30 min
4 Hours
Daily
My Bias: short in wave 3 blue. Wave Structure: downward impulse wave 1, 2 blue Long term wave count: lower in wave 3 blue Important risk events: EUR: German Retail Sales m/m, CPI Flash Estimate y/y. USD: Chicago PMI, Pending Home Sales m/m.
Hello to you all, and welcome back to a new week. The market was back open today, and after a quiet day yesterday we got some interesting action in todays trade.
Firstly to start, After a few questions on the subject, I thought I would lay out the general thesis I am working with in the current wave counts. It does make sense when examined at a macro level.
The Dollar: The US dollar is now mired in a corrective phase against the big three major currencies. This is born out in the action we have seen over the last year in the major cross rates. Sideways, overlapping and generally meandering price action, Lacking any major imputus. This is the very definition of a corrective move.
So; What follows a correction, A move back into the dominant trend, thats what. And that is exactly what I am anticipating for the Dollar. A large strengthening against the major currencies. The larger wave counts clearly call for exactly that, And hence, the reason why I continue to focus on that theme in the short term wave count. I am preparing for that large trend move to occur.
The DOW / general equity markets:
I track the DOW simply because it is the benchmark index in terms of global interest and fascination. And as such it is a very good barometer for general societal mood and investment appetite.
The DOW is ending a very large half cycle movement to the upside. the market is at an overbought and overbullish extreme by every measure. This is clear also in the wave count, as the market approaches it final zenith.
The next major move for the DOW is down, in a multi year long bear market which should bring the DOW below 5000. This market outlook also meshes well with the outlook for the USD,
As the equity market crashes, it will bring down with it the monstrous mountain of cross collateralized derivative products and contracts.
And suddenly these so called 'netted' positions, and questionable assets, will be exposed for the fraudulent froth that they are.
The domino effect of bankruptcy and insolvency will be a sight to behold!
In essence this new era of Credit derivative hocus-pocus, is a massive short on the U.S Dollar.
Creating Dollar values on balance sheets out of thin air. Because, The lions share of derivatives are USD based and, as they have grown, have created a ballooning balance sheet USD 'value' across the financial industry as a whole. Hence, the derivitive market is a massive short on the underlying currency.
This will end! And when it does, it automatically creates a monumental short squeeze on the USD. Driving the dollar higher.
GOLD: Gold is money, all the rest is promises and dreams, GOLD should do well in this environment also!
And that, my friends is my general thesis towards the market!
Now down to the business at hand.
EURUSD: I have labelled the short term chart to show a possible sequence of 1,2 waves to the downside. This wave count calls fr a large decline in wave '3' green dead ahead.
The 4hr chart shows a downside centreline cross in place. And MACD also registered a sell signal yesterday. The head and shoulders pattern is in place also.
The likelihood is high now for a decline in wave '3' green. The price should not break 1.1250 in this bearish scenario. A break of todays low at 1.1109 will conform that wave '3' is underway.
DOW JONES INDUSTRIALS
30 min
4 Hours
Daily
My Bias: market topping process ongoing Wave Structure: Impulsive 5 wave structure, possibly topping in an all time high. Long term wave count: Topping in wave (5) Important risk events: USD: Chicago PMI, Pending Home Sales m/m.
The DOW has now drifted sideways for a solid week. I think this corrective phase is nearing completion. The slight decline today seems to have completed a three wave pattern off the high. I have labelled it as a complete wave 'ii' pink.
A rally above 21097 will signal the beginning of wave 'iii' pink which will carry the market to a new all time high.
Read more by Enda Glynn
