Stocks Look to Fall; Euro Firmly Bearish

Below I list my projections and stop levels.  As long as the stop levels remain intact and nothing significant develops, this post will stand as guidance for the foreseeable future.

The bottom line is that the S&P looks poised to fall soon.  It has either topped already with wave (ii), as seen above, or will do so with one more poke higher before turning down hard.  As long as 1422.38 in the S&P cash index remains intact, the index is very vulnerable to a big decline at any moment.  Remember, the Fed will make an announcement later today which could result in some volatility at the end of the trading day and into tomorrow. 

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The daily euro chart is very bearish as you can see above.  There have been several attempts to break down the 1.3000 level that have failed.  But with every attempt, more and more of the support is eroded until eventually there's almost nothing left.  The decline from 1.3384 is strong and the recovery from the 1.3000 area is choppy and weak.  I expect the euro to stay below 1.3384 and continue lower through 1.3000 quite soon.

Stock Market Turning Points: Has Wall Street Ever Warned You in Time?

The short term does not look good for the euro either.  The euro has really been laboring to make new highs since recovering from 1.3000, and the most recent high on the hourly chart was not confirmed by the RSI, suggesting the rally is weakening severely.  The Fed announcement can throw everything off quite a bit, so if you have a trade in, manage risk properly, buckle your seat belt and prepare for a possibe wild ride later today.  Overall though, as long as 1.3384 remains intact, I see the euro as very 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.

Keep it Simple

Internals show a market that is moving around on light volume with only 734 million NYSE shares traded today. More importantly though was the fractured nature of the overall market.  Apple, and other big tech stocks, helped pull the market higher the past month or so.  But Technology failed miserably today, and has been having trouble the past week overall.  This is part of the reason why despite a solid performance from the Dow on the upside, the NYSE's up volume only slightly outpaced down volume, 387 million to 335 million.  Internally, the market looks bearish.

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I'm keeping it simple.  I'm not worried about Primary wave ((2)) or ((3)), and I'm not trying to make a fortune by gambling on a Primary wave ((3)) right now.  All I'm doing is focusing on the short term obvious points we have in front of us which are: 1) the market was severely overbought going into the recent weakness; and 2) you can count an impulsive decline from the high suggesting that the larger trend is down.  I would simply be shorting against 1422 with a minimum target of 1340, but probably much further.

Diagonal: Straight Shot to a Trading Opportunity

The euro seems to have made up its mind on which of my counts it's tracking.  Usually a correction goes just above the prior 4th wave high, which is 1.3225 here in the euro, before topping.  1.3400 should not be exceeded, so I'm shorting with a stop just above 1.3400.  Keep it simple, the larger trend appears to be down as long as 1.3400 is not exceeded so shorting seems wise 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 Shaken and Movin Finally; Euro to Head Lower

As I said in last week's post, stocks appear to have topped.  I'm unsure of how major of top this is, but for the short and medium term bears, it provides opportunities.  Stocks are correcting a severely overbought situation they've been in for many weeks.  The short term is bearish.  1422 should mark the high for the foreseeable future.  I'm shorting modestly against that level.

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With stocks slapping me around the past several months, I've focused more on the euro since it has been more predictable, and has consistently been profitable for me.  I propose two wave counts today, both are short term bearish.  Above is my original count I was tracking for the past week or so which is still very much possible.  But today's sharp decline makes me think that it's not just a wave ((v)), but possibly a 3rd wave instead.

Here's what I mean.  By changing the degrees of trend to the Minor level, it's quite possible today's decline is the kickoff to Minor wave 3.  Now there's a lot of trading left in the day, so let's see how the euro closes before we make a decision on which count to put as top choice.  The way I see it, if the euro closes near its lows for the day, this count directly above is my top choice.  But if the euro makes a solid comeback and closes significantly higher than the lows on the day, then I'm still putting the count with wave ((v)) underway as my top choice.  Minor wave 3 should be strong and relentless, so anything short of that type of action here will put this count in 2nd place.  Either way, the short term for the euro looks 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.

Stocks Toppish; Euro to Decline Further

The S&P managed a new high to eliminate the head and shoulders pattern I showed in last post.  But it immediately declined afterward.  What's more important is that the Nasdaq Composite did not confirm the S&P and Dow's new highs and they all have now turned down.  The Nasdaq has been the leader of the overall market the past few months, so when you factor in that the Nasdaq is showing weakness now, the odds are good that at least a short term top is in place.  I recommend being conservative and flexible and managing risk appropriately on any short positions.  I'm not calling a P2 top or anything right now.  The focus is on the short term, and the short term suggests further weakness ahead.  I'll assess the longer term picture once the short term plays out a bit more.

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Unlike stocks, the euro did follow my head and shoulders topping pattern I laid out in last post and has been on an assault to the downside since.  The daily chart shows that the 1.3000 level is a good support level for the moment, and it currently sits near that level at the time of writing.  Judging by the pattern I see before me, 1.3000 will be taken out farely soon.  There may be a relief pop to the upside to alleviate some of the oversold condition it has on the intraday charts.  But that pop should be short lived and the downside movement should resume to well below 1.3000.  I'm firmly bearish the euro, and bullish the US dollar.

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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.

Nasdaq Erases 2007 Crisis Losses; Head Shoulders Not Just for Dandruff

The Nasdaq has made a significant new high as it has erased all the losses from the 2007 financial crisis, but more importantly it erased what was labeled as a nice 5 wave impulsive decline.  This ws important for wavers to use in order to support the claim that a much larger downtrend was in place.  This is gone now.  And this is not good for the EWP community that was following Prechter's count.  The Nasdaq's new high may signal that it is leading the blue chip S&P and Dow higher.  Usually the higher risk stocks lead the overall market so I have to be prepared for this to be the case here.  The flipside here is that the Dow and S&P have not made new highs with the Nasdaq so there is a divergence in place.  If stocks turn down hard while this divergence is in place, then it's very bearish for the overall market.  But this is less likely to occur.  I believe that it's highly possible that the Nasdaq is simply leading the S&P and Dow higher, and they too will take back all their losses from the financial crisis and erase their 5 wave declines as well.

Remember, markets are all about probabilities.  The probabilities at this point favor the bullish side.  That doesn't mean the bears are dead, it simply means that the odds favor the bulls.  I have no position in stocks right now.

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Focusing on the short term I see a possible head and shoulders top forming.  This means that the current rally is the right shoulder that should top around the 1414 area.  A move above the head at 1419 will negate this pattern and keep the rally well intact.  I am not shorting here though since trying to call a top has been foolish the past several weeks as many of you know.  I'll wait for an opportunity to arise and announce it here.  Until then, I'm focusing more on currencies as I've found more success their recently.

The euro appears to be forming a head and shoulders top on the daily chart.  The pattern here is much more mature and suggests a decline is coming very soon, perhaps Sunday night or Monday.  I have a small short position in place but plan to add to it if there's a strong impulsive shot lower.

What All Major Depressions Have in Common

Momentum for the euro rally on the intraday charts is not good for the bulls.  The RSI is lagging badly and has not confirmed the euro's new prices highs in a long time.  This is not a good timing indicator so this doesn't mean the euro will decline right now.  But with a head and shoulders formation in place on the daily chart, I'm shorting the first sign of weakness.  Euro bears be alert Sunday night and Monday for an opportunity.


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 Put in AT LEAST Temporary Top; Euro Clearly Has Topped

Stocks have not been kind to many wavers, mainly the bearish ones.  So I'm going to be conservative in my approach here.  The stock market has been floating higher on weakening momentum and light volume the past several weeks.  Normally this results in a sharp snap back decline to allow a "restart" before continuing higher.  Or, it signals a major top will occur.  It has been very challenging trying to predict that top, and whether it will be a short term one or a long term one.

The structure right now is only 3 waves down, which is a correction.  But you need a 3 wave move to start a 5 wave move, so let's wait and see how this decline unfolds.  And you'll see I put up a quick five wave count leading into the decline to show that a top at some degree is in.  This could quite possibly the be the final impulse wave of the entire move up the past several months. 

I believe there is at least a short term top in place simply with all the other evidence suggesting this market is bloated and overbought at the moment.  Even though I'm almost guessing here, the risk/reward is solid since I can put a stop above the high on the week and expect a decline to the area of previous support at 1340.  So I'm not going to jump and call a top to Primary ((2)), or suggest a major depression is picking up speed.  No, I'm just saying that odds favor the market having put in at least a short term top this week and the risk/reward favors the bears here.  Keep it simple, keep it short term.....for now.

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The euro, on the other hand, has been kind to bearish wavers since it has more or less followed my wave count.  Wave (c) of ((ii)) ended up deeper than I expected so I had to adjust waves (iii), (iv) and (v) to give it a better look.  But it all fits well.  This count suggests the euro's next move should be down big.

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And drilling down even further for the euro we see one of my favorite trading patterns; a head and shoulders top.  When you combine this formation with the wave count above it, you have a very bearish and tradeable outlook for the euro moving forward.  I'm pretty heavily short the euro right now myself.

Are the Efforts of the World Central Banks Working?


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.

Heading into Next Week; Stocks, Euro Discussed

Today was options expiration day for the first quarter so volume was quite heavy, yet the net result in price was almost neutral.  Not much to obtain from internals today with that in mind.

In looking for resistance, I see the 1400-1410 level as a great reversal point.  It's a previous congestion area from a few years ago, as well as a round number.  Above 1410 we have a nice zone between 1425-1440.  Although I doubt the market will make it that high, it's still worth watching in case it does.  Right now, I'm still waiting, no trades in.

Which Method Can Traders Use to Confirm an Elliott Wave Count?

Wave (v) is currently trading at the 61% fibonacci relationship of wave (i).  Oftentimes, 1st waves will equal 5th waves, or some fibonacci combination of the 1st wave.  So again, there is another nice piece of resistance here that could repel this market toward a major selloff.

But with no solid evidence that a top is in place, we have to respect that the trend is still up for now since there is a well defined series of higher highs and lower lows.  We need to see that trend break down, preferably with a nice reversal pattern near the resistance levels I cited, before I will take a short position.  Until then, I will remain on the sidelines.

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The euro is tracing out the flat correction I put in my last post.  Although flat corrections for 2nd waves are rare, it's still possible here.  The sharpness of the rise also coincides with the wave (c) labeling since C waves are impulses and therefore very strong.  I expect the 1.3200 area to cap the rally, but if it doesn't and it follows through to the upside, then another pattern is probably forming.  Most likely it will mean that the 1.3000 level was reached by a 5th wave ending diagonal instead of a (b) wave like I have labeled above.  If correct, then there's certainly room for a lot more upside.  But 1.3485 remains the line in the sand for the bearish count regardless.  As long as that level remains intact, I'm bearish 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.

Stocks Float Higher; Euro Struggling

I'm not posting any stock charts tonight.  EWP has not been accurate in forecasting stocks the past several weeks and some people have expressed anger and great frustration with EWP and me, and judging by the hate mail I've been getting I think most of them simply look at the charts and don't read what I say.  So I'm going to only post words for stocks tonight.  This anger and frustration some people are feeling is usually because they are new to trading and fail to understand that no analysis is 100% accurate all the time, and it's up to the trader to determine when the probabilities, along with risk/reward ratios, are in their favor to determine when a trade is worth making.  Professional and successful traders don't have to always have a trade in place, and don't have to always know which direction the market is going.  Trading is about probabilities and risk/reward ratios, and when they're in your favor then you trade, when they're not in your favor you stay away.  Right now, EWP is not in our favor for stocks, so I'm staying away until a nice reversal pattern forms.  EWP's accuracy for stocks will return, and I'll continue to make money on swing trades when it does.

Now EWP and basic technical analysis has been much more accurate with the euro lately so that's why I've been actively trading it and am currently short right now.  The euro has declined impulsively from its high at 1.3485, and so I will bearish until price goes above that level.

There are two wave count options I see for the euro right now.  The first is posted above where wave ((i)) has completed and it is about to undergo wave (c) rally within a "flat" correction for wave ((ii)).  The story here overall is still bearish, it's only in the very short term I have to expect a sharp wave (c) rally to around the 1.3200 level before it tops and reverses.

The other option is that wave ((ii)) has already completed, and a big strong wave ((iii)) down is now underway.  If correct, the euro will not hestitate to shoot lower this week.  If correct, this is a move I don't want to miss, so I have sell stops in place to catch a break out to the downside.  Utlimately risk is capped for the bears at 1.3485.


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 Decline Looks Corrective; Euro Finishing its Own Correction

Internals today continue to support the bigger bearish picture in that volume is not supporting the rally and therefore the rally has no legs over the long haul.  However, in the short term, the wave structure indicates a new high is probably coming before a major reversal occurs.  Volume declined again to 715 million NYSE shares on a rally move today which is far less than the 876 million shares that accompanied the decline earlier in the week.  Unfortunately for the bears though, 876 million is still a small number overall.  I'd like to see volume break 1 billion to gain confidence in future direction.  Most likely that type of volume will occur on a huge down day in price.

Which Method Can Traders Use to Confirm an Elliott Wave Count?

Although I'm short now and am looking aggressively for shorting opportunities only, I can't overlook the fact that from an EWP perspective, the recent decline looks like a 3 wave drop which is a correction.  No worries though, it was probably just one of the fakeouts I mentioned would probably occcur as a major top forms.  Patience rules the day.  Once I notice a high confidence reversal pattern is in place, I'll mention it here.  Until then, I'm waiting to add short.

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The euro is probably correcting in a wave (iv) as I labeled above.  If correct, it needs to fall almost immediately because wave (iv) is getting a bit stretched relative to wave (ii).  Prolonged rallying probably means I have this mislabeled, but the alternate counts are still very bearish.  Bottom line, look for the euro to continue lower soon. 

Who's Going to be President? Ask the Stock Market.


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 Weakness is a Good Opportunity for the Bears; Euro Trend is Firmly Down

Today's reversal was decent from a bearish perspective since the decline is unfolding impulsively after the market internals and momentum are beyond stretched and tired.  This suggests more downside is to come.  Also, down volume was 95.7% of total volume on the NYSE today, so it was all selling all the way today.  Looks like a lot of profit taking of people who have done well on the recent rally and want to reduce risk here at these levels.  So all it takes today or tomorrow is a small fear jolt and this delicate market will crumble as those who didn't exit yet but are thinking about it, will rush for the exits and take profits at the next sign of trouble.  Total volume increased by 25% today compared to yesterday, which is good for the bears, but overall it's still a very light number so let's not do a cartwheel just yet.  I doubt a major top like the one labled in EWP below will occur this easily, so be prepared for some fakeouts and disappointments.  Always manage risk assuming you're wrong whenever you place a trade.

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In addition to total volume being a bit light for such a major top perhaps forming, another piece of evidence isn't exactly very bearish.  You can see that today's decline is sitting right on an ascending trendline established from late last year.  The market may bounce from that trendline tomorrow, but ultimately it should crash below it and open the door to the possibility of heavy selling.  A nice close beneath this trendline in an impulsive structure would be a great sign that top is in.  I shorted small already since the risk/reward is so favorable here, and because I've been on the sidelines for so long.  But I will pile on the short side more and more as the evidence mounts that a top is in fact in place.

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The euro followed the wave count I put up yesterday as it continued lower it what is probably a wave v within wave (iii).  As long as the euro continues following the basis of this wave count I will continue to use it and trade with it.  3rd waves tend to do whatever they want, and they often extend, especially within their 5th wave which the euro is in right now.  I'm holding short, expecting lower levels for the euro in the days ahead.

Who's Going to be President? Ask the Stock Market.


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.

Still Waiting For Stocks to Make Tradeable Move; Euro Has Opportunities

Nothing has changed from my post, charts and the wave count remain static.  I'm still waiting for a reversal pattern and impulsive move to the downside so I can establish a position.  I've been on the sidelines for weeks now, simply waiting.  Volume continues to be light with today barely breaking above 700 million NYSE shares.  Tough to trade with volume like that, unless you're a daytrader which I am not.  One of many signs that this rally has no legs is that volume has left a long time ago.  The next move of consequence to provide traders a good solid opportunity should be to the downside.  But we have to wait until the market is ready.  But I'm on high alert....looking for signs of a reversal, knowing that many others are doing the same so there will probably be a fake out or two to the downside before the real heavy selling gets underway.  So as always, I'll be managing risk appropriately and looking for a shorting opportunity.

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The bottom line is that the euro appears to be falling impulsively.  Being so early in the decline makes it hard to determine the degrees of trend with high confidence, but the subdivisions of the move is undoubtedly impulsive nonetheless.  So the path of least resistance for now is down.  The euro should not exceed 1.3485 in the near future, so shorting with stops just above that level seems like a good opportunity to me, especially if a big rally occurs from current levels which would allow me to short at a better price.

Who's Going to be President? Ask the Stock Market.


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.

New Highs Slap Wavers....AGAIN; Euro Correction Looking Clearer

I haven't posted anything in a while because there was nothing new to add from my last post.  The market has continued the slow grind higher with no clear signals to establish a tradable position in my view.  But this week the S&P confirmed the Dow's new high, which is a significant event, and therefore the reason I'm writing today.  The major bearish setup was that the Dow made a new high while the S&P did not, so any sharp downturn would be a great signal for the bears to jump in short for what could have been a major selloff.  But that setup was negated with the new high.  It means again, wavers were wrong in calling Primary wave ((2)) complete, and again we have to look higher and continue stretching out the count.  It has been tiresome and frustrating to say the least.

Although I have not taken a position for quite some time since I thought the best move was to get short when opportunities arose.  But the fact that I missed this long gring higher frustrates me.  Again, I find myself standing on the sidelines with no position, simply waiting for an opportunity to get short.  It won't be easy at this point.  I expect volatility to pick up when a top starts forming, and most likely at least one fakeout will occur.  So I'll remain disciplined and keep risk tight when trying to catch a top and short this market.  But for now, it's a waiting game.

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The euro's correction seems a little more clear now.  It's completing a Minor A-B-C corrective rally with wave B tracing out a nice flat correction, and wave C tracing out a nice impulse pattern with a wave ((iv)) down and wave ((v)) up to complete the entire corrective pattern.  Once we get a new high, I'll be looking to get short this pair on any reversal pattern.  Stocks MAY follow soon after.

Forex Market Insight: EUR/USD Rallies...Why?

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 Grind; Euro Rally Faltering

This chart illustrates why I haven't been posting much lately.  Stocks have simply floated higher in a an unconvincing, yet very persistent, grind to higher levels.  Just look at this chart and think to yourself how you would write a post based on this crap above unfolding.  The lack of conviction and volume on the rally has left me skeptical of its ability to be sustained much further.  But it has done so, seemingly on an empty gas tank.  As I've said in past posts, this can continue even longer, and without evidence of a top I don't think it's wise to short here.  I'm waiting for a reversal pattern to form, and hopefully it will be accompanied with solid volume, before I attempt shorting stocks.  The divergence in price between the Dow's new high and the S&P's lack of a new high remains in place.  So if a reversal pattern forms with that divergence still in place, it will leave a nice high probability shorting opportunity in my opinion.

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The euro has a couple options here: one is bullish, one is bearish.  Which I am well aware is an absolutely useless statement at this moment in time.  But let's look at the options to see how things will setup for a trade in the future.  The bullish outlook has the move from 1.2625 to 1.3225 as an impulse move (probably an A wave) and the up-down movement since then can be a "flat correction" (probably a smaller degree ((a))((b))((c)) of B wave).  This means that the current decline is simply wave ((c)) that will come down just below 1.3025 before bottoming and then undergoing a fierce rally to the upside.  Okay, so that's the bullish view.  The bearish view has the entire rally, from 1.2625 to 1.3325, a 3 wave correction that has completed.  The result will be continued selling pressure for the foreseeable future which will take the euro well below the recent 1.2625 low.  Right now, the euro is simply making a stair-step decline, with big looping moves to the downside, and therefore there is no impulsive pattern to help further analyze the bigger picture.  However, the series of lower lows and lower highs means the current trend is down at the moment.

My approach is this; wait for a move below 1.3025 and see what happens.  Continued selling pressure and closes beneath that level will reduce the likelihood of the bullish outlook since wave ((c)) of a flat correction shouldn't go too deep as an EWP guideline (not a rule though).  Since trading is all about probabilities, I think the probability at that point would favor the bearish view and getting short at any opportunity.  On the other hand, if the euro makes a quick dip to 1.3025 and then reverses sharply higher, I will jump on the long side since it would appear that the bullish flat correction might be unfolding and the move higher will probably be a sharp and deep impulsive move higher for wave C.

But unfortunately, at this point we are only left with concluding that the euro will either go up, or it will go down.  A completely useless analysis at this point in time.  However, by looking at our two options of wave patterns, we can sit and wait for more price action to unfold to work ourselves into a high probability trade. 

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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.

Intermarket Divergence in Place = Bearish for Stocks; Euro Pullback is Bearish

The Dow's new high has created angst in the EWP community, and rightfully so I suppose.  For EWP purists it's tough to explain it away and still try to justify a major top in the overall market.  I am more flexible with my analysis and although I'll never violate an EWP rule, I use EWP as a basis for my overall analysis, not the be-all know-all form that must be adhered to as if it were an infallable law written in stone.  The key is make sure we don't violate any EWP rules, and use our best objective judgment when using EWP guidelines.  I will say, with the experience I've had in these markets, EWP is the most reliable out of all other forms of technical analyis I've tried.  I can't tell you how many times when all technical indicators point to the market moving in one direction, but the EWP count suggests the opposite, the EWP count proves to be correct.  It happens a lot. 

With that little preamble out of the way, let's try to take a basic common sense look at the market.  The Dow made a new high, suggesting that its Primary wave ((2)) did not end last may as previously projected.  The Dow only has 30 stocks in it, and is the bluist of the blue chips for that matter.  So I'm not sure it's the best proxy for crowd psychology as EWP is based on.  This is why I follow the S&P, it has 500 stocks (or close to it), and is much more diverse and touches a much larger crowd than the Dow can.  The larger and more diverse the crowd, the more reliable our EWP wave counts will be.  The S&P has so far failed to confirm the Dow's new high, keeping the original wave count that its Primary wave ((2)) has topped already.  And with today's modest decline, it leaves the potential for a major intermarket divergence to be in place between the Dow and S&P. 

The bottom line is that the market rally is stretched, I think it's hard to argue that.  So what are the plays here?  1) Getting long here at this point in the rally without any meaningful pullback?  I don't think so.  Not wise in my opinion.  2) How about getting short now with a stop above yesterday's high?  This seems like a great risk/reward opportunity I'm jumping all over, despite it being a Friday.  3) And lastly, sitting on the sidelines doing nothing is another options.  Certainly a viable option, at least until we get confirmation a significant top is in.  Regardless of the choice, trading is all about probabilities, not certainties.  So I make every trade with assumption that I'm going to be wrong, and manage my risk accordingly.

Do Low Interest Rates Power Stocks Higher?

Above is another possibility for the Dow.  It suggests that it's in an Intermediate degree "flat correction".  This suggests the larger trend is still up, and pretty much destroys Prechter's call for the past several years.  So I'm not confident in this count at all.  However, it's worth noting this count for at least the short term because even though the count suggests a larger bullish move is still underway, the downward correction still has to undergo a major Intermediate wave (C) pullback that will be fast and deep, about 2,500-3,000 points.  And although it seems unlikely, it's still a valid wave count and therefore must be respected.

The bottom line is that I think the best plays here are to look for shorting opportunities with tight risk and then jump on them, or just wait on the sidelines until solid confirmation of a top comes in.  But getting long here at this point, just doesn't seem like the risk/reward is on your side.

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The euro appears to have completed an A-B-C correction and is now pulling back.  Whether a major top is in, or just a short term top is in, is still in question.  For currencies, I usually don't jump in on a Friday since Sunday afternoon when the market reopens we often get a gap in price which is very tradeable.  I want to get short so I hope we gap-up Sunday afternoon so I can short aggressively at a better price than today AND get the odds of a gap-close on my side.  On the other hand, if the euro gaps lower I can simply wait to get short when it rallies to close the gap.  Either way, I feel I can get the most optimal positioning on the short side if I wait until Sunday afternoon.  Either short on a big gap-up, or if it gaps-down then just wait for it to rally and close the gap before getting short.

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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.

Line in the Sand....the Rubicon 1370.58

February 9, 2012: I don't have anything new to add. The Dow made a new high while the S&P has so far lagged behind, failing to exceed 1370.58. If a reversal occurs with the S&P failing to make a new high above 1370.58, then there would be a major intermarket divergence in place suggesting a major top had formed. But entering short prior to that is purely speculation in my opinion. I'm waiting for a reversal pattern to form, and if it occurs before the S&P can exceed 1370.58, then I'm jumping in big on the short side. Until that happens, I'm simply waiting, doing nothing but trying to determine if it's possible to twiddle my thumbs long enough to burn off the two donuts I ate this morning, and to see if I can twiddle them fast enough to break the sound barrier.

Internals illustrate a typical Friday behavior where volume is fairly soft and a large majority of up volume accompanied the rally relative to down volume.  Nothing conclusive here since price moved right in line with these internals as would be expected.




I thought today would be a great day for a nice reversal to the downside and hopefully leave a setup to either short today, or early Monday.  But Mr. Market wanted to annoy me today, and he succeeded.  The rally remains intact and I see no reason to "guess" and just short here unless you're a gambler.  I'm waiting for evidence of a reversal, and will load up on the short side upon confirmation of a reversal if it's not too late when that happens.  The market is moving higher, contrary to what the evidence I see suggests it should be doing.  When this type of thing happens, I want to simplify things and focus on the bottom line.  The bottom line is that 1370.58 is key to the bearish wave count, and the bearish case as a whole.  The Dow came within just a few points of exceeding its wave ((2)) high today, so things are a bit shakey for the EWP bears right now.

But as along as 1370.58 in the S&P cash index remains intact, the bearish wave count remains valid and so any good sign of a reversal on the short term charts is worth taking a shot at the short side with a stop at the day's high, or just above "the Rubicon" level at 1370.58.  A perfect scenario for the bears would be for the Dow to exceed its wave ((2)) high Monday while the S&P stays below 1370.58 and then a big reversal occurs.  This type of divergence in two major indices would be deadly bearish.

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Although the euro has been able to make a new low and has not been able to make a new high, there has been no follow-through to the downside.  As a result, there has been a net sideways action the past week or so.  This consolidative pattern conveys a similar message that an EWP triangle conveys; which is that the euro is pausing from its uptrend before it thrusts higher in a sharp and deliberate move to new highs.  Now since this is not an official EWP triangle the euro has formed, so I can't say the thrust to a new high will happen with any level of certainty.  But I will say that the odds are slightly tilted toward the bullish side for right now.

Technical Indicators: A Love-Hate Relationship


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.