Time to turn up again?

Yesterday bulls got butchered. After the enthusiasm in pre market trading in response to the financial 'aid' to Spain, markets turned down as smart money sold the news. Now that short term lagging bulls are out of the picture (as short term lagging bears during the 12050-12650 move), the wave structure as wave B might already be complete. Now we expect an upward wave C. Wave A paused at the 38% retracement and a sideways movement  as wave B followed. A move above 12600 cash DJI will confirm that we are in wave C. However there is high possibility that this move is minor wave 2 and that's why bulls should be very cautious as a larger degree wave 3 down is expected. This scenario is depicted in the following chart.

 

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Enthusiasm fades, trend remains down in Greece

 Greek General index  tried yesterday to make a considerable upward move influenced by the financial aid given to Spain, but as expected the rally faded as time passed. Enthusiasm was high at the beginning of the session but it looked more like a trap. Many bears tried to cover short positions and many also tried to go long hoping for a trend change. I will say it once again, I prefer staying on the side with cash than trying to pick a bottom without any of my criteria being met. What are my criteria? Increased volume with impulsive move upwards and break of previous resistance levels. None of these criteria has been met. The general index just back tested the broken red support trend line and remains below my averages for some time now.

 The same stands for FTASE 20. The broken support has been back tested and no previous high surpassed. I see new lows ahead unless this index manages a move above 190-195 that could open the way towards 220-230.

National Bank of Greece although it tried to make a strong bounce yesterday, the selling pressures pushed this stock downwards. The yellow support line is our near term target since the upward move from 0,90 is not impulsive. We assume the downward trend will continue till the end of this week. After that nobody knows what could follow the weekend elections.

Spanish aid pushes euro higher!Will it hold?

After the news announced on Saturday regarding the financial aid to Spain and its banking system, EUR/USD prices soar to new highs relative to Friday's session. The pair is trading late sunday near 1.27 after having opened with a gap up since it closed last Friday just above 1.25. Support lies now at Friday's low near 1.2430. The move from June lows still looks corrective as all moves are overlapping. There is no clear impulsive wave and as mentioned in previous posts, correction targets are 1.2650-1.27 and bears should be ready to pull the trigger again. The green support trend line should be the first alert for a trade signal if broken. The pair continues to make higher highs and higher lows. The correction finds strong resistance at 1.27-1.28 level. Now at 38% retracement from 1.3280, this could very well be the end of the rise. At these levels I would favor closing long positions and waiting to see a signal to go short again.

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Why markets rise despite fears of european collapse?

 Bearish sentiment has increased dramatically the last month. Fears for the european debt crisis, Greek upcoming elections and possibility of Spain in need  of a bailout plan has pushed both european and american markets downwards. EUR/USD  has been sold hard the last weeks and everyone seems to want to sell euros. The increased bearish sentiment is byitself one reason whe we were expecting markets to make a bottom soon. If every one had gone short who would be left to sell? Noone, that is why with elliott waves we can capture the markets movement and expect when a move is beginning or is at its final stage.

Looking at the DJI daily chart we see 5 waves down. Before the end of the 5th wave it was noted that the move from the highs could end anytime since we were at the final wave. The market bounced upwards almost 500 points in 2 days. With a bearish scenario as the most possible one yet, the countertrend rally is part of a larger correction. This correction will take the form of 3 waves and we probably have finished the first wave up or are about to.

Taking a closer look at the 30m chart in DJI we can see 5 waves up from 4 of June low. This can be wave A. The move from that high could very well be part of wave B down but it needs more time to unfold and for the wave structure to be clearer. When this wave B  is finished, we shall be able to calculate possible targets for wave C. All these wave counts take into consideration the bearish scenario that we started in April a new trend downwards. If this is not true we could very well see an impulsive move start from June lows. That is why I also labeled wave 1 the alternative to wave A.

 EUR/USD 6h chart looks similar in form and direction to the US indices. The worrying part of this chart is that the upward move still looks corrective as the past ones in March and April. In both these months lower highs and lower lows were made signalling weakness. After a long decline of more than 800 pips, the pair is bouncing upwards. If european and US indices are in a wave 2 stage, this means that the pair is most probably in a correction that could reach 1.27-1.28. After that is finished, new lows are ahead. Many fear the breaking of european union, others the collapse of the financial system.

Many people expect the euro to collapse, Greece to default, the prices to plummet in a deflationary spiral and financial markets to relive a year like 2008 in a scarier version. Call me contrarian but my experience tells me that in markets things go exactly the opposite from what most people expect them to. This doesn't mean that markets will go up either. The problems are there in europe and are very real. Elliott waves project rough times ahead for the markets unless something changes the next month or so. Time will tell and we must be prepared to adjust our strategy and trading.

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What to expect next in DJIA

 Bullish wave count of wave 4 gets canceled as proposed wave 4 overlapped wave 1. Moreover the move from recent highs has an impulsive form. DJI has stepped out of the long term channel in the daily chart. First try was made to reenter but was not successfull. I don't think that new lows are on the way just yet.

Taking a closer look at the 30m chart, DJI has found resistance at the 38% retracement. Futures spiked yesterday during premarket in response to the rate cut in China, but as I mentioned in twitter we should have thought twice before labeling this as 'good' news. Most probably the market is now in correction status. I think until the end of June the market will not crash to new lows, instead it will form a corrective A-B-C towards 50% and 61,8% retracement. Currently we are at the start of this potential upward correction. A pullback was expected from yesterday to begin as the rise was too steep and too fast. 

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