Thursday, March 25, 2010

EUR/USD - Still decining, but time to start being careful.

We may be in or near completion of a small degree 4th wave in the larger 3rd wave decline that started on March 22nd. The move up off last nights low looks corrective so far with overlapping waves.

Again, the fibonacci fan is proving its worth on today's chart. Notice the movement maintained within the short term fan created off the high of wave 2 of 3 for the duration of wave 3 of 3.

I kept the lower green trend channel line that was broken yesterday on the charts. I thought we might come back up to re-test it, and sure enough, notice on the chart how wave 4 came back to retest and break the lower green trend channel line. Even though it broke to the upside, it immediately came back down under the trendline... bearish in my view. However, if the break is to hold, the next trend channel support is the upper purple.

What should follow is another wave down to new lows, likely underneath 1.3250, before a larger degree 4th wave takes over.

A very important note: The likelyhood of a significant low is coming ever closer. By my count, we are in a fifth wave down from last November highs of 1.51+ (EUR/USD Longer Term View) The small degree squiggles do not look finished to the downside for now, but the name of the game right now is to manage risk very tightly. I don't use stops, but I accomplish this with smaller position size, and watching the rebounds very closely to determine their "correctiveness" before considering entering into a short position.

I am always skeptical of moves when large news feeds start following the trends. I can't tell you how many advisors near last Novembers highs were coming out with their predictions of EUR/USD above 1.55. A tell-tale sign of the last leg of any move. We now have that same effect happening now, but to the other extreme...

Stay safe out there! There are infinately more possibilities to get back in the market when you are out of the market, than when you are stuck in a position in the market that has gotten away from you.

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