S&P 500 - Bearish Gartley pattern ?

I have being looking into the Gartley concept lately. I think it's rather complex, but having a succes rate near 70% for the "222" as the Gartley Butterfly is also called is pretty amazing.



Therefore I will give it a go with the S&P 500. We are looking at a bearish Gartley butterfly. The first demand is, that the top of X isn't broken, that means any break above 1,219.61 will destoy the formation. In an ideal Bearish Gartley a maximum of 88.6% of X to A will be seen. At 1.195.99 88.6% of XA was seen, at the top until now has been 1,196.20 - That should be within the margin of error.



There is no trigger point for the fomation as i have read it (If you disagree or know anything about a trigger point, please let me know). Therefore one should try selling as near the top as possible with at stop just above 1,219.61. (If one sold at yesterdays close the would equal a 3% stop-loss - Not bad).

The target for the formation if fulfilled will be in the 747 - 748 area.

The possible Bearish Gartley will be in line with the possible Diamond topping pattern I have described lately (see the chart below)

EUR/USD - The C-wave decline is still on track

The impulsiv count still lookes good, but under no circumstances can a break above the bottom of wave 1 at 138.90 be allowed before we have seen one more decline below 138.03. If resistance at 138,90 is broken then the triangle concept becomes the favorit scenarium.

Looking at the internals, we can see that wave 3 became exactly 1.618 times longer than wave 1, which is pretty common in a impulsive structur.

EUR/USD - Wave 3 down underway

I'm still looking for wave 3 down in wave C of the ongoing flat correction. With that said that count will only hold if we soon see acceleration to the downside and a break below 137.32. If we don't see a break below 137.32 the possible triangle count becomes the prominent count. If this is the correcte count we are now in wave C, which normally is the most complex wave.

For now my preferred count is, that we are in wave 3 down of wave C.

Time to sell the Nordic currencies

EUR/SEK has broken above the resistance line in the big falling wedge. First major target area is in the 997 - 1,010 area.

Ideally support in the 935-936 area will protect the downside.


EUR/NOK has broken above resistance at 815.22, which has opened up for a rally higher towards the 851-855 area.

Ideally support in the 815 area will now proctect the downside, but a deeper set-back down to the 805 - 805.65 area can't be excluded.

EUR/USD - Short term recount

The break above 138.52 forced a recount. The best option seems to be, that a expanding flat is building and we are currently tracing out the C-leg. If this is the case we could see wave C top near 138.90 for a break below 138.34 and more importantly 137.96 for the next move lower.

However if 138.90 doesn't hold firm, then the next obvious target becomes the 139.60 area.

USD/CAD - Possible inverted S/H/S bottom

An inverted Shoulder/Head/Shoulder bottom might be building. A break above the neckline at 103.79 will activate the pattern for a move to at least 107.66.

Looking at the rally from 99.77 it does look impulsive and therefore could be wave 1 in a new bigger rally. However there is a possibility that the rally from 99.77 was only a wave C, but a break above 103.79 would kill that count and call for 107.66 and an important bottom in place.

EUR/USD - Pressure to the downside delayed

We never got the break below 137.55 and the correction from 137.32 extended to 138.29, which is 78.6% retracement of wave 1. This correction should soon be over and a break below 138.05 be seen, which should be the onset of wave 3 down.

A break above 138.29 will worry and a break above the top of wave 1 at 138.52 would cause a recount.

AUD/USD - We should see one more new high

It's some time since I last showed this chart, but we should be very close to the top. From a time point of view we could spend a little more time (the red part of the rectangle) tracing out the last rally towards a new high just above the 100.06 high.

Looking at the 4-hourly chart (see below) we are currently making a flat correction and are in the last part of the C-leg down, from where the last rally above 100.06 should begin. When this last rally is done close to par, we should see a big decline.

S&P 500 - the target is still 1,200 and possibly 1,218

The bullish count gained upper hand on Monday. This count calls for a continuation towards 1,200 and possibly 1,218. The last part of the rally has been a mess and that is not a good sign for the ongoing trend, but as long as the minor support line near 1,171 isn't broken we should keep looking for 1,200.

The now alternative Bearish count still shows the possibility of an topping pattern (Diamond). Ideally we need one more rally higher towards 1,191-1,191.50 before the pattern is complete. Again a break below 1,171 will be the trigger confirming the top.

EUR/USD - More downside to come

Wave 2 didn't even reach 138.77, which is a sign of weakness. I do think the current minor correction is building up power to accelerate the next decline A break below the minor support line at 137.55 would start the next powerful decline (On the MACD a bearish Sling Shot is building - That signal if confirmed normally tends to accelerate the ongoing trend).

Elliott wave wise we are in wave 3 of C, which normally is the most powerful wave.

EUR/USD - No extention = new count

We didn't see any extentions, which demands a new wave count (see above). I still like the impulsiv count better, than this being part of a triangle.
Even the impulsiv wave count calls for a correction towards 138.77 first.

Time will show, which is rigtht...

EUR/USD - Wave C down is progressing nicely

Wave ii of 3 ended in the lower end of the expected area, and we are now tracing out wave iii of 3, this wave should ideally extend and fall towards 136.18.

At this point only a break above 138.77 would be of concern, as it increase the odds for a triangle evolving.

S&P 500 - Bullish count has become the favorite

The break above 1,189.43 have made the bullish count the preferred count. We should see a rally higher towards 1,200 in wave 3, but the latest part of the rally doesn't look impulsive, which points towards an Ending Diagonal evolving as wave v of 3.

Keep an eye on the VIX as it could break out to the upside of it's Ending Diagonal.

EUR/USD - The minor waves still look impulsive

The possible wave 2 already ended at 139.82 and the following decline also show impulsive characteristics. As can be seen the count since 139.82 is of one lessor degree than wave 1, that's because I would normally expect wave 3 to extend. The first part of wave 3 isn't even as long as wave 1 and that should be the absolute minimum to expect. Therefore in the short term I'll look for a minor correction towards the 138.77 - 138.91 area, before the next leg lower in wave iii of 3.
As this is "just" wave ii of 3 it might extend higher towards 139.21, but shouldn't correct much more than that.

EUR/USD - Wave C down has begun

The break below the minor support line was the first indication that wave B was over and wave C down has begun. If that's the case we should see a five wave decline on the lower time fram.
The 5 minute chart below shows, a clear five wave decline from 140.80 to 139.60, which ends wave 1 and wave 2 is ongoing. Ideally wave 2 will end in the 139.90 - 139.95 area, setting the stages for wave 3 down.

If we are in some kind of flat correction, wave C down should be a five wave decline, if it turns out to be a three wave decline it could be a triangle og maybe even a Leading Diagonal (see the post below in regards to the dicussion about Leading Diagonals).

EUR/USD - Testing support

We are currently testing support and a break below this minor support line would be the first indication that wave B have ended and wave C down have begun. Wave C should be a five wave decline, if its only becomes a three wave decline odds favors a triangle in making as a wave 4.

Time will show which is right.

USD/CHF - A leading diagonal on a major time frame

Yesterday I wrote, that I had examined the possibility for the decline to be a Leading diagonal i the EUR/USD cross on the hourly time frame. I wrote that it wasn't a option as Leading Diagonals come in 5-3-5-3-5 in either wave 1 or A, which wasn't the case here. Infinitus later wrote a comment to me that Prechter tenth edition of "The Elliott Wave Principle" says that Leading Diagonals maybe could be 3-3-3-3-3, but the jury is still out there.

I can't exclude, that Leading Diagonals could be 3-3-3-3-3 affairs, but in my view that would be a direct violation of Elliott's impulse rule, that wave 1,3 and 5 has to be five wave affairs.

Infinitus asked me if I had ever seen a Leading Diagonal on one of the major time frames? My first answer was no, but then I came to remember USD/CHF, which had the right shape, but I have always regarded it as an Ending Diagonal, but reviewing wave 1,3 and 5 they do look impulsive to me, which makes the Leading Diagonal a real possibility. Wave 2 and 4 also became zigzag's which adds credence in the Leading Diagonal view. I had to use the St. Louis FED data, as mine only goes back to 1984, while the FED data goes back to 1970.

The other alternative would be an Ending diagonal. Ultimately the outcome would be a major USD-rally.

S&P 500 - Bullish vs. Bearish count

The bullish count above and the bearish count below is still both very much alive. My favorit is still the bearish count, but a break above 1,189.43 would give the Bullish count the upper hand and call for a continuation towards the 1,216 - 1,217 area.

EUR/USD - Not quite the picture I expected to see

Let's just revisit the long term picture first. The triple resistance point near 140.00 still holds, but we will have to wait till the end of the month to see where the EUR/USD cross closes. The short term picture doesn't look to promising for a possible turn lower right now.

Then lets move to the hourly chart. This was not the picture I was expecting to see upon coming back from Rom. It's clearly a three wave decline from 141.56. So my first assumption will be that this was only part of a correction and that a new high will be seen after this correction is over.

I was looking into the possibility of this being a Leading Diagonal, but they come in 5-3-5-3-5 overlapping affairs and this one clearly don't. So the only possibility seems to be, that some kind of flat correction is ongoing. That would mean a B-wave closer to the top of wave A at 141.56, before wave C kicks in. Only a direct break below 138.55 would argue that wave B is already finished with the 140.50 test and wave C is under way.

Rom - Italy calling

I will be in Rom - Italy all of next week.

I don't think I will have the time or the possibility to update my blog doing that time.

Take care out there!

EUR/USD - The five wave count is now complete

With the rally to 141.56 the five wave rally from 126.23 is complete. A break below 140.67 will confirm that a top is in place and call for a much deeper decline. The first minor target will be 137.73, but as the 141.56 high also marks the end of the A-B-C correction fra 118.75 is also marks the top of wave 2.

Stay tuned for a powerfull decline.

S&P 500 - Five waves down or an A-B-C correction?

The above 5 minute chart can be counted as a five wave decline, what I don't like about this five wave decline is, that wave iii didn't extend, which is why the five wave count seems to be a forced count, therefore the red ALT a-b-c count seems more likely at this point in time.

The kind of action to the downside I'm looking for can be seen in the 5 minute chart below of the Banking Index.

As can be seen wave iii clearly became extended and became 4.236 times longer than wave i and wave v became 38.2% of wave i through wave iii. This is a clear impulsive wave and would be the right kind of stuff to see and before calling the top in the S&P 500.

EUR/USD - one more minor high should do the job

The decline since the 141.21 high, clearly isn't a five wave decline, it's clearly corrective in character and therefore only a minor wave iv, which should be followed by one more rally to a new high. As wave i and iii is equal in length, wave v should either be smaller (0.618 times wave i) or much bigger (1.618 times wave i). There is no way of telling which it will be. If wave v becomes smaller in should end close to 141.63, while wave v would end near 143.70 if it become much longer than wave i.

I do think the smaller wave v would fit the picture best, but with the extreme bearishness towards the USD currently, one shouldn't be surprised to see a rally to 143.70.

EUR/USD - Five waves up

With the latest rally to 141.21 we can now count five clear waves up from 125.84. Wave 5 would be equal to wave 1 at 141.05, which means that a top could be in place or close at hand. To confirm a possible top we need a five wave decline followed by a three wave correction, which ideally will correct 61.8% of the decline.
A break below the 139.11-139.50 area would be first minor indication that a top could be in place, but only a break below 137.73 will confirm the top.

VIX - Bulls has become complacency again

This week the VIX index went into the Complacency area, that means that Bulls are now all to confident, that the rise will just keep going - It won't!, but it doesn't mean that we can't stay in this area for a longer term, just take a look at 2005 and 2006.

Looking at the Bollinger Bands the VIX closed above the lower band yesterday after two days with a close below the lower Bollinger band. A close below the lower Bollinger band is bearish for stocks and it's just a question of time before the market turns. After a close outside the Bollinger band the VIX will at least head for the mid band, but more likely head for the opposite band, which in this case would be the upper band.

Finally the Elliott wave count confirms that a important bottom could be in place and a new powerfull rally ready to begin at any time now. As can be seen wave [A] and [B] is now in place and wave [C] ready to begin. In the bigger picture this is a flat correction, which would call for wave [C] to break above the ending point of wave [A].

S&P 500 - Topping?

If this bearish count is good, then wave 2 should be very close to it's top. At 1,173.46 it will be at the top of wave 4 of one lessor degree, that's a pretty common ending point for wave 2.

As showed in the previous post, the VIX has now giving two signals, that the S&P 500 is close to a top. It's time to be cautious.

Maybe the USD is the one to turn to for a clue. EUR/USD has reached its ideal target area (The red box - see the chart below) and it has broken above the rising channel, which could be a warning of exhaustion too.

Finally the extrem negative sentiment towards the USD is almost unpresidented, also warning of exhaustion soon.

Looking at the hourly chart we can see that EUR/USD has broken below the rising channel and has tested the backside of the rising channel, what's needed now is a break below support at 137.73 to trigger a minor double top an confirm a decline to at least 135.17 and more likely the 133.60 - 133.30 area.

VIX - A new close outside the lower BB

The VIX closed below the lower Bollinger Band for the second day in a row. This is a pretty rare thing. I went back to 1996 to see the largest amount of days the VIX closed below the lower BB and only once did it close below the lower BB three days in a row. That means we should be very close to a top in the S&P 500.

The chart below shows my favorite count in regards to the VIX. As can been seen an ending diagonal has been seen since May 2010 and the break below the supportline shows that the decline is close to exhaustion, confirming the BB signal.

VIX - Todays standout

Despite a very low trading volume and a close at the same level as Friday the VIX made a new low. As can be seen above the VIX closed outside the lower Bollinger Band, which is bearish for stocks. It doesn't mean that stocks have to decline today, but we should see a decline soon.

The Elliott wave count also suggest that wave [B] might have ended with the new low at 18.80.
My favorite count can be seen below and shows that wave C became and ending diagonal and the break below the supportline yesterday could well mark the end of the ending diagonal or that we are very close to the end.

AUD/USD - We are in last part of the rally

Jem has asked me for my view on AUD/USD. This cross has been a very tough call. Wave 4 broke the nice wave 2-4 channel (the gray channel) after what could look like a fifth failure an fell in five waves, but it turned out to be wave c of 4. Despite the following break above 94.05 the end of wave 3, I still view the rally from 60.04 as wave [B] in a major flat or expanded flat correction. If the current rally is part of a flat correction (my preferred count), then we should be very close to the top. We might need a little longer time-wise before the top is finally set, but not necessary a much higher high. The two boxes I have drawn represent my best estimates of a time extreme.

If I'm right that the current rally since the 60.04 low is just part (wave [B]) of an major flat correction, then we should soon see wave [C] down take over. Wave [C] should ideally end below the end of wave [A], which means that the low of wave [C] would be below 60.04 in late 2011 (ideally around December 13 - 2011).

If this tunes out to be a expanded flat correction we could see this [B] rally extend to the 107 area and in its extreme the 113 area. If this is the case at no time should we see a break below 92.08, before the top near 107 or 113 is in place.

In the short term a break below 95.40 and more importantly 94,60 would weaken the bullish case and add caution for a possible top.

By the way, the last part of the rally from 87.69 seem to be exponentially in shape, which should add caution in stability of this rally too.

The Polish WIG20 - Might have topped !

I have been asked to do a follow-up on my former post: http://theelliottwavesufer.blogspot.com/2010/09/polish-wig-index.html.

In my former post I said that I expected one more new high closer to 46,237.77. Closer to the middle of the channel (the gray line). Yesterdays high was 46,238.49, this new high was followed by divergence on the RSI indicator (see the chart below). It also looks like some kind of five legged C wave ended at that point.

Whats needed now is a break below 44,245.12 and more importantly a break below 41,451.23 to confirm the top.


Stepping down the time frame to the hourly chart (see below). We can see that the top of the rising channel was tested and slightly broken yesterday and the following decline does have a impulsive look over it, but to be sure we need more evidence.
The break below the gray rising channel also adds confidence in a possible top being in place, but a break below the 44,245.12 support would really add confidence in the top scenario.

I would consider sell the WIG 20 here as the risk/reward seems pretty nice here, with a stop just above the top at 46,238.49.

Non confirmation between DJI and DJT

The last two days of new highs in the Dow Jones Industrial index has not been confirmed by the Dow Jones Transportation index. That doesn't mean, that a top is firmly in place, but it could be a warning that we could be near an important top.

A break above 4,614 in the DJT will eliminate the non-confirmation.

EUR/USD - Testing strong resistance

I have shown this chart a couple of times before, but had the possible S/H/S neckline going from the low in late 2005 to the low in late 2008 and early 2009 ( [A] ), That neckline was clearly wrong, but the above pink S/H/S neckline could still be a possibility. If the S/H/S top is to maintaine value we shouldn't see EUR/USD move much higher than the 140-141 area. In that area the we also have triple resistance from the light green and gray fibo-fans and top of the pink channel.

Looking at the shorter term picture below wave C will be equal to wave A at 140.43. A relationsship which is very common. As can be seen we have entered the red box and a top could be in place any time now.



The chart below shows the hourly timeframe. As can be seen on the MACD (144 periode) we have been in overbourght territory for a very long time (17 days), which is an unusual long periode. That doesn't mean that we can't overbourght for a longer time, but the risk of a top forming near the 140.43 area is substantial, but a break below 136.35 is needed to confirm the top.






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