Hello traders,
This is my first post here, but since this is not the section for introductions I’ll do it very briefly:
Name & Surname: Dimitrios Charalampidis
Country: Greece
Trading Experience: 5+ years
I decided to write my first post, just after the dramatic developments in the markets that last Friday’s NFP and unemployment reports resulted in.
In general, I believe that most market participants at the current point is trying to identify the direction of the markets for 2014. Will the bulls continue to dominate or maybe it’s the time for bears to be in charge?
I will share with you my views and thoughts and I would be happy to hear/read your thoughts back.
Starting with the Dow Jones Industrial Average (keep in mind that I use price data of the CFD on the index as provided by my broker):
The following chart includes the whole 2013, and I think when somebody looks at it can be nothing less than amazed!
During the last days of of 2012 DJ was declining loosing almost 500 pips (488.5) in 5 consecutive days and it closed positive by about 100 pips the last day of the year. 2013 opened with a gap on the upside and since then it’s like bulls went crazy! Look at it, 3638 pips on upside for one year! Buying on 01.01.2013 and holding until 01.01.2014 would have been a very profitable strategy!
I’m afraid though that will not be the case in 2014…
According to my EW count, 2012 ended together with the correction of wave 2, 2013 started with the beginning of wave 3, which was quite extended (~ 3 times the wave 1) and ended (I believe) in the middle of the correction of wave 4 within the wave 5 of the wave 5 that you see at the chart above (two degrees down). In other words, I believe that news historical highs will to be recorded in 2014! But when and at what level are the two key questions…
Let’s zoom the chart to 4H and take a closer look!
In the chart above, you can see my counts for the two sub-degrees colored in blue and magenta. If we suggest that my counts are correct, then it appears that currently we are within a very complex correction forming the wave 4 (magenta), which I’m still straggling to count! I may not be able yet to say for sure what’s the exact count of the correction, but at least I know this is a correction! Then I see a head and shoulders pattern with a clear breakout (it is easier to identify it on the Stochastic Oscillator). Then statistically a move down to 16362-16302 is very probable (we seen a low of 16378 so far).
So maybe there is more room for the correction to expand?
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The 100 period SMA is currently at 16315.
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The RSI is just below its neutrality area.
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The magenta wave 4 has retraced only 23.6% of the magenta wave 3, 38.2% is at 16275 and 50% at 16183, very near to the level of blue wave 3 top, providing great support!
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The count invalidates at 15933.
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Finally, taking as given that magenta wave 4 will be completed at some point without invalidating the count, then what? Where will magenta wave 5 end? After that what?
Since red wave 3 was quite expended, a possible and the most likely target for magenta wave 5 end, that will also be blue and red wave 5 end, is 16648. This is the Fibonacci Expansion 61.8% of the net distance that red wave 1 and 3 traveled, projected from red wave 4. But if you look another degree up from the red count if appears that we are about to complete a corrective wave b, and if we accept that wave b = wave a * 1.618, then wave five may end at 16982. That’s more than 300 pips higher!
But what’s more important here is, that if my counts are correct… everybody should take a good look at these historical highs because we are not going to see them again any time soon! A wave c is about to unfold, that will drive prices below 10000 at least! So, let’s hope I’m not right!!!
Thank you for reading, I’m to your comments, but before that you should also take a look at the two charts below, the CFD of the DAX index and EURUSD (I cannot really get a decent count for the pair in the longer term, but this short term count seems to be ok, although there is room for the pair to correct more (higher prices). At the current point it stands exactly at 38.2% retracement of wave (1) and the abc-like corrective wave (2) may be completed since the Fibonacci Expansion 161.8% is very near to the 38.2%. But also, the FE 261.8% is at 61.8% retracement of wave (1)… so again there is more room for the correction (1.3760 area).
Thanks again,
DC
