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I'm looking for Minor wave 5 to get underway to continue shorting with the larger trend. Today's reversal is a good initial sign that perhaps Minor wave 5 has started. But an S&P key level needs to be broken first.
Today the market put in a nice reversal that sets up the possibility Minor wave 5 is now underway. The Dow, S&P and Nasdaq 100 all made new highs today while the Composite lagged. Tech is also leading the charge lower right now which shows that some risk aversion has returned. Also, notice that the S&P's new high was not confirmed by the RSI. Overall, the new highs made today were very weak and the reversal that just happened make it ripe for Minor wave 5 to get underway. But I don't want to jump the gun early, I still want to see if the S&P cash index breaks to a new low beneath 1180.53, then I think it's a good risk/reward trade to be short here with a stop just above today's high.
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.
One last time, in case you missed it: Prechter Discusses Market Forecasts on CNBC Closing Bell
We invite you to watch the interview below. Then download Robert Prechter’s free report that uses an 84-year study of stock market values to help you prepare for and understand today’s critical market juncture.
Download Robert Prechter’s Free Report To Discover How You Can Prepare For Today’s Critical Market Juncture
While we're sure you're reading countless articles and analysis about the market's recent volatility, if you're not reading what EWI's subscribers read, you're missing the valuable, prescient perspective contained in each issue of Robert Prechter's market letter, TheElliott Wave Theorist.
Access Robert Prechter’s free report and read in-depth analysis -- including an 84-year study of stock values -- that will help you prepare for and understand today's critical market juncture.
Internals today show a countertrend rally. Volume continued to contract today as the NYSE only hit 1.1 billion shares whichs is about half of what we've been seeing the past couple weeks. The price move was big, but internally it's hollow, suggesting this rally is countertrend. I'd continue shorting rallies.....this surge the past few days should be completely erased in fast order pretty soon. If a bottom for the year was put in last week, there'd be a lot more volume on the rallying the past few days, in my opinion.
It's just a waiting game for the bears in my view. Stocks look strong as they shrug off bad news and rally on mild good news. The market is clearly relieving its oversold condition from the past few weeks of heavy selling. Right now the S&P is in a good and typical reversal zone for 4th waves. Fibonacci retracement levels of 38% - 50% of the prior move tend to be good areas for reversals to happen. The problem is that there is virtually no evidence that there is a reversal, or that one is coming. The market is is full bull mode at the moment. The daily RSI has come out of significan oversold territory, and another day or two of up closes should prime it to get ready for another downturn.
So although there's no evidence of a top in place, I'm watching the S&P's 1200-1223 area for signs of a reversal so I can add to my shorts.
For continuity purposes I'm posting the follow up to last Thursday's short term chart forecast. According to this count, Minor wave 4 is coming to an end. I still feel we need some more up/down movement that's weak internals, i.e. low volume with dragging momentum. I wouldn't doubt if today starts that pattern, but it will probably continue at least another day or two before reversing sharply lower.
The euro has made a new swing high and is trying to breakout to the upside. It has yet to take apart the series of swing highs laid before it though. Breaking above 1.4600 would probably point to a sharper move higher in the coming days. I'm now neutral the euro.
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 posting the internals after the close today. My intraday post from this morning is below. Internals were extremely bullish however volume continues to pull back, now down below 2 billion NYSE shares today. Not encouraging for the bulls. With the new highs made today above my wave ((a)), it's possible wave ((c)) of Minor wave 4 is already over. And the late day selloff into the close may be a hint of Minor wave 5 already beginning. We'll see tomorrow. If wave 5 is already underway then it should be almost a straight line down tomorrow. If wave 4 up is still working itself out, then we'll either get a sideways or up move tomorrow. Either way, my finger is on the "sell" button at every opportunity.
Also, at the bottom of this post, check out the new Prechter video of when he was on CNBC's Closing Bell the other day:
Please read yesterday's post below for bigger picture bottom line analysis. Basically I think a Minor wave 4 correction is underway that may take the form of a triangle (sideways move). Another possibility may be a simple zig-zag correction (ABC) as shown above. Tuesday's big triple digit Dow rally looks impulsive, which could make it an ((a)) wave, then you have a clear 3 wave decline with yesterday's selloff for wave ((b)), then this morning we have a clear impulsive rally again which is probably just a wave (i) within wave ((c)). If correct, the market should rip higher in wave (iii) of ((c)) fairly soon.
This is very very speculative on my part and just food for thought of something to watch out for the rest of the day and tomorrow. I'm not getting long at all, I'm merely tracking this count to determine when to get short on a rally. At any time this market can easily break down to new lows since it's now in a clear and strong large downtrend. A sharp rip higher would put the above count on track.
This count only works on a closing basis so confidence in it low in that respect. Ignore the degree of trend since I'm unsure of it right now. I'm just sticking with EWP basics of 1-2-3-4-5 / a-b-c right now. On a closing basis it's such a perfect EWP pattern, I just can't ignore it. If correct, the euro should be headed sharply lower very soon. The above chart and count warrants at least a short term short position in my opinion since the risk/reward is so great with risk held at a new high on the day (stop 1.4293), or the start of the impulsive decline (stop 1.4400).
Prechter Discusses Market Forecasts on CNBC Closing Bell
"The problem is deeper than just a minor recovery or a minor recession."
Robert Prechter joins CNBC hosts Bill Griffeth and Maria Bartiromo on Closing Bell to talk about the still-unfolding forecasts presented in his New York Times bestseller Conquer the Crash.
We invite you to watch the interview below. Then download Robert Prechter’s free report that uses an 84-year study of stock market values to help you prepare for and understand today’s critical market juncture.
Download Robert Prechter’s Free Report To Discover How You Can Prepare For Today’s Critical Market Juncture
While we're sure you're reading countless articles and analysis about the market's recent volatility, if you're not reading what EWI's subscribers read, you're missing the valuable, prescient perspective contained in each issue of Robert Prechter's market letter, TheElliott Wave Theorist.
Access Robert Prechter’s free report and read in-depth analysis -- including an 84-year study of stock values -- that will help you prepare for and understand today's critical market juncture. Download Robert Prechter's Free Report.
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 calming down a bit today relative to the last few major triple digit moves we've seen the past couple weeks. Volume was still very high overall though at 2.14 billion shares. Of that volume, 93.5% was to the downside. Overall, again a very bearish day. My guess is that margin calls are hitting traders and fund managers' desks forcing the large selling of their assets, which in turn facilitates further margin calls and more forced selling. Then speculators are jumping on board and riding the short term trends, magnifying the impact of these moves. So we get these wild swings on huge volume. As far as price structure and internals go, this market looks ugly and in severe trouble. Somebody better do something "magical" to calm the markets down at least short term or this thing will continue to fall off a cliff in the coming days. Things are bad.
I'm still thinking that Minor wave 4 is underway which should lead to a see-sawing up and down with very little overall net gain or loss over the next week or so. This is highly speculative on my part since the market can easily just plummet lower at any time and I'm trying to give wave labels to basically a straight line down. Yesterday we had about a 450 Dow rally and today we had about a 530 Dow decline, but no new low. So wave 4's choppy sideways move is off in typical fashion. I would not get long this market at all, I'd simply be looking for rallies to short into. This market remains bearish overall.
The financial sector has finally broken down. I have said this a couple times in the past couple years as the $14 level was taken out, but was wrong on both accounts obviously. I feel more confident in calling it a breakdown now that it's in the lower $12 range now. Financials are the backbone of our economy. We have to borrow money to buy or do almost anything in this country, i.e. buy a car, house, go on vacation. So if financials are breaking down this severely as seen from the above weekly chart, it shows you how much trouble our economy and stocks are in right now.
Nothing new here for the euro as the bears and bulls keep exchanging blows in a truly consolidative pattern. The bears have a slight edge here in my view though since there is a series of lower lows and lower highs in place, suggesting the making of a larger downtrend is at hand. But with no clear EWP count on the bearish side, it keeps me honest and cautious of getting too aggressively short. The euro is due to breakout from its consolidation at any moment, and the weight of evidence slightly favors the breakout being to the downside.
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 market was deeply oversold going into today's session, and the bulls pounced on that opportunity. With little bears left to sell the market the "buy the dip" crowd came in today and surged the market higher. As a bear I would have liked to have seen lighter volume on today's move, but with 2.4 billion NYSE shares with 97% to the upside, the bulls are making a strong move here to put in a bottom. I'm not convinced a bottom is in place, but today's rally certainly got my attention. But let's look at volume in a little more detail through the S&P's ETF (SPY):
Looking at volume on the day as a whole on the NYSE, it was a very big volume day. And looking at the big rally into the close you'd think it was all bulls all the way. Although for the most part this is true, when you look at down volume relative to up volume on the SPY, you'll see there was still a slight bias to the downside with volume decreasing on rallies and increasing on declines. This is a very small piece of evidence showing a slight bearish undercurrent on an otherwise very bullish day. Just something to keep in mind when looking at the rally as a whole today.
I know a lot of folks have been very excited and happy this decline has taken place over the past several weeks. In fact, I know a couple of people who are absolutely joyful that the market has fallen so much so fast. And no, they are not bears and they are not short. They are perma-bulls who view this decline as a great buying opportunity. Well people like this, and many wise short term traders who covered their short positions, were the reason why we had this bounce today. The only difference between the two groups of people is that that the perma-bulls will hang onto their long positions and get their faces ripped off on the next series of declines while the wise short term opportunist traders will know when to get short again.
Today's rally may be part of a Minor wave 4 which I speculatively drew out a path forward in the above chart. I expect further rallying tomorrow morning, but if it's a 4th wave, the overall move over the next week or so should be that of a fairly sideways move. The key for the bears is to keep the Minor wave 1 low intact at 1258.07. As long as the S&P cash index remains below that level, I'd be selling into rallies.
The euro continues to consolidate and will breakout hard and fast soon. If I weren't a waver I'd look for that breakout to the downside. But being a waver makes feel that this consolidation is similar to a triangle which means the consolidation is just a correction of the previous trend (up) and once the consolidation is over the previous trend will continue (up). So I'm conflicted. But I think the weight of evidence and risk/reward tell me to stick with the basics which show a series of lower lows and lower highs, so I think the short side should be favored as long as a new swing high on the daily chart is not made.
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 stock market action has been jaw dropping to watch the past two weeks to say the least. The Dow lost almost 1800 points in just two weeks. Wall Street overvalued the market going into the so-called "recovery", and now there is a severe repricing of that recovery. It's happening in a hurry though and panic is well set in. That doesn't mean a bottom is in though, the market closed down huge and on its lows today, and both the international and US governments have so far failed to calm the nerves of investors over the crumbling backdrop of our financial system.
But just like the market overshot to the upside recently, it will also overshoot to the downside and lead to a sharp relief rally. When that happens though, I have no idea. The selling pressure is beyond intense and should be very worrisome for investors and politicians. Today's volume on the NYSE was a whopping 2.54 billion with practically all of that volume going to the downside. It's really jaw-dropping. Just crazy.
I'm going to address the giant elephant in the room, Bob Prechter. There's no more avoiding it, or sugar coating it, Prechter's Primary wave ((3)) analysis is fitting in well here. Primary wave ((2)) would have stopped shy of an all time high, and the strength and speed of the current decline is certainly that of a very large wave 3. Prechter's call is back in business, and as prudent investors and traders, we should all at least be mindful of the current downside potential if Prechter is right. Today's selloff feels like a "point of recognition" at some degree, meaning that we should be approximately in the middle of this current Intertermediate wave (1) of Primary wave ((3) down. If correct, the market should continue sharply lower for most of this week taking the Dow at least another 1000 points lower before any meaningful bounce occurs.
The euro is a mess. It looks like a correction, but the lower highs and lower lows keeps the downtrend intact and open the door to a sharp selloff at any moment. But with this structure in price being so choppy, it's hard to gain confidence in the bearish outlook.
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.
Yesterday I said the market was oversold and that bears should exercise prudence and caution and wait for rallies to get short. I also added that taking a very small short position late in the rally yesterday would also be wise. And of course, I wish I had gone "all in" yesterday, but that would have been a pure gamble on my part. And I try not to gamble in the markets anymore. The only reason I said that it would be wise to take a small short position yesterday is because sometimes when the market is oversold, and there's a big looming topping pattern in place (head and shoulders), the market will accelerate downward with a massive selloff. But this is rare, so putting on only a small short position seemed wise. Hind sight is 20/20 though, and today's action won't change how I approach the market in the future.
Now I don't want emotions to get ahold of me, I'm in the business of taking well thought out and disciplined strategies that offer a high possibility of success relative to the possibility of failure. So I still want to approach the market smartly here and not get caught up in the "I'm gonna miss the move unless I put everything I own in to short the market now" crowd. With that said, I must say the charts, price action and internals look absolutely horrible right now and it appears that the equity markets are in severe trouble. So finding a good entry point for the bears might be difficult. All I can say that if someone were to have to get short and just can't stand having a small, or no position on right now, then I'd suggest that they make sure that they always keep at least some cash on hand to add to their positions on rallies, and/or to make sure they can survive a huge and sharp snap back rally.
Looking at the internals today it's hard to think that there's anyone left to sell. An amazing 1.82 billion shares were traded on the NYSE today. This is about 1 billion more shares than the average the past few months. Buyers were non-existent as the S&P had only 3 advancers and 497 decliners while the NYSE had only 152 advancers and 2946 decliners. NYSE down volume represented an amazing 98.4% of all trading done today. Those numbers are absolutely incredible in their entirety. Just amazing. But with so much selling force done today in such a calm orderly fashion, it's hard to think that there's anyone else left that's going to sell tomorrow. I mean, who would have waited all day through a slow orderly selloff to -500 on the Dow and then is going to wake up tomorrow and sell? Unless more horrible developments take place in Europe or early in the US session tomorrow that aren't already expected, then I would think we'd at least get a relief rally either early tomorrow morning, or most likely after an initial decline early in the morning where it will bounce back later in the day. BY NO MEANS AM I TRYING TO GET IN LONG AT ALL. I'm merely preparing myself for any rally that I can short into.
Unless the Dow rallies over 500 points tomorrow, this market looks horrible right now and the short side should be favored whenever opportunities arise, in my opinion.
For those of you who are savvy in chart technicals know this chart looks very very bad. You have a major head and shoulders topping patter that has completed and has been followed by a very sharp drop to new lows. Today's close occurred on the lows suggesting further selling early tomorrow morning, although I'm not sure who out there missed their selling opportunity today and decides to sell tomorrow after a 500 point drop. But the chart is the chart, and it suggests that as it stands now, this market is in severe trouble. Now that can all change in a heartbeat, like with a 600 point Dow rally Friday. But we trade the with the data we have and view the market as it stands now. And as it stands for the moment, stocks are in big trouble.
The euro wasted little time taking back yesterday's gains and breaking down to new lows which I said yesterday would mean follow through to the downside. The euro's series of lower highs and lower lows suggests the trend is down, despite no discernable wave pattern to count. Look for the euro to charge for the 1.4000 area 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.
The S&P broke down the levels I cited in my last post, making the bigger picture look bearish. We've had rallies that failed to make new highs on the daily chart, and now a new low today. This suggests that the trend is now down in the bigger picture. There's a possible major head and shoulders top in place now, suggesting much further downside in the weeks/months to come.
With that said, the market quickly recovered after breaking down to a new low this morning, typical behavior when establishing a new extreme. So as long as we don't make a new high on the daily chart (around 1350), I see the larger trend as down, which means I'm looking to short rallies.
In today's national news, as seen by http://www.drudgereport.com/, there is massive pessimistic news out there right now. Not the type of mood I'd expect to see at the start of a major selling phase, but more like what I'd expect to see at a bottom. So I still want to stick to the basics here with a disciplined shorting strategy. As long as a new daily high isn't reached (around 1350), I want to short rallies as I get them. With the market is oversold intraday and the news headlines so negative right now, it seems a sizeable bounce is due soon that should give me a good opportunity to enter short. With the markets almost even right now, entering a small short position right now also seems wise.
A solid shelf has been established in the euro at the 1.4170 area. It has tried several times to sustain a break beneath this level but has failed to do so and is now rallying sharply. This level is obviously important so I'll keep watching it. The bears must see the euro trade below 1.4453 in order to keep the short bias intact, and a sustained break below 1.4170 should open the door to further heavy selling.
The Single Most Reliable Indicator
In this video excerpt, Elliott WaveFinancial Forecast Editor Steve Hochberg explains one of the most important things to keep in mind when assessing a market, "Extreme opinions, shared widely, constitute the single most reliable indicator of an impending change of direction for a market." Enjoy your video excerpt.
To find out more about the Wave Principle, be sure to watch the Club EWI video series: Learn the Why, What and How of Elliott Wave Analysis. This 3-video series is a great way to get started with the Wave Principle. You can watch these videos free with a Club EWI Membership.
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 momentum is clearly down at the moment, but you can see how wild the market has been the past few days to where it can turn on a dime at any moment. So be careful. I want to see the S&P break down before I get short with confidence. Making new lows beneath 1258.07, and especially 1249.05 would be a good sign that the larger trend has reversed to down, and that the big head and shoulders pattern top may be in force. If so, the S&P has big downside potential and I want to capitalize on it. But I'm not getting sucked into a trap, so I want to be patient and make the market prove to me that it's time to get short.
To keep me honest, I have to respect the potential for a triangle-like consolidation that's occuring which means there will be a very sharp and long rally coming at any time. But if 1258.07 and 1249.05 are taken out, then that bullish consolidation potential will be significantly diminished. So I'll wait for that breakdown to occur before I get short.
The euro has been a choppy mess downward, making it hard to develop a high confidence wave count at the moment. But the series of lower highs and lower lows is well intact so the path of least resistance is down. I'm bearish the euro as long as 1.4453 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.
The S&P remains rangebound. I thought we might get a nice breakout of the range to the downside after yesterday's reversal. But it seems the low volume is making that impossible. Today's early weakness has been bought up immediately, putting price right back into the range as seen above. I see a directionless market here over the past several months, and now the market is probably waiting for the "debt crisis" in Washington to get resolved before it breaks out of its long held range. Once volume enters the market again, we should get a nice breakout of this range and a good short term momentum trade. Until then, I see only options strategies favoring sideways movement being favored here.
The euro appears to have declined in 5 waves and is completing an a-b-c upward flat correction. Early next week should bring more weakness to the euro in this case.
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.
Although it may seem like the markets have been wild lately, overall there is practically a net zero gain or loss over the past several months. The market is range bound and trading on very light volume. Wall Street must be working on their tans in the Hamptons and those left back to still trade are probably waiting for this US debt "crisis" to get solved. As for me, I've been hitting the beaches in souther California and the pools up here in the Bay Area. I plan to continue doing that until the market demands my attention.
Until the range is broken, there is no play here in my view. But whichever way the range is broken, up or down, should be the quick and sharp direction for the short term. So short term momentum traders can consider trading the breakout of the range.
One thing to note is that the Nasdaq 100 is the only major index that made new highs recently. The Dow, S&P and Composite have not. This type of divergence between markets often marks tops that last more than just a day.
The euro rallied much higher than expected, and on the 1 hour chart it looks like it did so in a 5 wave move. But in the bigger picture, as seen in the daily chart above, you can see there's no real discernible EWP pattern here. So that means back to the basics. With lower highs and a new low just prior to the current rally, we can still say the trend in the euro is down. So at the moment, the bears have a good risk/reward ratio in going short now with a stop at the overnight high.
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's big move yesterday had no follow through today, and volume was at a pathetic 794 million NYSE shares. Not what I'd expect on a Wednesday after a big rally the day before. But the bears have failed to come in and control this market as well. At the moment, the bulls look tired and are having a tough time getting volume in on their side with a sustained rally. This could spell trouble for the bulls the rest of the week, if not longer.
I was tracking a 5 wave rally count that had recent weakness as a wave ((iv)). But Monday's decline overlapped wave ((i)), violating an EWP rule and therefore rendering this bullish count invalid. So we have more overlapping waves on our hands, making me conclude we're probably in some type of flat or triangle correction. The other conclusion is that a much larger top is forming, and all the diverging behavior between indices and sectors along with sloppy overlapping price action is all just part of a large topping process. Too early to tell right now, but it's definitely on the radar.
Weekly momentum is not showing a bullish picture. Looking at the RSI compared to the S&P's head and shoulders pattern you can see that the new high (the head) was not confirmed by the RSI. Then the right shoulder on the S&P exceeded the left shoulder while that move in the RSI left a peak well under that of the left shoulder. This, along with the bearish stochastics on the weekly chart as well, gives us more evidence to support that a head and shoulders top may completing, and the next big move will be to the downside.
Also of note is that the Nasdaq was much weaker today that the Dow and S&P. Intel (INTC) closed slightly down on the day but posted a solid earnings report after the closing bell, yet shares are down over 2% after hours at the time I'm writing this. The mood seems a bit sour in the market right now. Watch for a sharp decline soon in the overall stock market. How far or long it will last I don't know, but the market appears grumpy right now.
Nothing has changed for the euro. I'd still be cautiously short against 1.4577.
The Personality of Stock Market Waves
Elliott waves don't merely reflect prices plotted over time. Each wave has its own "personality." Listen to this video by EWI's Wayne Gorman to learn more about the psychology behind the waves and how it affects your investment decisions.
This video was taken from the free Club EWI video series: Learn the Why, What and How of Elliott Wave Analysis. This 3-video series is a great way to get started with the Wave Principle. You can get these videos free with a Club EWI Membership. Watch your free videos 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.
Blogger isn't letting me upload my charts right now so I'll just have to give a short description of today's action:
STOCKS
The internals today were slanted heavily on the bearish side despite the late day comeback in stocks. 90.6% of total NYSE volume was to the downside and there were 2,569 decliners and only 446 advancers. But volume overall was very light at only 871 million shares traded. Not typical of a large 3rd wave down starting as some wavers may be leaning towards at the moment. That's not to say they're wrong, I just don't see the evidence here. First you have a 3 wave decline from the high on the year, then it flip flopps around on light volume......that doesn't seem like a big 3rd wave kick off, but we'll see.
Excluding the wave count, the bears can hang their hats on two things in my view:
1) the S&P has formed what looks like a head shoulders top on the daily chart.
2) the Nasdaq 100 has diverged from the rest of the major indices and made a new high on the year and that divergence has now been in place for several days, often a subtle indicator of a trend reversal in the overall market.
So the wave count and internals don't support a big decline is starting right now while basic techincal analysis does. With an indecisive and unclear market structure, I choose to stand aside until things clear up a bit.
EURO
As for the euro, it's not behaving like I'd expect a 3rd wave to behave so I'm skeptical of my big bearish call. But on the daily charts you can see it made a new low and hasn't bounced much since doing so. So I'm still leaning toward the bearish side in the short term at least, as long as 1.4577 is not broken.
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 view of stocks since my last post. But the euro has presented itself with a nice setup for the aggressive bears here. The Minor 5 wave count I labeled in my llast post has become invalid since the 4th wave entered into the 1st wave's territory. What's important now though is the strong impulsive nature of the decline and where the current rally has so far stopped at. You can see on the above chart that the euro has rallied sharply and closed an open gap left from a few days ago, but has then sharply reversed after doing so, hence the long candlestick wick. What's also of interest is that the reversal took place near a fibonacci 61% retracement level, which is a common reversal point for 2nd waves.
Although very risky, I thinking aggressive bears could attempt a short position here with a stop just above the overnight high. Sure, the euro can blast right through that stop like nothing at any moment. But that tight risk level is dwarfed by the reward potential of a catching the very early stages of a large 3rd wave 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.
Late last week we saw some topping action that suggested weakness going into this week. And we got it. But it may be over now. There is still a clear 3 wave decline (ABC) from the high on the year in the S&P, so a new high on the year seems likely. We can't forget that. Only the Nasdaq 100 managed a new high while the other major indices failed. Now, the rally from the wave C low looks impulsive, with the recent weakness this week being a wave ((iv)). If correct, stocks should be on their way to new highs on the year soon.
If you close your eyes and pretend that there is not an ABC three wave decline from the high on the year, then this chart might convince you of taking a bearish position. There is an imperfect 5 wave decline that just completed on the intraday charts. This alone is not compelling enough to me to get short. But a failure to break above 1360 and a sharp decline to a new low would get me on the bearish side rather quickly.
The euro is declining in a nice impulsive patern, it even subdivides nicely into 5 wave moves. The chart speaks for itself, the euro will confirm that it has started a major downtrend when wave 5 breaks down to a new low.
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.
