CHF/NOK - At important resistance

CHF/NOK has formed a very big S/H/S top with a 536.00 target, however strong support will be found near 595 on the way down and it might even be able to halt the decline.

The upper chart is the weekly bar-chart, showing the long term picture, while the chart below is the daily chart zoomed in on the S/H/S top. As can be seen we are currently back-testing the neck-line, which has now turned into resistance. This sideways consolidation can go on for a while longer, but decision time will be seen within the next two week. A break below 634.66 will confirm the next leg lower.

Junk Bonds - Breaking down

In late August we saw Junk Bonds break down from its Diamond top-formation (see my August post here: http://theelliottwavesufer.blogspot.com/2011/08/junk-can-be-nice-but-not-all-time.html )

Junk Bonds are leaders, they break down before stocks do, so the break down from support confirms, that the next decline towards the 32.60 Diamond-target is under way. But the break down spells trouble for the equity market. Prepare for the next leg lower soon.

Elliott wave analysis on EUR/USD; Gold and Crude Oil

EUR/USD - We saw a slight break below support at 135.39, but no clear break, which has kept the correction higher from 133.61 alive. We need a break above 136.89 to confirm a continuation higher towards 137.88 - 138.27. before the correction ends. If we break above 136.89 we can conclude that wave - B was an expanded flat correction in a Zig-zag correction from 133.61.

NB! Any break below 135.97 and more importantly 135.18 will turn us down hard again.

Gold - The minor break below 1,584.39 is not ideal, but it could just be part of an expanded flat wave 2 correction to the rally from 1,534.49 to 1,638.80. A break above 1,667.99 will confirm that scenario and call for a continuation towards 1,702.

However any break below 1,582.79 will turn us back towards important support at 1,500.

Crude Oil - Expect resistance at 82.69 to protect the upside for a break below 79.65, which will accelerate the decline towards 77.18 and further down towards my target area near 72.

Chinese economy in trouble?

Please first see my posts here:
http://theelliottwavesufer.blogspot.com/2011/09/shanghai-composite-at-important-support.html

http://theelliottwavesufer.blogspot.com/2011/09/charts-telling-tail-of-economic-future.html

I have not been a great fan of the Chinese economic miracle. I have seen it before during the 80's in Japan. The headlines was pretty much the same as they are today and look where the Japanese economy is to day.
I do think the ones betting on China to pull the global economy is wrong, very wrong. I wouldn't be overly surprised to see China drag us even deeper into a global recession.

The Shanghai Composite (the upper chart) has broken below important support and is now headed for next support at 2,319 and below here will be very bad for the ones having hopes for the Chinese economy.


The chart just above is showing USD ag. CNY. Since mid-2005 we have seen the CNY get stronger, but it might soon be over. The technical picture is not pretty as can be seen. Since mid-2008 a major divergence have been building. That said a break above the long term falling trend line is needed to confirm a weaker CNY, but the building blocks is there...

Elliott wave analysis on EUR/USD; Gold and Crude Oil

Sorry for the late update today, but I have been very busy.

EUR/USD - Is the correction over already? I do think the correction from 133.61, has been a little shallow only reaching 136.89, but we have a clear divergence between the price-action and the MACD-Indicator, that tells us that the correction could be over. To confirm, that the correction is already over we need a break below 135.39, which should do for a new decline to 133.61 on the way to the next support near 131.

Only if 135.39 holds firm for a break above 136.41 can we expect one more rally towards 137.88.

Gold - We saw a break above 1,663, but the following decline is getting awful close to important support at 1,584.39. This support can not be broken if we are in a new impulsive rally.

A clear break below 1,584.39 will have the rally from 1,534.49 look like a correction an call for a new decline closer to important support near 1,500.

Crude Oil - The "Hidden divergence" seems to be kicking in and we could soon see the next aggressive impulsive decline below 77.18 towards my 72 target area.

Short term a break below 80.48 will confirm that the next decline is on.

AUD/USD - At strong resistance

The long term count does show, that we have seen a double Zig-zag from the low at 47.73 in 2001 to the 2011 high at 110.80. The break below 99.65 triggered a Shoulder/Head/Shoulder top, which has a target at 87.93, but longer term we should see AUD/USD much lower.
The question is whether we are looking at an "X" wave in a triple Zig-zag or a new low below 47.73.


Zooming in on the last part of the rally to 110.80 we can see, that we are back-testing the S/H/S neck-line (prior it was support now it has become resistance) and should soon see a break below 96.11, which will confirm my long term bearish count.
That said I have one concern. The decline from 110.80 to 96.11 is clearly in three wave and wave "a" and wave "c" is equal in length, but it will take a break above 103.98 to confirm this count and a new rally higher towards 110.80. This count is not my preferred count, but we will have to consider the possibility.

Apple - ready for the next leg lower

Long term picture showing, that we could have seen a major top at 422.86

Zooming in on the topping action we can see a five wave decline from 422.86 down to 391.30, followed by a three wave rally to 409.25, just below the 61.8% retracement of wave a or i down.

I do favor the impulsive count calling for a break below support at 385 soon.

Longer term we have the all important support at 353.

Elliott wave analysis on EUR/USD; Gold, Silver and Crude Oil

EUR/USD - After the low at 133.61 we are currently building wave iv higher towards the 137.11 to 137.88 area. It could even rally towards 139.21, but that is not favored at this point.
Short term a break above 135.77 will confirm the move higher towards 137.11.

Gold - After a scary move all the way down to 1,539.49 I'm now looking for a break above 1,662.89 which will be first strong sign, that red wave iv is over and that we have begund red wave v of 5 up.
At this point only a break below 1,503 will cause concern and force me to reconcider my preferred count in favor of a more bearish count, that has the wave 5 top in place at 1,919.49.

Silver - After the decline to 26.04 just below the ideal wave iv of 5 target area between 26.37 - 26.67. We have seen a new rally above 30.86, which is first good indication, that wave v of 5 has begun. This wave v of 5 should ideally reach 53.36.

Crude Oil - Is correcting in wave ii of 5. We now have the first signs that "Hidden Divergence" is seen. Hidden Divergence is seen when the price is rising of falling, but not making a new extrem, while the MACD-Indicator to the contrary is making a new extrem. This Hidden Divergence normally results in a very aggressive move in the direction of the main trend, which in this case is to the downside.

I still look for a move towards my target area near 72, when this wave ii correction is done.

Elliott wave analysis on EUR/USD; Gold and Crude Oil

EUR/USD - It seems as we have stallt just above ideal target at 133.54 with the low of 133.61. I now look for a move higher towards 137.20 and maybe even 139.28 before the next leg lower.
We have a clear positiv divergence on the MACD-Indicator adding confidence in the view of a short term bottom.


Gold - Has fallen very hard the last couple of days, and the clear break below 1,665 is of concern, but only a clear break below 1,500 is need to turn more negative. However we also need a break above 1,650 to ease the pressure towards the downside and call for a move higher to 1,720.

Just a short note about Silver. We saw a decline to 26.04 in early Asian trading, which was just below the target area I mentioned yesterday. I still think that this should be the end of wave iv of 5 and we should now see one more rise in wave v of 5 towards 53.36.
Short term a break above 31.04 will be the first minor confirmation, that we have seen a bottom at 26.04.

Crude Oil - Is headed for support at 76.08. Acturally we might already have seen a minor bottom at 77.18 for a reaction back towards the 80 - 82 area, before the next decline towards my target area near 72 should be seen.

Brent Crude oil ag. Crude oil

The chart above shows Brent Crude oil ag. Crude oil with the spread between the two as the first indicator below and the MACD-indicator of the spread below that.
I'm not an expert on oil, but to me a spread of USD 31.62 in favor of Brent Crude oil (black line) doesn't make sense. I simply don't get it. Maybe some of you out there can explain it to me?
From a pure technical point of view, we can see Crude oil (the red line) flirting with its early August low at 79.30 and a break (close) below here will open up for a move towards the 72 area.
If there should be any sense Brent Crude oil should break below is August low at 103.91 and decline towards at least 87, which would make a USD 15 spread, which would cut the spread in more than half from the present spread.
Looking at the MACD-indicator we can see a clear double divergence, which as warns of spread loosing momentum.
I'm not much of a spread trader, but this could pose a very good trade if I'm right...

US Banks breaks to new lows

US top banks all but one broke down into new lower for the year last week. This is not a good sign for the US equity markets, which should stay under pressure next week too.

Bank of America was the only bank, which barely held its late August low at 6.01, but is should only be a question of time before this support gives away and the late February 2009 low at 2.53 is in sight.

Citigroup broke its support at 25.30 last week and the next target is at the March 2009 low at 9.70.

The leader of the pack "Goldman Sachs" clearly broke down too and is headed for the lower Pitchfork Support-line near 74, but a return to the late November 2008 low at 47.41 is clearly a possibility.

JP Morgan doesn't look to good either. It will find some support at in the 26 - 27.50 area, but it doesn't look like it will be able to keep the downside in check, so a retest of the early March 2009 low at 14.96 is clearly a possibility.

Finally we have Morgan Stanley, which is headed for next support at 10 followed by the mid-October 2008 low at 6.71. MS does look pretty shaky and its portfolio of risky bets doesn't look good. Therefore MS could be a major risk-candidate this time around.

Silver still working on wave iv of 5

Already in July I had a post saying we where working on wave iv of 5. See the post here
http://theelliottwavesufer.blogspot.com/2011/07/silver-working-on-wave-iv-of-5.html

We are still working on that same wave iv, but we can now say more about, which target we are most likely headed for. That target is in the 26.37 to 26,67 area. In this area we see multiple important supports coming in. At 26.67 we have the 50% retracement of the entire rally from 3.51 to 49.51. At 26.60 wave b of iv will be equal in length as wave a of iv and finally at 26.37 will find the 66% retracement of the rally from 14.63 to 49.51.
So the area between 26.37 and 26,67 should be a formidable support area posing the best opportunity for the final wave v higher towards 53.36.

Charts telling the tail of the economic future...

The first important chart to tell us, what we expect on the economic horizon in the comming months ahead is The Shanghai Composite. In early-August we saw a break-down from the big B-wave triangle, which has been building since late 2008. The target from this breakout is at 1,169.
After five weeks of consolidation we have seen a break below support, which should be the set-up to the next decline lower.
I hear it all the time China is now in the economy driver-seat, but the above chart tells us otherwise. They (the Chinese) will be hit hard once again. Globalization is very much alive and well. A lot of people tell me, that we have seen the Asian economies decouple from the Western economies. But I simply can't see. The chart tell me otherwise and I belive them more, than even the best economist.

Next chart telling me, that the economy is headed down is the CRB-Index. We saw a decline from 473.97 is mid-2008 to 200.16 in early 2009 (Wave [A]). QE1 and QE2 massive stimulus packages gave the economy some support, but we only managed to correct 61.8% of the Wave [A]. and is now seeing the correction collapsing, Wave [C] down is clearly under way.

Already in March I called for a possible top as we closed in on the 61.8% correction target see the post here http://theelliottwavesufer.blogspot.com/2011/03/crb-index-top-in-place.html

The final chart telleing me, that the economy is headed lower is the Copper chart above.

After break below the pivot point at 397.04 there was no turning back.

Copper has been a very good leading indicator telling us which way the economy will be headed within the next 3 months.

My EW-count calls for wave [C] down below the ending point of wave [A] at 124.75. If that is correct we have just entered the bening of the next perfect storm.

This is no time to take excessive risk and trying to ride the wave down will be as fast and furious as it was in 2008. So take care out there...

A Mixed bag of goodies

S&P 500 - It has been a while since I have said anything about this index, but now seems to be a good time.
We are testing important support here at 1,108 (neckline support of a major Shoulder/Head/Shoulder top), if this support breaks we are looking at a 813 target.
Looking at the MACD-Indicator it's turning down below the zero-line, which is quiet negative for the outlook and raises the odds for a break below support.

AUD/USD - We saw important support at 99.72 be broken, the break at thesame time triggered a big Shoulder/Head/Shoulder top with a 87.93 target.
Short term we can see support at the red falling Pitchfork, if however this support breaks we will see acceleration to the downside.
The neckline will now act as resistance.

Apple - The top is in place! The break back into the ending diagonal is a clear sign of weakness and we should soon the diagonal support-line tested and a break here will confirm a decline to all important support at 353.

Elliott wave analysis on EUR/USD; Gold and Crude Oil

EUR/USD - We have seen the expected break-down, but it has become deeper than I first expected. My best short term can be seen above, which calls for one more low near 133.54 and maybe even 132.28, if we have seen the top of red wave-iv.
We can see a clear positive divergence, which tells us we are in the later part of the decline from 139.36 and soon should see a correction higher towards the 137 area.
Longer term we are headed for a move below 123.78.

Gold - broke to the downside. The messy consolidation turned out to be wave d of an ending diagonal, which could bring us down towards 1,665, but againe we are in the later part of this pattern and we could see a turn higher anytime now. A break over 1,808 will confirm the next rally higher towards at least 2,032.

Crude Oil - We saw the break back into the fat red Pitchfork, which have accelerated the decline.

We are now headed for the Pitchfork mid-line, which is now in the 72-area, which also happens to be my target area.

The upper Pitchfork line should now act as resistance.

Bank of America - Where now?

August 25, 2011, 9:22 am Investment Banking
Buffett Invests $5 Billion in Bank of America

On August 25 Warren Buffett bought USD 5 Billion is Bank of America.
The very next line in this New York Times article was:

1:04 p.m. Updated Warren E. Buffett comes to the rescue, again.

See the link below
http://dealbook.nytimes.com/2011/08/25/buffett-to-invest-5-billion-in-bank-of-america/

It was a vote of confidence for the beleaguered financial firm the article said, but was it really? Don't get me wrong. I have absolutely nothing against Warren Buffett or Berkshire. Buffett and Munger is in a league of their own, but was this a wise bet?

I'm sure that Buffett and Birkshire walked away with a profit, the very minute the deal was announced. The question is will anybody else?

Looking at the chart below. I would say no, but I'm positively sure, that Bank of America, some how will be saved and Buffett will get his money back. That is not the problem here. The real problem is the small investors who followed Warrent Buffett on the back of this deal. Will they make money? No way! They will very soon see their "investment" disappear. Operation Twist announced by FED yesterday is bad news for Bank of America. I have no idea who or how Bank of America will be "pick" up, but the remains of this once proud company. One person or one company will look back at a handsome profit and that is Buffett and Berkshire, the rest? Don't ask me, but I doubt if they will leave with anything, if they hold on to their investment, as we are headed for the 3.75 area.

AUD/USD - At important support

Is currently testing important support at 99.72, a break below here will trigger a large Shoulde/Head/Shoulder top for a decline to at least the 87 - 88 area.

From an Elliott Wave perspective I see the rally from the 2001 low at 47.73 as a double zig-zag correction (see the chart below). A break below 99.72 will confirm 110.80 as a long term important top calling for a decline towards at least the 79 - 81 area, but we will likely see it even lower.

Elliott wave analysis on EUR/USD; Gold and Crude Oil

EUR/USD - After a little confusion as FED annouced it's "Operation Twist", where we saw a quick spike to 137.88, we saw a equally qucik sell-off towards support at 134.99. I still look for a break below 134.99 for a move slightly lower to 134.55, from where I expect a short term rebound.
Longer term I'm looking for a decline to below 123.78.

Gold - What's up and what's down here... Are we seeing a triangle or not? At this point I simply don't know, but I will go with the break which ever way we break.
Below 1,768.89 we should see a move down to 1,665
Above 1,827.36 we should see a rally towards at least 2,031.

Crude Oil - Is acting in accordence to my expectations. It's however much slower than I had expected. A break below 83.30 should accelerate the decline towards 76.08 and my target area near 72.

Apple - Followup

Todays price action for Apple was a weak one. We started the day with a gap upto 419.64 from the previous 413.45 close, but we ended the day at 412.14 almost the low of the day, which where 412. The down day actrually confirm the Shooting Star top and calls for a decline towards all important support at 353 soon.
I would of cause like to see a break below 411.19 too, but after the latest price action I would be very careful if I was long of Apple (As a secret I can tell you, that I'm not...).

EUR - Will it make it or not?

I saw the above catoon in Financial Times yesterday and thourght it did fit well into my view of the Euro.

It also mad me think of the song "The Heat is on" I think it was a ABBA song, but I don't think Merkel, Sarkozy, Berlusconi and so on fell the same kind of heat as Agnetha Fältskog, when she song the song...

Original Post below:

The above cover from The Economist could be seen on 16 July, 2011. It shows a Euro coin ready to roll over the edge.

On 17 September, 2011 The Economist had a cover showing a Euro coin with cracks, which two workers is working to mend.

For both covers the colours are held in red and black, but on the September cover the red is weak and more towards an orange colour.

Looking at them together like this. I would expect that the Euro coin did roll over the edge, but made it and the cracks can be mended.

I do think this is a sign, that we haven't seen the worst in regards to the Euro. We haven't seen the Euro roll over the edge and we don't know if it only have minor cracks or it's broken in two. They are simply ahead of time.

I know The Economist isn't the best contrarian indicator. It´s actually a very good magazine, with a lot of in depth stories.

I just found the two covers so close apart interesting.