BOVESPA - Big drop is looming

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Odds very much favor, that the Brazilian Bovespa Index has topped for now and as red wave [C] progresses. A break below 54,881 will call for a fall to at least wave iv of red [B] at 48,261, but I do expect this level to be broken too.

Brazil is the king of commodities, you name it they got it. China has done a lot of deals with Brazil in the last 6-8 months, but Chinas commodity stocks are now filled so it's time to back away from commodities alltogether.

Looking at the Baltic Dry Index, we can see that Global trade has been weakning since begining of June. Not many in the stockmarkets has noticed that, but I'm sure they will in a short while. The Baltic Dry Index is currently sitting at the supportline from December 2008, but when it breaks, there isn't much support before the bottom of wave b of red [B], which is 40% below the current level at 2,437.

SENSEX - Big drop looming

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In the last couple of weeks we have seen the Sanghai Composit falling about 20% from the top, but the Sensex has barely seen any real downside pressure (down 1.9%) , but that is about to change.

If my count is right, minor wave (iii) of III down is about to begin. This wave should be strong and powerfull and we should see a move down close to 14.700. Longer term we should be headed much lower.

There is no reason why the Sensex Index should do better than the Shanghai Composit. The picture is very much the same for the Brazilian Bovespa. China has been buying a lot of commodities from Brazil, but I do think they (the Chinese) are about to scale down their buying.

Meaning lower prices for base metals, oil and other commodities.

EUR/USD - Non-confirmation between EUR/USD and the USD-Index

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As I was trying to figur out the latest rally in EUR/USD and was comparing it to USD-Index I noticed that USD-Index didn't confirm the break above EUR/USD 143.75. This is a classic sign, that a trendchange is imminent.

As long as support at 142.04 isn't broken we could see one more rally above 144.46 closer to 145.50, but odds at this point in time seem low for that outcome. A break below 142.04 on the otherside would all but confirm the top is in place for a stronge move down 140.45 and a break below here will add momentum to the downmove.

Oil - Wave c or iii has begun

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Eventhough I'm still not totally sure whats going on in oil, my count seems to work out nicely.

Wave b or ii had a target near 73.45 and it ended at 73.41 and we are currently seeing wave c or iii which should move down to at least 69.20 but more likely 68.90 before finding support. If 68.90 protects the downside for a new rally above 73.41, then we know that this was a c-wave down and a higher high than 75 will be seen, but if 68.90 gives away and we break below the support line at 68.00 and better yet 65.29, then we know for sure, that a firm top is in place at 75 and we will see a fall much lower in wave C.

FTSE 100 - One more rally to complet wave [II]

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Lets take a look at FTSE 100 because I have and idea that the next part of the ongoing crisis could being i Europe and UK could well be the place. Quite a few of the Easten European countries could ignite the next face of the crisis too, but wouldn't it just be amazing to see the UK to be ground zero for the next face of the crisis.

As can be seen we need just one more small rise closer to 5,014 to end wave 5 of C and thereby end wave [II]. Wave [II] has been a double Zig-Zag, in the first Zig-Zag wave a and c was equal, whereas wave a was very strong, which normaly means that wave c will be just 61,8% of wave a, meaning a target near 5,014.

As we have seen for the US the positive sentiment in the UK has reached (and for that sake Germany) a level not seen since the top in October 2007.

The euphoria when in August The Business Confidence in UK saw its biggest quaterly rise ever was just a ball and pointing towards a top close at hand.

Will we see a top near 5,014? or do we need a rally higher towards the strong resistancearea at 5,096 - 5,163. Again it doesn't matter. It is time think riskmanagement and the risk of a wave [II] top and wave [III] to beging, as this wave will be very powerfull.

S&P 500 - Is the top in place or do we need one more rise?

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We are just 2% from the ideal target at 1,048, will we have one more rise to fullfil the ideal target or not?

All requierments for the wave [II] to be finished or very close to is in place:

* The ideal target is almost fullfiled.

* The volume during wave [II] has been falling, which points towards a rally of poor quality.

* Positive Sentiment (89% bulls) is at or above what we saw in October 2009.

* More and more prominent economist, asset managers, Government Institutions and of cause.

Ben Bernanke has declared that a recovery imminent.

In my world it doesn't really matter if we are about to see one more rise closer to ideal target at 1,048 (pride maybe - for calling the top), but from a riskmanagement point of view, the risk for missing the beginning of wave [III] is much bigger, and will instantly leave you with hope one more "chance" to sell near or at the top.

A break below 1,023.39 would be first minor warning, that wave [III] has begun, while a break below 1,016.44 (light green wave 4 low) would add confidense that wave [III] has begun.

It is time to scale into shorts or at least to protect you portefolio. One way could be using Ultra Pro Short - (SDS). This will give you a 2:1 leverage to the short side. There is lots of other insturments to use, but this is one of the more simpler one.

Oil - still in way b or ii

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We are still in wave b or ii since the top at 75.00. Wave b or ii has become an irregular where wace (c) of b has a target-area in the range from 73.45 - 73.91, from where we should see a fall down to at near 68.99.

I still am not sure what to do with the move from 65.33 to 75.00, but will let from and time guide me untill the picture clears up (or my head clears up...).

This is why stops are so important

My call for a possible top in DJI and S&P 500 was premature. The "old" targets near 9,667 for DJI and 1,048 in S&P 500 is still on. It doesn't mean that I would chase the rise, trying to squeeze the last dime out of this rally. If anything I would use this oppotunity to scale into short-positions.

More of a surprise to me, was the rally in EUR/USD and the AUD/USD. Looking in the rear-mirrow did we get any warnings? If any it was the lack of acceleration when minor wave 3 was expected, but it isn't a rule that you must see strong acceleration in wave 3. What we can conclude is that the break above EUR/USD 143.75 left us with a clear three waves down from 144.46 and thereby a clear Zig-Zag. That calls for one more new high above 144.46 and I'm looking for a move closer to the 145.50 area in the coming days.

In AUD/USD the last part has taken the shape of a triangle. The nice thing about triangles is, that they breakout in the direction of the main trend (in this case up), but triangles also predictes, that it is the last move in the direction of the trend before a move back to the triangle apex (at least) and often the last move for the entire move. In this case we sould see one more move closer to the 85.75 area, before returning to at least 83.38. In this case I do think this will end the entire upmove from 62.45 and thereby wave C.

Dow Jones Industrial Index and S&P500 might have topped

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This might be a premature call, but we might very well have seen the top the major US stock indicies.

If in fact the tops are in place we missed the ideal top in DJI by about 48 points and the ideal top in S&P 500 by 11 points...

In both indicies we can count a clear five wave up to finish wave C and wave II. If my count is correct we are now in the very beginning of the powerfull wave III down.

First lets have a break below the minor support lines at about 9,335 in DJI and about 1,008 in S&P 500.

Is this Nemesis punishment of Bernankes "We save the world" statment we are witnessing now. It would be a classic case of Hybrise being punished less than seven days after the comment was made.

AUD/USD - Recounted

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The break above 83.43 has forced a slight recount. Wave ii ended at 84,25 on August the 25 and not with the test of 84.29 on August the 24. That means that minor wave i (red) ended with the test of 82.37 and we are currently in minor wave ii up closer to the 83.50 - 83.60 area, before minor wave iii is expected to start.

The minimum target for minor wave iii is in the 81.58 - 81.68 area, but I would not be surprised to see a move down to near 80.44.

EUR/USD - Wave iii seems to subdivide nicely

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Minor wave iii seems to subdivide nicely and the ongoing (pink) wave (ii) should find resistance in the 142.71 - 142.76 area, from where the next powerfull (pink) wave (iii) should start. Target for (pink) wave (iii) will most likely be near the 140.68 area.

If my count is right we might see a short period where the US-dollar gets stronger at the same time stock indicies heads higher towards the final targets. DJI = 9,667 and S&P 500 = 1,048.
Be carefull with stocks they could hit the ceiling any time now, but more high above DJI 9,619.70 and S&P 500 1,037.73 would be prefered.

AUD/USD - Minor wave iv target is in the 82.95 - 83.08 area

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Minor wave iii down from 84.25 clearly finished at 82.37 and I'm looking for minor wave iv to end in the area between 82.95 - 83.08, from where minor wave v down to the 81.58 - 81.68 area should be seen. That should end wave i of iii and call for a new correction back to 83.08 ending wave ii of iii.

GBP/USD - Minor wave iii is well under way

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Minor wave iii is well under way, as can be seen the break below 162.74 also triggered a minor Shoulder/Head/Shoulder top which has a target just below 155.00.

The main picture I have been working with since the early part of August, that the US-dollar has bottomed for now, seems to be working out well. I will admit, that it has been a very slow start, but this scenario looks more and more convincing.

The stronger dollar will add to pressure on the stock indicies, which might see one more minor rally. I do see the possibility for the Dow Jones Industrial index to reach the 9.676 area and S&P 500 might test closer to 1,048, but I would not trade the long side under any circumstance at this time, risks is just to big.

Cash for Clunkers did wonders for the Durable Goods figures, but strip the figure for transportation and the figure couldn't be much worse...

AUD/USD - Minor wave iii down is about to begin

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The powerfull minor wave iii (pink) of iii(red) is on its way. This should bring us down to 82.45 and possible even 81.56 again.

A break below 81.56 will be the real trigger for a fall down to next strong support at 77.00 and much further to fall longer term.

Oil - The next move down will eliminate one or more counts

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Wave b or ii has just finished and I'm now looking for wave c or iii down. If we are lookin at wave c, it should be a five wave affair with a target near the 69 - 68.75 area, which is where wave c will equal wave a and it will be the 61.8% retracment of the move up from 65.33 to 75.00.

A firm break below 68.75 would add confidence in the wave iii count and for a move closer towards 65.33 again.

As I mentioned yesterday we are still left with a couple of valid counts, but form an time will ultimately show us the rigth one.

GBP/JPY - Important support line is broken

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The powerfull minor wave (pink) iii of (red) iii is just about to begin. This move should bring us closer to the double top neckline at 146.68.

The bigger picture clearly shows that wave B has ended at we are now in the early starges of wave C, which will be a five wave downmove to below the bottom of wave A at 118.78.

I will sell GBP and buy JPY here at 153.40 with a strategic stop at just above 155.50 (155.65). I will consider taking profit near 146.68, but will let form and time guide me.

What is oil doing ?

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The upmove since the end of wave iv is very confrusing. I can count five waves up, but they overlap and the shape isn't close to looking like a wedge. Still as long as 75.70 isn't broken to the upside it could be some kind of wirde looking wedge. If this is the case odds favor that a top is in place with the test of 75.00. which would call for at least a move down to the bottom of wave iv at 58.32.

Any break above 75.70 would add confidence to the count that we have seen a series of one's and two's, that count would call for a move closer to 90.00, before topping.

It could also be that wave iv is still ongoing (an irregular), which would also call for a move down to or just below 58.32, before one last rally closer to 76.30.

Looking at the hourly chart we can se a clear five wave rally from 65.33 to 75, which should at least call for a three wave correction to at least 71.30 (currently being tested), but more likely closer to 69.00. A break below 65.33 would call for at least a move down to 58.32.

Take care and let form and time guide you.

Shanghai Composit - wave c of 2 is just beginning

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The wave 2 correction from 2,761 is ongoing. As wave a was a five wave upmove, that suggest that the entire wave 2 should be a Zig-Zag containing a 5-3-5 wave move. That also means that wave b of 2 is in it final stages and wave c of 2 close to beginning. The ideal target for wave c of 2 is close to 3,100, from where the powerfuld wave 3 down should take over.

Let form and time show.

AUD/USD - Wave c of Minor wave ii extended

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Wave c of ii is clearly in its final stages. I'm looking for a break below 83.56 to confirm that wave c has ended. As long as 83.56 isn't broken to the downside I can't exclude one more rise closer to 84.77, but at no point in time is 84.77 allowed to be broken, if however 84.77 breaks it would call for a move closer to 85.19, before the rise from 62.45 complets. Keep stop at 84.85 (strategic).

Below 83.56 should accellerate the fall towards 77.00.

Dow Jones Industrial index headed for the 9,667 - 9,800 area.

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The break above the August 7'th high at 9,437.49 calls for a continuation high towards the 9,661 to 9,802 area before finding at firm top.

On friday MarketWatch.com ran a story under the headline "We saved the world from disaster, Fed's Barnanke says".
This kind of hybris is often seen near and important market-turn. I'm sure Nemesis is preparing a suitable punishment for Bernanke. What would be more suitable than a doubledip recession at best or worse as I expects an outright periode of deflation/depression.

EUR/USD & AUD/USD - Wave ii is done!

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Odds favor that wave ii in both EUR/USD & AUD/USD is finished and the powerfull wave iii downmove has begun.

As mentioned earlier today wave ii in EUR/USD was a irregular, while it became a double Zig-Zag in AUD/USD. We are currently seeing the early stages of wave iii in both crosses.

This leaves us with some very nice low-risk trades in both crosses, but also in GBP/USD; NZD/USD and USD/CHF too (USD/CHF would not be my prefered cross thus)

For now lets just focus on EUR/USD and AUD/USD.

This is what I am going to do:

In EUR/USD: Sell EUR and buy USD with a stop at 143.85 or strategic stop at 144.55 for a move down to 138.25 area.

In AUD/USD: Sell AUD and buy USD with a stop at 84.05 or strategic stop at 84.85 for a move down close to 77.

Waiver: I does not accpet responsibility for any investments made on the basis on the above analysis.

Shanghai Composit - The wave ii is not finished yet

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The quick and firm break above the wave iv of 1 high at 2,929.25 does indicate, that the ongoing wave 2 will be bigger and problably reach somewhere between the 50% or 61,8% retracement of wave 1, that would call for a continuation towards 3,100 to 3,200 before finding the top.

Short term support is now found in the 2,840 to 2,860 area.

EUR/USD - Wave ii is an irregular

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The break above 143.27 has, as I wrote yesterday, forced me to alter my count. The break above 143.27 confirmed, that wave ii is still in motion and should idealy find its top at 143.64 before turning down. A break below 142.07 will confirm that wave ii has finished and wave iii down closer to 138.25 has begun.

The August 5 high at 144.46 may not be broken at any time, as this would indicate, at the C wave from 124.55 in early March has not yet ended and should rise closer towards the 145-147 area. (This is not the prefered picture, but will have to allow price and form to show us which count is the right one).

Buying USD close to the 143.64 target area will represent a low risk buying opportunity as the stop can be placed just above the August 5 high at 144.46 (risk should be less than 1%).

The safe bet would be waiting for at move below 142.07 with stop above 144.46 meaning a risk closer to 2%.

Remember allways use protectiv stops when trading - The most important thing in regards to trading is money and risk management. If you don't manage your risks, the market will punish you at some point! The market will at best take away what you might have earnt and at worst leave you broke.

AUD/USD - Minor wave (ii) is in its final stages

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On August the 9'th I stated that all odds favored that a top was in place. This is still very much the case, minor wave (i) ended at 81.53 on August the 17'th (3 days from the top - 3 is a Fibonacci number. If wave i and wave ii is going to equal in time, we should find the top for wave ii today). Minor wave (ii) is now in its final stages having hit the bottom of its target area, which is streching from 83.28 (top of wave 4 of a lessor degree) to 83.54 (the 61.8% retracement of the fall from 84.77 to 81.53).

When wave (ii) is done shortly, we should see a powerfull downmove as wave iii comes into motion. A possible target area for wave iii could be near the 77.22 to 77.42 area.

I would like to add, that NZD/USD is in an similar position. wave ii is just about to end and the powerfull wave iii down about to begin.

EUR/USD in the final stages of minor subwave ii

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We need one more high to finish minor subwave (ii) of wave iii, which idealy will end just above 142.67 closer to 142.84 before turning down in wave iii. Wave iii should be fast and idealy end close to the 138.20 area.

Only a break above 143.27 will force me to alter my count slightly. A break above 143.27 would mean that wave ii wasn't a simple Zig-Zag, but instead an irregular flat, which would call for a move to 143,64 to end subwave a of ii, before turning down in wave iii.

Only form and time will tell us which is right.

Copper - The top has been confirmed

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Here we go!

The top has been confirm by the breaking back into the channel and we are now headed for the bottom of the channel , which is currently in the 236 area. I will expect it to be closer to 246.30 when it's hit.

Ultimately I do expect the bottom of the channel to be broken to for a continuation down to 213.45.

The long term picture calls for a move below the December 2008 low at 125.

China has a BIG problem

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As mentioned in my previous post regarding the Shanghai Composit, where I statede that a break below the gray supportline would confirm that and important top is firmly in place.

The rise in the Shanghai Composit has been created mainly because of the Chinese government forcing banks to lend out to just about everyone, if just they were employed. Alone in 2009 banks have lend more than USD 1 trillion. Most of that has gone to buying cars, real estat and stocks ( in mid July close to 500,000 new stock-investment accounts where opened in just one day - Can you say bubble?), but with the top in place in the Shanghai Composit everybody invested now has to rush to the exit to protect any possible gain og minimise the losses.

Anyone with a loss small or big now won't be able to pay back their loans, that will bringe down consumtion, have real estat prices going down forcing consumption down even more and so on.

Technical speaking we are currently sitting at the 50% retracement of the rise from 2,037 to 3,478, which in the short term could spark a seconde wave rally up to 2,925, the wave 4 top of a lessor degree. A frim break below 2,713 would call for a directe move down to the 61,8% retracement at 2,587, but this is not the prefered picture at this point.

Goldman Sachs - A top is in place

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After a very nice rally from the November 2008 low at 47.41 to the August 9'th high at 170.94 a top is now in place.

The 61.8% retracement of the fall from 250.70 to 47.41 came in at 173.11, so it was and almost perfect 61.8% Fibonacci retracement, but the break below 157.90 yesterday closed the case, the top was firmly in place with the 170.94 high.

We are now resting at the wave ii - iv supportline, but I expect that to be broken soon for a continuation down to the 135 - 137 area, before a more serious correction can be expected.

Longer term I'm looking for a break below the 47.41 low to finish the A-B-C correction down from 250.70.

I have the outmost respect for Warren Buffet and Berkshire Hathaway Inc., but I just read that half of the seconde quarter earnings came from derivaties. I do hope that Buffet sold some of his warrants or shares in Goldman Sachs during this rally otherwise the earnings in third and fourth quarters could quickly change.

Copper - Odds favor that and important top is in place

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Copper is a tricky one, as you could easly count the upmove from December 23 2008 and to 292.35 on August 13'th as a five wave rally, but to me that would be the wrong counting. In my view the odds favor a double Zig-Zag correction, which has found its top just under the 61.8% correction targte of the fall from 408.25 i July 2007 to 125 in December 2008 at 300.

I am currently looking for a move back into the channel (near 275) and a break below 270.75, which would call for a move to the bottom of the channel problably near the 245 - 246 area. A break below the channel-bottom would add strong confidence to my count and call for at least a move towards 220, but most likely much lower and ultimately below the December bottom at 125.

SDS - ProShares Ultra Short S&P 500 might have bottomed

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As I statede last week it migth be a good time to "leave" the bear-market rally from March. It might even be a good time to play the short-side and ProShares Ultra Short S&P 500 Symbol SDS) could be one way to do that.

As can be seen we can count a wave A ( 3 wave)up from October 2007 to November 2008 and wave B down from November 2008 until now (3 wave), this means that we are looking at a flat or an irregular correction. Eventhough we have broken a bit below the October 2007 low at 47.50 I would still call this a flat correction. What can be expected next? A five wave C rally that will take us all the way back up to the November 2008 top at 133.20 and maybe even slightly above.

Playing the short-side though SDS gives you a leverage of 2:1 to the down-side and makes you money if the market goes down.

GBP/USD - My count is on track

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My call for a top last week after the test of 170.42 seems to be correct. The break below 163.88 this morning (European time) has confirmed that minor wave "iii" is under way. I do expect the first subwave (i) to end near the 158.74 - 158.82 area, from where a correction higher towards 166.60 - 167.40 area ending subwave (ii) and setting the staged for the powerfuld wave (iii) down.

Shanghai Composite might have topped

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As I wrote last week the Chinese stocks might be leader in the coming bear-market as it was the leader higher from the bottom.

As can be seen all odds favor that an important top is firmly in place for the Shanghai Composite. All we need is a break below the gray supportline to confirm the top and to state that wave C down has begun.

Wave C should have an final target below the start of its buble run up from 2005 to October 2007, that would call for a move below 1,000 before wave C find its final bottom.

As pressure mounts on the Chinese stock I do expect stocks Worldwide will come under renewed pressure too.