EUR/USD pair in the last leg down of a 5 wave decline since high on Nov 25th of 1.5143.
By Daniel at 11 December, 2009, 4:57 pm
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Look for a corrective 3 wave rise (or variation) to take the pair back up to prelim fib zone roughly between 1.48 - 1.49 where it should meet stiff resistance.
The closer the corrective wave gets back to 1.5143, the greater the opportunity for the next leg down, which should be significant.
Dollar index broke through this morning… giving it five waves up from lows. It is nearing a short term end, and should likewise correct toward initial targets in the fib. range.
I fully expect equities to have their last gasp during the upcoming dollar correction which may last a week or more. Seasonal strength has kept equities up in spite of forex and commodity weakness. Once the weakness relaxes a bit, I see no reason why equities won’t continue their trend… at least short term. The pattern in equities is extended, and even the most aggressive elliott wave bullish counts have the primary indexes nearing completion of a triple diagonal move since March.
http://www.elliott-wave-theory.com/elliott2.html
For those not familiar, a triple zig-zag is the most extended corrective pattern in Elliott wave analysis. There is not a quadruple pattern. Most important is that the pattern is absolutely indicative of a CORRECTION against the primary trend. This implies that the next significant, multi-month move is down below March lows.
The forcefulness of the move upwards in equities since March is typical of the character of a wave 2, which has a purpose of fulfilling all the hype of the former bull market (sentiment readings), but at volume and price levels below the peak of the former trend.
I have seen some Elliott interpretations that place the corrective rally since March as a wave “B” instead of a wave “2″. Although less probable, it is possible. It really doesn’t matter how you label at this point, because the outcome is the same… wave “B” is followed by a wave “C” down below March lows.
Elliott analysis has strengths and weaknesses, as does any trading method. The primary weakness is that there are multiple interpretations (counts, or labeling) that may be valid at any point in time. The strength is that when all or many of these interpretations effectively point in the same direction, you are presented with an incredible high probability, low risk opportunity to capitalize.
The latter is the situation that is presenting itself at the primary degree trend level (good for investors… multi-month and year trend). Forex and commodities are already in the early stages of the next move down. Equities will soon follow.
As always, there is NO SURE 100% CERTAIN TRADE OR INVESTMENT. Anyone who informs otherwise is either foolish or trying to sell you something. Trade or invest only what you can afford to lose, and look for the best opportunities using a method that works for you to go short or long at whatever time-period you are comfortable investing/trading.
- protechtor
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