Friday, April 23, 2010

Euro Rebounds... but for how long?

If you have been following these posts, you know that I have been bouncing back and forth as to whether we are an ending diagonal 5th wave, or a diagonal wave 4th option. Both are similar in form, but with the breakthrough yesterday to new lows, and what would have to be a very shollow "e" wave of the triangle, the ending diagonal view took the spotlight. The diagonal 4th is still the most likely alternative, but if we break through 1.3524 to the upside, the diagonal 4th option is completely off the table.

The selling didnt quite reach the lower blue line as I was anticipating yesterday, however, after doing some more analysis overnight, I realized that a touch of the blue line on the bottom would have eliminated the ending diagonal option completely, as wave 3 would have stretched out to be longer than wave 1 (a rule breaker in Elliott rules). The bounce that played out overnight was critical to the ending diagonal option.

Ending diagonal's are very rare and only take place where the preceding moves have gone too far, too fast. The Euro's move down from 1.51+ last November to 1.32 could be described as such a move. Even still, because of the rarity of seeing this pattern, and even more rare being able to identify it in real time before it is almost complete, I will continue to be vigilant in moving alternatives to the front and center as they become viable.
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