Elliott wave analysis of Facebook - A top is in place at 86.07

Facebook a top is in place at 86.07 

I have been looking for confirmation that a top was in place at 86.07 and yesterday saw the first close below the support-line from 54.66 and at the same time, we saw support at 77.26 pierced, these two breaks of support does indicate that a top is in place at 86.07 and a correction of wave [3] now is about to unfold. The first corrective target for this correction is found at 69.48, which marks the 23.6% corrective target, but a more likely target is the 38.2% corrective target at 59.55, which is also close to the bottom of wave (4) of one lessor degree.

If you look back in my previous posts you will see a post from March 24 where I mention the possibility of an ending diagonal (you can see the post here). That post was filed at the very same day that the top at 86.07 was being set. I that post I also said that the top likely would be found in the 86 - 87 area and it certainly did.

Well this ending diagonal count is as valid as the count shown above and this count also calls for a correction unfolding. Whenever an ending diagonal is finished, we should expect to see a return to the origin of the formation, which in this case is at 43.55 and it should take half the time it took for the ending diagonal to develop, which would call for a decline to 43.55 (about a 50% decline from the top at 86.07) in about 6 - 9 months.

Let me say already, if a decline to 43.55 is seen, that would call for a relabeling of the larger picture, but ultimately be much more bullish long term.  

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Elliott wave analysis of USD/JPY - Has it topped or is one final high for the year needed?

USD/JPY

The break below 119.19 indicated that a top could be in place at 122.02 and a correction of the entire rally since the 75.56 low is developing. That said, we have to acknowledge that one impulsive structure does allow for overlapping waves and that’s the ending diagonal. If this alternate count is unfolding, we still need one final rally to new highs just above the 122.02 high and likely not above 123.52 before the major correction takes over.

To confirm that the top is in place a break below support at 118.31 and more importantly a break below support at 115.83 is needed. 

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Elliott wave analysis of DJI - Has the long term picture changed?

DJI has the long term picture changed? 

For years I looked for wave D higher in the expanding triangle. I will admit, that I was looking for a wave D top ultimo 2013 near 16,450 (see my blog post from March 26 -2012 here). Well here we are at 17.857, with a peak at 18,288 more than a year after the expected top, so it would be obvious to ask, if the long term picture has changed?

I don't think that things has changed and I still expect the rally from the March 2009 low at 6,470 as being wave D of an expanded triangle. The rally from 2009 has been kept artificially alive by the Central Bank's pumping billions of USD into the market, but if we look at the RSI indicator, we can see that it has made no new high. Actually it has respected the down trend-line nicely, but it have not yet given a sell signal either.

For a sell signal to be triggered a break below support at 15,855 is needed. The crowed has once again become complacent as the VIX shows 

but do they have any reason to be complacent at this point in time? I would not be complacent at this point in time. I think, that at minimum a major correction is long overdue and if my expanded triangle count is correct, the decline will break below the March 2009 low too.

If we look at the margin debt, which has proved to be a very reliable long term indicator (the chart below is by courtesy from Doug Short). We can see that the margin debt peaked already in February 2014 and has since then moved sideways, but a break below the April/May 2014 lows will trigger a major sell signal as it did in December 2007 and as it did in September 2000, so there is all the reason in the world to pay close attention to this indicator.

Finally I think it's worth paying attention to the US 10Y yields as they have staged a huge rally the last couple of weeks (see the chart below). Will the funds move into the stock market? well it's possible, but I'm not convinced that this is the first place they will go. I think it's more likely that they will move to the currency market and push the USD even lower along side JPY. As the debt needs to be paid back the currency that normally is used for borrowing, will become much stronger as investors cover their debt. 

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