The first impulse - update

The 4th correctional wave was a bit higher than initially excpected, giving more room for 5th to go.
So, I expect the current 3d to complete this Monday morning (East Coast time zone). The 4th may be a strong one, leading to the formation of expanded triangle.

As for the EURUSD, things seem to be a bit in advance to the stock market. A strong reaction to NFP figures means the 4th wave is in the making and should complete under 1.25 on Monday:

The first impulse

The picture in the markets seems to get clearer.
In my opinion, next week we're going to finish the first bear impulse for the DOW. The currencies also seem to start looking to stabilize before the correction of the downtrend will start.

Among all indexes, The Dow has the clearest picture:

And as for currencies, I expect euro to over perform the commodities dollars (AUD, NZD, CAD)  before the bottom of this impulse (in DOW) is reached. The base for EURUSD will be probably built over 1.24 level:

Is AUDUSD done?

One of the  key components of the global markets - AUDUSD is showing some strange behaviour, that could translate into the full-blown panic in not so distant future.
In the coming days we should find out if the current wave is an impulse as shown bellow and hence if we could expect an unravel of carry trade in months to come.

The Bear Market's possible path

So, we've entered the 2nd phase of the Great Bear. I think we still have some room on the downside in order to complete the 1st intermediate wave down. Let's say somewhere near 10K on the Dow. May be a bit higher, may be lower (toward 9600). But, in any case we're only  at the beginning of this bear market. Most likely somewhere next year we'll enter the time where any support for the markets from the politics or monetary regulators will become impossible due to continuing polarization of western societies (think about American elections) and some form of capitulation will ensue.
The shown chart doesn't include even a remote possibility of sovereign failure of countries like Spain or Italy. I hope the EU will struggle and will prefer to sacrifice  the real economy rather than the sovereign debt market.

DJIA: this is the end, my only friend (c) The Doors

The ods are high, the advance of the DJIA from 26/11/2010 is over:

 

 

XLE shows the way?

The year end rally for AUD/USD has finished exactly 31st Dec. The odds are high the cyclical strength of the green back is here for rather a long period of time. 90 in the index (DX) should be taken this year without any difficulty.
But for the moment a quick look at the XLE ETF. The rally started in July is coming to the end, my preferred date for the top is around the state of the union speech (Jan 25th):

DJIA short term update

The market seems to be in the final 5th wave of the move started in late August.

And the fuel (fear ) is burning out quiet fast:

Current EW count for DJIA

The clearest picture of the current markets is shown, in my opinion, by the DJIA:

Medium term projection for EUR/USD

The following projection of EUR/USD behavior considers that the correction of the first wave down in the US equity markets will be done by mid or end of July. The August, in this case, will be really hot with the 3d wave down for the equities and the 5th for the euro.

The risk is back

Market has tried to rally and was sold in a controlled manner during the second part of the yesterday's  session. But looking in the details one will remark that risk is starting to enter by a small door. Small caps were clear performers. Commodity currencies were strong as well as East European ones. The implied volatility as well as it expectation (VXX and contracts on VIX) were about unchanged.
As for the moment I'd expect  one more close near the recent lows for the broad US indexes as well as for other risk plays (EUR/JPY, EUR/CHF) before we start the summer risk rally.

The 5th is the 5th

So, yesterday we've closed at multi months lows on DJIA and SPX thus confirming my view and the possible trend reversal.
A good indicator to watch is the old good EUR/JPY. Technically it's rather constructive.

Bottoming

So, in my opinion, we're in the process of bottoming.
Despite the strong performance of the european markets end US futures this morning, be aware of a highly probable pull back to test the Tuesday's low. In my opinion, that will be an excellent entry point if you're not already in.

Fat fingers?

May be, may be not, after all it's not that important:

The Gold/Silver ratio is surging 3d day in a row:

And what's about US treasuries, they were already rallying for some weeks:

So, was it really because of a fat finger?

Thoughts about the primary trend

An excellent analyses about the current market from Claassen Research.
They explain with historical charts and data why we shouldn't pay too much attention to the market's internals. This time it's really different and is similar to  the previous bear market rallies.
A must read.

USD: showing the way

This morning in Europe we have tested yesterday's highs on March's SPX contracts at 1112.75, the same time NDX's ones have missed previous high by about 2 points. Also we've seen a  sharp rally in  all currencies against USD, bringing USD index to its trend line going since mid January.

The price action which actually followed suggests that we have finally rolled over and, at present, entering new phase of dollars appreciation and sell-offs in all classes of risky assets.
 This scenario will be validated by crossing 81.5 on the USD index.

Gap and run

The tittle of my post is the program for today's session in the stock market. Yesterday's one  proved  just merveilleusement my EW count. NDX has stopped right at 61.8% retracement of the intermediate wave 1.
After market FED's announcement proves that they have good EW analysts as well. In any case, the message is pretty clear: "drop stocks, currencies, commodities and run on treasuries". So, don't fight the FED.

Fast and furious

In the not so distant past the market was taking its time to correct. After a 1st wave, we could expect 50 to 62 percent of retrace in time as well as in price. Not this time. We have really entered a liquidation mode. We're in hurry to liquidate all this "risky" stuff we've hoarded since the beginning of March '09.

So, yesterday (Feb, 4) we have completed the first minute  wave (1105 -> 1063 for SPX) of the 3d minor. Usually, the third waves are strong and often extend. So a reasonable target for this minor one could be at near or below 1000 on SPX and 2000 on the  Nasdaq Composite.  We'll reach the bottom of this third very quickly, most likely next week.

The first minor wave is about over

The stock market had only good news on Friday with Q4 GDP, Chicago PMI and consumer sentiment, all shooting higher than was expected. But the stocks faded, especially in tech sector. And if someone thinks the decline in stocks was driven by an expectation of the future rise in interest rates, he must look at treasuries. Their rates have declined strongly, - not exactly a situation of eminent rise in FED funds.

All this has given one more proof, if one needed, that markets aren't driven by news.

In my opinion we have approached the end of the first minor wave down, as shows  my Elliott Wave count for Nasdaq and SPX:

I'd like to add that I consider the beginning of the first minute wave  January 11, the same day as for Nasdaq. Indeed, even if we can't see it on the charts of cash SPX,  the March's contracts on SPX, have put in the absolute top right before the bell on the  January 11. That top wasn't taken off when 2nd minute wave topped out. Thus, one of the most important rules of the Elliott Wave Principle ("Wave 2 can never exceed the start of Wave 1") is preserved.
The obvious conclusion of this count :  the most likely, this Monday (February 1st) we'll start a corrective rally. The possible targets for this move are shown by red horizontal lines.

Should I stay or should I go?

This week, market is seeking to stabilize after last Friday's sell off.   It's difficult to be sure in very short picture. We can push much lower today (my privileged call), in which case it will be the 5th minor wave of the 1st down, as well as we can stay in the range of previous 2 days or slightly rally in order to work out short term oversold conditions.
Let's look where this market is heading in the nearest perspective.
In my opinion, both SP500 and Nasdaq Composite are heading to test (and pierce) their 200 days MA.

And that should happen within weeks. After that, we'll certainly have a tradeable rebound  and then the real things will be able to start. Currently I think that we will start the new Big Wave down somewhere in April heading in what Yelnick has called the Summer of Disillusionment.

XAL has finally taken off

Happy New Year for everyone and successful  investing. To start with the positive mood, let's look at one very positive development.
I've discussed already the possible long term bottom in the air transports some months ago.
Despite recent terror menace airlines have hold very nice. I see a clear 5 waves impulsive pattern unfolding since the retest of March's 09 bottom, meaning airlines are probably the first US industry to get out of the bear market, well, after ......  at least 10 years and ~94% decline.  It's pretty encouraging for other sectors, isn't?