Wednesday, June 23, 2010

Euro Update and Opportunity...

What seemed a bit tentative yesterday appears less so today.

I was looking for an impulsive 5 wave count, and while not the most perfect looking impulse, what appears to be an ending 5th wave thrust from a 4th wave triangle ended the wave has helped clear the picture and raise the odds a bit.

The spike up post Fed today is steep, and as I type, is close to being counted as a 5 wave impulse. I will count that wave as "a". The opportunity to go short will come with the completion of the "c" wave, which could take a day to play out.

One potential blip in the bearish case is found on the daily bolliger band chart I have been showing lately. This is the fourth time since the downtrend began last November that we have touched the upper band. Each of the 3 times prior, we spent 3-4 days flirting with that level. Now, there is nothing that says we must have a repreat performance, however, since we did not break the average (midpoint) between the bands today, and instead, this area acted as resistance, it may mean either a very healthy retrace of this first wave down, or that we will head to new short term highs before a return to the bearish trend.

For now, we are well within common wave 2 retrace levels, with a 5 wave pattern behind us that leads the path ahead until proven wrong.

Tuesday, June 22, 2010

Whose afraid of a little debt... the Euro is.

A brief reflective look at the Euro.

Short term perspective first.

Last Thursday the post "Not Even Going to Try to Count This..." described an rally set in overlapping waves. Two charts posted, the first with no elliott wave counts posted (I really tried, but it was just too much of a mess... one of the reasons why I believe that this will be fully retraced eventually), listing a prediction of a bounce to the mid 1.25's. The second a touch of the upper bollinger band on the daily chart. Here is what they looked like:

The top tick ended up being 1.2513 (this may differ from what your market makers data tells you since the top tick happened on traditionally low volume Sunday afternoon), and we now have what is beginning to look like an impulsive wave as a retreat.

Here's the daily bollinger band today:

Notice the perfect touch of the upper. The technical trigger using this method is a cross of the moving average/midpoint, so we are not quite there yet using strictly the daily bollinger.

We may have just finished (presently in a wave 2 up) or are nearly finished (another dip for a wave 5) with the first impulse wave down...

Longer term...
On May 22nd, I posted "EUR/USD Downside target realized, and then some...". At that time, I was exploring a very bearish option that has us in a wave 3 down since last November. While I have since shifted my view to one that places us in a lesser bearish C wave (see "Updated Longer Term EUR/USD View"), the internals of 3 vs C are the same.... a five wave impulse wave. Here is the chart from that post speculating on how wave 1 of 3 (or the entirety of C) would finish up.

This turned out to be precisely what the market had in store for us up until now.

Notice the sharp retracement of wave [iv] noted into the mid 1.20's. I believed at the time that it would be sharp because of the tendancy of waves 2 and 4 to alternate. In this case, since wave [ii] was a flat, then probability favored wave [iv] being a sharper corrective rally, more like a zig zag. If wave [iv] is finished, it probably counts best as a double or triple zig zag, but whatever the count, it certainly fit the alternation tendancy that Elliott describes. If wave [iv] is not finished, and we break through 1.2513 on solid momentum, it will likely mean my count is wrong. This does not mean that the bearish trend is over, only that the internal subdivisions need more time to work themselves out. I still believe we will hit that lower green trendline (very speculative) before monting a more significant rally.

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