This Elliott Wave blog is dedicated to sharing Fibonacci ratios and other technical analysis for forex signals, index futures signals, options signals, and stock signals. Elliott Wave Principle puts forth that people move in predictive patterns, called waves. Identify the wave counts, and you can predict the market.
Price action today in the S&P and the euro suggest a possible bullish reversal just took place which might act as a floor for these markets for at least a few days.
Volume was solid today, similar to yesterday's, only the internals were flat as the market seemed a bit confused today. But with a strong rally at the close, at the moment it's sending up flags that the bulls might have regained control of the market for now.
Seeing this ending diagonal-ish looking structure here in the daily S&P chart is not encouraging for the bears. The "bunching" up of price usually occurs before a very big and sharp reversal. We may get some more choppy downward movement for a few days but at some point this market will give. There will be a very sharp move to the upside or downside judging by the structure developing. And right now I'd guess that the move will be to the upside since it usually precedes a reversal, but either way, be prepared for a sharp move. Taking profits on some aggressive short positions might be wise if the overnight session holds firm or rallies big.
The euro is not my friend today either since it put in a potential daily reversal candle itself. This sends up the warning flags to me and had me put a stop at 1.4496 on my short position. A move above that level will make the recent decline a 3 wave move, which is a correction, and imply new highs are on the way. So any movement above that level means I shouldn't be short.
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.
Internals today were solidly bearish. Everyone was a seller today, and all day. Yesterday's rally was a sucker's rally. No capitulation, no bottom. Volume even picked up a bit today after yesterday's big move higher. The bears remain in control.
Below is what I posted this morning:
The S&P relieved some of the oversold measures with yesterday's rally. I'd have liked to see another day or two of relief rallying to have a better feeling about harder selling ahead but so far it doesn't look like it will do that. The S&P seems poised to continue toward the 1250 level I've mentioned before. Right now we just have a series of 3 wave moves all over the place so I'm counting this decline as a correction at the moment. The behavior of the S&P around the 1250 level and the wave count that develops at that time will help us better assess the bigger picture potential of the decline. But right now, I'm just targeting 1250 in the S&P.
The euro's wave ((ii)) bounce was short lived as a new low was established in today's trading. All signs point to a large sharp move lower being underway in the euro as wave ((iii)) down gets firm control of this pair.
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.
The S&P has completed a 3 wave rally to a new high, and has so far only completed 3 waves down from that high. Volume and intensity on the decline are a bit tepid so I'm still concluding that this current weakness is just a correction of a larger bull move higher. That could change though with some sustained sharp declines with increasing volume and bearish internals. But right now, the market is in a temporary downtrend that doesn't appear over quite yet.
The best guess here is that the market is unfolding in a "flat correction", which is derived from the 3 wave rally to a new high. According to EWP, this type of behavior lends itself to flat corrections. So that means a 5 wave decline for wave C within that flat correction is underway now. So the market should hit, and perhaps slightly exceed, the 1250 level before bottoming. The action surrounding 1250 will be important to the bigger picture. A sharp reversal and rally near that level will make it probable a bottom is in and that the market is on its way to new highs on the year. But if the market accelerates the downtrend and drops significantly through 1250, it may mean a bigger decline is underway than expected. So I'm watching the action around 1250 closely.
The evidence of a major euro top is strong. Normally when I say that though, I'm proven wrong shortly afterward. But the evidence speaks for itself. Momentum diverged on the final push to a new high, then a head and shoulders pattern formed, followed by a 5 wave impulsive decline. So the evidence is strong a major euro top is in, and any sharp rally that occurs I'd see as an opportunity to get short, or add to existing short positions.
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.
Nothing has changed in my outlook on stocks. They continue to trade heavy and the trend is still down. Some indicators are now oversold intraday, but there's usually a lot of divergence occuring before a meaningful bottom gets put in, and that's not there quite yet. Stocks may bounce in the very short term, but the trend remains firmly down regardless.
The euro appears to have finally topped and is now going to play catchup with stocks to the downside. Looking above at the 2hr euro chart you can see a strong rally leading into a head and shoulders topping pattern. This is a good sign the euro has toppped.
Another good sign the euro has topped is the impulsive decline it's tracing out from the high. Not only is there a clear small 5 waves from the top, but wave (iii) is an extremely sharp decline which is what we'd expect to see if the above count is correct. So the euro looks very weak and vulnerable 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.
Stocks continue to trade horribly and so the downtrend remains well intact. The bulls were at it again today, trying to put a floor in this market and surge the market higher. However the rally stalled late in the morning and flip flopped around until eventually collapsing into the close. The buying power just isn't there, and yet there is no panic despite the constant selling pressure the past few weeks. Bottom lin: expect the market to continue lower for at least the short term as it keeps the trend of lower lows and lower highs intact.
The euro is still looking farely strong although starting to show signs of possible weakness. But right now they're only "possible signs" of weakness, nothing convincing. Momentum has started to diverge and the euro is having a hard time sustain its recent strength on the surges higher. Once I get a reversal bar or impulsive decline, I'd be slamming the short side on this.
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 continue to trade very heavy. The bulls attempted to put a floor in the market through the first half or so of the trading day but gave up as the close neared. The bears still have control and today's internals highlight that fact. Volume was modest at 954 million NYSE shares traded with 92% of stocks trading to the downside, and 449 of the S&P 500's stocks closing the day down. The selling in June is probably more than just some kind of new month profit taking since May failed the rally for the year. The decline has developed into a little more than that. But without a clear EWP count, I'm still cautious getting too excited and overleveraged on the bearish side here.
Without a clear impulsive count on the decline I have to use retraint on the short side. On the last swing high (3rd red line to the right on above chart) I thought shorting after that day's close was a good risk/reward opportunity on the short side since a new swing high failed to be established. That "bet" paid off well as the market has slid ever since. Late last week I thought taking profits on part of that short position to protect gains was a good idea. The market has continued lower though. But I would not close the rest of my short position here since there is no sign of a bottom. Granted, those signs often come in the overnight futures session and there's little one can do to protect themselves from a monster rally in the cash market first thing in the morning. But I'm going to play it tight and protect gains and simply trail this decline lower until I'm stopped out.
The play here is simple, as long as the market keeps making lower highs and lower lows, I want to remain short. If this is the big Primary wave ((3)) then there will be plenty of opportunities to pile on after we get some big impulsive wave counts. I don't want to get ahead of myself though, I want to trade what I see now, in the short term. And the short term action tells me to play it on the short side, with a small position, and have a quick trigger finger to stop/exit out of the position.
The euro has been a bit frustrating lately. Stocks have fallen and yet the euro has continued its rally. It's now very deep for the projected (c) wave of a flat correction so I'm not that confident in the count here. There's nothing suggesting the euro's rally is nearing an end other than this wave count. If the count is correct, there is little room for the euro to move any higher. As a euro bear I'd like to see it reverse lower very soon to keep this count in play.
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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.
News headlines are looking awfully bleak this morning. I said yesterday that I expected some follow through to the downside this morning and I'd take profits when that happened. Well that's exactly what we got, and taking profits seems like a good idea with these gloomy headlines above. I'd still keep some position on short, but I'd trail the stop down with the market. It's approaching oversold on at least a short term basis pretty soon.
Bottom line: The market has fallen so much so fast that we are approaching oversold on a short term basis. When you combine that with the gloomy news headlines we see this morning, I'd like to take some profits here to protect gains, and then trail my stop lower as the market heads lower.
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 took a pounding today with the Dow losing almost 300 points and S&P losing over 30 points and closing on their lows. It was an across the board selloff as all the major indices/sectors were punished with exception of the safe haven sectors Staples, Utilities and Health Care down the least. Internals in the overall market were also bloody as declining stocks, and declining volume, well exceeded the advancers. Normally there is a relief rally after such a bloodbath internally, especially since today is the first day of a new month. But seeing as that the downtrend was held intact yesterday by failing to make a new swing high, and today's S&P close was right at support, it's quite possible we'll get some good follow-through to the downside tomorrow, especially in the morning.
Yesterday the market's rally came dangerously close to making a new swing high which would break the series of lower highs, and therefore put the overall downtrend in serious jeopardy. After that failed new high, the market sold off sharply today. Those of you who took advantage of the bearish side for a short term risk/reward trade like I mentioned yesterday did real well. And I think the market will continue lower through the current support level at least through tomorrow morning. From there, getting an over 300 point Dow drop in less than two days would be good enough for me to exit at least some of that short term trade. Since the longer term trend still seems to be up since we don't have an impulsive decline yet, I'm still leary about getting too aggressive on the bearish side too long. So very short term, I'm still bearish, but longer term I'm cautiously bullish.
I changed the degrees of waves up one notch since the flat correction I've been tracking has really expanded here. I mentioned yesterday that I wanted to see if the euro followed through higher, or reversed and broke down lower, in the overnight session. Well it didn't really do either last night, but today it showed some shakey legs before finally falling late in the trading day. Other counter US dollar pairs like the AUD/USD and GBP/USD were punished much more than the euro, so looking at the EUR/USD alone for overall US dollar action wouldn't give you a comprehensive picture. Looking at the big picture, the US dollar appears to be getting its legs back again and poised to rally hard here which means the euro should fall hard. And looking at the euro's wave count here it suggests that a wave ((ii)) top is in. This means heavy selling directly ahead for wave ((iii)) down. I remain firmly bearish this pair as long as yesterday's high remains intact.
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' downtrend remains intact by the skin of their teeth. Today's rallys stopped short of making a new high above 1346.82 in the S&P. So the series of lower highs and lower lows is still in place, and therefore the downtrend remains in place. Shorting here against 1346.82 would be a good risk/reward trade for the bears. Although in the bigger picture, with no clear wave count in place, and certainly nothing impulsive looking, I think this downward action lately is all part of a correction that will result in a move to new highs on the year eventually. So if I were short, I'd play it tight here and only for the short term action. Longer term the market still seems bullish.
The euro's rally has gone much deeper than I would have liked to see for my impulsive count to remain in high confidence. Breaking out to a new high makes this structure shown above look very similar to what we saw in November 2010 to January 2011 where most wavers were trying to label a clear 3 wave move as an impulsive decline. The result was a confirmation of the 3 wave decline being a correction and a sharp and long rally to new highs ensued for months. Well this structure above on the 8hr chart is starting to look a lot like that structure on the daily chart I just mentioned. If correct, then my count above is wrong and the euro is getting ready to blast off higher again. But we'll see. I'm not as convinced of the euro's bullish potential like I am for stocks. So I want to see how the euro trades the rest of the day and into the overnight session tonight. Follow through to the upside would knock me out of the short side and put me on the sidelines. But a reversal lower would keep me firmly bearish.
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.
Today's action was bearish in my view. The internals showed mild total volume, but not as light as earlier in the week when we were in the 800s million shares. But up vs down volume was only slightly bullish and the advancers vs decliners were mildly bullish. Yet you'd think the market would look stronger than that internally since the whole trading day seemed like it had its rally jets on as it continually floated higher. But it didn't. Today' rise appears corrective when looking at it internally compared to the price action. And when you add the fact that the gains the market made today fell apart sharply at the end of the day, price action also lends itself to a bearish day. So even though the markets closed up today, it was not an impressive move higher by any means.
There's not much new to add here from Monday's post. Tuesday was a nothing day, and today wasn't much better in helping us get a high confidence wave count. Today's move higher looks corrective, and although it may float higher tomorrow and Friday, as long as it stays below 1346.82 then I'm short term bearish overall.
The euro appears to be completing a 3 wave rise for wave ii within wave (iii). IF the euro continues higher, it should be short lived and give way to immediate sharp selling well below 1.4000. On a short term basis I'd be shorting rallies against the wave (ii) high at 1.4344.
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.
Internals were very bearish today with down volume well exceeding up volume and advancers vs decliners on the NYSE and S&P heavily negative. But total volume on the NYSE was quite light at only 865 million shares. In the bigger picture, the internal structure of the decline over the past several weeks feels corrective. But that doesn't mean it can't continue lower in the short term.
As I mentioned Friday the structure in the blue chip indices is very choppy and filled with 3 wave moves suggesting it's corrective. But this correction can continue lower and develop into a WXY combination correction which it's hinting it now wants to do. Without a confident impulsive count to focus on here, I'm going to stick to the very basics. There is now a series of lower highs and lower lows in place from the high. This will define the downtrend until I can better assess the short term wave count. As long as the series of lower highs and lower lows remain in place, I have a bearish bias. I am not getting short though until I get a good impulsive decline with supportive internals.
Last Wednesday I put forth an impulsive count with a flat correction to unfold before the resumption of the downtrend (click here for count). The market has fulfilled the forecast so far, and in doing so it has given me confidence in my wave count labeling here. Expect the euro to continue lower, and the US dollar to rise for the foresable 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.
Internals today were fairly bearish and volume hit the 1 billion share mark on the NYSE, no doubt options expiration played a big part in puffing that number up The first and last 30 minutes of trading pushed the market down towards the triple digit level on the Dow, closing barely in double digits at -93. The first and last 30 minutes are usually when options expiration factors are the strongest. Outside of those two timeframes, the market was fairly flat. Tough to get any solid conclusions from this action in my view.
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The S&P, and especially the Dow, sport structures that definitely look corrective right now from an EWP perspective. Sure, a sharp decline can easily give us wavers some creativity in our pens to start an impulsive wave count to the downside. But right now, as it sits at first glance and keeping it simple like I talked about the other day, this decline over the past few weeks looks corrective. A break of 1351.05 in the S&P and 12,718 in the Dow will confirm that it is in fact a correction. Until then, the possibility that we're in the early stages of a large impulsive decline after a major top on the year is still on the table.
Wednesday I said, "The euro appears to be in a flat correction. Wave c should finish shortly after it exceeds the wave a high. Once it does so it will be open for a sharp reversal to the downside." Well that's exactly what happened. When the price action fits the forecast it usually means we're on the right track in wave labeling. I'll stick with the count above so expect sharp selling in the near future for wave (iii), with today's high remaining intact.
Also worth noting, the euro had a very choppy and sloppy slow grind higher, typical corrective behavior, which led to today's big and sharp impulsive looking decline. Today's action formed a nice bearish engulfing formation where the high exceeded yesterday's high but then closed well below yesterday's intraday low. This is bearish and a good signal that a top is in place.
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.
Internals posted above. You can see there is light volume today suggesting a lack of enthusiasm towards moving the market higher after yesterday's surge. But closing higher on the day has kept me on the sidelines from getting short. The short term has a slight bullish bias to it while the longer term indicators are slanted to the bearish side (especially momentum). Below is what was posted mid-day today.
Stocks so far are failing to follow through with yesterday's rally. A sharp reversal and new swing low would be a welcome sign for the bears, but right now we don't have it. Still watching, waiting.
The euro on the other hand is looking very weak and vulnerable to a selloff as you can see from the above chart. The price action is choppy and starting to struggle significantly. The RSI reflects that struggle as it is now diverging from price on the hourly chart. I like shorting this pair on a break below 1.4200 and then placing a stop just above 1.4300. I think that breaking down below 1.4200 would be a good enough sign that the pair is probably breaking down to where I can put some money on it and potentially get some huge gains real quick with minimal risk.
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.
Internals were strong as far as advancers vs decliners although volume was light at 881 million NYSE shares, much less than yesterday. Regardless of total volume, the strength seen internally today suggests further upside. But we'll see.
I like to keep things simple. My philosophy is that when I start overcomplicating analysis it's usually because I'm trying to justify my current bias. In other words, if I'm bearish and have a short position I will push aside bullish evidence and continue to grind down the charts and indicators until I get a bearish view, which often includes make things more and more complicated. This is done to convince myself that I was originally right by going short. So a long time ago I removed this basic human emotion of always wanting to be right by just using the simplist conclusion as top choice.
This thinking applies here. EWP is centered on the fact that 3 waves are corrective (counter trend), and 5 waves are impulsive (with the trend). Looking at the above chart it's quite clear that there are only 3 waves down from the high, and that it's a choppy mess to boot. Looking at this chart alone, and keeping things simple, it tells us that most likely this decline is just a correction and may have completed. There is a lot of bearish evidence out there right now on the larger timeframe charts, but because they're on such larger timeframes it is easier for those bearish indicators to remain in place for many days, or weeks, while the market moves higher.
If we're keeping things simple, then we should conclude that we're in a downward correction that probably has ended, and the market's uptrend is now back in force. This goes strongly against what I thought earlier in the week. But I have to call it as I see it. I don't want to get too caught up here with a decisive bullish or bearish stance since the picture is a bit mixed here. So I'll wait until tomorrow and see if today's rally has any follow through before I take a definitive stance.
In addition to what I just mentioned, the S&P reclaimed the previous support level convincingly, confirming that it was just a false breakout before.
So the longer term evidence is bearish, the short term evidence suggests a bullish bias. I'm not getting long here though, I want to see what happens tomorrow, and see if the rally has follow through first.
The euro appears to be in a flat correction. Wave c should finish shortly after it exceeds the wave a high. Once it does so it will be open for a sharp reversal to the downside. Risk is wide here since wave (ii) can retrace up to 100% of the entire previous decline so proper money management should be followed here to make sure you don't get blown out in case this pair moves against you to the upside.
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.
Internals today don't tell me much. Volume was farely quiet at under 1 billion NYSE shares, and the rest of the internals were slightly bearish just like the overall market was. What is of note is the fact that the Dow took the biggest hit today and closed with the biggest losses of the major indices. The S&P and Nasdaqs didn't do nearly as bad, so looking at the Dow alone for overall market performance today would not be wise. It was basically a flat day with a slight bearish slant. Whether the S&P and Nasdaq strength is a sign of a just a temporary relief rally, or the start of a more established floor and resultant rally is yet to be seen. The evidence is still overwhelming that at least a decline of a few more weeks should be underway though. I still favor the bearish side right now.
The S&P is looking like a choppy mess. Tough to label this impulsive at this point. Right now it's looking more corrective in nature. But a lot of big impulse waves often start out imperfectly, so I'm not going to hold this too much against the bearish scenario right now. But it is on my radar. As a waver, I'd like to see a sharp drop lower soon so I could label it a 3rd wave and see how the rest of the waves fit in from there. But right now, I'm seeing only a choppy grind lower on the 30min chart.
The S&P easily brokeout to the downside with its convincing move, and then close, below 1329.51. Now I know that it basically closed right on that support level, but technically it did close just below it. The S&P shot through the 1329.51 level sharply, and then did a slow choppy rally back near that level again where it closed today That tells me the breakout to the downside has some conviction, and the move higher was just the typical retest of prior support before it turns lower. So I expect more selling tomorrow to follow through with this downside breakout. But if I'm wrong, and the market moves higher and closes well above 1329.51 then it was probably just a "false breakout", which would have bullish implications in the coming days.
The euro is finding support around the 1.4200 level, but the bulls have so far been unable to sustain a rally or even make a new high. Until that happens, the trend is still firmly down in my view. Making new highs and rallying sharply here wouldn't necessarily remove the bearish bias I have, it would just lessen my conviction of it a little.
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.
