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Monday, 24 May 2010

Just a little further I think

As I mentioned the other day, I'm no EW expert, but I've read Elliot Wave Principle and I'm happy enough looking at counts and doing them myself to an extent.

From a patterns perspective I'm expecting to see a retest of the February low in the 1044.5 SPX area before this wave down bottoms and my count for what seems likely to me to be this wave 5 down backs that up:


There is a significant caveat on this 15min chart though, and that is the IHS that formed over the last couple of days last week. If that plays out it would take us above my wave (i) bottom at 1114 and invalidate my count.

I don't think so though. The EURUSD action over the weekend was bearish and the IHS I posted on Friday morning has failed and the broadening ascending wedge has broken downwards with a target in the 1.22 area. If we had bottomed last week I would expect that EURUSD IHS to be playing out now:

GBPUSD is trading within a range / rectangle and seems to be heading back to the bottom of that range at the moment:


What I'm expecting to see is that ES will bottom near the Feb low today or tomorrow and then we will see a sharp rally in all of the above.

We are due a rally soon and we have been seeing some simply amazing readings on some of the indicators that I watch. NYMO just made a three year low which was surprising. The three year high was in January 2009 just as a major rally was peaking:


The $NYDNV: $NYUPV spike is almost at a three year high too. That has been a good indicator for interim bottoms over the last year, though it was less reliable during the strong bear moves over the previous few months as you can see from this three year chart:


My $SPX:$CPC chart has also been hitting major lows within a falling wedge:


I'm expecting to see a lower low in the next day or two, but everything is saying that we are due a sharp relief rally in both equities and USD currency pairs soon. I'm viewing this week as a great short term long entry to play that rally. Counter-trend plays are notoriously tricky though, and all trading options this week look risky.

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