Prices actually closed Monday’s session above the down trendline. But, the breakout was not to be as prices fell back below, and also failed to close above it on Friday’s brief break. Daily RSI is back below 50, and although we are still maintaining our bullish outlook up towards 1.1400-1.1600, a break of the 1.0800 level would suggest the corrective bounce from the March low was corrective, and complete.
The most important feature on the intraday chart is the corrective decline from the high set on Monday - it’s a clear three wave move. The preceeding move that we’ve labeled (i) is a less clear five, so we do have an alternate listed that would explain the wave (i) move as an (x) (with a running flat as b of (x)), which doesn’t undo a bullish outcome after another test of the 1.0800 level. the trouble with the immediately bullish view is that the action up from the wave (ii) low isn’t a clear five either. So, we’re going to want to wait for a push back above the down trendline prior to getting overly excited about bullish prospects. There’s plenty of room to the upside to wait clarification.
Once again, we’re not going to alter our top count here, as it’s been playing out just fine. We did see some new lows this week, although Friday’s occurred on a slight bullish divergence. Until prices are able to close above the down trendline drawn off of the wave B high, there’s little reason to believe in a bullish outcome that won’t be fully retraced.
Here the bullish divergence into Friday’s low is a bit more pronounced, but the count doesn’t appear to be complete, yet. It’s always painful to be waiting for that “one more new low” that never comes, but bulls will have to show a push above the down trendline and the .7600 area before we’re willing to change our count here.
We’re anticipating one more new low here too, but there’s reason to be a bit wary of its extent. First, prices dropped slightly below the 100% expansion target from the wave B correction, so prices are at a natural place for a bounce. The commodity rout continues, though, and the action up from the wave (iii) appears to be corrective and complete. One more diverging new low would be ideal for our count.
The key feature on this chart is the sharp decline once prices pushed above .6695. Notice that the wave (iv) high is near former fourth wave resistance (wave .iv of v of (iii)), and the decline from (iv) appears to be a five wave move. So, we can hold bearish ideas as long as prices remain beneath .6740, looking for a new low. We won’t overstay our welcome as bears though, and will be quick to take profits into a new low.
Prices fell to start the week as expected, but an interesting thing happened once prices traced out five waves down from the high - a dramatic reversal. Daily RSI remains in Sustainable Bull territory, which keeps the idea alive that any decline will be a correction.
Here you can see the very clear five wave decline for wave .c of iv. You can see the power of the trendline, which is really just a representation of the “herd’s trend.” In this case, the herd is clearly in favor of higher prices. We’re looking higher still into a top, although we won’t be surprised to see the red trendline broken during the flat wave 4 correction we’re anticipating. Keep in mind that the wave 2 correction retraced 61.8% of the wave 1 rally, so a triangle or other flattish correction should appear per the guideline of alternation.
So, both counts point higher from the wave 4 or (A) low into a wave (iii) of C of (B) high. The trouble is that wave (ii)/B was awfully shallow, and there’s only three waves up from that low right now.
Rather than commenting on the rather untradeable USDCHF, I’ll pose the dilemma below instead.
Coming into 2015, we were berating the Swiss National Bank (SNB) for its idiotic euro peg. We thought it would continue with the peg since the SNB actually wanted a weaker franc. As a result, it electronically printed francs to buy euros, which were falling in value. Then in January the SNB changed its tack. Instead of buying a falling euro, it chose to buy stocks instead. Now, given 21 years in various facets of the investment world, I consider myself a savvy veteran of this world. But, I can’t for the life of me figure out why any citizen of Switzerland, or any other country, would want its central bank to buy stocks.
If the SNB wants a weaker franc, should it be buying assets that go up in value or down in value? And, wouldn’t it make sense to leave the stock buying game to professionals in that area? Do you really want Janet Yellen in charge of a mutual fund, or ensuring that banks have adequate capital reserves. It’s just another example of why countries should restrain government (and quasi government) officials - otherwise, there will inevitably be mission creep.
It took until Wednesday, but the early week decline and then rally we suggested was exactly what played out. Notice that prices are now testing resistance from the May and June highs, along with the upper parallel of the base channel. This rally isn’t complete, though, and we remain bullish. Notice that daily RSI is just under “Sustainable Bull” territory.
Yes, we know the wave i high is far away from current prices. But, it shouldn’t be breached until prices have pushed much higher first. That’s the critical support for our bullish view, although ideally prices will remain well above that level. There’s still resistance overhead, so prices will need some backing and filling next week, but we’re dip buyers.
The pound’s rally certainly didn’t measure up to the EURUSD, but that’s not to say it wasn’t bullish this week. In fact, on the weekly chart (not shown) this week completed a weekly buy signal bar, to go with the prior week’s reversal bar. That means we can hold a very aggressive bullish view while prices remain above 1.5458. We don’t think prices will be anywhere near that level in a week or two. Be bullish.
What’s most important on the shorter term chart is the clearly corrective action to the downside shown in both wave (ii) and 2 (And E, and C, you get the idea, right!). We won’t be surprised at all to see the pound play a bit of catch-up with the euro to the upside next week. We remain aggressively bullish. A break of the wave (ii) would give us pause, and would potentially suggest that the wave (B) triangle was ongoing, rather than something more bearish. Even under that view, prices will remain above the 1.5400 area on their way towards 1.6100 (or higher). Do notice that 1.5700 has been resistance lately, and any push above there may serve to panic the shorts (On any hint of no Sept rate hike or QE4 perhaps.).
Now, what’s most interesting is that AUDUSD didn’t fall to a new low as the signs that the global economy is weakening became apparent this week. Remember that AUDUSD has already fallen a long way from its 2011 high (about 35%), and so a bounce isn’t out of the question. What could cause Aussie to bounce as the global economy weakens? How about more monetary easing from Australia’s largest customer, China, or how about easing monetary policy in Australia? Wait, isn’t that heresy? How could monetary easing actually benefit a currency? Ask the euro after Mario Draghi’s “whatever it takes” speech and bailout of Greece. Both were forms of monetary easing, yet the euro rallied from 1.20 to 1.40 after those “easing moves.” Remember, be careful of relying too much on causation, and instead let the charts do the talking. We can’t rule out one more stab lower, but Aussie should be near a bigger rally phase, and that’ll be sealed on a push above .7600.
The decline from the .7360 area is corrective, and the bounce from .7200 looks impulsive. That means we should see a near term rally regardless of which count is operative. Be bullish towards the .7440 area early next week, and possibly beyond considering the weaker US dollar we’re expecting.
NZDUSD showed several bullish divergences into the wave C low, with the final one occurring ABOVE Sustainable Bear territory (lower grey zone). We mentioned at the time that we needed to pay attention to this divergence, and last week showed why. Prices have now pushed higher, with RSI above 50, and we’re expecting it to continue.
Don’t stand in the way of higher prices on the shorter term view either. We think wave i of (iii) was a leading diagonal, and prices should soon push the upper boundary of the base channel. Only a drop back below the .6600 area will call into question our bullish view.
Under both the bullish view and the top alternate, prices are headed higher from above the 1.2925 area. The line between the two counts is Wednesday’s low 1.3024. We have five waves up from 1.2952 into 1.3152, with a correction into Wednesday’s low. Remaining above that level means wave 5 is underway already. A break of that low means that a triangle of flat correction for wave 4 is the operative view, and considering the strength we’re looking from for AUD and NZD, perhaps that makes more sense. The pair to play any USD strength is USDCAD.
Prices have now returned to the breakout level, which means they’ve really gone nowhere since December, similar to the S&P 500. There’s little reason to believe that prices are going to stop here, though given the big bearish bars the last three days. We’re going to be sellers of any bounce, partly based on the action in daily RSI. Notice that into the wave B high, RSI turned down from the upper grey zone, which is the “bearish resistance” zone. Now that RSI is back near Sustainable Bear, there’s little reason to think prices are going to turn back up on a dime, although we can’t completely rule that out until the wave 4 low is taken out.
hello elliot traders,
I’m searching info about zigzag double combinaiton
I read that we can find it as ZIGZAG + X + ZIGZAG or ZIGZAG + X + FLAT or ZIGZAG + X + TRIANGLE
But could it be as FLAT + X + ZIGZAG as i define magenta WXY in wave-2 ?
Tnx
Thanks for the post. It helps to see the entire structure, so a zoomed out image would help. That being said, it appears your W structure is actually a complete A wave correction, if I took a wild guess. It appears that the structure corrected wave 4, typical of an A. I suggest looking for the sub-wave count for clarity, I am guessing you can’t see the 5 waves in the A so you are assuming a combo is developing. I will take a look at this one myself during the week.
Other than that you are on the right track. Nice work!
[QUOTE=“Trader Skillset;714179”]Rather than commenting on the rather untradeable USDCHF, I’ll pose the dilemma below instead. Coming into 2015, we were berating the Swiss National Bank (SNB) for its idiotic euro peg. We thought it would continue with the peg since the SNB actually wanted a weaker franc. As a result, it electronically printed francs to buy euros, which were falling in value. Then in January the SNB changed its tack. Instead of buying a falling euro, it chose to buy stocks instead. Now, given 21 years in various facets of the investment world, I consider myself a savvy veteran of this world. But, I can’t for the life of me figure out why any citizen of Switzerland, or any other country, would want its central bank to buy stocks. If the SNB wants a weaker franc, should it be buying assets that go up in value or down in value? And, wouldn’t it make sense to leave the stock buying game to professionals in that area? Do you really want Janet Yellen in charge of a mutual fund, or ensuring that banks have adequate capital reserves. It’s just another example of why countries should restrain government (and quasi government) officials - otherwise, there will inevitably be mission creep. Happy Trading! The Wolf[/QUOTE]
I really like to know the source of these informations. Do you have any thing other than news.
In my opinion at the beginning of 2015, Swiss, had extra fund, they were thinking of buying gold or dollar, the gold buying did not pass because of down trend, the dollar buying did not pass either, because we have bad history with dollar inflation upon QE of TARP 2009 to 2011
Now the swiss are in trouble what do they do with the money. Euro started to show long term inflation as well, so they went to US equities which is quit good investment of 2016, but how long will it last. Not only Swiss, up to my knowledge also, Norway are getting there as well.
The source of my information is local news.
But I Am really looking for a solid resource of information of all these macro-level trades.
hello elliot traders
What’s your experience about the rule “wave-4 never enter in territory of wave-1 in an impulsive wave (expected in diagonal)”.
Let’s see this situation:
Green waves aren’t developing diagonal .
Green Wave-1 is an initial diagonal where sub-wave c is above sub-wave e.
Do you consider that green wave-4 is entered in territory of green wave-1 from c or when below e?
If indeed wave (v) of 1 (or e of 1 as you have it labeled) truncated, you’d use the extreme of wave 1 as the territory that wave 4 shouldn’t enter (i.e. c of 1 as per your labels).
Keep in mind, though, that Prechter allows wave 4 to enter the territory of wave 1 in a “highly leveraged market.”
Personally, I think the lesson is that one should trade clear patterns. When rules, or guidelines, are broken, rather than forcing a count, look somewhere else.
Friday’s break of 1.1399 means EURUSD traced out three waves down from the 1.1465 high. So, we’re now looking higher into resistance, and as most are focusing on a potential breakout, we see a “sell the range high” type of situation unfolding. Of course, we’ll need to see how next week plays out first, but it’ll take a break of the up trendline to suggest something more sinister to the downside is developing. Until then, RSI found a bottom in the Bull Support zone (lower blue), which points higher near term, at least to eclipse the wave (a) of Y high.
Same story with GBPUSD - higher into a top. Prices have pushed past the red line, but remember to think of structural resistance more of as a “zone” as opposed to a “single point.” So, there’s still plenty of overhead resistance despite the push past the internal trendline drawn off the wave (1) low. That said, we need to allow for higher prices before things top out, so perhaps we’ve got some weak data coming in the US, and some dovish Fedspeak from the bafoons at the FOMC.
As the headline says, central bankers appear to have painted themselves into a corner. When the BOJ “failed to act” last week, the yen rallied and stocks there sold off hard. Since Japan must “print or die” there’s little doubt further easing will be coming from Japan. And, with Bernanke, Krugman and the rest of the Keynesian/Monetarist clowns calling for fiscal helicopter drops of cash(Since QEs effectiveness at improving economies has proven to be futile.) we expect nothing less.
The hubris and egos of the central bankers won’t allow them to admit failure; instead they will simply pivot to some additional “tools (fiscal printing)” in addition to more monetary stimulus (QE). Part of the reason Bernanke is promoting fiscal printing now is to give his monetary policy failures some cover. If Congress fails to add more fiscal stimulus, Bernanke will blame that, rather than the boom/bust cycle that was turbo charged by absurdly loose monetary policy.
Keep in mind, that the Taylor rule, a Fed created model, suggests the overnight rate should be 2.8% even now! Talk about ignoring data. Listen, monetary policy can’t fix structural problems, and when structural problems abound (too much debt and overcapacity) too loose monetary policy makes things worse.
