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Twitter: http://twitter.com/gregahorvatfx

Twitter: http://twitter.com/gregahorvatfx

Apr 12 2012

Euro unfolded impulsively from 1.3382 peak, which now appears to be wave (i) bottomed at 1.3035. We know that impulses shows direction of a trend, so we will be looking for further weakness in days ahead with fall beneath 1.3000 psychological mark. However, before downtrned resumes, pair will look for deeper pull-back ideally into 1.3200 zone, where wave (ii) may find a top.

Critical/invalidation level is at 1.3382.

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Cable made clearly five waves down from 1.6060 high broke trend-line support of an ending diagonal and wave (4) swing as well. These are all indications for a bearish trend, especially as rise from 1.5805 looks clearly corrective, labeled as wave (2).
Pair should fall below 1.5805 while 1.6060 critical region holds.

We see a very clean bullish pattern on gold. Notice that from 2011 highs decline has unfolded in three waves, followed by bullish impulsive reversal through falling trend line. Well, once wave (1) found the peak, the price reversed lower as expected, into a corrective wave (2), which is now looking for a bottom around typical 61.8% retracement area. A minor impulsive bounce towards 1715 will confirm a bullish case, and immediate rise to 1800 and even higher.

For now invalidation level remains at 1522 low!

Notice that we are currently also observing huge head and shoulders pattern with right should near completion.

• Gold reversed nicely in the past few sessions, in-line with our expectations, from around 1640 area. A minor fall from the top has an impulsive shape, so we think that top is in and that prices should move lower, especially as market is already trying to break out the support channel line. But to get even more sure about the "top in place", you may also wait on a daily close price action. But in either case, if wave 4 done, then we don't want to see price back above 1642.

• Cable broke through the 1.5860/90 support region which could be start of something bigger to the downside, especially if we consider that prices slipped below the support line of a trading channel as well. But notice that even if we still count move from the top in a corrective way, such as double zig-zag, we still need one leg lower (wave (C)) after wave (B) bounce, which may occur in the coming session or two. Alternate count also signals for weakness after corrective retrace into 1.5860/90 area which will now tend to react as a resistance either in wave (2) or (B) wave! "Support becomes resistance; Resistance becomes support". Bottom line: Weakness to come after any pull-back higher, while pair trades below 1.6090!

Sep 04 2011

The US stock market moved significantly lower in August, with S&P500 down to 1100 region once the critical region at 1249 (March 2011 lows) was taken out. Below we have a weekly chart, where you will notice that prices also broke through  the lowest support line of a corrective channel which is a very strong indication of  a completed  wave B)/II) around 1370. In such case we know that market is headed much lower, and the reason is a recovery since March 2008 which was clearly in three waves.

Three wave pattern as we know is a corrective structure, and since market already made one impulse down from 2007 pick, we know that long-term trend has changed from bullish to bearish.  With this being said, investors and traders, who are aware of an extremely bearish technical picture, should move their money out of risky assets into cash.

During the crisis money is also going into the bonds, but this safe-haven may not last long, and here is the reason WHY, taken from the book Conquer the Crash (Chapter 15), written by Robert R. Prechter Jr.

• “Any bond issued by a borrower who cannot pay goes to zero in a depression. In the Great Depression, bonds of many companies, municipalities and foreign governments were crushed. They became wallpaper as their issuers went bankrupt and defaulted. Bonds of suspect issuers also went way down, at least for a time. Understand that in a crash, no one knows its depth, and almost everyone becomes afraid. That makes investors sell bonds of any issuers that they fear could default. Even when people trust the bonds they own, they are sometimes forced to sell them to raise cash to live on. For this reason, even the safest bonds can go down, at least temporarily, as AAA bonds did in 1931 and 1932.”
  

However, you can also take advantage during the “stock collapse”! There are many ETF’s that are negatively correlated with stocks, which means they trade higher when stocks are falling. One of them is called SDS (UltraShort S&P500 Proshares). Well, lets take a look the wave count on it.

On SDS daily chart, we can see a very sharp rise from July lows, called an impulsive wave in Elliott Wave theory, followed by a three wave of decline from August pick. A corrective retracement that shows first evidences of a completion around 22 region. Further rise and close above 27 will confirm a bullish trend towards and above 30, while the S&P500 (cash market) will be moving lower.

Will you stay in cash, or will you move your money into assets like SDS is your decision, but keep in mind that there could be a good buying opportunity ahead of us, once the global bear market finds the bottom somewhere below March 2008 low.

Oh and one more thing, "its always better to be prepared than negatively surprised" !!


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