Thursday, March 3, 2011
Bulls Gut Punch Bears, Obtain Full Control of Stocks; Euro Looks Higher

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

The market rallied today as expected. But it rallied much stronger and higher than I expected. Does this look and feel like a Primary wave ((3)) decline folks? Not to me. But let’s focus on the short term since that’s the best strategy in my view. Internals on this rally were extremely strong, the bulls had full control from the start of the trading day to the end. Advancers and up volume crushed the bears today and total volume was also solid. It’s days like today that often put a floor in the market for days/weeks. So be ready for more upside if the bears don’t show up Friday.

The major indices made new highs today so I’m on the sidelines again. Only a big time bearish reversal to the downside Friday that erases what the bulls did today would get my attention again on the short side. But right now, the bulls have control. Tomorrow will be an important day for the markets.

ELLIOTT WAVE COUNT

Since the market did not break above February’s high, the bearish count technically remains intact. However my experience tells me it’s extremely unlikely this count will pan out, unless the market tanks hard tomorrow to erase today’s bullish move. The correction for Micro wave ((2)) is now too long and deep for my comfort, and the fact that the bears flexed their muscles last week and created all kinds of bearish evidence and yet still could not defend this week’s highs tells me the trend is still up.

So it’s quite possible the decline last week was a Micro ABC, and this week’s action is part of a 1-2 sequence (i and ii). We’ll know soon which count is correct. I’m on the sidelines for the moment, but follow through higher tomorrow would probably get me in on the long side.

Last week I showed this chart with the big daily bearish engulfing candle. Today you can see that this bearish formation has now been erased. It blows my mind how many times the bears get great setups in wave counts, optimism, momentum, and basic chart studies and yet the bulls come in and erase them all with ease in short order. But hey that’s the market, and that’s also a sign that the trend remains firmly up. I’m not getting in this market’s way on the short side unless the bears can step up Friday.

The euro has been flip flopping all over the place with 3 wave rallies and declines for the past several months now. The big strong moves the past couple days and new high this week leave me thinking 1.4250 will be challenged and broken soon as well. The decline from that area a few months earlier looks more like a 3 wave move than a 5 wave move, so I think that area is vulnerable to be taken out at the moment. With the longer term trend still down I don’t like getting long here, but I’m certainly not getting short here while it’s in full bull mode. So much like stocks, I’m on the sidelines for 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.

People that are trying to find more information about the topic of forex investment, make sure to go to the URL that is quoted in this paragraph.