Tuesday, April 6, 2010

Euro fears = Ending Diagonal Wave 5

With the break this morning through 1.338, it appears that the small degree wave 2 count that has been my primary count since last week (see Tues. March 31st post ) is indeed in play. It also means that the primary and alternate counts I am following are both telling the same story on a short term basis. The primary difference between the two is whether an ending diagonal is in play (see last weeks ending diagonal speculation post ), or a more bearish impulsive count. Clarity on which one is in motion should work itself over the next day... it is a close call between the two given that the correction moved up into a very common ending point for wave 2's... between 50% - 61.8% fibonacci retracement zone, and that we never did get a touchpoint of the upper blue as noted in my speculation last week which would have put the ending diagonal at a much higher probability.

A break through of 1.3459 to the upside would warn that a more complex wave 2 was progressing (and that we may still hit that blue upper channel!).

Even though the trend looks like it is still clearly down, I would be remiss if I did not point out that we are most likely in the ending move (wave 5) of the entire wave down since last November. Once wave 5 is complete, I would expect to see a significant rally. I continue to read more and more articles about the record number of short EUR/USD positions in the market. As a contrarian study by nature, any elliottician reading such news with an almost textbook 5 wave pattern in it's later stages, must prudently consider the risk and manage money tightly.

My longer term EUR/USD count may be worth reviewing at this point to give you some perspective at where wave 5 may take us before a larger corrective rebound that retraces some portion of the down move since November.

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