chart). A strong close beneath that level today would strongly suggest that a significant top is in.

One thing I wanted to point out is that after Steve Hochberg with EWI pointed out the bullish island reversal in the VIX a few days ago, the "fear index" has been pushing higher and has really surged today; so much so that it's piercing through a 15 month descending trendline held since the October 2008 collapse. If the VIX closes above this trendline as shown on my attached chart, and holds it in the coming days, this indicator combined with the island reversal would suggest that the VIX is going to soar higher, and therefore stocks should tank lower.

My AUD/USD and GBP/USD sell stop orders executed so I'm now short both pairs with very wide stops. It's my goal to exit this trade if they don't act like I think they should, or I'll at least significantly lower my stops as soon as possible. Since my risk is so wide here, I'll little patience in holding on to these pairs for a long time if they don't perform. As you can see on my wave counts for these pairs, it seems they're completing 5 wave drops. Now this can morph into an extended 5th wave, or subdivide into various fractals leading the pairs lower, so I don't want to lower my stops now. I plan to let stocks show their hand a little more at the close here and see how these currencies react in the coming days and then take action to reduce risk.

I should have more later on the stock market after the close.


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.

AUD/USD and GBP/USD Currency Trades

Just wanted to let everyone know that I'm currently flat on currencies, but just put in two orders to get short the AUD/USD and the GBP/USD if they break beneath today's lows. My thinking is that I want to get long the US dollar, and I usually do that by shorting the EUR/USD. And seeing as that it's possible that the EUR/USD is about to tank hard along with equities in an extended 5th wave, or even possibly a 3rd wave, I want to make sure I'm long the US dollar in some way. But the EUR/USD pair has fallen too much at this point to jump in right now. But by looking at the the GBP/USD and the AUD/USD, it's evident that they have not fallen nearly as much as the EUR/USD so perhaps there's a good trading opportunity there because risk is well defined and not as wide as that of the EUR/USD.

I don't want to enter short these pairs right now because of the late day strength we had in the pairs and the stock market; it may mean that another rally phase is underway. So I just decided to get short if weakness continues because it may accelerate aggressively soon. So I put sell stop orders in for the AUD/USD at 0.9060 and for the GBP/USD at 1.6235. My stops are listed in the attached charts, and I will look to lower those stops as soon as I can if my orders execute.

A Top is in...

What an exciting week this has turned out to be in the markets. The S&P cash index made a new high by .04 points according to OptionsXpress, but the S&P futures fell short of a new high by .50 points according to OptionsXpress. Like I've said many times before, and as many of you know, the market will do everything it can to shake you out before it forms a major top and reverses. The Dow made a new high, but the Nasdaq Composite and Nasdaq 100 failed to do so. We also have break-away gaps from the major indices at this morning's open while all the major indices broke last week's lows. The Dow has been making new highs the past several days while other indices, especially the Nasdaq Composite, has failed to do so. This type of action, along with the break-away gaps this morning, are signs of a severe exhaustion in the uptrend. Although it appears that a major top is in, we've seen this market do crazy things to shake out the weaker hands, so I'd like to see the S&P close beneath last week's lows at 1131.39 today in order to confirm that a major top is in. Continuation and acceleration of this downtrend will strengthen the case that THE top is in of wave C of Z of [2] or [B].

Adding more pressure to equities is the collapse in precious metals today with silver down well over 4%, as well as weakness in the EUR/USD (US dollar strength). As you can see from the attached chart, the long term EUR/USD trend is now officially down as last night the the pair made a new low completing its 5 wave drop from the November highs. The pair should be at the beginning of a multi-month decline which means the US dollar will be on a multi-month advance. This will bring about tremendous pressure on the stock market and precious metals and other commodities, which also lends itself to the projection for a top in equities as well.

Many of you subscribe to and follow Bob Prechter and Elliott Wave International's newsletters, educational materials, and forecasts. I don't want to reveal any proprietary information they have for their paid subscribers, but they have been nailing this wave count and technical analysis for a long time now. And although they certainly are not perfect, no one is, they have been excellent giving average traders like myself a significant advantage in the market. I'm not just saying that because I'm an EWI affiliate, I'm saying that because credit is due where it's deserved.


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.

Make or Break Time for the Bears; Risk/Reward Favors the Short Side

Just a quick note this morning; the markets have surged higher this morning sharply, bringing the major indices close to last week's highs, however none have exceeded those highs. The S&P is only 6 points from doing so, so it brings about a great risk/reward opportunity for the bears here whether to establish a short position or just add to it. I would place a stop at 1151 or higher. The possible profits of catching a major top here and risking only 6 S&P points is quite significant so I would think it's worth taking. A break above 1151 would get the index marching towards the 1200 level.

The EUR/USD has declined in 5 waves on the hourly charts but has not made a new daily low beneath 1.4217 yet, but I believe it will do so quite soon. Although the EUR/USD is tanking hard, the AUD/USD and GBP/USD have remained quite buoyant and have not followed the EUR/USD. Although the EUR/USD just completed 5 waves down, it may be the finishing 5th wave of a multi-month impulse decline starting in November, and the risk of sharp snap back rally in a wave 2 is too great at this point. Currencies are a bit "dicey" right now and not exactly clear where exactly we are in the wave count so I remain on the sidelines in the currency market right now.


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.