The Euro appears to be in the final wave 5 decline of this first leg down. After a larger Wave 2 corrective rally, we should see a drop greater than we have seen over the past two weeks; if this count is correct that is…
ACTION: Expect a larger counter-trend rally to sell into beginning from these price levels to as low as the 1.3257 area. That corrective rally would likely last 3 to 5 days. If 1.3250 is exceeded on the downside before at least a 3 day bounce, then the larger sell-off is already likely unfolding. See weekly and daily charts for the Euro below.
USDCAD: Ok, we caught the nice move up on this pair from the buy breakout reco on 02/8, and if you listened, we got you out right near the top on the 12th, depending on what time our webmaster posted it (by the way, we are in the process of completing the technology to publish these posts a lot earlier than they go out now. That should be ready very soon). The market has now compressed on the 240 minute charts.
ACTION: We expect an UP move now. Place a buy order a few pips above the horizontal red lines shown on the 240 minute chart. In case its a fake out, stop and reverse to short at the lower horizontal red line. I like compression patterns because if one side fails, you have a high probability of the other side winning at least enough to cover your loss and often much more. See 4 hour chart below for targets.
XAUUSD: Gold hit our first short-term target of "compression width = breakout move," and it tagged one of the lower support bands in evening trading. From here, or from 1630, 1617 or 1610, we will be looking for a $30-60 dollar bounce to sell into. Either way, the measured move suggests it is headed lower to the 1575 to 1450 area within the next few weeks, unless this sell-off is immediately reversed.
ACTION: Position traders hold short with stops at breakeven; short-term traders peel off some positions on weakness and continue to sell "larger overbought intra-day rallies," especially if we see at 30-60 dollar bounce and as long as the 60 to 240 minute trends are heading lower at that time. See weekly and daily gold charts below with the complete analysis.
SP500: The S&P500 index appears to be forming a megaphone pattern on the weekly charts that some would likely deem an expanding top formation similar to the top formation in the early to mid 1970's, if you look at historical charts. The 1974 top formation was a prelude to a 55% drop. That will remain a possibly unless the upper resistance trend-line is exceeded for two or more days, which could then negate the potentially bearish pattern. On the 240 minute chart, you can easily see the declining momentum on each rally. I removed the signal indicators so you can better see the situation.
The automated forecast calls for a bit of a sell-off, one more rally, then a significant sell-off. The takeaway from this is that the S&P500 appears to be running out of momentum (at least for now). A very tradable counter-trend down move, or potential top, could unfold over the next 2-6 weeks. In the meantime, the action may still be ugly trading for medium term traders until the big break and the first corrective rally occur (should that happen sooner rather than later). Short-term and long-term traders are likely both loving this meandering stream…
ACTION: The automated pattern finder is forming a triangle which will likely provide a breakout either way. Long-term traders hold long until our daily trends or weekly trends reverse. Swing traders should look to play the breakout out of the forming triangle pattern either way, and/or lightly trade the swings as this train appears to be is slowing down for now. Be aware that the 2013 cycle top projected for around mid March of this year is still a possibility and could happen any time now, if the cycles are still correct. A thrust above the megaphone pattern's upper trend-line could mean a further acceleration, but we think that is a less likely event from what we can see. See the weekly and 240 minute S&P charts below.
DE30: The Germany 30 stock index has 2 out of 3 trend indicators heading lower now. Keep in mind that these are unusually responsive, yet often highly accurate indicators. In that context, we have a double systematic sell signal. However, since the breakout point is in close proximity to our short-term stop trailing indicator (which is positive), we would only recommend selling if it drops below the stop indicator to 7595.00.
ACTION 1: SELL at 7595 stop to open, use 7665 stop loss, move stops to break even on 1/2 the position (very tight) at 7555 (due to a support line there), keep the other 1/2 and the initial protective stop, exit 1/2 at 7475, trail stops down to exit 2 at 7199.
ACTION 2: In case the market does not sell off and instead rallies through the down trend resistance line, BUY at 7728.50 stop to open, use 7645 stop loss, move stops to break even 7998, exit 1/2 at 7854, trail stops up to exit 2 at 7937 or just trail stops on 240 minute charts from first target on, if possible. See the daily chart below.
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