SPX Daily Count

Apologies for my lack of posts lately. I have been extremely tied up with work and haven't had time to trade, let alone do up charts. I hope you all have been having some luck trading these markets. My risk averse bias as shown in my last several posts has proven to be incorrect as risk appetite has been increasing for far longer than I predicted. I still remain bearish on equities however and sentiment is once again reaching an extreme (see Prechter's latest interview here). In the SPX price is coming up against solid trend and shoulder line resistance, and I do not foresee a push up through the May 13 retracement at 1177 before a reversal. We may have already turned but if not I believe we are very close. I have just taken a short postiton at 1138 with a stop at 1180.

AUD/JPY Triange

The Aussie/Yen looks to have almost complete a huge triangle that began back in May this year. I think we are nearing a point of reversal from where we will head sharply lower which is the norm on completion of a triangle. For this count to remain valid 79.50 needs to hold. There is a fairly good risk to reward trade that can be make from current levels with a stop at 79.50. If this count is correct price should break back down through 72 over the coming months and will likely head much lower into the end of the year.

EUR/USD 4 Hour Chart

Just a quick one today as I don't have much time through the week anymore. Here is a EUR/USD 4 hour chart with a fairly obvious 5 wave move down from the recent high. I think we will continue to push higher in the final sharp leg of a correction before reversing near the 50% Fib level. This move will correlate with a push higher in risk across the board but will reverse sharply in a downward thrusting 3rd wave possibly around NFPs. Expect volumes and volatility to drop as we push closer to Friday's release.

Bearish SPX Hourly Chart

My daily count seems to be holding up well and I think we are ready to drop. Momentum so far hasn't been strong, but I am still confident that we are heading lower, and have just taken another short position based on this count. As you can see, the move I have labeled and red wave 2 is a flat, and retraced less than 50% of the preceding wave 1. This signifies weakness, which has also been shown through the minimal retracements in the last few weeks when other risky markets bounced much harder. I am moving my stop loss on my previous short to 1064 because if this is a 3rd of a 3rd of a 3rd we should start to gain momentum very soon and since this wave is expected to extend a long way, it is unlikely we will retrace much from here. If we do push back up above 1064 I will have to review my count.

NZD/USD Daily Charts

Here are two daily chart possibilities for the NZD/USD. This first one is my primary count, based solely on the Diagonal pictures counting better as a Leading Diagonal (5-3-5-3-5) rather than as an Ending Diagonal (3-3-3-3-3) as per the chart below. It is also possible that the LD wave 1 is an A, the 2 is a B of a more complex double or triple 3 correction, and we will continue to hold the daily range for some time to come. This alternate to my chart does not sit well with my fundamental based expectations for a large decline in the US economy coming into 2011 however, so I do not believe it is likely. I expect the relationship between the US and it's "safe haven" status will continue to deteriorate into the coming months and years, and we will see a decline in the US Dollar as the next wave of global economic decline sweeps across the globe.

Here is my other count for the NZD/USD. If this count is correct it is likely we will retrace the entire length of the Ending Diagonal C of X all the way back to 0.66. This downside move will likely take up a bit more time than the correlatory one in the chart above, however in a similar way I expect that once it reverses to the upside it will do so sharply and impulsively. In both of these two counts, expect the coming move to the downside to be choppy in nature as the moves are both corrective and not impulsive. I think selling this pair in the short term is a possible option but would not suggest getting short unless prices were to retrace to the 0.715 level. In my opinion there are better trading opportunities around at the moment.

SPX Ending Diagonal Possibilities

Here is my bearish SPX Ending Diagonal count. In this count the market has already topped out and completed green wave 2 (see my last post for a daily chart of my longer term count). Although it is hard to make out on a 4 hour chart, there is a possible Leading Diagonal down from last weeks top, and we have reversed sharply in a wave 2 which is a common occurrence after an LD. We will know very early in the week whether or not this count is correct, and while I am hopeful it is, I think it is more likely we push up one more time before reversing as per my next count.

Here is my other Ending Diagonal count, which is bullish in the short term. As you can see price bounced hard off the lower trend line support during Fridays session, and we may see some follow through on Monday in the form of a throw-over fifth wave. If this is the case I would suggest taking short positions from the 1140 level which should offer strong resistance. I do not expect price to break much above 1150 however if it does I will have to revise my longer term count as this will most likely invalidate my ED counts.

SPX Looks close to Topping

This is my current favoured SPX count showing an Ending Diagonal nearing completion. I am expecting price to rollover on a spike up above 1120 from where it will drop sharply in a wave 3. 1035 which has held price in the past should do so once again, although I will be placing my stop at 1180 to be safe. As I have mentioned several times in the past I am very bearish on the US economy and expect the bear trend to continue very soon. I have attempted unsuccessfully to get short with a small stop several times over the last month in anticipation of top, however we have now retraced to a level where I think it is worthwhile taking a short with a larger stop. I agree with the longer term views of Prechter and Gerald Celente and believe we very near to a wave 2 top.

As you can see on the chart to the left (showing a 4 hour zoom of the C wave ED from the chart above) there is clear divergence in the RSI, and price is once again nearing overbought levels. I expect this final thrust up in price (whether it makes a new high or fails) will not make a new high in the RSI showing more bearish divergence. I will be looking to short at 1125 with a 1180 stop. If price fails before reaching that point I will take a short on a break through the bottom upward trending ED support line. As I have mentioned in the past, this is a medium to long term hold position with a great risk to reward. Price is expected to fall beneath 670 in the long term.

GBP/USD Keeps Pushing Higher

Cable just keeps on going! Here is a 4 hour chart of the trend lines I've been watching. If price continues higher into the top resistance zone I think it will make a good short with a stop at 1.59. 1.58 has been important support and resistance several times in the past so it will make a good entry point.

I got out of my SPX short just now as the pattern down from the top looks corrective. I now think risk is likely to edge slowly higher for the remainder of the week until the US GDP data comes out on Friday, which I expect will be dismal.  I will be watching the markets closely then for a top out in equities and likely a turn in risk across the board.

SPX Could be Completing an Ending Diagonal

Here is a possible Ending Diagonal count for the SPX. I have put in a black count showing the ED pretty much complete as I write this, and a red count with another possible wave up to come before a reversal. Either way a break of the bottom trend line should offer a good signal to get short with a stop above the previous high. If this move down complete as an ED it will be the C wave of a large zig-zag from 1007.4, and I expect that price will reverse sharply from the high as it begins falling in a large 3 of 3. I have just taken a short from the top trend line in anticipation for a collapse. Anyone who follows me knows I have been trying to get on at the top of this move for some time. More conservative traders may want to wait for a confirmed break of the bottom trend line before getting short.

GBP/USD Support Channel Continues to Hold

There is a really apparent upward trending support zone on the 4 hour which has continued to hold up the Pound. One again price has reversed sharply pushing higher against the USD. As this entire move looks corrective I am expecting price to eventually break through the bottom of the channel and make a new low. Until then it is not safe to get short unless we move to near the top of the channel or if the support zone has been decisively breached to the downside. Expect resistance just above 1.55 as this has held price in the past.

SPX About to Plummet?

Here is my primary 15 minute SPX count. While the whole move from the high could be counted as a correction it is also possible that we have already topped out and are heading lower from here. As you can see there are some extremely bearish looking candles beginning to show and I think fundamentally it is more likely that we will hear negative news over the weekend. In my chart you can see in my chart we have just begun a third of a third of a third which would explain the sudden sharp drop off in price, and also means this momentum is likely to carry on for the remainder of the session and into next week. I have just taken a short position with a stop at 1090. The target remains open but the expected risk to reward on this trade is massive.

SPX Showing Signs of Weakness

Here is my irregular flat count for the S&P 500. The reason I favour this count is because the wave I have labeled as black wave B fits perfectly as a 3 wave move, and looks awkward when labeled as an impulse which ever way the sub-waves are labeled. Wave 2 retracements are normally deep and sharp however this shallow flat is a warning sign of impending weakness. I expect the final wave of this correction (black C) will likely be a failure as well (not reach the end of black wave A), which is also be a sign of weakness. Once this correction is complete I expect a very hard and fast fall straight through the 1000 level. This will likely occur as levels of negative press about the US and it's imploding economy increase. If there is one trade I want to be in for the rest of this year it is short US equities.

NZD/USD Hourly Chart

Here is my latest NZD/USD count with what I am expecting from this pair over the coming weeks. There appears to be a reasonably clear 5 waves down from the triple top at 0.7155 and it appears as thought the pair has almost completed a flat correction from the low. I expect that price will encounter strong resistance at around the 0.6980 level, which is strong technical resistance and also very near the 50% Fibonacci level. Look to sell from this zone with a stop above the triple top. While this stop is over 100 pips away, if this count is correct and we are about to fall in a third wave the target is well over 400 pips away giving us a great risk to reward ratio.

SPX Head & Shoulder Reversal Pattern Complete

The SPX H&S Pattern that many of have been watching for some time has completed and the neckline has been broken. Price may drop hard from current levels in a large wave 3. While it is possible price may rally from here in a 2 of 3, I think it is more likely that the neckline will hold as resistance and price will fall hard and fast from here after a negligible pullback. I have taken a short from the neckline break. The H&S target is 860 however I think we will go much lower than that. Keep stops at 1050. There is currently a nice 5 waves down from 1048 on the 5 minute so we may pull back to the 1030/38 area before continuing lower.

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.