Wednesday, August 3, 2011
S&P Breaking Down; Euro Draws Line in Sand

Using my Elliott Wave Principle fundamentals can give us an edge on predicting future movement of the financial markets.

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.

ELLIOTT WAVE THEORY COUNT

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.

Tuesday, August 2, 2011
S&P Breaking Down? Euro Continuing Lower

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.

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