18 October
TECHNICAL ANALYSIS – ELLIOTT WAVE
The 10 day rally up from October lows is complete in Elliott Wave terms, that is five smaller waves are completed. This is the same for Commodities, Currencies and other Indices. Now we are going to see a three wave correction down, a simple Elliott Wave ABC pattern.
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01 Today's EarlyBird Report – 18 October
Market Drivers
Dow Jones – 11, 441 -1.74%
Base Metals Negative
US Gold CFD: 1670
Oil WTI CFD: 86.20
Copper CFD: 336
US Dollar CFD: 77.27
EURUSD 1.3760
AUDUSD 1.0230
Dow Jones CFD 11,450
S&P500 CFD: 1,203
FTSE 100 CFD: 5400
SPI CFD 4200
US News
LONDON - (Dow Jones) - European stock markets dropped Monday as hopes faded that a comprehensive solution to the euro-zone debt crisis will be announced at a summit this weekend.
Commodities
US Gold CFD: 1670
That should be the end of the September / October correction on the MediumLevel 1650* and that would also go for Silver. Look at a short from these levels. This also means the 1532 low would be taken out.
And also that the Dollar is on its way back up and the US Indices on the way down. Even though this may be the case, I would first consider the Dow having a larger correction at the MediumLevel 11,500*, rather than making a new low even though that could be the possibility.
For confirmation on Gold would be developing the 1650 as the resistance, the trading strategy apart from using the 1650 as the retested resistance would be shorting here with Subgroup 2 (SG2)* as resistance and the stop above the high.
*See » TradingLevels Fast Track Intro
Oil WTI CFD: 86.20
Shorting at 88 mTL8* with the stop above 90 for the time being would be the trading strategy then working the 8672 and 8650 as the retested resistance to add the second position, then 85. If you’re working small lots for your capital size then they can be equal lots at this high, otherwise every position added reduce by 50%.
Oil follows stock with reason…
*See » TradingLevels Fast Track Intro
Base Metals
US Spot Prices (in l/b)
US US Copper: Last: 3.37-
US Nickel: Last: 8.57+
US Zinc: Last: 0.97-
US Aluminium Last: 0.85-
Copper CFD: 336
The move down in Copper will be in line with most other markets so we can expect smaller sets of five waves down and three wave rallies as the price moves down towards TL3* 300 like Gold and Silver and most other markets.
*See » TradingLevels Fast Track Intro
Forex
US Dollar CFD: 77.27
I think that is the low in place, as we are seeing five small waves up on the intraday.
I so need to point out that it can also be the wave four rally, I don’t think that’s the case, but using Elliott Wave we have to keep all counts until proven otherwise.
The 77.72 is the door stoper resistance, if and once this becomes support then go long and also add to the Euro shorts.
Trading Strategy: keep the first position stop under the current low.
EURUSD 1.3760
TradingLevels: Firstly like the Dow at 11,500 and the Euro at 138 as levels it’s only natural to see larger correction at these levels, but as you know we have been looking for tops and these current highs fit the top in terms of Elliott Wave, but we have to be careful that we are not just seeing larger corrections at these particular levels and that it is indeed a top in place. The top is what we are going with in trading terms
Elliott Wave: The top of Wave A should be in, so now we can expect Wave B down to unfold. B waves are three wave structures 5-3-5 waves in each wave
Trading Strategy: Short here with stops above the high. Or the failed retest of 138
AUDUSD 1.0230
TradingLevels: Expect We should remember that this market covered the Gap and turned for future use. The market should work towards 1.00 TL1 There is a lot of support in the 101 – 102 zone
Elliott Wave: This top is the Wave A of a ABC correction, so the move down is the Wave B 5-3-5 Elliott wave structure, so we can start counting the first five waves down from the 10372 SG2* high
Trading Strategy: take a good look say on a 2 or 4 minute chart and observe how the price works through the tradinglevels, the retest as resistance is what you’re looking for. Every price has a certain personality, I know that’s a bit flaky, but there are certain things worth noting with price, such as SubGroup 1 (SG1)* in a down trend will naturally have orders sitting on each Level* 1, 2, 3 this will create a choppy pattern and therefore slow the trend down, you should not trade in this zone unless you trading longer term. The Midpoint* 5 is highly likely to create resistance so it’s a great place to take profit and then wait for the price to work around this price point as retested resistance, you can add on the failed retest or you can work in orders all around the unfolding price pattern, you will also start to notice other things like the price runs quite fast from 8 to 5, or 3 to 5.
*See » TradingLevels Fast Track Intro
Indices
Dow Jones CFD 11,400
TradingLevels: The 11721 one point off that 11720 level creates the high, last week we were considering the moon cycle which also starts to weaken in this Mon and Tue, I’m not getting all moony but it can be helpful at time is we are correct with the waves count it can add weight to the analysis. The 11500 is back in play, we were expecting a retest of this level and in trading terms this could be a bullish correction and in trading terms we will consider this, we will give this market time to work this levels as support or resistance and if it ever becomes support, we will turn long with our trading, but for now we are treating the current high as either (2) or Wave A.
Elliott Wave: Apart from the (2) or Wave A of a ABC rally for Wave (2) we should stay with the intraday and daily count ( minor and minute degrees) The current move down is five small waves ( nearly completed) once they are completed we will see a abc three wave rally and then another five waves down. We can expect the three wave abc rally to be the first retest of the 11,500 MediumLevel
Trading Strategy: Once this small impulse wave is completed, the 11,500 should be retested.
S&P500 CFD: 1,203
TradingLevels: The 1230 SG1 did not hold as support, this is very important point to understand as it stops us from being long around this area, support on any SG1 is the long trade without it we simply don’t go long, no matter what the Elliott Wave count is.
The price will now bounce off the 1200 either back to first resistance 1210 or 1220. And for scalping you do understand that there is a whole suite of Micro tradinglevels between every 10 points
Elliott Wave: Five waves down nearly competed from the last high, then expect abc rally then another five waves down
Trading Strategy: Look to short the abc rally, this abc is a 5-3-5 wave pattern, so shorting into the last 5 waves the wave c, the fifth of the fifth, line this up with the closest price level.
Because we can see five waves down from the high, this is five wave in the other direction and if we get five waves in the other direction then we can expect another five waves after the abc rally, so this is a strong trading set up.
FTSE 100 CFD: 5400
TradingLevels: The top of this rally is likely in place now the 5300 is the 38.2% and 5200 is the 50% retracement levels of the trend up and would be normal consolidation areas
Elliott Wave: The sharp move down is an impulse wave that is not completed, maybe in the 5372 SG2* area? But it doesn’t really matter; because it’s the abc rally back up that you should be waiting for to short? Try and line the wave count up with all the other markets
Trading Strategy: Let the 5 waves down complete and then wait for the abc 5-3-5 pattern up to complete and then look to short.
SPI CFD 4200
TradingLevels: A nice strong and clear impulse wave structure down over night creating a top. The impulse wave will complete at 4200 or the SG2 below 4172 depending on the cash opening and dragging it down, you just have to work the levels
Elliott Wave: The impulse wave down (five waves) may only have the wave three completed the four and five may need to unfold, I need to pull the trend down apart
Trading Strategy: Daily Robo** or scalp the sublevels.
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Summary
It can be quite stressful staying with a wave count especially when it moves to the outside limits in terms of price and time. The news that met the wave count turn was negative European news, no surprise. I’m a simple soul, so while I see the US printing presses running overtime the underlying reality would have to be a negative sentiment and the skeletons of companies debt would eventually be seen. They mentioned last night that Citi Group has a US$32 billion exposure to Europe. If you have seen the movie ‘To Big To Fail’ then you will really understand that they are all financial cowboys!
Support and resistance is the name of the game and the Dow Jones is basically retesting 11500 (the MediumLevel) for support as expected, but will it find support, is the question and this may not be answered for some time. It does however give us something to look for that we can understand in a simple way; we can expect a few good swings across this level and if this is the case, then we can simply observe the support or resistance move into place and this can give us the basis for the next direction.
With the AUDUSD and the ASX200 we can expect the trend up to be corrected 50%.
The China GDP is out today 1.00 PM and it’s expected to be lower however that’s not the point as these things are already priced into the current price, it’s getting the 'expected' that’s important and that’s a bit of a guessing game so trade les's and trade with stops.
Day traders trade up to 11.20 AM as the Monetary policy hits the street at 11.30 AM.
ASX daily Robo traders can short the open with stops above yesterday’s highs.
Trading Quote
"If you understand and accept risk, you will never risk too much again."
Today's Financial Events
Time Currency Detail Forecast Previous
11:30am AUD Monetary Policy Meeting Minutes
1:00pm CNY GDP q/y 9.3% 9.5%
1:00pm CNY Fixed Asset Investment ytd/y 24.9% 25.0%
1:00pm CNY Industrial Production y/y 13.5% 13.5%
1:00pm CNY NBS Press Conference
1:00pm CNY Retail Sales y/y 17.1% 17.0%
18th-19th CNY Foreign Direct Investment ytd/y 7.7%
7:30pm GBP CPI y/y 4.9% 4.5%
7:30pm GBP RPI y/y 5.4% 5.2%
7:30pm GBP Core CPI y/y 3.2% 3.1%
8:00pm EUR German ZEW Economic Sentiment -44.7 -43.3
8:00pm EUR ZEW Economic Sentiment -45.1 -44.6
11:30pm USD PPI m/m 0.2% 0.0%
11:30pm USD Core PPI m/m 0.1% 0.1%
12:00am USD TIC Long-Term Purchases 27.8B 9.5B
1:00am USD NAHB Housing Market Index 15 14
4:15am USD Fed Chairman Bernanke Speaks
Tentative USD Treasury Currency Report
NOTES:
1. Check the Dividend & Reporting section for your stock on this site before trading
2. Prices may change as this report is written while markets are closing/trading
3. Always think things out for yourself, we are only here to bounce ideas around.
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02 FOREX: ElliottWave count for AUDUSD
AUDUSD 1 Hour Chart
Tuesday, 18 October 2011 at 1:20:00AM AEST
Aussie reversed nicely lower, through EW channel line, which suggests that wave (v) of A is in place. As such, trend has now turned bearish for the near-term, as pair should move lower at least in 3-waves within a black wave B.
AUDUSD 4 Hour Chart
Monday, 17 October 2011 at 5:35:00PM AEST - wave A at resistance
NO change!
AUDUSD is trading sharply higher for two weeks already, but still only within a first leg of a corrective recovery; A-B-C structure. IN recent trade Aud/Usd moved into nice resistance region; 61.8% retracement area and gap from September 19th. Since gap was already filled, it may be a time for a reversal lower, into a lower wave B, but only price can confirm that! So we need to see a fall below support line of a trading channel, before we can say that wave A is done!
AUDUSD DailyChart
15 October 2011 - wave two pull-back?
AUDUSD bounced significantly higher in the past two weeks, with current prices threatening the upper channel resistance line, where a breakout will seriously threaten the bearish forecast! For now however, pair still trades below 1.0760 critical region, so as long this one holds downside is possible. But we of-course need to see an impulsive, bearish fall in price, before we may even consider downtrend continuation!
Alternate counts on the radar, which if proves correct, will send pair above 2011 pick.
AUDUSD Weekly Chart
25 September 2011 - bearish trend, weakness to come!
AUDUSD broke through and closed below a very important support line connected from 2009, which is the most important evidence of a change in trend. As such, the updated wave count suggests that a five wave recovery from 0.6 is complete and that prices are headed much lower, now into wave 4 territory.
We also have a bearish divergence on the MCAD, and a break below zero line will be just another downtrend confirmation!
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