DJI + S&P 500 - Could it be a top?

DJI yesterday made a small new top, while no other indices did that. It could be a indication that the wave 2 correction is over, but no matter what it is a sign of weakness.

As can be seen below the S&P 500 didn't make a new top alongside DJI. If this turns out to be a top, the we had a Truncated fifth wave in the S&P 500.

A break below 10,264.85 and 1,088.86 would add confidence the bearish case, as what should have been wave 4 will enter the area of wave 1, which is not allowed under the EWP.

My preferred count is still that we will one more rally higher, but be aware of this possibility.

AUD/USD - Time for the next impulsive leg down?

Saw a top on the exact day, when wave 2 had taken 1.618 times (47 days) the amount of days wave 1 took (29 days). That add confidence in my count that wave 2 is over.

Zooming in on the latest price action, we can see on the hourly chart below, that the decline from 90.64 to 89.13 was wave i (five wave decline - see the 5 minutes chart below the hourly chart)and the rally to 90.42 was wave ii (A expanded flat - wave b broke below the start of wave a and wace c rally well above the startingpoint of wave b). Wave ii corrected 78.6% of wave i. We should now be in the early stages of wave iii down.

The current level 90.15 reprecents a very attractive risk/reward trade selling AUD with a stop at 90.75.

USD/CAD - Seems that it made it.

It's still very early, but it seems as support near 102.54 yesterday held and we are now in the very early stages of wave iii up, which should break above key resistance at 108.59 at some point.

If we zoom in on the hourly chart (see the chart below). we can see the move up from 102.54 was swift and does contain five waves and does have a very impulsiv look. The correction following the minro rally to 103.93 is a big flat correction (3-3-5), see the 10 minutes chart below the hourly chart, and should be close to its bottom. Buying USD here represents in my view a very attractive risk reward trade. Stop should be placed at 102.50.

S&P 500 - Time for the next rally ?

Is minor wave 4 over or was this just the first leg down in a flat correction?

Looking at minor wave 2, which was a zig-zag correction, then wave 4 should be a flat or a triangle duie to the principle of alternation. So the most likely outcome is that this was only wave a of 4. If this is correct then wave b of 4 should rally to near 1,120.85 and then wave c of 4 to just under 1,107.

Time will show how wave 4 play itself out.

USD/CAD - Its time to make it or break it...

USD/CAD yesterday tested its minor supportline near 102.54 (it acturly broke it slightly), which might be a sign, that the decline from 106.77 is maturing.

My preferred count is still, that we are seening a series of waves one's and two's. Both wave 2 and wave ii corrected 78.6% of their respective wave 1's. In the currency market wave two's often retrace a great part of wave 1 and is common that 78.6% of the first impulsive wave is retraced. So this is a time for "Make it or break it" decision.

I still think that the triangle count is misplaced here, but the decisive point where my preferred count will die is if we break below 101.37. So the risk/reward is very good at this point.

AUD/USD - Time to top out...?

From a time point of view we should be very close to the top. Wave 1 down took 29 days and wave 2 up has taken 47 days today, that makes wave 2 1.618 times the amount of days that wave 1 took. At the same time the wave 2 rally is looking quite stretched.

Looking at the hourly chart below. we can see that wave C2 is now 0.786 time the length of wave A2, which isn't that common a relationship, but a more common relationship is that at 91.09 the second zig-zag would equal the first zig-zag in length, so we should be close to a top.

Shanghai Composite - Close to the top?

We should be very close to a top. In the bigger picture this might only be wave A in a flat correction, but for now lets see how the decline unfolds.

If we zoom in on the C-wave rally, we can see a Ending diagonal is developing and we should be very close to a top any time now. A break below 2,549 confirms the top.

S&P 500 - Minor wave 3 of C is almost done

The alternate count that I was forced to adopt upon the break above 1,100. The ideal target area for the correction from 1,011.50 is in 1,140 - 1,145 area.

Short term we should see minor wave 3 of C top out near the 1,116-1,117 area leaving room for a flat or triangle correction in wave 4 before the last rally higher in wave 5 of C.

EUR/CHF - The small correction is becoming more complex

The correction from 130.70 has become a complex correction. The break above 136.75 has turned the correction into a double correction. I'm looking for a double zig-zag where we are currently in wave A2, then we should see B2 down and one more rally in wave C2.

Wave A2 is most likely to end near the 138 are. As it looks like a small five wave rally from 133.40 is almost done. The rally from 133.40 to near 138 has been a five wave rally telling us, that we a looking for a second zig-zag higher.

If Wave A2 ends near 138 we should see wave B2 down to the 135.15 - 135.70 area and then one last rally higher in wave C2 to 139.75 -140.15 area.

EUR/CHF - Ready for a new decline?

The Swiss Franc is one of the most used borrowing currencies in Europe, but it has been a very expensive experience since late 2007. For quite some time the Swiss central bank tried to hold a hand under the currency pair, but it was just a question of time before they had to give up and when they did, the EUR just plunged against CHF.

The chart above shows my favorite count and as can be seen I count it as a double zig-zag, where we currently is in the later part (wave v) of wave C2 down. Zooming in on wave v down the chart below shows the hourly chart.

As can be seen the rally from 130.70 was clearly in three waves up to 136.76. The decline from 136.76 does look impulsive and can be counted as a five wave decline down to 133.40 and the rally up to 136.20 is a three wave affair (see the chart below).

On the 10 minutes chart we can see, that the rally from 133.40 is a zig-zag correction, which should be over or after one more small spike higher to just above 136.20 it should be done. The next decline wave (iii) of 5 of C2 down should take us down to the 130.70 area. before some kind of flat or triangle correction sets in.

I would not be surprised if we will see allot of panic for CHF-borrowers, quiting their CHF-loans very close to the final bottom.

S&P 500 - Wave C of 2 is devoloping nicely

As we broke through 1,085.20 on Thursday it said, that odds had shifted towards my alternate count (see the chart above) The price action Friday confirmed the shift as we saw a break above the former top at 1,099.36 confirming that wave C of 2 was in progress. If wave C of 2 becomes as long as wave A of 2 was, then we should see a rally towards 1,144.00, which would be just above the 61.8% retracement of wave 1 down.

Short term support at 1,088.85 and maximum 1,079.70 should hold and setback before the next rally towards the 1,116 area, from where we should see some kind of flat develop and then one more move higher towards the 1,140-1,144 area before the next big decline sets in.

USD/CAD - Still treading water, but...

Not much is happening here. The cross is still treading water in a narrow range, which will soon have to end. At first eyesight it does look like a triangle, but a triangle just doesn't fit the picture. A more likely scenario (my preferred) is, that we are tracing out a series of waves one's and two's, therefore I'm looking for a break above 106, 106.77 and more importantly 108.59 that would accelerate this crosse higher towards at least the 117 area.

However if we break below 101.33 we must accept this as a triangle and a move down to the 93.25 - 93.50 area before a bottom is finally in place.

AUD/USD - Wave 2 should almost be over

This is my preferred count. It has been some times since I have written about this cross, but it hasn't done much and the wave 2 correction has been more complex than expected, but that is how correction works.


One could make a good case out of this wave two being very close to its top. First of all it has corrected 61.8% of wave 1 decline and looking at the time factor it has taken almost 1,618 times the amount of days wave 1 did. Wave 1 decline for 29 days and wave 2 is now only two days from being 1,618 * 29 = 47 days.

Finally we have tested the wave iv triangle apex at 89.77, which is a common retrecement target.

Zooming in on wave 2 we can see that it has become a double correction, where the first A-B-C correction was a flat (Wave B corrected almost all of wave A) and wave C became 1.618 times the length of wave A. While the second A-B-C has become a zig-zag correction (wave B only corrected a little more that 38.2% of wave A) and wave C untill now is 61,8% the length of wave A. It's too early to exclude that wave C will be equal to wave A, but a break below 88.50 and more importantly 87.35 will be needed to confirm that the top is in place.

Shanghai Composite - We could be near a top

It has been some time since I have written anything about the Shanghai Composite. I have shown my favorite count, which calls for a possible end to wave ii soon or if we break clearly above 2,572 we could see a continuation higher to just around 2,700. Looking at the short term picture below we have a almost done 5 wave rally since 2,389. We might have one more spike early tomorrow, but we are very close to a top. The decline will determine if we need more pressure to the upside later or not.

S&P 500 - Odds favor a shift to the alternate count

The rally today (well beyond 1,085.20) has shifted the odds in favor of my alternate count - The leading diagonal - As wave 1 down. The rally from 1,011.52 to 1,099.36 wave wave A of 2, the decline from 1,099.36 to 1,057.08 was wave B of 2 and we should now be in wave C of 2 with a target zone in the area from 1,135 - 1,140.

Wave 2 is a Zia-zag correction (5-3-5) that means that wave C shall also be a 5 wave rally to the upside. Minor wave i of C rallied from 1,057.08 to 1,088.86. Minor wave ii declined from 1,088.86 to 1,057.08 - A 50% correction of wave i and we should now be in minor wave iii up. Minor wave iii would ideally rally up close to 1,116 before some kind of flat correction or triangle sets in.

S&P - A minor top should be in place

The expanded flat (irregular) correction we have seen over the last couple of days most likely ended with the close yesterday or will after a small spike early this morning. I still look for 1,085.20 to protect the upside for a break below 1,067 and more importantly 1,057 that should yield a more serious test of support at 1,045. A break here should open the downside for a decline to 1,011.50 again.

The chart below shows the expanded flat correction close-up, where we can clearly count a five wave rally from 1,057.08 and thereby the end of wave c of ii.

Apple - A important top is most likely in place

It looks like a nice five wave up move. Apple has been one of the leaders, but it seems that we have come to the end.

The rally in Apple (AAPL) since January 2009 is a nice five wave rally too ending wave 5 up since 1998. If this count is the right one then we should soon see a major bear market take over. The target would be 108 and maybe even the 80-86 area.

As can be seen the Orthodox top was found at 272.46 in late April and we have seen the first two waves of an irregular correction. Wave C should take us down to at least 200 and a break below here will call for a much deeper decline.

Remember my post from April 7 - 2010 regarding Apple possibly forewarning a top. Looking back S&P 500 made its top on April 26 and with Steve Jobs on the cover of Time magazine Apple could be just four months from it's major high. The cover page indicator seems to have worked again.

EUR/USD - Was this wave 2 or just A ?

With the test of 130.28 a top is in place, the big question is weather this was wave 2 and we now have begun wave 3 down or it was wave A and we then should have a B wave before wave C up?

I favor the first call, that we have just ended wave 2 and wave 3 down have begun. A break below 125.20 will confirm more downside towards at least 121.49 and then 118.50 and below.

If this was only wave A of a bigger correction, then we should see a decline close to 118.50 in a flat correction and if it falls below 118.50 the it could be and irregular flat correction.

What will determine if it's wave 3 or B of some kind of flat. The form! If it's a five wave decline then it's wave 3 and if is a three wave decline then it's wave B.

S&P 500 - My favorite count is still well and alive

The above chart (30 minutes) show my favorite count. As can be seen we are now in the early parts of wave iii of 3 down. This should be a strong and powerful move to the down side, so what I would like to see is resistance at 1,085.20 protect the upside for a break below 1,045 and even better a break below the bottom of wave 1 at 1,011.50, which would put my runner-up count (see the hourly chart below) to sleep - finally.

If we see a break below 1,045 and even better a break below 1,011.50 we should see wave 3 head for 978.69, at least, but a more likely target for wave 3 would be 904.66.

If however support at 1,045 holds and we see a break above 1,085.20 the below count, will take over as the preferred count and allow for wave C up to the 1,131 - 1,140 area as the end of wave 2 and set the stage for wave 3 down.

The Investor Sentiment chart below show, that the bears are gaining the upper hand. If one draws a trend line from the top October/November 2008 that trend line is clearly broken to the upside, giving the bears the upper hand.

If you take a closer look at the chart below, you will See, that every time we have and important top or bottom, we do see divergence. The bears was at a low point in July 2007 at bears made a second higher low in October 2007. The same thing was seen at the top in October 2008 and March 2009 and we have just seen a low in January 2010 followed by a higher low in May or June 2010. All pointing towards and important bottom being in place for the bears and they are slowly, but surly gaining the upper hand.

EUR/USD - An alternative we can't forget

The break above 127.50 has questioned the strength of the USD. By breaking above 127.50 the big S/H/S top-formation is in danger of being cancelled. A close above 127.50 this week will do serious damage to the possible top-formation.

Therefore we should also consider the possibility, that the entire [A]-[B]-[C] correction from 160.38 is done. Wave [C] became a bit smaller than wave [A], but we can clearly count five waves down and the break above 127.50 means that wave C or 3 will rally towards the 130.77-131.26 as it extends. It will be the following decline that will determine if the rally since 118.75 was wave C or it's wave 3. If the next decline enters into the area of the first wave up from 118.75, then it has to be and A-B-C correction. If it doesn't and we will see one more rally to a new high, then we know we need to cover more upside, after a correction.

The daily chart below shows the decline in the possible wave [C] and the following rally in details.

EUR/USD - Is the big S/H/S top being killed ?

Failure of the Shoulder-Head-Shoulder (S/H/S) neckline to act as resistance is disappointing to the long term picture. If we close this week and next week above the neckline I would seriously consider declaring the big top formation as dead and the consequences could be a quick rally towards at least the 135 and more likely 138.

If however prices turn back down and we closes below the neckline this or next week, we should see acceleration to the downside for a decline to at least the 114 area.

S&P 500 - Correcting or a series of wave 1 and 2's?

As the count is right now from the minor high at 1,099.39 is almost impossible to say if we are just correcting or we have begun the next leg lower. If we are headed lower then resistance at 1,092.18 should not be broken to the upside. If we break above 1,092.18 we can safely say, that we have only seen a correction from 1,099.39 and that we shall see a new top above 1,099.39.
If however 1,092.18 holds for a break below 1,087.96 we should see downside pressure building calling for a test of important support at 1,070.

USD/CAD - Has wave i of 3 up begun?

It has been some time since I have talked about the USD/CAD cross, but now might be a good time to do it and try to answer if wave iii of 3 up has begun.

The above chart is the daily chart back from the bottom on November 7 - 2007 at 90.56. Wave 1 or A is clearly a five wave rally followed by a big down-correction wave 2 or B, which has retraced 78.6% of wave 1 or A the minor rally from April 21 -2010, which I have labeled wave 1 or A is a bit tricky, as all waves overlap as they would do in a correction, but it could well be a expanding Leading Diagonal (see the hourly chart below for details). Wave 2 has almost retraced 78.6% of wave 1 and seems to have finished, which means we are in the very early stages of wave i of 3 up.
A break above the key-level at 106.78 would add confidence in this count.

Where can we expect wave 3 to end? I would expect wave 3 to extend and become at least 1.618 time longer than wave 1, which should make wave 3 hit 116.40. Wave 3 or C of one lager degree should carry prices all the wave up to at least 139.50, where wave 3 or C will be equal in length to wave 1 or A.

EUR/USD - Alternate count

I just wanted to share this alternate count in EUR/USD with you.

Wave 1 and 3 is almost equal in length (wave 3 a little longer than wave 1), while wave 5 has clearly become extended. The rally from 118.75 has fulfilled all requirements therefore wave 2 could be finished with the test of 127.35 today. However it could also be only wave A of a flat correction. R.N. Elliott said that extended fifth waves must be "double retraced" (see EWP page 58-59 too). If this is the case we should see a new low before wave C takes us much higher. Probably all the way to the 138 area.

I just want to make clear that this is an alternate count and not my preferred count, but it could be a possibility.

S&P 500 - No close above 1,097 keeps my count alive

We saw a high at 1,099.36 yesterday, but we didn't close above important 1,097, which keeps my count alive.

Still I would like to show you an alternative count for the entire decline since 1,219.61. It could be a Leading Diagonal (See the EWP page 40).
All the waves 1 to 5 is of the zig-zag kind, but they all alternate from each other. As can be seen the rally from 1,011.52 could also be counted as complete or very close to completion.

As long as 1,090 isn't broken to the downside the minor trend is up, but a break below 1,090 would be first indication that a top is in place, while a break below 1,070 will confirm the top.

S&P 500 - It still lookes like a Ending Diagonal

Despite the strong surge today the best fit is still, that we are in the final stages of an Ending Diagonal. Yes we broke above the 61.8% retracement target at 1,085.50, but I just can't fit the beginning of the rally from 1,011.50 into something impulsive, so I stand by my count, but I really don't want to see a rally past 1,097. A daily close above 1,097 would make the entire move since May 25 look like an irregular flat correction. If this is the case, then we are more or less in the middle of wave C, which should then take us up to the 1,151 - 1,156 area. At this point it's not my favorite count.

If however 1,097 protects the upside for a break below 1,084.96 and more importantly 1,070 my preferred count will be confirmed and call for a new decline in wave 3.

EUR/USD - Odds favor that wave v down has begun

First lets take a look at the long term picture. As can be seen on the weekly chart above a big Shoulder-Head-Shoulder top. We have just seen a back-test of the S-H-S neckline just above 127. The long term target for this formation is near 88.35.

In Elliott wave terms we have seen wave A down from 160.38 to 123.28. Wave B up from 123.28 to 151.44 and we are currently in wave C down. At 114.34 wave C will equal wave A in lenght. If however wave C becomes extended it will fall to 91.41 if wave C become 1,618 time the lenght of wave A. That would be a common relationship.

If we look at the shorter time fram, we can see that the A-B-C correction from 118.75 found resistance in the upper part of my target-zone and the following decline looks impulsive.
We should soon see the decline pick up speed. When the current minor correction towards 126.18 is done we should see a powerfull decline down to the 121.50 area.

S&P 500 - Ending diagonal might be developing

Failure to break below 1,067 Friday and the following break above 1,077 has delay the top for now. The possibility for a Ending diagonal fits this picture well, as it "buys" more time, but the outcome will still be the same. A top should soon be seen, but as the ending diagonal progresses it could reach the 61.8 % retracment target of the decline from 1,130.97 to 1,011.52, which comes in at 1,085.34, before setting the stages for wave 3 down. Of cause wave 3 has to develop, but do remember, that wave 3 is normally the most powerfull of the waves.

A break below 1,069 will be the first indication, that the top is in place and confirmed by a break below 1,058.

S&P 500 - The top should be in place very soon

The top wasn't quite in place with yesterdays test of 1,070.98, but it should be very soon (most likely in the 1,075-1,077 area). A break below 1,067 will be first indication the top is in place, while a break below 1,058.24 will confirm the top for a fast decline to at least 1,040, but it should be much deeper longer term.

S&P 500 - The top could be in place

It's impossible to count any of the waves since the 1,011.52 as impulsive, which means that we are in a correction. Yesterday we saw a overthough of the resistanceline and the following break back below the resistanceline tells us, that we correction is running out of momentum.
Because of the speed of the e-wave we should be aware, that once the correction is over, the subsequent decline to new lows will in all likeyhood be of similar speed.

If we haven't already seen the top with the test of 1,070.98 we should be very close to the top.
A break below 1,058.24 will indicate that the top is in place and call for a fast decline towards
the 1,038-1,040 area. Longer term we should see a break below support at 1,011.52. for a decline to at least the 951 area.