Tuesday, May 4, 2010

Longer term view prediction getting closer...

Here is the target and prediction I put forth on March 22nd. That we would hit the trendline near 1.289 in or around the mid-May timeframe. While it took wave 4 much longer to play out than was apparent on March 22nd, the market appears to be attracted to the lower trendline like a magnet.

Notice the yellow trendline support.

Here is where we are today. Notice the blue trendline that has held all price action for months is not broken to the downside. Yellow trend channel target dead ahead!!!

Shert term analysis in yesterdays post I mentioned an opportunity with a bounce to 1.3206-1.3250 to go short for a wave 3. Here is what the chart and count looked like yesterday...

As such, my best count is that we are in a wave iii of wave (iii) of wave [v] of wave 1, thrusting from a completed triangle, and on our way down to a touch of long time trend support. Wave iv and wave v are still ahead, but downside is now becoming limited before a much larger expected rally that could carry us to at least between 1.38 - 1.40 in a 3 wave correction of the entire move down from last November. This correction will serve to scare the now overcrowded, weaker shorts into long positions... just in time for wave 3.

Monday, May 3, 2010

A week later... Euro still declining

My apologies for no posts in a week. Unfortunately, I got hit with a viral bus in the shape of acute bronchitis and laryngitis... a very nasty combo. Almost as nasty as the combo punch that continues to decimate every Euro rally since last November. And if Elliott wave counts are correct, we still have a bit more to go on the downside before a more sustainable rally to correct the primary trend down.

Last Monday I mentioned that a new low was likely. Sure enough, we did hit a new low shortly after. On Friday, April 23rd post, I had posted that there were 2 counts that were most probable to explain the price action over the last month and a half... an ending diagonal 5th wave or a diagonal (or some call triangle) 4th wave... with the diagonal 4th as the most probable.

Today's short term action still has both firmly on the table and the likelyhood of new lows is clearly ahead of us. Here's the primary count I am following:

This has us in a wave ii of wave (iii) of wave [v]. Wave ii could take us near support in the prior fourth wave of 1.3206 - 1.3250, but it would take a break of last nights high of 1.3362 to move to the alternate, still bearish option of an ending diagonal 5th wave. The only difference in the alternate is some additional upside, likely to near 1.3450 prior to dropping down for a new low. A solid risk/reward opportunity on the short side is presenting itself with a near term bounce in 3 waves.

Although the short term is pointing clearly down, we are quickly heading into a time where a longer lasting bounce may be around the corner. My longer term EUR/USD model is still in play, and I fully expect a significant bounce to begin off the lower support trendline. The trend is down, but moving to a more cautious stance soon is certainly called for and wise.

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