Nov 282013
 
 November 28, 2013  Posted by at 6:27 am Comments Off on Market Update: November 28th, 2013 – Happy Turkey Day…

Over the last week, the equity markets achieved the minimum requirements for a 5th wave advance with new ATH’s above 1802.33.  The SPX continued towards my 1810/15 target with ES achieving and stalling at my month-long target of 1809 and the DJIA heading towards long term broadening trendline resistance at 16137. There is no clear evidence of a reversal as yet so I will remain patient. The Euro pushed higher as warned in last Friday’s twitter post creating a more complex correction but one which I believe will be fully retraced. Those who follow me on twitter had advance warning that the rally started to look impulsive to the upside as I covered shorts. The commodity currencies of NZD, AUD and CAD have all continued lower respectively against the USD while the USD/JPY strength continues unabated in it’s 5th wave advance.

The SPX is now within pips of my wave (3) target zone after wave iv caught support at the Maginot Line as expected and continued higher in wave v of 5 of (3). While minimum targets have been achieved, there is no indication of a reversal yet. At this point, I expect any decline to gain support in the 1740-50 range which is previous 4th wave support and a Fib 0.382 retracement of wave (3).

SPX 60m

SPX 60m

The immediate short term count has wave v of 5 of (3) complete at 1808.42 and a decline below 1800 will increase the probability that the immediate near term top is in.

SPX 15m

SPX 15m

The DJIA weekly chart shows the long term broadening trendline dead ahead which should provide near term resistance. How the DJIA reacts to this resistance should be an important tell.

DJIA Weekly

DJIA Weekly

As I have said previously, it remains difficult to get too bearish on the broader equity indices while the BKX has clearly broken higher in it’s 5th wave and has further room to run on the upside. Wave iii of (v) does not look complete and we still expect wave iv and v to come, which means higher prices in the near term. I have a cluster of measured targets in the 71 – 72.50 range for BKX

BKX Daily

BKX Daily

The commodity currencies such as the Aussie$, Kiwi$ and CAD are at important support. What we know as traders is that support remains support until broken. The AUD/USD is showing signs of a tradable low (bullish black count) but given the bearish performance of the NZD and CAD, the door is still wide open for a nested 3rd wave decline (red count).

AUD/USD Daily

AUD/USD Daily

The NZD/USD prevailing H&S pattern continues to play out and near term there are some key levels to watch. We currently have 3 waves into the recent 0.8116 lows which is important! The immediately bearish (black count) has a series of nested declines (if it remains below 0.8213) which will likely accelerate on a break below recent lows in a nested 3rd wave. Above 0.8213 will likely see a push back above 0.8267 in an impulsive wave c of (ii) for an expanded flat correction (red count) to provide one more whipsaw and great s/t short entry before wave (iii) of [iii] of 3 of [3] begins. It should be a sight to see indeed!

NZD/USD 240m

NZD/USD 240m

The USD/CAD has also reached important trendline resistance and is threatening to break higher (weaker CAD). Any trade above the labeled wave (C) high (1.0616) will likely kick-off a sustained advance out of this long term basing formation.

USD/CAD Daily

USD/CAD Daily

The EUR/USD short continues to evade me with the counter-trend advance becoming more complex than hoped (not that hope has ever been a particularly good strategy). I have labeled the immediately bearish count where wave (Y) of 2 / B is complete and wave 3 down has begun OR the recent rally is only wave (a) of (Y) with waves (b) and (c) to come to complete the pattern in the 1.3650 – 1.37 area (red count). Either way, the rally counts best as corrective and I am expecting it to be fully retraced.

EUR/USD 60m

EUR/USD 60m

GBP/USD has finally pushed to new highs in it’s 5th and final wave higher but does not yet count as complete. I am unable to count a clean impulsive 5 wave advance for this 5th wave so I will give the chart more time to develop for more clarity. In the meantime, I expect further upside for this pair.

GBP/USD 240m

GBP/USD 240m

The USD/JPY’s rise continues unabated in it’s 5th and final wave for this 2 year impulsive rally towards my 105 target. Short this at your peril as it continues to gain momentum as you’d expect in wave (iii) of 5.

USD/JPY Daily

USD/JPY Daily

Gold and Silver continue to search for support but gold bears in particular should be cautious at these prices. I can count a clean 5 waves down in wave [i] (black bearish count) or red C of (B) which would be near term bullish. We currently have 3 waves down from the $1434.4 highs nearing equality which suggests that the near term trade is to be long of gold. Either way, the PM’s are overdue for a correction to the upside so bears should not be complacent.

Gold 240m

Gold 240m

That’s all I have for now for some Thanksgiving reading. Happy turkey day everyone…gobble, gobble  🙂

Nov 222013
 
 November 22, 2013  Posted by at 7:31 am Comments Off on Market Update: November 22nd, 2013 – Still Waiting

The equity markets threw a bit of a curve ball over the last couple of days of 4th wave chop, exciting the bears, but never invalidating the bullish counts I’ve been posting. The path is now clear for wave v of 5 to push to new highs on the SPX targeting 1810/15. The strength in the BKX is warning of even more upside to come. The US$ also reversed higher as expected reversing the Euro’s advance, crushing the Kiwi and Aussie $ and with them, the precious metals. I expect the strong US$ theme to continue. New marginal highs in the SPX and DJIA should provide good risk/reward short opportunities for a tradable top, targeting a decline back towards 1740-50 shelf support.

SPX 60m

SPX 60m

The DJIA continues to make a charge towards the bigger picture megaphone trendline (significant resistance) in the 16140-50 area in what I count as wave v of (v).

DJIA 60m

DJIA 60m

All the while, the BKX has quietly broken out to new swing highs (as expected) after lagging for much of the recent rally since its August highs. All sma’s are pointing higher for BKX which warns of a stronger than expected advance for equity markets in general. Equity markets are unlikely to sell-off as the BKX continues higher, so I continue to watch this index as an early tell.

BKX Daily

BKX Daily

The EUR/USD reversed lower as expected in a key reversal day for wave (i) of a more protracted decline targeting the 1.3100 area as previously mentioned. We are currently in a wave (ii) counter-trend rally which has now reached our target sell zone in the 1.3490 – 1.3510 area.

EUR/USD 60m

EUR/USD 60m

The USD/JPY has broken out strongly from its multi-month and probably most widely anticipated triangle ever on it’s way to new highs above 103.74 in a 5th and FINAL wave for this advance. New highs coupled with a completed EW structure will set up an excellent shorting opportunity for this pair. Once again, we can clearly see the sma’s turning higher, supporting this advance which I expect to continue towards my 105.00 measured target.

USD/JPY Daily

USD/JPY Daily

The NZD/USD turned lower where it had to and raced back down to the H&S neckline. This range racing is finding strong support at the 200 sma which needs to give way to open the doors for the bearish floodgates and move lower towards 78.00 and potentially MUCH lower

NZD/USD Daily

NZD/USD Daily

Gold has continued its decline making marginal new lows (below the October lows) but it is unclear whether the immediate decline is over. It has found internal trendline support for now but there are as yet no signs of a reversal out of its green crash channel.

Gold 240m

Gold 240m

In conclusion, I believe we are nearing a tradable top in equity markets and I expect US$ strength to continue against all FX pairs.

Trade safe 🙂

Nov 202013
 
 November 20, 2013  Posted by at 6:08 am Comments Off on Brief Market Update: November 20th, 2013 – Almost there…

Well, the equity markets threw a little headfake yesterday, but that’s the nature of 4th waves. They are very unpredictable which is why I rarely trade them unless they are triangles. The decline continues to count as corrective in a more complex a-b-c. No key levels have been violated in the SPX and DJIA. However, the RUT and Nasduck Composite invalidated their 4th wave counts leading the market weakness so caution is warranted for remaining longs here. The US$ correction continues to whipsaw but appears to have completed an ending diagonal wave (c). We are yet to see evidence of a confirmed change in direction for the US$ pairs but they are coiling for a fast move here. There continue to be attractive r/r setups in the EUR/USD and NZD/USD in particular.

The SPX continues to find support in the 1785 area where we would expect a 4th wave decline to terminate. The SPX remains above a confluence of trendline support in the 1778/82 area (see below). The BTFD’ers need to step up to the plate tonight for a push towards 1810/15. This count is invalidated on trade below 1773 where we would expect a deeper decline towards 1740-50  support.

SPX 60m

SPX 60m

The DJIA’s rally appears incomplete, requiring one more push higher in wave v of (v) towards the 16130 level which coincides with the 4 year broadening megaphone trendline shown in green. Wave iv is clearly corrective and currently in the form of a triangle so I would expect a thrust to new highs here. A word of caution… If this is indeed wave v of (v) of 5, this should create a great shorting opportunity on the DJIA at new all time highs which may coincide with the release of the FOMC minutes tonight.

DJIA 60m

DJIA 60m

The following weekly chart of the DJIA puts the proximity of the green megaphone into perspective… almost there…

DJIA Weekly

DJIA Weekly

The EUR/USD continues to extend higher in what appears to be an ending diagonal wave (c) of 2 / B. The Euro has now retraced 50% of its decline in an overlapping corrective wave structure. Wave (c) equals 1.618x (a) which is a standard measured move for C waves. With last night’s “overthrow” of the i – iii trendline and reversal back underneath, this pattern can be counted as complete. A break of the ii – iv trendline would add confidence that this counter-trend rally was complete. The ending diagonal as shown is invalidated on trade above 1.3615 where wave iii would be the shortest wave and therefore in violation of the EWT rules. My downside measured target remains in the 1.31 area

EUR/USD 60m

EUR/USD 60m

The DXI can be counted similarly to that of the Euro except that the ending diagonal is wave (c) of an expanded flat correction terminating at the origin of the previous 4th wave. The correction is shallower than that of the Euro due to the relative strength and weighting of the USD/JPY in the index. A break of the upper red trendline along with a clearly impulsive rally would increase confidence that this US$ correction is over. It is still premature to call a turn here as we await further price evidence. The USD/CHF can also be counted similarly as a regular flat which provides strong inter-market correlation.

DXI 60m

DXI 60m

The NZD/USD may provide the greatest r/r of all FX pairs at the moment if it remains below this morning’s 0.8400 high. As it stands, this pair has no less than 4 coiled / nested 1’s and 2’s from its April highs coupled with a double right shoulder H&S pattern. That is a lot of coiled energy IF released to the downside. A strong close below 0.8169 would set the stage for a fast move lower to at least 0.7850

NZD/USD 240m

NZD/USD 240m

That’s all for now. Trade safe 🙂

Nov 192013
 
 November 19, 2013  Posted by at 4:29 am Comments Off on Market Update: November 19th, 2013 – Almost There…

The US equity indices have continued making new highs and have hit my s/t targets beautifully with the SPX completing wave iii of 5 last night at 1.618x wave i (which was the expected target of 1804) and reversing lower in wave iv (target 1785). In an ideal world, we should expect to see the SPX push to new highs in wave v of 5 towards my 1810 – 1815 stated near term target where wave v = i to complete wave (3). The minimum expectation for wave v is a new all time high above last night’s high. This count is invalidated below 1773 (previous wave i high). Completion of this 5 wave impulsive advance would set the stage for a correction back towards 1740 – 50 shelf support. The DJIA, NDX, Nasduck Comp and BKX would all “look” better with one more marginal new high.

SPX 60m

SPX 60m

The EUR/USD has reached my sell zone as mentioned in last Friday’s update and has so far found strong resistance in the 1.3500 – 1.3550 area of the previous 4th wave and I’m looking for a reversal lower from these levels. I am watching for a clear 5 wave decline to signal a change in direction for this pair and move back to a strong US$ trend. Targets for this next decline are 1.30 – 1.31

EUR/USD 240m

EUR/USD 240m

The USD/CHF has also declined to my downside objective at the origin of the 4th wave triangle and 0.382 Fibo retracement and the stage is now set for a US$ advance. Once again, while no change in direction has been confirmed, targets have been met and it’s time to look to the long side.

USD/CHF 240m

USD/CHF 240m

The USD/JPY continues to lag and regretfully, both bullish (black) and bearish (red) counts remain valid. The USD/JPY has now declined to back-test the triangle breakout and needs to hold support to keep the immediately bullish hopes alive. I expect any new highs above 100.44 to accelerate as a 3rd wave advance. So far, the back-test has been successful.

USD/JPY 240m

USD/JPY 240m

The GBP/JPY needs one more new high to complete wave (v) of (5) of the triangle thrust and set up the potential for a significant turning point and shorting opportunity for the pair. I am targeting the 162 – 162.50 region for an important high.

GBP/JPY 120m

GBP/JPY 120m

The stage is also now set for a nested 3rd wave decline in the NZD/USD on any break of the H&S neckline. Yesterday’s thrust higher failed at the previous swing high and reversed lower impulsively. Downside targets remain below 79.00. This chart presents a great r/r setup and “fits” with my near term strong US$ theme.

NZD/USD 240m

NZD/USD 240m

That’s all for now, so my key themes are looking for a marginal new high on the equity indices targeting 1810-1815 SPX and renewed strength in the US$.

Trade safe 🙂

Nov 152013
 
 November 15, 2013  Posted by at 7:24 am Comments Off on Market Update: November 15th, 2013 – Bulls Break Out

The bulls have gotten the job done pushing the SPX above the Maginot Line and the ES has already tagged my first target of 1789 (posted November 4th) on its way to 1809. The trend remains up as the liquidity tailwinds continue to smoke the bears. Impulsive up, corrective down, higher highs, higher lows, the theme continues…

Near term, we are near the end of wave iii of 5 with waves iv and v to come. I have a cluster of measured targets for this 5th wave in the 1810/15 area. Next week is very strong liquidity-wise with +$23 bln and no days of drawdown so this rally may continue to extend. Technical indicators remain strong with daily sma’s breaking higher, MACD bullish zero-line reversal and confirming momentum indicators for a 3rd wave of minor degree. I would expect my ES 1789 pivot to provide near term resistance, but a strong break of this level pushes us straight to 1809.

SPX 60m

SPX 60m

The bigger picture daily chart continues to show momentum divergence at these new all-time-highs but with sma’s trending strongly higher, the trend is your friend.

SPX Daily

SPX Daily

With the DJIA’s breakout of it’s broadening red trendlines, the door is now open for a push towards the bigger picture megaphone green trendline which crosses at 16130 next week.

DJIA Weekly

DJIA Weekly

The BKX broke back above resistance after finding support from the 10 and 20 sma re-test and will likely extend higher towards new highs in the near term.

BKX Daily

BKX Daily

The Nikkei 225 has finally broken higher from it’s six month triangle and is heading to new highs above 16000. What folks need to remember though is this is now the ENDING move of an elliott wave sequence, a 5th and final wave. What we do know about the behavior of 4th wave triangles is that once the 5th wave completes, it returns to the scene of the crime, ie, the origin of the triangle (at a minimum). Gravity works so there will be some great shorting opportunities at the new highs.

Nikkei 225 240m

Nikkei 225 240m

The EUR/USD has climbed correctively towards the bottom end of my 1.3500 – 1.3550 sell zone as expected but the rise does not yet appear complete. Ideally, I would like to see one more push higher towards the previous 4th wave extreme and another retest of the green trendchannel above 135.00

EUR/USD 240m

EUR/USD 240m

One of the main reasons I remain near term bearish on the US$ is the shallowness (if that’s a word?) of the DXI retracement to date. I would expect a retracement of 38.2% towards the previous 4th wave around 80.50 at a minimum.

DXI 240m

DXI 240m

The USD/JPY has also broken out of its six month triangle, but its price performance is not particularly convincing at this point. A true invalidation of the triangle does not occur (in my world) until 101.54 is exceeded to the upside or 93.79 to the downside. The USD/JPY rally does not look particularly impulsive yet. That’s why I have kept both bullish and bearish options on the chart.

USD/JPY Daily

USD/JPY Daily

Another trade I am stalking is to go short the GBP/JPY once it completes 5 waves up from its triangle 4th wave (ans invers H&S) to complete the larger structure. It currently appears to be in wave (iii) of 5.

GBP/JPY 120m

GBP/JPY 120m

HYG caught critical trendline support and bounced impulsively, calling into question my bearish scenario. A break of this trendline is required to move me back into the bearish camp. Patience is required here…

HYG 120m

HYG 120m

Lastly, I have gone long Silver against recent lows following an impulsive 5 wave rally on a very short term chart. This is a highly speculative position given Silver has been in a strong downtrend but we are near long term buying levels down here. I could be early on this but my risk is clearly defined

SIZ3 240m

SIZ3 240m

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

Nov 132013
 
 November 13, 2013  Posted by at 4:27 am Comments Off on Market Update: November 13th, 2013 – Headwinds Abound

Not much to update really, the SPX remains tightly range bound while the bulls and bears consider the next move. The Maginot Line continues to hold for now and we continue at this inflection point. The USD/JPY showed the bulls the way by launching towards the top end of it’s 6 month triangle trendline but has been stopped in it’s tracks. While US equities tread water, the Nikkei pushed higher in line with USD/JPY but other global indices like the Europeans and ASX200 look vulnerable to the downside and may be warning of further weakness to come. The Euro continued its counter-trend rally while the GBP and NZD have led the way down once again. The precious metals have been torched and Crude Oil is nearing a tradable low following a 5th wave thrust down from a 4th wave triangle.

The preferred  bullish count for the SPX remains on track while it holds the 20 day sma but needs a push above 1775.22 to gain some upside momentum. So far, prices have merely corrected back to the previous 4th wave on an intraday basis which is what you’d expect following an extended 5th wave.

SPX Daily

SPX Daily

The BKX notably failed at trendline resistance and needs to push back above recent highs to state its case for a bullish advance.

BKX Daily

BKX Daily

The European Indices are threatening to break lower with 5 waves down and 3 waves up since the 5th wave triangle thrust last week. I will continue to watch the European indices for leadership of risk assets. This is a clear shot across the bow for the bulls.

Euro STOXX 50 60m

Euro STOXX 50 60m

The EUR/USD continues its counter-trend push higher towards a backtest of the trendline breakdown and previous 4th wave. I have measured targets in the 1.3500 – 1.3550 area for potential short opportunities.

EUR/USD 240m

EUR/USD 240m

The USD/JPY has launched towards the upper end of its constricting range but has been stopped in its tracks by the 6 month trendline (so far). While we can count a series of bullish nested 1st and 2nd waves for the bullish case, the rise from the 96.57 low actually counts best as a corrective advance reaching equality where red w = y for wave E of (B). If this red count is correct, we can expect an impulsive decline in a large wave (C) targeting 90.00 which I believe nobody expects at this point. That’s what makes it such a great risk/reward contrarian play. Or, maybe I’m just talking my book as I’m short up here 😉

USD/JPY 240m

USD/JPY 240m

The NZD/USD H&S pattern I have been following remains alive and well. Interestingly, it had a false break and bear trap last night which is what I like to see as a setup to the real break which is to come…

NZD/USD 240m

NZD/USD 240m

Precious metals were torched yesterday but gold found support near previous lows. It is unloved and oversold so be wary of snap-back rallies. The decline is in 3 equal waves so far so can be counted as corrective until we see a 4th and 5th wave materialize. The bigger picture trend remains down and I look forward to buying the precious metal around 1150

GCZ3 240m

GCZ3 240m

HYG is now at important trendline support at 92.14 so we’ll have to see whether it holds or breaks lower.

HYG Weekly

HYG Weekly

Finally, take note of the changes to the November Liquidity Schedule as the US Treasury has announced an additional $30 bln of borrowings which settles on Thursday which will likely be another headwind for the market.

Updated November Liquidity Schedule

Updated November Liquidity Schedule

In summary, the trend remains higher for US equities but warning signs abound with European equities lagging, credit markets under pressure and our resident risk on / risk off indicator the USD/JPY at an important inflection point. I suspect the debate will be settled this week and in the meantime, trade safe 🙂

Nov 102013
 
 November 10, 2013  Posted by at 6:00 am 11 Responses »

This weekend I’ve spent most of my time stepping back from the near term gyrations of the equity markets and getting back to basics without bias. Two things are clear to me. (i) The SPX continues to make higher highs and higher lows with impulsive advances and corrective declines (ii) The Maginot Line of 1778 (a line of concrete fortifications) has held this market in check for two weeks without a clear rejection but rather consolidation as I mentioned in last weekend’s update. On face value, the depth of the current correction fits the profile of a 4th wave, finding support at a 0.236 retracement and previous 4th wave support. The door remains open to a push to the next measured target clusters of 1810/15 and 1850/60 respectively. First things first, the bulls need to push through the Maginot Line to state their case for a continued advance. There remains the possibility of a significant top already being in place and right here is a good risk/reward shorting opportunity if you’re that way inclined (against last week’s highs) and nimble but odds and technicals do favor further upside. The SPX found strong support at the 20 day sma following completion of wave (c) down that I highlighted last week. We expected a counter-trend bounce at the minimum, and that’s what the market provided with critical support (1740) and resistance (1775) levels holding firm. The following 60m SPX chart shows the near term count I am favoring at the moment. Without any overlap of the September swing high (1729.86) we can continue to count a 5 wave advancing structure.

SPX 60m

SPX 60m

The Daily SPX chart shows prices bumping up against the green trendline while sma’s remain pointing higher. The RSI divergence on the recent highs is not confirmed by the MACD signature but my longer timeframe MACD currently provides confirmation of my view that we are in a 5th wave of larger degree with extremes in momentum occurring in wave circle iii.

SPX Daily

SPX Daily

The DJIA is also faced with strong trendline headwinds but will have room to run if it exceeds last weeks’s highs. The reversal lower was convincing but the strong Friday close sets the stage for a continued advance unless reversed immediately on Monday.

DJIA Daily

DJIA Daily

One chart that is providing impetus to the bullish camp is the BKX which has been lagging since July. The BKX reversed higher from the 50 day sma and backtest of the declining green trend channel. The inverse H&S highlighted by the pink trend channel projects a measured move to 70. The BKX also printed a bullish weekly key reversal pattern reinforcing the EWT count shown and expected further upside. The bears will struggle in the face of a stronger banking index.

BKX Daily

BKX Daily

The SPI (ASX200) continues to look bullish with a close at new highs on Friday suggesting we are now in wave iii of an extended 5th wave targeting the 5500 – 5540 area. Patience continues to be a virtue.

SPI (ASX 200) 240m

SPI (ASX 200) 240m

The  EUR/USD held Thursday’s lows despite a deep correction so my count remains valid for a 5th wave low in place prior to a counter-trend rally taking place. What IS important is that the DXI made a new high on Friday creating an intermarket divergence which I often observe at key turning points in this market. I am expecting a retracement to the 1.3500 – 1.3625 range as long as Thursday’s low holds. The bigger picture trend is now down so any counter-trend trades had better be nimble.

EUR/USD 240m

EUR/USD 240m

The GBP/USD corrected deeper than I expected but does not change the count looking for new highs in this pair above 1.6120

GBP/USD 240m

GBP/USD 240m

The USD/JPY never-ending triangle continues to frustrate both bulls and bears while destroying option premium. While this pair continues to find strong support at its 200 day sma, the trend bias favors the bulls while we traverse the upper end of the narrowing range.

USD/JPY Daily

USD/JPY Daily

The Nikkei 225 also shows an unresolved triangle although it does appear to be forming a small diagonal which needs one more marginal new low to complete the near term structure. Watch the blue trendlines for breaks.

Nikkei 225 240m

Nikkei 225 240m

The NZD/USD didn’t provide the depth of counter-trend rally I was looking for on Friday and continued to sell off in what looks like a nested decline. The prevailing H&S formation will be confirmed with a close below the 0.8193 neckline.

NZD/USD 240m

NZD/USD 240m

Finally, I have been keeping a close watch on the debt markets as they begin to unravel and I’ve mentioned the bearish patterns forming in TLT, HYG, JNK and LQD. Higher interest rates are NOT supportive of a continued broad based equity market rally IMHO despite what the pundits and spruikers say. The following LQD chart shows that we may be beginning a wave (3) decline now.

LQD Daily

LQD Daily

In conclusion, the equity markets continue to defy gravity despite deteriorating fundamentals supported by strong liquidity, animal spirits and “belief” in the Fed. Not even rising interest rates in a world drowning in debt can slow this equity bull at the moment. We may be nearing a tipping point where rising interest rates become a drag on the overall market and there are enough signs that the equity market is in a topping process for us to be cautious.

Trade safe 🙂

Nov 082013
 
 November 8, 2013  Posted by at 7:08 am 6 Responses »

Last night, the markets provided yet another headfake with the news of the ECB rate cut (fortunately I was short Euro) and GDP upside surprise pump and dump (where I shorted the US$). Is the equity Top in or are we about to see the BTFD’ers intercept the Bears once again (an ongoing theme). There are arguments for each of these scenario’s and I’ll try provide evidence to weigh up the path forward. On the balance of probabilities, even though I was looking for higher prices in the equity indices (which we did receive in ES, DJIA, Eurostoxx50, SPI, Dax, etc), I will give the benefit to the bears and jump in the bear cave until last night’s highs are exceeded. I will remain nimble as QE remains and the bulls have had the upper hand.

The US$ initially thrusted higher in what I expect to be a 5th wave completion of this current US$ rally and subsequently reversed lower impulsively. Gold also looks like it completed it’s 5th wave down aligning itself with the US$. HYG continued on its countertrend rally and we are getting close to a great risk/reward short entry.

The bullish case…

The SPX reversed hard after completing an ending diagonal wave c of (b) declining in 5 waves in what looks like all of (c). While it is difficult to count an initial wave 1 down, it IS possible and Jason Haver of Pretzelogic has pointed this out to me. He is an outstanding analyst and I rarely bet against him. This flat count illustrated suggests the decline was corrective and we have new highs on deck.

SPX 15m

SPX 15m

The Nasduck Composite also argues the bullish case with what appears to be a 3-3-5 flat correction where (c) equals 1.618x (a), setting the stage for another advance to new highs. Once again, while it is difficult to count an initial 5 down for 1, it IS possible.

Nasduck Composite 30m

Nasduck Composite 30m

The bearish case…

The DJIA provides one of the best illustrations of a completed wave 5 with a clear 5 wave advance into the trendline resistance highs and a prompt reversal lower which also appears to be in 5 waves. The DJIA suggests any countertrend rally should be sold

DJIA 60m

DJIA 60m

Another strong indicator that a material high is in place is the Eurostoxx 50 which had been leading us to expect new highs. With its 5th wave thrust from a 4th wave triangle (ending pattern) and subsequent reversal lower, this chart strongly suggests that countertrend rallies should be sold

Euro STOXX 50 60m

Euro STOXX 50 60m

The SPX long term chart may provide the answer as the critical resistance I outlined last week of the green trend channel and 1778.56 where circle C equals circle A in time and price has yet to be exceeded despite 3 separate thrusts to this level (high 1775.22). Given the rejection of this key level, I am inclined to short against it on any countertrend rally

SPX Daily

SPX Daily

There you have it, for what its worth, I think the bears have a real shot at doing some damage to the ever complacent BTFD’ers and I for one will be looking for a good risk/reward short entry.

The EUR/USD performed as expected and thrust lower in what I believe to be a 5th and ending wave to this decline. While the decline was severe (almost 250 pips) it was accentuated by a break of the base channel trendline support which had held the market for 3 days. I am expecting near term US$ weakness while the Euro attempts a countertrend rally to set up the next 5 wave decline and trade opportunity. The rally off last night’s lows is impulsive and sets the stage for higher prices in the pair in the near term.

EUR/USD 240m

EUR/USD 240m

The GBP/USD provides a potential trade setup here with its 5 wave rally off the November 4th lows and subsequent 3 wave decline. I will be looking to go long this pair around the 1.6060 Fib retracement zone against last night’s low for a push to potential new highs. This trade is consistent with my view that we should see near term US$ weakness against the European pairs.

GBP/USD 240m

GBP/USD 240m

The NZD/USD also provides a potential trade opportunity with great risk/reward. I will be looking to short this pair around 0.8370/90 against the 0.8416 highs looking for a substantial move lower in either wave C (300 pips) or wave 3 (500 pips). Coincidently, the proposed H&S “works” to the 0.7850 area which is also the measured move for wave 3 of 1.618x wave 1.

NZD/USD 240m

NZD/USD 240m

Finally, Gold looks to have completed a 5 wave impulsive decline from the 1360 highs suggesting a countertrend rally is due in the near term, supporting my view of US$ weakness.

GCZ3 120m

GCZ3 120m

That’s all I have for now. With so much data out in the US tonight (such as NFP), and markets being more than a little edgy, expect further extreme volatility in the near term and stay nimble. I’d rather be out wanting to get in, than in, wanting to get out…

Trade safe 🙂

Nov 072013
 
 November 7, 2013  Posted by at 4:58 am Comments Off on Brief Market Update: November 7th, 2013 – Failure to Launch…

Well, the bulls spiked the ball on the 10 yard line failing to push the SPX to new highs. The DJIA did however succeed in making new all time highs in 5 waves at the close of business. This SPX and NDX failure at key resistance opens the door for a push towards the lower end of the range. There are too many options available here on the SPX near term (flat, triangle, combination, etc) but most now point to an immediate decline. It is a chopfest at the moment as the bulls and bears battle this one out. I have no conviction either way but I do expect new highs once this correction plays itself out.  A push towards 1750 would help clear up the structure. No conviction equals no position here for me.

SPX 15m

SPX 15m

The Nikkei 225 is at a critical juncture forming a triangle wave E within a larger triangle creating significant energy for the next move up or down. It is exactly a 50/50 bet at the apex of the triangle but the bulls appear to be losing their mojo. It’s decision time…

Nikkei 225 240m

Nikkei 225 240m

The EUR/USD is set up to be Draghied later today and would still look best with a 5th wave below 1.3440 before staging a strong upside counter-trend rally. The rally off the lows looks like a corrective a-b-c 4th wave with 5th wave lower to come. ECB days are often market movers in this pair.

EUR/USD 240m

EUR/USD 240m

The SPI (ASX200 Futures) new high continues to elude me as I patiently await an upside resolution to get heavily short. Patience…

SPI 240m

SPI 240m

That’s all for now 🙂

Nov 062013
 
 November 6, 2013  Posted by at 2:03 am Comments Off on Market Update: November 6th, 2013 – Prepare for Launch?

The global equity markets remain on track for a continued push higher following this sideways corrective consolidation over the past couple of days. While this correction may get even more complex, the odds are in favor of an immediate resolution to the upside for SPX, DJIA, NDX, etc. My weekend update remains on track. The US$ is also consolidating recent gains but given the strength of last week’s rally, we should expect near term corrective US$ weakness against most pairs. As is often the case, the GBP/USD and NZD/USD have led the way higher against the US$ following completed 5 wave declines. The commodity markets have been crushed as of late and I’m beginning to like potential longs such as Crude Oil.

The trend remains your friend for the SPX and the trend is up. We ARE in nose-bleed territory but the price action says we go higher. My expectation is that we make new highs in November with a cluster of price targets in the 1795 – 1810 area near the upper blue trendline on the Daily SPX chart. I will await EVIDENCE of a change in trend and will not front run the short side. I suspect that China monetary tightening and higher interest rates may be the catalyst to stop this bull market rally, but that’s purely speculation for now.

SPX Daily

SPX Daily

The near term count on the SPX remains on target and warns of immediately higher prices and an obvious inverse H&S will likely provide fuel to new highs here.

SPX 15m

SPX 15m

In an ideal world, I’d like to see the DJIA challenge its monthly megaphone trendline at 16,100 (16,500 on a semi-log scale) before reversing. The stage is set, let’s see if the bulls can get us there.

DJIA Monthly

DJIA Monthly

The credit indices appear to be warning of tighter credit and greater risk ahead which is NOT bullish for equities. The HYG and LQD charts I highlighted on the weekend look to have completed a small 5 waves down from recent highs, setting the stage for significant falls following a countertrend bounce which may coincide with new expected highs in the equity markets.

HYG 120m

HYG 120m

With 5 waves down complete, the GBP/USD has led the way higher (as it normally does) in what is either a counter-trend rally OR push to marginal new highs. At the moment, the rise looks impulsive so I’d be cautious shorting this pair in particular.

GBP/USD 30m

GBP/USD 30m

The daily count would look best with a push to marginal new highs in 5 waves, staying below the wave E high of 1.6379

GBP/USD Daily

GBP/USD Daily

While the EUR/USD would count better with one more marginal new low to complete 5 waves down (but not necessary), the Euro bulls seem determined to hold the green trendline. Either way, we should expect a near term counter-trend rally in this pair which would be a shorting opportunity with an expected push down to 1.31 in the intermediate term.

EUR/USD Daily

EUR/USD Daily

Since the weekend update, the USD/JPY has struggled to advance higher but has not done anything to invalidate the bullish near term count. I guess they were never going to make it easy. I still expect a bullish resolution to this multi-month 4th wave triangle but I’ll let the price be the final arbiter.

USD/JPY 240m

USD/JPY 240m

The EUR/JPY appears to have completed 5 waves down from the 135.50 highs so I’d expect a counter-trend rally here which coincides with my views of a near complete EUR/USD and strengthening USD/JPY.

EUR/JPY 30m

EUR/JPY 30m

Crude Oil’s decline is extended and I’m now alert to a strong counter-trend rally. I will await a small 5 wave advance before committing to a long position here. Knife catching is a dangerous sport but this decline looks about done. As I’m counting this recent decline as an extended 5th wave, the rally should be strong and target back above $100

Crude Oil Daily Continuation

Crude Oil Daily Continuation

That’s it for now, trade safe 🙂