Friday, April 16, 2010

Iceland, Greece, now Goldman?

Fear has been back in the markets since last November, although by looking solely at the equity markets, one would hardly know it. It is only upon review of the Euro, the dollar, and other major currencies, one gets the sense that there are serious fears being acted out in the markets.

The Euro has Greece, and while the possibility of Greece's default is significant, it is much, much, much, much, much (is that too many???) more significant in what Greece may signify... a tip of the iceberg of foreign nations defaulting. Ironically, Greece has had much wider coverage in the international news, but last year, Iceland sounded the alarm. That fear alarm has driven the EUR/USD pair down significantly from it's highs up over 1.51+ to a recent low of 1.32+. That's about 13% drop in a little over 5 months! A large move in any currency.

Equities back in 2007 had Lehman Bros.... the straw that broke... well, you know how that story goes. Today's announcement about potential Goldman fraud does not surprise anyone I have talked to, but it does point to fears that so far since 2009 lows, has so far been able to be ignored. I am no expert in derivatives, or the complex financial arrangements that surround them, but I do know that noone has a solid grasp on the amount of leverage they represent in the global marketplace... and hence, the impact of a chill on these bets such that the Goldman news today may represent.

I digress though... as a non-expert on all things Goldman, and merely an Elliott wave analyst and part time trader, I will leave the deep dive into such matters to those with more experience. I point these relationships out... that between Iceland, Greece = Euro, and Goldman = Equities to merely show that fear, the everpresent necessity of a bear market, does not show its ferocity all at once, at the same time, in the same marketplace. It has peaks and valleys. This is the root of a grand supercycle bear market elliott wave. The valley of the absence of fear in the equity markets may have just passed.

Binve has a great post on elliott wave counts (short and long term) in the equity markets. I highly recommend checking his latest post out. He has had a minority view that the latest wave up (since Feb) was NOT impulsive (which I had agreed with)...

As far as EUR/USD action, the bearish triangle or ending diagonal counts of late are still in effect. No need to change things here. The short term picture appears as if a small degree 5 waver has or is near to ending, which may mean a partial retracement of the move down from the upper blue trendline.

I thought I would show the various trendlines that may be in effect that are very solid tools at finding support and resistance levels.

The white line represents the recently broken upper trend channel that has guided price action since last November highs. Yup, it has been broken (with a gap up that was just closed today), but I would keep an eye on this line as it is common for breaks to retest.

I have spoken a lot about the blue trendlines shown. These have a number of touchpoints on the upside, and will be a formidable barrier for the bulls to try to break.

The purple is a so far weak upward bound trend channel. It may provide some resistance on the way down, but given the non-impulsive nature of the rise off last months lows, it should not hold for long.

The yellow lines are very short term trend lines. The most speculative of the bunch, a break of the upper would tell us that a short term trend change is in effect.

The red line isn't a trend channel, but rather represents my line in the sand for the bearish scenarios. If my analysis is right, price will not move above this level.

If we are in a triangle, wave D will probably end along the white line, and probably someone in the neighborhood of 1.34, before a 3 wave bounce in a wave E.

Will indicators a bit oversold, and RSI diverging on the latest lows on the short term indicators, my guess is that profits have been taken for the week and we won't see much action until open on Sunday.

Have a great weekend!
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