The upward trending support that I have been watching on the EUR/USD broke last night and the move from the top can be labeled as an impulse. I am going to take a short on a pullback to 1.2345, which could be a second 2 of a 1-2, 1-2. Stops will be kept tight at 1.2395. If the 1.24 level breaks however it is likely we will be moving higher still. There isn't too much else to report as market patterns haven't been very clear over the last week so I haven't been trading. Good luck.

SPX Video Analysis

Roy's latest video analysis of the SPX is out. His thought on equity markets echo my own exactly. I think we will see another small increase in risk appetite early in the week before a reversal. Check out the video by clicking on the link to the left of the page.

Some thoughts on EUR/USD

While the larger count for the EUR/USD pair is indeterminate due to the ambiguous nature of the sub-waves from the 1.5150 high, I have been focusing on shorter term patterns to decipher intra-day direction. For the past month the pair has been carving out a series of 3 wave patterns, which looks very much to me like it is all part of the same corrective move. Many people are calling for a medium term bottom in the EUR/USD and while sentiment is at an extreme which favours the bulls, I am highly dubious that this move down is yet complete. The move from 1.2670 (in red) is clearly a 3 wave move and thus cannot be the final move in an impulse, unless it is part of an ending diagonal, which is clearly not the case in this instance.

Another reason why I believe that this is not the bottom everyone is hoping for is the highly corrective nature of the move up from the 1.18765 low. If we are to see a significant retracement which relates to the entire move from the 1.5150 high, I would expect a much sharper rebound. To the left I have posted an ending diagonal count which is currently my favoured scenario from here. While it is possible that we are just in a corrective move as pictured above, I do not think the EUR/USD has much room left to fall before a larger retracement on the daily scale, and we will probably chop around in a further series of 3 wave moves for the next month or so before pushing higher. Both of these scenarios point to coming downside in the next few days, so I will look to enter short on a move above 1.25 with my stop above 1.27.

NZD/USD Daily Update

Recent bullish price action in the NZD/USD pair has forced me to review my count. On the daily chart the move from the 0.7635 high does not at all look like the beginning of a new motive wave. While it is possible that we have a large drawn out second wave that stretches from 0.7083 to 0.7326, I think this is unlikely the correct count and in the long term the Kiwi will eventually push back above 0.76 again. Medium term I am still bearish however and I expect that after the completion of this rally - which I have labeled as X - we will fall in another corrective ABC to the downside.

NZD/USD 4 Hour

The NZD/USD looks to be completing a very large complex flat correction from the May low. Price is nearing this month's high which should act as some resistance if we make above 0.69. I think it is more likely we rollover soon and head lower in an impulsive fashion. This move will likely coincide with a turn in equities and a shift in sentiment away from riskier markets. This pair has the most extreme sentiment reading of all the majors according the DailyFX data, which warns of an impending reversal. I think this pair offers a fairly good risk to reward from current levels with a stop just above the 50% Fib at 0.695.

SPX Analysis

Here is my 4 hour SPX count. I think we have either just begun the red wave 3 down from the 1108 high or are still correcting in a large complex wave 2 of the same cycle. So far price has been twice rejected at the 38.2% Fibonacci of the entire move down from this year's high. While I am very bearish long term - click here to see a very informative video on Supercycle Theory and how it will affect you over the next few years - it is still possible that equities will remain range bound for several more days, or maybe even weeks, before breaking to new lows.

This chart is a 15 minute close up of the last move down from the 1108 high. I believe the move is either a 1 of the large, red wave 3, or a C wave of an X wave and we are still correcting in the large red wave 2. Either way it looks very obvious to me that the move ended with an ending diagonal. This means that price will almost certainly retrace to the point of origin of the ED before moving lower. Based on this I am going to take a small long position from here with my stop at the recent low. My initial target is 1071, however if my alternate scenario plays out and we are still in the red wave 2 price will move much higher, and likely test the 1105 level again.

SPX Video Analysis

Roy's latest video analysis of the SPX is out. His outlook is extremely bearish from this point onwards. If you are still holding any longs in equities you might want to reconsider your positions. Click the link on the left of the page to view the video.

EUR/USD Ending Diagonal Possibility

Here is another insight into the possible future movements of the EUR/USD. The basis of this idea is the extremely choppy price action from the high (red 4). The 3rd scenario from the last EUR/USD post is also possible, but the other two have been invalidated. Click here for Jamie's take on things. Either way it looks relatively safe to get long from here, with your stop at 1.210 but be careful price could fall in a C of B of 2 before heading higher.

USD/CHF Hourly

The USD/CHF looks to be correcting from 1.147 in a wave ii of C or an X wave (if wave C was complete at the low). Either way I expect more downside over the rest of the week. Look to short from around 1.162 with at stop near the recent high just above 1.17. I am fairly confident in this trade as the drop from the top was sharp and very impulse like and the move off the low is very choppy typical of a correction. Move stops to break even on a break below 1.15. Initial target is 1.1350 however it is possible that the move will extend much lower depending on the pattern that emerges in the coming days. I will update as this move plays out.