First chart below is the daily chart for the past year. I have included the elliott wave counts that I have been following along with trend channels and the standard RSI and MACD indicators that I use to judge where I am in the elliott wave counts and the momentum of the trend.
As you can see above, it appears that we have 2 impulsive waves off the lows back in June 2010 with a correction in between. The price action off of the recent May highs becomes critical... will it be a 4th wave, with a 5th to follow to new highs? Or is it the end of an ABC correction and beginning of a new trend down. Notice when the peak in RSI and MACD happen... they peak at where I have labeled the "3" of the first impulse wave. The RSI and MACD are also both clearly narrowing.
I have seen a number of counts pointing to a triangle with the count somethin like this...
Or this (same message short term, different longer term implications)...
1.427 is a absolutely critical level to the first of these bullish triangle counts (bold red line in chart). Elliott wave rules do not allow a 4th wave to enter into the territory of the 1st wave. Triagles are common 4th wave structures and are allowed to enter into the price territory of the first wave as long as the endpoint of the "E" wave of the triangle ends above the 1st wave territory... in this case at the level of 1.4277. If we break below, this count is proven incorrect. However, a triangle or flat can still be forming based on the second bullish count. Prices would have to fall below 1.385 before these counts are off the table. Personally, I view this bullish option as less likely... the 4th wave is very large and long in the tooth as compared to the second wave.
There is another count I am watching that is bullish on the very short term, but bearish further out. It looks like this...
I like this count for a number of reasons. The RSI and MACD peaking on the first wave? Possible, but not likely. They also are creating a divergence with price which many times is a warning sign that prices are peaking and about to head the other direction. Also, take a look at the bold blue trendline that we burst through to the upside prior to May's peak. Many times after a break in a trendline, the market will send prices back down to test that trendline before deciding on its future path. It happened last year (bold green trendline), and it is likely to happen again. Also, the purple tren channel seems to be forming which would make a nice stopping point for a wave 2 (or wave B if you prefer). If we break through 1.469 to the upside, I will be watching any resistance that this trendline has for opportunities to go short... especially if the above triangle scenarios are eliminated first.
Bottom line... I am watching the action over the next few weeks very closely to clues to help me eliminate counts. You should be too!
