Oct 312013
 
 October 31, 2013  Posted by at 8:20 am Comments Off on Market Update: October 31st, 2013 – Halloween Surprise

Well, it was the FX shuffle we expected and an equities samba that greeted the FOMC. As I mentioned yesterday, “FOMC days are great for reversals so be aware of the potential here tonight as the market has NOT priced in any disappointment”. Ironically the “disappointment” came when the Fed didn’t INCREASE QE which I find astonishing, as if $115 billion a month of liquidity wasn’t enough for the equity bulls? Importantly, the DJIA managed to eke out new all time highs before reversing sharply lower as the bears finally had something to cheer about.

The SPX found strong resistance at the green long term trendline highlighted yesterday, getting within 3 pts of our measured target before selling off pre and post the FOMC announcement. Wave circle C can now be counted as complete but we need to see some downside follow-through tonight culminating in a 5 wave impulsive decline to increase our confidence in a tradable top.

SPX Daily

SPX Daily

On an intraday basis, the SPX finally showed some weakness with its reversal lower from a higher open but the bears need to put the hammer down tonight and keep the SPX below 1770.48 (blue trendline) to get some momentum. Otherwise the decline will very much look like 3 waves as another correction ensues. If we can get a clean 5 waves down we will have something to work with. With $60 bln being taken OUT of the system tonight and no POMO, the bears have the upper hand. Clearly, a break of the 1740 shelf support will go a long way to helping the bears.

SPX 15m

SPX 15m

The Russell 2000 chart which I Tweeted live mid-session also points to a completed near-term count, opening the door for the bears to test the downside. Once again, it will be the structure of the decline which will provide clues as to where we are in the bigger picture.

Russell 2000 15m

Russell 2000 15m

The Eurostoxx50 also completed a perfectly balanced wave count terminating at yesterday’s highs where all subdivisions are accounted for and wave (5) equals wave (1) which is an expected measured target.

Euro STOXX 50 60m

Euro STOXX 50 60m

In the FX markets, we finally received some confirmation of my strong US$ call on the weekend with the USD/JPY completing a picture perfect 5 wave impulsive rally off critical support. The bigger picture trend is now up. We should now expect a corrective overlapping decline for wave (ii) before we see another 5 wave advance. The following chart highlights the EWT signature with peak momentum for wave (iii) followed by momentum divergence for wave (v). Ideally, we get a wave ii correction to the 97.50 – 98.00 buy zone.

USD/JPY 30m

USD/JPY 30m

The EUR/USD continued to follow our strong US$ theme by stair stepping it’s way lower so far this week. Unfortunately, the decline is overlapping and not clearly impulsive but with lower lows and lower highs, the near term trend remains down. The nature of the decline to-date makes me suspicious and unless the decline accelerates, it will look corrective and due for complete reversal which is unexpected. There are no signs of a reversal higher yet. However, there is a cluster of near term measured targets in the 1.3650 to 1.3675 area (where the H&S “works” to)

EUR/USD 30m

EUR/USD 30m

The AUD/USD climbed towards the bottom of my 95.20 – 95.50 resistance (high 95.18) and was met with heavy selling. I suspect we remain within the wave 4 of (3) correction with further lows to come as the thrust to new lows appears to be in 3 waves and incomplete. I have outlined a potential 4th wave triangle as a possible roadmap forward.

AUD/USD 15m

AUD/USD 15m

That’s all I have for now, trade safe 🙂

 

 

Oct 302013
 
 October 30, 2013  Posted by at 6:17 am Comments Off on Brief Market Update: October 30th, 2013 – FOMC FX Shuffle

Well, the FX markets are doing the FOMC Shuffle, whipsawing up and down while giving no clues as to the near term direction of the US$. The equity markets remained strong and continued to climb as investors embrace the idea of QE forever in the party that never stops. The US$ has given us the early week bounce we expected but the count is not yet clearly impulsive. I expect more whipsaws come the FOMC announcement. The initial reaction is often the wrong one so be alert for intraday reversals before the market sets its course.

The SPX and global equity markets continued climbing and the SPX is now within 6 pts of where circle C equals circle A at 1778.56. Even though the SPX is now running into long term trendline resistance and investor optimism is at all time highs, there are no signs yet of this trend reversing as the bulls continue to run. As long as we keep making higher highs and higher lows, the trend remains up. FOMC days are great for reversals so be aware of the potential here tonight as the market has NOT priced in any disappointment.

SPX Daily

SPX Daily

The DJIA is within 20 pts of new all time highs and I’d expect that to occur prior to the FOMC announcement. I have rarely seen the markets so universally bullish and without fear and that makes me nervous. When everybody is standing on one side of the boat, it eventually tips…

DJIA Daily

DJIA Daily

The USD/JPY found support in the 97.00 buy zone and has rallied impulsively in 3 waves so far, leaving the door wide open for both bullish (black) and bearish (red) counts which is frustrating. Yesterday, I correctly identified a sneaky impulsive rise and corrective decline setting up last night’s advance. The path forward from here is a 50/50 bet at this stage and like most US$ pairs, we’ll have to wait for the definitive trend to emerge.

USD/JPY 30m

USD/JPY 30m

The EUR/USD has declined as expected but the near-term count is open for both bulls (red) and bears (black) to take the ball and run with it. The critical line in the sand for the bears is last night’s high of 1.3814 which effectively formed the Right Shoulder for a bearish H&S which “works” to 1.3675 if the bears take control.

EUR/USD 30m

EUR/USD 30m

The EUR/JPY confirmed my suspicions yesterday of a push higher to 135.20 which is exactly where this pair rallied to in 3 waves. The circled decline remains my signpost here with a clearly impulsive 5 wave decline, followed by a corrective overlapping counter-trend advance. 135.50 remains critical resistance for the bears. The decline from last night’s highs is NOT clearly impulsive . This pair is heavily levered to the carry trade and warns of an impending reversal in risk appetite and risk assets and therefore should be watched closely.

EUR/JPY 15m

EUR/JPY 15m

The AUD/USD recent weakness continues and we look to have completed wave 3 of (3) to the downside with a couple of 4th and 5th waves to come. There is a near term cluster of resistance for the Aussie in the 0.9520 – 0.9540 range where the previous wave (iv) of a lesser degree resides, a 0.382 – 0.50 Fibo retracement of the wave 3 decline and green trendline resistance.

AUD/USD 15m

AUD/USD 15m

That’s all for now folks but I expect the next 24 hours to provide more clarity on the path forward. Trade safe 🙂

Oct 292013
 
 October 29, 2013  Posted by at 3:42 pm Comments Off on Covered @ BE – Re-Short EUR/JPY @ 135.05 (SL @ 135.50)

Don’t like the 3 wave decline from the highs. Low probability short for me here

EUR/JPY 15m

EUR/JPY 15m

As mentioned in my update, there was a risk of a push to the 135.20 region. Correction should now be complete. Short against 135.50 highs

EUR/JPY 15m

EUR/JPY 15m

Oct 292013
 
 October 29, 2013  Posted by at 3:29 am 3 Responses »

Equity markets are hanging tough and higher highs and higher lows indicate the trend remains up. We are due for a pullback and maybe the FOMC lends a hand on Wednesday as NO-ONE is expecting any talk of taper so the headline risk remains to the downside. The near term charts are unclear for equity markets although the European indices are either setting up for another run higher or a very near term puke. The US$ has shown some strength early in the week as I anticipated in my weekend update, but the rally off the lows is hardly convincing as yet. PM’s are feeling a little vertigo and look due for a correction, possibly in line with more US$ strength. I expect the markets to remain choppy until the FOMC on Wednesday where we are likely to get clarity for the next move in global risk markets. I was hoping for the EUR/JPY to lead risk markets lower but it continues to defy gravity. The bearish count remains on the table but is getting stretched.

There are a number of ways to count the SPX right now and I’m favoring a retracement from these levels but I wouldn’t fight the trend unless you’re very nimble. I’m not trading equities here at all. I have highlighted a couple of near term bearish counts but the uber-bullish launch pad into the 1929 analog mentioned previously has not been discounted (green count). Liquidity is very tight later in the week but a dovish Fed statement will likely rule proceedings.

SPX Daily

SPX Daily

Near term, the SPX appears to be struggling up here in wave (v) with choppy price action although buyers continue to buy the dips and hold key support above 1740.

SPX 15m

SPX 15m

The BKX continues to lag but investors may just be waiting for a green light from the Fed before marching to new highs.

BKX Daily

BKX Daily

The Eurostoxx 50 has either completed it’s corrective zigzag 5-3-5 decline and preparing to launch once again or is nesting lower. The odds are with the bulls here given the structure of the decline as long as yesterday’s lows hold. Some of you will recall the circled portion of this chart.

Eurostoxx50 60m

Eurostoxx50 60m

The CAC40 shows the same setup as the Eurostoxx50 with a potential a-b-c decline complete. The European indices may provide strong leading indicators for the US markets and global risk appetite here.

CAC40 30m

CAC40 30m

The ASX200 appears to be in the final throws of an advanced 5 wave impulsive rise, warning of near term downside risk as momentum wanes. This is one of the charts that makes me wary of global risk appetite. Interestingly, the Aussie stock market has been very highly correlated to the AUD/USD which is historically very unusual (until QE infinity). I think Kyle Bass likes to call these investors “macro tourists” but they seem to be driving the ASX200 at the moment. This illiquid equity market is prone to sharp sell-offs when the macro tourists all try to get out at the same time.

ASX200 60m

ASX200 60m

As mentioned in my weekend update, I was looking for US$ strength early this week and the EUR/USD looks like it is trying to roll over here although no technical damage has been done to the bull case yet. I remain short from yesterday and will give this trade some time. With US$ bearishness at extremes, I like the contrarian position here for a stronger US$ near term. The risk is limited while the decline potential is asymmetric with initial targets of 1.3650

EUR/USD 240m

EUR/USD 240m

 

 

My EUR/JPY short position is testing my patience and is either nesting to the downside for a waterfall decline OR continuing a complex correction. Trade above 134.86 will likely push this pair up to the 135.20 area, further testing my resolve.

EUR/JPY 15m

EUR/JPY 15m

Has the USD/JPY formed a very sneaky impulsive rise? This would align with my stronger US$ theme but likely kill my EUR/JPY short position. I will watch this pair closely in coming days…

USD/JPY 30m

USD/JPY 30m

Gold appears particularly vulnerable here as we can count a completed a-b-c counter-trend rally terminating at a cluster of resistance of 1350 – 1375 – 0.618 Fib retracement and wave ii extreme of the proposed leading diagonal. The overlapping nature of the final rise looks like an ending diagonal so I’d expect a swift retracement to 1310

Gold 240m

Gold 240m

That’s all I have for now. Trade safe 🙂

Oct 282013
 
 October 28, 2013  Posted by at 3:14 am Comments Off on Stopped Out @ BE – Short EUR/USD @ 1.3810 (SL @ 1.3834) – Lowered SL to 1.3819 (HOD)

I committed the cardinal rule of trading. I stopped myself out of a position before it was proven wrong just to save a couple of $$$ and lost my position. I have made this mistake before and I am aware of it. Bad execution on my part. Bugger.

Shorting against complete ED for wave v of 5. Trade wrong at new highs… as mentioned in my weekend update. Looking for US$ strength near term.

EUR/USD 240m

EUR/USD 240m

Oct 262013
 
 October 26, 2013  Posted by at 6:57 am 2 Responses »

Well, as I mentioned last Thursday, the bulls held the line and have since driven the markets to new all-time-highs, invalidating my near term count. The bears never did break the 1740 support shelf I identified early last week and the bulls didn’t fumble the ball.  The last leg of this rally is ugly, not clearly impulsive, but achieved its objective of a marginal new highs. The near term wave count is unclear but there are enough squiggles to suggest wave (v) is complete although there are no signs yet of a reversal. While struggling to make progress, the buyers await in the wings to buy any dip, creating a choppy overlapping market. I have no position here or strong views on near term direction. My speculative ES puts expired worthless but I think a 5 pt risk was worthwhile given the critical inflection point. I continue to believe this Fed fueled rally will end horribly one day but I’m picking my spots and trading very short term.

SPX 15m

SPX 15m

The immediate trade opportunity for me is in the FX markets. The US$ may have put in an important low on Friday, holding it’s last trendline (red) support on a weekly basis while presenting a potentially completed count to the downside. I think Friday’s lows in the USD/CHF and USD/JPY and EUR/USD highs are important. Be nimble though because any break of these will likely result in an accelerated move. There are great risk/reward opportunities right here on the US$ crosses and DXI. I can count a complete 5 wave decline in the DXI terminating at Friday’s lows which I tweeted live to my followers. I will be looking to go long the US$ against these levels and likely reverse short if broken. Obviously, there is not enough evidence of a lasting low in place as yet and it would be prudent to wait for a 5 wave advance to confirm a change in trend. The confluence of measured targets achieved, trendline support and potential completed counts put me on high alert for long US$ opportunities.

DXI Weekly

DXI Weekly

The Chart below shows 5 waves down from the DXI highs with diverging momentum at the lows. Obviously I am very early calling this and it may be more prudent to get further price confirmation but I just like the setup here.

DXI 240m

DXI 240m

The USD/JPY reversed higher at the buy zone target of 97.00 (measured objective where a = c) I highlighted early last week to keep the bullish options alive for this pair, holding trendline support and staying above the critical 96.57 previous swing low.

USD/JPY 240m

USD/JPY 240m

The USD/CHF also found a confluence of trendline support and measured (Y) = (W) objectives at Friday’s lows (along with a completed 5 wave count). A clear 5 wave advance on a near term timeframe will add confidence of a potential change in trend here with significant upside potential.

USD/CHF Daily

USD/CHF Daily

The EUR/USD also looks to have completed a 5 wave advance from the July lows culminating in an ending diagonal wave v of 5. I will be shorting this pair on Monday against Friday’s highs. Note the supporting evidence of the RSI and MACD with peak momentum occurring in wave iii of 3 and the final wave v of 5 price highs diverging with momentum (as it should at the end of a completed structure).

EUR/USD 240m

EUR/USD 240m 

I remain short EUR/JPY and the corrective price action this week reinforces my view that a significant high is potentially in place. While the near term count allows for a push higher before a larger decline asserts itself, the count is only invalidated on a new high above 135.47

EUR/JPY Daily

EUR/JPY Daily

Silver looks to have completed its 5 wave advance from the 20.50 lows with an extended wave v for wave (i) / (a). I expect a near term retracement back to previous 4th wave support around 21.75 before we see another 5 wave advance for wave (iii) / (c)

Silver 240m

Silver 240m

 

Finally, I wanted to revisit the JPM chart I posted a month ago. The obvious H&S remains in play and a close under 50.00 “works” to 43.00 and I probably wouldn’t want to see JPM trade back above 55.00. I like how wave 2 retested the green trendline break and reversed back down confirmed by RSI divergence. Another good risk/reward potential here.

JPM Daily

JPM Daily

That’s all I have for now folks. Trade Safe 🙂

Oct 242013
 
 October 24, 2013  Posted by at 10:02 am Comments Off on Stopped Out – Short EUR/USD @ 1.3800 (SL @ 1.3824 – 24pips)

Trading short against the impulsive decline from today’s high (Thrust from a 4th wave triangle)

EUR/USD 15m

EUR/USD 15m

Or not… stopped out and now looks like an ED wave (v)

EUR/USD 15m

EUR/USD 15m

Oct 242013
 
 October 24, 2013  Posted by at 6:04 am Comments Off on Stopped Out @ BE – Short EUR/JPY @ 134.70 (SL @ 135.50) – Lowered SL to BE
EUR/JPY 10m

EUR/JPY 10m

 

Longer Term Setup… Target around 125.00

EUR/JPY Daily

EUR/JPY Daily

Given the overlapping nature of the decline, I expect any rise now above 134.70 to probably head back above 135.00. Will reassess if stopped out.

 

EUR/JPY 15m

EUR/JPY 15m

Oct 242013
 
 October 24, 2013  Posted by at 4:27 am Comments Off on Brief Market Update: October 24th, 2013 – Bulls Hold the Line

The SPX has reached its target for an a-b-c wave (iv) decline (shown in red) and held shelf support which is now forming a H&S targeting 1720 on a break below last night’s lows. The bearish count has the 3 wave decline as a series of nested waves (i) and (ii) lower which means that should we break last night’s lows, I expect an accelerated decline in wave (iii) to the H&S target. It is a 50/50 call right here so in the end price will be the final arbiter.

SPX 15m

SPX 15m

One trade opportunity I am keeping close watch is the EUR/JPY which appears to have completed an ED for wave 5 culminating with an overthrow of the 1 – iii trendline and reversal back beneath. I also like the fact that the decline from the highs is an impulsive 5 waves. I am looking to short this pair in the 1.3450 – 1.3475 sell zone against the 1.3550 highs. Expected target is 1.2500

EUR/JPY Daily

EUR/JPY Daily

I like the clean 5 wave impulsive decline and corrective rise…

EUR/JPY 10m

EUR/JPY 10m

Oct 232013
 
 October 23, 2013  Posted by at 8:24 am Comments Off on Covered Short NZD/USD @ 0.8386 (+130 pips)

NZD/USD looks to be completing wave v of (i) / (a), so I’ve taken profits looking for a 3 wave counter-trend rally to get short again. It’s done enough for now. 130 pips in 15 hours while risking 30 pips is nice risk / reward

NZD/USD 10m

NZD/USD 10m