Bye-bye Mr. Triangle, Stocks and Euro Headed Lower

I have said that I'd like to see the market pick up in volume, to at least 1 billion NYSE shares, and the 1225 level in the S&P be broken in order for me to remove the triangle count and put the aggressively bearish top count up as a far out first choice.  Well, we got both of those things with today's action.  There's still some risk to the short term bearish view with Thanksgiving week right around the corner, but I listen to the charts and internal behavior of the markets more than a loose historical seasonal bias.  The typically bullish week we are about to embark upon should be considered as a part of the overall trading strategy, but in my opinion it shouldn't be the sole reason for making a trade.

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Above is the top count and it is aggressively bearish and means the market should unfold sharply lower in the coming weeks.  Yesterday I eluded to Elliott Wave International's "Short Term Update" bringing an issue related to the triangle.  At the time I didn't want to divulge proprietary information, but now that the triangle is broken I'd like to explain further.  The Short Term Update brought to light an issue that contradicted the likelihood of the triangle scenario playing out.  They (Steve Hochberg) stated that yesterday the Wall Street Journal published a story that an extremely bullish triangle formation was in place.  So of course, the contrarian method of thinking is that if the Wall Street Journal is reporting a bullish triangle is in place, then that means it's a pretty mainstream thought and therefore it most likely will NOT occur.  In yesterday's post, I eluded to Hochberg's statement because I thought it was the strongest piece of evidence against the triangle interpretation.  It turns out Hochberg was very wise to post that analysis yesterday.  The triangle scenario has been eliminated, and the EWP structure suggests the market will head sharply lower soon.

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The euro rally has been very flat and filled with 3 wave moves as it only progresses sideways as you can see from the above chart.  This is clearly corrective and suggests the euro will head lower soon.  And remember, the last few years I can remember, the euro has been sold off hard during Thanksgiving week.  Like I said for stocks, I don't think these types of historical seasonal biases should be traded on solely, but they should definitely be considered.

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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.

Thursday Should Eliminate One of the Two Top Counts; Euro Trend Remains Down

Internals flipped bearish with the declines today and volume increased as well.  915 million NYSE shares traded today which is a strong increase from when the market was pushing higher, however in the big picture this is still fairly weak.  It instills confidence in that in the longer term picture, the trend is still down, but for the short term I'm not sure this lends itself to the start of a wave 3 at various degrees.  But we'll see.

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Again, the top count above is very bearish.  It suggests wave iii of (iii) of 1 of (3) of ((3)) is underway.  Unfortunately, I wouldn't expect to see such deep and long lasting corrective rallies for this structure, and I'd also expect volume to be surging with the declines.  Perhaps the holiday season malaise is already kicking in, but who knows.  The alternate triangle count comes in a very close 2nd but could be eliminated early tomorrow on a break below 1225.  If the triangle is eliminated, then this count above holds strong footing and will be used as a basis for all my trades for the foreseeable future.

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The alternate triangle count is listed above.  You can see that it's fitting quite nicely into a good consolidative triangle pattern that should be finishing up right now.  The result of this triangle is of course a sharp surge higher to a new high which will then be quickly and completely reversed.  Another strong piece of evidence for this count is how prices reacted to the news that came out about US banks worried that European problems might affect them.  The market sold off sharply in conjunction with this news.  EWP states that E waves of triangles often are the result of some news event, but are the last move of the triangle and result in sharp reversal thrusts to new extremes.  Well the news event about European and US banks led to a decline that fits well for wave ((e))'s placement in the triangle count and it means that early tomorrow the market will undergo a large and sharp thrust higher to above 1300 at a minimum.

A sharp move higher on solid volume would put this count as top choice and give wavers a good opportunity to start establishing short positions above 1300 in my view since thrusts from tirangles are finishing moves are quickly and completely reversed.

A break below 1225 would pretty much erase this count from contention and put the first bearish count post at the top as the best viable count.  For those of you who subscribe to EWI's Short Term Update you saw what Steve Hochberg had to say about the triangle scenario and I feel it's very compelling myself.  It's also a big reason I have the two counts listed the way they are.

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After a nice clear ABC rally with a B wave triangle in the middle and a C wave that stopped around 78% fibonacci, the euro did what was expected, it fell to a new low.  The euro continues to decline impulsively and rally correctively (3 waves).  I see no reason to abandon the bearish stance here.  I remain short 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.

Stock Triangle PIcking up Traction; Euro to Correct Higher, then Fall Hard Again

Internals suggest that the usual market participants had better things to do today.  Only 709 million NYSE shares were traded today, surely one of the slowest trading days of the year.  When you combine this with the price action it lends itself more to the triangle alternate count I mentioned yesterday.  With Thanksgiving coming up next week, a week that's typically good for stocks, it's possible we might just float around in a net sideways-to up market for the next couple of weeks.

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With volume so light on today's move, it would seem more likely that today's weakness was corrective, and that a new high is still on the way.  But seeing as that the correction from the Wave i low would be getting quite elongated, along with the unorthodox look of wave (iii) down that's supposed to be underway right now, it means this count is losing steam.  If this count is on track still, I'd like to see a sharp and quick pop to a new high tomorrow followed by a sharp reversal, or the market just fall hard with solid volume (above 1 billion NYSE).  Anything other than that would lend itself more to the below triangle scenario, or perhaps something else entirely.

The sideways action over the past month or so, along with decreasing volume numbers, fit well into the triangle scenario shown above.  If so, this would fit somewhat nicely into the upcoming holiday malaise we should see for the next week or so.  I think tomorrow's price action and internals will be very telling on which of the two above counts are most likely in play.

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One of the reasons the more bearish count is still my top choice at the moment is the wave count in the euro.  The euro appears to have topped and reversed again aftern an exhaustion gap up from Sunday.  The resultant decline looks impulsive, again furthering the case for a top and bearish reversal.  Yet stocks did not follow the euro's intensity to the downside today.  This tells me that perhaps the upcoming corrective euro rally with fall short of making a new high, yet stocks might make a slight pop up to a new high before reversing, creating an intermarket divergence I would see as very bearish.  So I still think it's better to be short the euro here.  And aside from stocks, the past few years the Thanksgiving holiday has been very bad to the euro and great for the US dollar.  If that holds true again this year, it means heavy selling is just ahead for the euro, and the wave count above supports this 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.

Volume Numbers Continue to Suggest the Stock Rally is Corrective; Euro Topping

From an EWP perspective the rally is getting very deep.  After a nice top and reversal for wave (ii) at the 78% fibonacci retracement level of the previous decline we got a very nice and sharp selloff which was encouraging for the bears.  But the ensuing rally has gone quite deep, yet has not made a new high.  Therefore the above count remains valid.  But I expect a top to be in now, or with just one more quick pop higher tomorrow morning before the heavy selling returns.  But that "pop" higher is not necessary, looking at the euro we may get immediate weakness right at the open tomorrow.  Either way, the risk/reward favors the bears here.

The count on the back burner is the possibility that a triangle is forming which means Intermediate wave (2) is not complete, and that the larger downtrend has NOT resumed.  This would also be another explanation for the decreasing volume the past few trading days.  I don' t see this count as top choice right now though, but with the holidays approaching and the weak volume right now and sideways price action, this count is gaining traction as a strong possibility.  A break above 1277 would put this triangle alternate on the table.

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Volume supports the EWP count in that last week's rally has been on severely weakening volume.  As I hinted in my last post, the Veteran's Day holiday Friday brought the market a nice rally but did so on weak volume at only 745 million NYSE shares.  So the masses aren't taking part in the rally, at least not yet.  So for now, price action relative to volume gives a bearish outlook for stocks right now. 

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The euro looks to be topping here.  Using basic EWP analysis it appears a nice ABC correction is complete with wave B being a triangle.  Although I don't have a longer term count that's reliable, it doesn't mean we can't us EWP basics to get a good idea of the shorter term action.

The 78% fibonacci retracement of the previous decline has been reached and slightly exceeded, making it the preferred maximum retracement possible to still reliably count this rally as a correction.  The fact that the RSI and stochastics diverged on the recent new high at today's gap open, and that it looks like an exhaustion gap since it was immediately reversed after a big rally, the euro may be topping here.  I'm looking for the euro to head sharply lower now and the risk here is tight, i.e. either at today's high or 1.3860.

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 and Euro Rallies are Weak, Larger Trend is Down

Today's price action was strong in that we got a triple digit Dow rally, but other than that, the move today looks quite weak.  The S&P lagged the Dow slighty, but the Nasdaq lagged big time as it struggled to just close in positive territory.  Also, the rally never really got any legs to push higher and hold itself higher, and as a result it so far looks weak and choppy on the hourly charts, which is corrective.  But this is subjective I suppose, but what's hard fact is that the internal composition of today's rally was quite weaker than what accompanied the decline yesterday.  Here's what I mean:

Today's up volume was 71.8% of total NYSE volume while yesterday's down volume was 98.5% of total volume.  Total NYSE volume today was 895 million while yesterday's was 1.1 billion.  Today had 409 S&P stocks closing higher while yesterday had 499 stocks close lower.  And today, the NYSE had 2.3 advancers for every one decliner while yesterday had 9.6 decliners for every one advancer. 

So clearly, the data we have from the last two days suggests today's action is simply just correcting the extreme bearish move from yesterday.  The larger trend is down.

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The wave count supports the internals' analysis above.  Minuette wave (ii) ended right at the 78% fibonacci retracement level of the previous decline and sold off sharply after doing so.  Today's bounce is choppy and internally weaker than the previous decline, and when you combine it with the fact that the price action looks choppy and weak so far, it has me concluding that today's move high is corrective.

Tomorrow is Veteran's Day so volume will probably be light.  And looking at the price action is seems there is a little more work to do to correction Wednesday's massively bearish selloff.  So I can see tomorrow being an up-day on light volume.  But that is fine with me, just another opportunity to add to my shorts with tightened risk at 1277.

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I'm getting close to developing a confident wave count for the euro, and it is aggressively bearish as you might guess.  There is no reason to think the euro's larger trend is anything but down at this point.  After the last large euro decline it could only manage a weak 38% retracement while US equities made a 78% retracement.  So I'm not expecting fireworks to the upside for the euro in the coming days either.  Regardless, the 1.3850 level should act as a solid ceiling to cap euro rallies, leaving a good clear and somewhat close stop loss level for the bears.

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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.

Stocks and Euro Top, Look out Below!

Judging by the internals and price action today, all signs point to another significant top yesterday.  Adding to this is the fact that the S&P cash index topped and reversed right on the fibonacci retracement level of 78%, a common place for second waves to end.

Today's internals were extremely bearish with only 1 S&P stock closing higher, 98.5% of NYSE volume to the downside, and 9.6 decliners for every 1 advancer on the NYSE.  When you add everything together, the market is tracking the wave count well and it means that heavy selling to much lower levels is ahead of us.  The only "question mark" out there for the short term is how the Thanksgiving and Christmas holidays will play on the markets since they tend to be composed of light volume rallies for the market.  Yet the wave count suggests aggressive selling in the coming months.  We'll see. 

For my charts and wave count see yesterday's post below.

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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.

Stocks Retracement is Deep, But Ending Soon; Euro Can't Get Off the Mat

Nothing really new or exciting has occurred since the last post.  Still watching and waiting for a reversal and don't see it yet.  Stocks only "paused" at 61% fibonacci and are attempting to launch an attack on the 78% fibonacci retracement level at 1276.  Deep retracements are not uncommon for second waves.  The key is that 1292.66 remains intact.  And as long as it does remain intact, I view the market as very very very vulnerable to a serious decline.  The risk/reward favors the bears big time here.  I can always be wrong, so I'm not betting every cent I have on the move, it's just that probabilities and the risk/reward strongly favor the short side here with a stop just above 1292.66 - in my opinion.

The current rally still looks corrective.  It continues to be choppy and uninspiring internally as volume continues to decline as prices rise.  And the euro is having trouble getting off the mat, suggesting the appettite for risk is muted as people are still trusting the US dollar versus the euro currency at this time.  That to me is a subtle sign of the real internal risk appetite of the fiinancial markets with all this Europe mess going on.  Risk taking is muted, yet hope is strong; a combination for nice selloff soon.

Earnings: Stock Market's Brightest False Beacon

Here's what I mean about the euro not being able to get up off the mat.  It is having trouble getting through even the 38% fibonacci level, despite US stocks rallying towards their 78% fibonacci level.  To me, this divergence between the two markets suggests that the stock rally represents the "hope" that everything is okay and anticipation of a strong market in the coming months, while the weakness in the euro shows the true underlying feelings of the global financial markets which is one of fear and restraint.  That's bearish. 

Risk is wide here on the euro since it can rally to almost 1.4250 before topping, so I have decent short position on now and will add shorts on rallies, or on signs of a reversal.

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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.

Stocks Pause at 61% Fibonacci, Euro at 38% Fibonacci....Are Tops In?

The market threw a head fake to the bears with the early morning decline then rally.  Not to mention the futures and euro were down big in overnight trading.  So it's been a wild 24 hours for the markets.  All eyes may be on Greece and every little move they do, but we wavers could care less since we know that for the longer term, Greece moves mean nothing.  We watch the wave count, and the wave count is very bearish.

Internals were mixed today as total volume kicked up to 1.05 billion NYSE shares, a slight uptick from yesterday's 955 million shares but still well short of the 1.3 billion shares traded on Tuesday's decline. S&P advancers stayed about the same at 455 from 448 yesterday, but only 85% of total volume was to the upside compared to 90% yesterday.  So the market had solid internal strength, but nothing jaw dropping to suggest any momentum is being picked up on the move the upside.  The rally still looks corrective.

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The S&P is primed for another decline as early as tomorrow (Friday).  The S&P filled its gap at 1253.16, and has paused so far at the 61% fibonacci retracement level of the previous decline.  Stocks can drop as early as first thing tomorrow morning.  If not, then they may want to push towards 1276.  Either way, the risk/reward here favors the bears right now.  Again, as long as 1292.66 remains intact I remain firmly bearish and will continue to short rallies.

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The euro also did a head fake to the bears this morning but has not performed nearly as well as stocks have.  You can see this clearly with the comparable fibonacci retracements of the two.  Stock have so far retraced 61% of their previous decline while the euro has only retraced 38%.  The euro usually leads the stock market so this lagging behavior in the euro might be telling.  Here too the euro looks poised to fall hard again at any moment.  Since stocks and the euro should fall together, and stocks are already at the 61% retracement level, I doubt that the euro's correction will go much past the 50% retracement level at 1.3925 if it decides to continue higher 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.

Stocks Form Major Top, Destruction Just Beginning; Euro Topped, Headed Much Lower: plus Wednesday's Addendum

Wednesday's Addendum: I've posted my thoughts on where we're at in the market in yesterday's post below, but right now I just wanted to put up a quick update on today's action.  Although the rally was fairly strong as far as price is concerned, internally it did not exceed the intensity of yesterday's decline.  For example today's S&P advancers were 448 vs. yesterday's decliners at 479, today's up volume was 90% of total volume while yesterday's down volume was 93%, and most importantly in my view today's total volume was a weak 955 million NYSE shares vs. yesterday's 1.3 billion shares.  So this rally has the internal makeup of a correction, suggesting the larger trend remains down and this week's lows will be broken soon.  This corrective rally either finished at the high today, or might do so with one more leg up to a new a brief new high.  But either way, 1292.66 should remain intact, giving the bears a clear risk level.

Tuesday's Post:

Usually I refrain from making bold statements like that in today's title since usually when I do it the market does the opposite of what I say, stamping the word "fool" on my forhead.  But I want it to be crystal clear what my outlook is now for the market looking ahead.  I will try to analyze the short term movements of the market in the coming weeks/months, which means anticipating relief rallies, but I want to drive home the "bottom line", which is the big picture.  And the big picture tells me that as long as 1292.66 remains intact on the S&P cash index, stocks are extremely vulnerable to a major selling phase in the coming months which could result in over 50% of value lost.  And although the greedy little monster in my head will whisper in my ear constatnly to leverage every penny I have in derivative-type trade shorting stocks, I also need to always keep in mind that no matter how sure I am of the market's direction, I could be wrong, and I need to always protect myself.

Now to the markets.  So another failed attempt for a "man-made" stock market recovery from the government....this time in Europe.  Last week the Dow popped 400 points on government intervention.  Some common investors I know were giving me jazz because the day prior I suggested they protect their retirement accounts by putting them in all or mostly cash.  But with a rally based on government intervention it was nothing more than a sell signal for me, and I told them that.  This week now has me giving those same people jazz back, lol.  It's all in good fun.  Governments around the world will attempt to stop the implosion, and will cause short term pops only, and in the end they will all fail.  Primary wave ((3)) will do what it wants to do and only stop when it is done destroying almost everything in its path.  There's nothing any person or government can do to stop that.  The crowd is in control, and the crowd always overpowers governments and individuals, i.e. Warren Buffet, et al.

The internals today were very bearish in that 84% of NYSE stocks traded lower, 479 S&P stocks traded lower, and 93% of total NYSE volume traded to the downside.  Total volume was just under 1.3 billion NYSE shares, which is not jaw dropping, but volume should increase as Intermediate wave (3) progresses downward.  So overall, a very bearish day in price action and internals.  When combined with the wave count and other technical indicators, it looks like a major top is in.

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Updating the S&P chart I've been posting the past few weeks, we can see that this top is a major one as far as EWP is concerned.  This week's declines should be the start of Intermediate wave (3) within Primary wave ((3)).  So a 3rd wave within a 3rd wave is now underway.  This is a Waver's dream trade here.  And what it means is that this market should move lower in a hurry, destroying support like it's paper thin.  And since 3rd waves tend to do whatever they want to do and ignore most technical and fundamental indicators, it's wise to ensure I don't get in its way.

With that said, the hourly charts show that the S&P probably has to make one more new low to complete a nice 5 wave decline from 1292.  This will probably occur tomorrow morning.  It's possible a sharp recovery rally will then take place.  But as long as it stays below 1292, I will be aggressively shorting that rally, IF IT EVEN OCCURS.

Bottom line: if the above count is correct, it means that over 50% of the value in the stock market should get erased in a very short period of time.  Needless to say, I'm short.  My stop is just above last week's high at 1293.

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The euro is getting destroyed.  The European "save the day" news only lasted about a day.  And now, as usual, the markets realize the financial system as we know it is still doomed.  So the dollar is back on fire again, crushing the euro in a 5 wave move as you can see in the above chart.  Here too I will be aggressively shorting rallies as long as last week's high remains intact.

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Stocks Go Flat After Big Rally Last Week; Evidence of Euro Top Mounts

Nothing has really changed since my last post as you'll see the same daily chart above that I've been posting for quite a while now.  Stocks are in the targeted reversal zone between the 61% and 78% fibonacci retracement levels, a common place for second waves to top.  What's important, aside from stocks having trouble gaining ground inside my reversal zone, is that after Thursday's monster rally from europe "saving the financial world" is that Friday was flat, and today is so far negative........meaning there has been abosolutely no follow through to the great save the world news and big rally last week.  Now today's trading isn't over and we could sure see a monster rally into the close.  So I'm not getting too excited here, nor am I calling a top at this moment.  All I'm saying is that so far we've had no follow through to the big rally last Thursday, and stocks are stalling in the reversal zone I've cited, two bearish signs.

The action into the close will be telling.  And keep in mind, it's the last day of the month so end of month trading can make things a bit whacky.  I have a feeling this week could get pretty wild as November gets underway, and it's a month that has been particularly brutal to the euro in past years which could be reflective of what will happen to stocks.

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And speaking of the euro, here she is.  On the daily chart you can see the top from last week took place at a very convenient spot, the 78% fibonacci retracement level.  If the big bearish candlestick on the day holds into the close, I will definitely be taking another stab at the short side on this pair.

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In addition to the reversal right at 78%, the euro declined from the high in five waves.  This in-and-of-itself is enough to get EWP bears in on the short side in my opinion.  I'd like to get a nice bounce from here to give me better positioning on the short side though.  And when you combine this with the fact that November, and especially the Thanksgiving US holiday, tend to be very bearish for the euro, it definitely has me salivating to short this pair 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.

Stocks Well Into Reversal Zone; Euro Slaps Me

Tuesday I thought a top in stocks might be in, but was unsure.  Then the big euro reversal yesterday made me think a reversal in both the euro and stocks was at hand.  Well, you know the result of that thinking.  If the top I'm looking for is in fact Intermediate wave (2) of Primary wave (3), then it will be a doozy when Intermediate (3) gets underway to the downside, and a big money maker for the sage bears.  However, I can almost guarantee you that catching this monster top will not be easy.  And that was proven to me yesterday.

But being wrong in the short term does not make me wrong in the longer term.  With the high on the year still intact, stocks are right in the typical topping area for 2nd waves right now, and the fact that this rally is based on some bailout nonsense in Europe, I feel this is simply just another time for me to nibble on the short side some more.  I'll get more aggressively short on a nice reversal day, or simply a sharp decline on very bearish internals.  But I have little doubt this market will not make it easy on me.  I just have to put my emotions in a box, lock them up, and keep them under the bed for now so I don't do anything stupid.

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Looking at the euro chart I posted yesterday it still looks great for a top and reversal and has me salivating to get short.  Then when I look at the above chart from this morning, I think I'm an idiot for wanting to get short.  But that's the market.  Right around major reversals in likes to suck you in and then slap you, making you feel stupid in front of your friends.  And this slap hurt, I tried twice to short this pair yesterday and got stopped out twice.  I'm waiting now for another reversal sign and will try again.  I'm not giving up simply because I was wrong yesterday.  Being wrong is part of trading.  It will happen, and happen often.  The key is to adhere to the bottom line we all have, which is to make money trading.  Well, that's what I plan to do.....make money shorting the euro.  Yesterday's decline looks like a 4th wave and the 5 wave rise into this morning looks like a 5th wave at some degree.  I'm not sure if it will subdivide further into 4th and 5th waves so I'm going to wait for now.  The top in the euro should align with stocks more or less.

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Euro Reversal Signals Top, Stocks Might Follow

Yesterday I said I suspected the euro might charge quickly toward 1.4000 before topping and sharply reversing.  That's exactly what happened.  Although I got stopped out on the sharp new high, reshorted a few minutes ago because this looks like a top was put in.  If so, stocks might follow soon. 

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Stocks Decline at Bottom of my Reversal Zone.....Top in Place?

Internals today were very bearish in that declining stocks far outweighed advancing stocks on the NYSE and S&P.  And although volume increase slightly today overall, it was still quite light today coming in at just under 1 billlion shares NYSE.  Not sure this supports the case of a top being in right now, but volume doesn't have to enter right at the top, it can come in during the following days, and there is certainly evidence in place now that suggests Intermediate wave (2) might be over.

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Stocks reversed at a very interesting level at the 61.8% fibonacci near 1257.  I've been citing this as the bottom level of my reversal zone the past couple weeks since the 61% and 78% fibonacci retracement levels are often the stopping points for 2nd waves, it's above the prior 4th wave, and the end of Minor wave 1 down June 16, 2011 is at 1257.  All represent good resistance levels that should give Intermediate wave (2) some trouble.

I would have liked to see higher volume with a rally and reversal to be more certain that a top is in right now, but the evidence would seem to at least warrant me to start getting short here.  I will add to my short position on further rallying and /or an acceleration of the downtrend with strong volume and very bearish internals. 

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I like to look at the SPY (S&P SPDR) as a proxy for overall stock market volume sometimes.  You can see that the big sharp decline we had this past July/August had increasing volume accompany it, while the recent Intermediate wave (2) rally has had mildly decreasing volume.  This is bearish.  You can even see the 20 day moving average trailing slightly down now while price moves higher.  This is a good sign that we're on the right track in counting this current rally as a correction, and NOT a resumption of the previous uptrend. 

There is plenty of other evidence to support this, but I don't see a reason to put a laundry list of things on here.  The bottom line is that as long as this year's high remains intact, I see substantial risk to stocks, and that once Intermediate wave (2) ends, the decline should be deep and sharp providing substantial profit potential for those on the short side.

The euro has reached a level I'm comfortable putting on a very small short position to start easing into a larger short position for the longer term.  Today's weakness may even be enough for some aggressive traders to get short with a stop just above the overnight high.  With a nice round number of 1.4000 at the 61.8% fibonacci retracement level in arms reach, it's hard to think that at least on sharp, and possibly quick, attempt to reach 1.4000 won't be made by the euro.  But no matter what my play is on how to approach the short side, I want to make sure I'm in the market when this pair finally decides to turn sharply lower on what I believe will be a move towards parity with the US dollar.  If a sharp move to 1.4000 occurs overnight and stops me out, I wouldn't be surprised if a sharp reversal takes place shortly after, prompting me to jump back in on the short side.


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.

Wave (2) Nearing an End; Euro Should Follow Stocks

Stocks have not done anything unexpected the past week.  Wave (2) was projected to be underway, and was projected to be strong and deep.  It's definitely filling those expectations as you can see it's already surpassed the 50% retracement level, and has barely let up at all.  I see no signs of a top so I expect higher levels next week.  However it's probably in Minor wave C of Intermediate wave (2), and wave Cs can be very sharp yet brief affairs.  So I want to be vigilant and watch the moves carefully next week.  A big rally and reversal in the same day would be a great sign that Intermediate wave (3) had started.  This wave will present an absolutely fantastic opportunity for the bears since it should result in several hundred S&P points being erased rather quickly before a bottom occurs.  So I don't want to miss it.  Further rallying from current levels will get me to start nibbling on the short side.  Once we get a good sign of a reversal then I'll start to pile on even more to the short side. 

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The euro's structure remains unclear so I'm focusing on basic technical analysis here.  Although I do feel a major top has occurred in the euro back in May of this year since it aligns with the big picture in stocks.  With that in mind, the RSI's rise remains healthy while the stochastics have crossed over, suggesting at least a pullback might be coming soon.  I hold the RSI in much higher regard than stochastics, so I'm still on hold trading the euro.  And since stocks probably haven't topped yet, I'm looking for the euro to continue climbing as well.  Looking higher we see a nice resitance level at 1.4000 since it is a solid round number and it's also a 61.8% fibonacci retracement level of the big decline the past few months.  This should be a good topping area to watch for the euro. 

Much like stocks, further rallying this upcoming week will get me nibbling on the short side here, waiting for a big reversal sign for me to pile on even more to the short side.

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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.

Stocks Contiue Higher in Wave (2); Euro in Same Position as Stocks

Stocks have continued higher in Intermediate wave (2) as I've been talking about the past several days.  Nothing new has developed this week to change tjos outlook so I haven't posted anything.  But today's pullback may signal that Minor wave B down has started.  I want to be clear though, I am not a firm believer in trying to dial down corrections to predict every little move as if it were a mathematically and scientifically calculated certainty.  EWP, like all technical analysis, is all about probabilities.  And with several different corrective forms Intermediate wave (2) can take on, and many of them so different from each other, trying to project the wave structure would still produce low probability trades.  My opinion.  With that said, I'm merely tracking it in the above chart with an educated guess.  I usually start counting my corrections as the simplist form, a zig-zag, and then make them more complex as the market demands.  I am neutral on stocks right now and have no positions in equities at the moment.

Bottome line: stocks were repelled at a prior swing high as well as 50% fibonacci retracement right now.  I believe this is only a temporary barrier, with the current decline possibly being the start of Minor wave B.  Once Minor B is over, Minor C higher will be in full force, a strong 3rd wave surge into my reversal zone labeled above.  Once Minor wave C is complete, Intermediate wave (2) might be complete, and then disaster should strike for stocks with a large and very destructive Intermediate wave (3).

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I'm uncertain of the wave count in the euro since it started so choppy and with a lot of 3 wave moves around the high.  So I'm using basic technical analysis, and monitoring stocks in correlation to the euro since they tend to move parallel more or less.  You'll notice here that the euro is also trading at, and having trouble at, the 50% fibonacci retracement level.  Although, keep in mind I'm not using my fibonacci measurement equal to stocks since the euro's fibonacci does not start at the high on the chart.  The reason I'm not starting it at the high in the euro is because it doesn't look like a full 5 waves down from the high, so the next best thing is to measure the length of the sharp decline itself and count the retracement from that only.  Needless to say, the euro is not painting a clear picture here so I don't want to trade it.  But when stocks top in Intermediate wave (2) I will be looking to short the euro along with stocks despite the euro's lack of clarity.

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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.