Friday, March 19, 2010

Clear impulse waves and Greece.

Not a surprise that Greece is not out of the woods. I am beginning to wonder if Greece may begin a domino effect... Spain, Portugal... who"s next? The European union is being rattled to the core of its foundation with this one.

The EUR/USD decline has extended with another stab to new lows overnight after consolidating most of the day yesterday in a triangle formation. As you might know, triangles are important structures in Elliott wave analysis as the precede a final move in a series. If it is a triangle, we could be due for a partial retracement rebound of the impulsive move from recent highs.

Notice again how well the impulse wave is adhering to the fibonacci fan. It is likely that when we finally do get a clean break of the upper fib fan, it will indicate the start of wave 2.

If the move continues, the next hurdle will be trendline support near 1.345. This is the last even somewhat bullish lower parallel trendline that I could find to draw. Given it's proximity to the low last month, it may take a few tries to break through, but I don't see it as very strong support. We will be heading to new lows.

RSI and MACD are beginning to show signs of turning up on the short term charts.

Keep in mind the trend. Rebounds are meant to be sold.

Thursday, March 18, 2010

EUR/USD Elliott Counts

My post with the proposed counts from Tuesday is right on track.

Here's Tuesday's count...
Link to post:

It appears that wave y of 4 ended with a flat out of a triangle x pattern. We have completed, or should be close to completing wave 1 of 5 (perhaps another stab below this mornings low to complete), and are due for a rally. First target is near 1.3675 - 1.3697  if the current low holds (or lower if we get another stab). This area represents the important levels.

1) The area of the previous fourth wave (common retracement area for 2nd waves)
2) Fibonacci zone
3) Lower trend channel support that has held the lows (was cleanly broken this morning) throughout wave 4 crosses through that area over the next day or so. It is common for the market to retrace up to the underside of this broken channel and give it a kiss before resuming its trend.

It may retrace higher as wave 2's can retrace up to 100% of the previous decline and still be valid from an Elliott perspective. If we were to retrace a significant percentage though (above 61.8%), I would become skeptical of the count I am following depending on the form of the rally (impulsive or corrective).

An opportunity to place short position with minimal risk is approaching if the rebound is in corrective 3 wave form. I intend to be ready.

Here's the count. It would take a break of the high at 1.3820 to change this view.

The Trend Returns...

Dollar is rallying in an impulsive looking fashion. The primary bearish trend looks to be returning again to the EUR/USD in a big way with a drop over the last 2 days of over 200 pips. The count looks to be close to the end of an extended 3rd wave as I type, or possibly the end of the 5th wave. The movement so far has sliced cleanly through all resistance levels except for those near last months lows (1.3434 or so)... a hallmark of an impulsive move.

I will be posting an updated longer term view once we have a completed 5 waves down on the 15 min scale, but wanted to show the fibonacci fans that I showed yesterday at the 15 min scale, and how well the move down has adhered to them as support. These are now a permanent part of my toolbag. Correctly placing can be a bit nuanced, so will post some general guidelines when I get a moment.

Bottom line: Wave 4 (or wave B) likely ended at the top near 1.3820, and we are now in wave 5 (or wave c). GBP/USD so far is having a muted response. USD/CHF is moving up in a 3 wave move so far. Ideally, the rest of these currencies will join the EUR/USD, although they may hit nominal new extremes while EUR/USD does not in a second wave correction, creating a divergence that itself would be bullish dollar... but I am getting ahead of myself.

Wednesday, March 17, 2010

Fibonacci Fan Magic...

Quick post to show some short term fibonnaci fans in practice. Notice the white arrows outside the fib area... quickly retrace back inside. Also note the yellow arrows this morning testing the fib fan started from yesterdays lows. Will we break cleanly into the new fan, or is the break a false one moving us back into the upper fan for another test of the top?

Short term EUR/USD Count

Have been watching the counts in the EUR/USD very closely overnight and this morning. We either completed a five wave move up last night or have another move up to complete the pattern.

I am leaning toward the alternate right now as the move down from yesterdays highs looks corrective and is not in a clear five wave pattern (although it may be a diagonal).

A break through 1.37 is needed to confirm the change in trend. Until then, we may get a new high.

Larger degree counts favor a potential flat ending at the completion of this rally, which may be completing the entire wave 4 correction (or wave b if you prefer).

Tuesday, March 16, 2010

Post Fed Announcement - EUR/USD

Dollar being sold after fed announcement of "no change" to interest rate policy. As a result, EUR/USD being bought up, but not so much as to change the longer trends... just a matter of how we get to the end of this corrective rally.

The movement from yesterdays lows looks impulsive in form. A new short term count has been added that would give us a flat for (c) of wave 4. Even if wave 4 is not over, we should see a correction since we are close to completing 5 waves up.

UPDATE: Something isnt sitting right with me on the details of this count. A triangle shouldnt be followed by a flat in a correction unless it is a combination corrective structure. The alternate on the next chart depicts an WXY structure... a double combo, with the X being either a triangle or a zigzag. Implication is that the entire structure could be the (a) portion of the corrective wave, which would mean a (b) and (c) structure still ahead. If the triangle X is correct, we are nearing the end of (a) since triangles always preceed the final move in a pattern.

The difficulty in corrections is how many options there are relative to an impulsive move. It is always a challenge to know exactly which pattern is playing out in real time. The most important takeaway for me during these times is that I do the research to have confidence that we are in a corrective pattern, and to that end confidence is pretty high at this point due to the nature of overlapping waves since last months lows.

The dollar index looks to be completing its near term corrective pattern, so we will have to wait and see if it turns into a more complex structure or begins a next leg down shortly.

Test of Upper Bollinger Band

Another view I have been experimenting with. 1 day candlestick with bollinger bands set at 20,2.

Notice each time the upper end of the BB has been breached, it has followed up with a break of the midline support.

The test is merely the signal though, and as I am learning it doesnt have to be followed by a breach immediately. I am using elliott wave in conjunction with this signal to determine the best entry points.

Fib Fan

For the past few months, I have really started to toy around with the fibonacci fan. I am by all means no expert on the use of the tool, but have found it very helpful in identifying support and resistance areas, as well as being invaluable in determining a shifts in trend.

Here's an example from today and yesterday in the EUR/USD. As EUR/USD has been a key leader in trends over the past few months, I have been following very closely.

Notice the bounces off fib support, and thrusts through fib resistance. Late last night that was an early indicator that we may be in a new short term trend. The breakthrough this morning of the last fib line was confirmation.

Another option for fib placement in this case... similar message.

Monday, March 15, 2010

EUR/USD Pair 3 Hour 3/15

Posting a 3 hour view fresh from this morning. I dug through the close details of the wave structure of the moves since the low on Feb 28th, and in particular since the rally from March 9th, and find nothin impulsive about it. In fact the move up last friday looks like a classic surge after a diagonal b (3 wave patterns in both directions on the short term charts). I added an alternate that while different at the smaller degree, has the same outcome. It is possible also to count the minute wave 4 as a wave b, but not highly probable IMHO due to the time duration of the move so far, and the less than ideal 5 wave count that would have to proceed it.

EUR/USD Pair Daily View 3/12

Taking a step back for a longer term view of the entire EUR/USD decline since last November. Notice the peak of waves 2 and 4 defining the upper trend channel lines, and the hit of wave 3 on the lower. Classic Elliott wave so far. Also notice the double peaks of RSI on waves 1 and 3. Usually, wave 5 will diverge from wave 3 in terms of strength, so we will have to watch for this divergence when the time comes.

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