Ben Bernanke’s parting Xmas gift provided the impetus for the 5th wave kick-off as the equity indices have climbed to new all-time-highs as per my preferred count. With these new ATH’s, we are now well on our way towards my first 5th wave target of 1825-35 for the SPX before we start looking for a larger degree 4th wave correction. The trend for equity markets remains higher with impulsive advances and corrective 3 wave declines leading the way into 2014. The trend is your friend until it bends. With equity bullishness and “belief” in the Fed at all time highs along with the markets, I will continue to tread cautiously, trading the near term wave structure which shows no signs of a reversal as yet. With complacency at extremes and EVERYONE all-in long, I am alert for a swift reversal in the new year. My daily SPX roadmap has not changed…
With Wednesday’s strong move higher, the near term charts are more difficult to interpret in terms of micro wave structures so we must rely more on measured targets and bigger picture trendlines. The SPX 60m chart below clearly demonstrates the strong short-term momentum.
The BKX has FINALLY made new highs to achieve minimum targets for it’s 5th wave advance setting the stage for a decline of “at least” intermediate term degree. The Banks remain the “tell” for this market and have kept us on the right side of the rally. With significant momentum divergence associated with the new wave v highs, I am alert for a significant change of trend here in the new year. With all the ducks lining up in 5th waves, which are ENDING waves, now is the time to be vigilant in managing risk.
The FX markets remain at a critical juncture with the US$ holding critical trendline support following last week’s FOMC meeting. As long as DXI holds last week’s lows, I expect near term US$ strength towards the 82 area. So far, the DXI has 3 waves off the lows and has yet to confirm a change in trend higher.
The EUR/USD was unable to trade above prior swing highs at 1.3835 and reversed lower following the FOMC to print a weekly bearish key reversal bar. However, both bullish and bearish counts remain valid as the Euro has remained within its intraday rising trend channel and there has been no overlap of waves [i] & [iv] (red count). Trade below 1.36 trendline support will likely bring accelerated selling of the Euro.
USD/JPY has now achieved my initial measured wave 5 target of 104.72 (actual high 104.65) where wave 5 equals wave 1 and new highs above the wave 3 price extremes. This is an ENDING wave. Once we see evidence of a change in direction to down, MINIMUM expectations are for this pair to return promptly to the scene of the crime (or… origin of wave 5) around 97.00. That is the r/r opportunity in the near term.
EUR/AUD appears to have completed it’s 18 month long 5 wave rally from the 2012 lows. From a big picture perspective, assuming this 5 wave rally is complete for wave (A), I am looking for a corrective decline back down to the 140 level for wave (B).
AAPL found support at its previous swing highs so I’ve moved my SL to 555 above key overlap on a s/t basis. With news of the China Mobile deal it will be important to see the markets reaction. A pop and drop or gap and run to new highs. Having already covered half shorts for +$20, tonight’s price action will likely determine near term direction. NB. Exited remainder of AAPL shorts in pre-market @ $565 (-$1).
Wishing everyone a Merry Xmas and prosperous New Year.
Thank you all for your support as I journal my thoughts and trades on the world wide web 🙂