[B]Euro / US Dollar[/B]
Last Wednesday, my colleague and I published a bearish EURUSD article. There is no change to long term wave structure, which remains steadfastly bearish. However, the large decline probably will not continue until the EURUSD exceeds 1.3742. The expected advance will enable those looking to short the EURUSD the opportunity to so at a higher price. What exactly has altered the near term wave structure? The push above false (non-Elliott) channel resistance suggests that the EURUSD corrective advance from 1.2510 is not yet complete. In fact, recent developments suggest a rally through 1.3742 and possibly as high as 1.4150-1.4200 (78.6% of decline from 1.4723 and 100% extension of 1.2510-1.3742). Staying above 1.2965 keeps this outlook intact and there is short term Fibonacci support at 1.3125. There is one count that treats the current decline as an ending diagonal…I do not see this count as probable given the break of the channel AND the break higher in equities on 4/29 (assuming that recent correlations hold…and see more below on equities).
[B]
1929-1933 DJIA[/B]
The initial bear leg of the bear market that began in 1929 ended following a 49% decline. The bear market rally that followed ended 53% from the low (61.8% retracement of the preceding decline) and at the 200 day SMA. This got me thinking about today’s bear market(s). The following table details how far the major indexes fell from their 2007 highs, how far the indexes have rebounded (as of the 4/29 close), and how far the indexes are from their 200 day SMAs and 61.8% retracements. Keep these levels in mind as the bear market rally intensifies. It is worth noting that a 53% rally (the equivalent of the 1929-1930 Dow bear market rally) from the DJIA and S&P 2009 lows would result in DJIA 9,900 and S&P 1,021. These levels are close to each indexes’ 61.8% retracement; which are at 10,516 and 1,135. [B]In summary, expect a strong rally in stocks over the next several weeks, as high as 10,000-10,500 in the Dow. Also, expect a strong rally in the EURUSD, to 1.4150-1.4200. Following these advances, deflationary forces should return, resulting in stock indexes and the EURUSD plunging to depths currently thought unimaginable.[/B]
[B]
DJIA[/B]
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.
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