Alastair asked my opinion on the Nikkei index as it produced a Gravestone Doji in May and what the consequences on other markets could be.
The above count is my preferred count and the big question is of cause whether we have begun a new impulsive rally or it's just an X-wave and a new decline should follow.
I do prefer the impulsive count, but in this case we should see a break above important resistance at 15,943.
However, looking at the current rally from the 2008 low at 6,995 wave 1 or a moved up to 11,408 the following decline to 8,136 is wave 2 or b and the current rally is wave 3 or c. As can be seen we have only finished three waves at 15,493 and therefore we need at least one more rally to above 15,943. But will it be a minor break followed by a new decline to below 6,995 or will we see a break that is confirmed as only wave v of 3 and will be followed by wave 4 and 5? As I said I think the odds favors the impulsive count and that means a confirmed break above 15,943.
But what about the Gravestone Doji? As it is with all candle formations they will have to be confirmed, which in this case means a lower close in June, but even if that happens it does not alter my count above and therefore I would be very careful about being to bearish on the Japanese Nikkei Index. I don't think we will see the Nikkei index much lower and is looking for a break above 13,585 as confirmation that wave iv of 3 is over and wave v of 3 higher to above 15,943 is developing. However, until we have seen a break above 13,858 we could see a slightly deeper decline towards 11,806 before wave iv of 3 is done.
About the implications on the other markets? I don't know, what the implications will be. I'm still looking for one more rally in the US indices. I expect the JPY will continue to weaken once the ongoing corrections is over. I'm looking for a weaker AUD and NZD and likely also CAD and ZAR. But if the rally in the Nikkei has anything to do with that I really don't know and does it really matter? If you just follow you analysis and know when and where you are wrong it can be all that bad.
We are currently in a wave 2 correction, correction the entire rally from the 94.10 low to the 133.81 high. I expect this correction to correct 38.2% of wave 1, which will give us an ideal target near 118.73. We are currently in the middle of this correction and I'm looking for important resistance at 127.01 to protect the upside for a break below 126.13, which will confirm a new test of strong the neck-line support at 124.96 and a break here will accelerate the decline towards my ideal target 118.73. However, if important short term resistance at 127.01 gives away, we need a move higher to 128.28 before we can expect the next part of this decline.
With the break above important short term resistance at 1.6590 we had the confirmation we needed to say, that we did see the bottom of wave iv at 1.6388 and wave v higher towards the ideal target near 1.7640 is now developing. Short term we now find support at 1.6651 and strong support at 1.6595, which ideally will hold for the next rally higher towards my next targets 1.6913 and 1.6983, but they should just be small bumps on the way higher towards our ideal target near 1.7640.
I have had some trouble with my normal charting system this morning, so I have had to use my back-up system, but I hope everything will be fine later today.
Resistance at 128.17 did protect the upside for a break below 126.16 which has open up the downside again for a new challenge of important support near 124.96 and once this support breaks we should see a powerful decline towards our target at 118.73, where wave 2 will have corrected 38.2% of wave 1. Short term we could see a little more upside towards 126.55, but we should not see a break above 127.01 as that would indicate a new rally higher towards 128.29 before down again. However, a break below 125.81 and more importantly a break below indicates, that the next real downside pressure has begun.
With a low at 163.88 (just 11 pips below my ideal target at 1.6399) we have most likely seen the bottom of wave iv and should now see wave v higher. We still need a break above important resistance at 1.6590, but a break above here will confirm the bottom is in place at 1.6388 and call for a rally higher towards 1.7640 as the ideal target for wave v. Short term I would like to see support at 1.6465 protect the downside for the break above 1.6590, but we must allow for a move all the way down to 1.6388 before the next rally higher. However, support at 1.6388 can not be broken with even a single pip as that would invalidate my bullish call.
Zink has asked me to update my Count on EUR/USD and GBP/USD and if has changed my long term counts.
Let me start by saying, that I have not changed my long term Counts neither on EUR/USD or GBP/USD.
I expect wave c to peak any time now, but we will have to remember, that wave 2 can correct all of wave 1, but not a single pip above the start of wave 1, which is at 1.3711. We we break above 1.3711 I will have to change my Count to a very bullish Count, but this scenario is not my preferred Count at this point. I'm looking for a break below 1.3266 and more importantly below 1.3177 as confirmation, that we have seen wave c peak and a new decline in wave 3 should be under way.
Long term I'm still looking for this cross to move much higher. However, if we are in b-wave triangle we have only seen wave c bottom at 1.4831 and should now see wave d higher towards 1.6255 and then finally wave e lower before wave C take us much higher.
But is it possible, that USD can be stronger against EUR and weaker against USD? YES it's possible, but I might also just be wrong in one of my calls and if this the case I think it's my EUR/USD Count that is wrong, but for now I will keep my Counts as above and stay flexible.
I'm looking for a decline in wave 2 towards the ideal target at 118.73. Since the top of wave 1 at 133.81 we have seen a zig-zag correction as wave-w interrupted by an x-wave and ideally we are in wave y down towards at least 123.75, where the ongoing wave y will be equal to wave w. That said we will have to consider an alternative count, in which the x-wave is not over yet. In this alternative Count, the rally from 127.62 to 131.31 only was wave a of the x-wave. The decline from 131.31 to 124.95 was wave b of the x-wave and we are just entering wave c of the x-wave for a rally towards 132.51. If this count is to become my top Count, we will need a break above 128.17. If however, resistance at 128.17 protects the upside for a break below 126.15 and more importantly below 124.96, then we can be sure, that the x-wave did end at 131.31 and wave y is ongoing for a decline towards 123.75 and possibly lower.
I'm still looking for black wave iv down to the ideal target at 163.99. Since the top of black wave iii at 1.7109 we have seen a three wave decline to 1.6537, which was wave w and the following rally to 1.6913 was an x-wave and we are now in the second zig-zag lower. Of this second zig-zag we have seen the a-wave and are currently in the b-wave and the question here is, if this b-wave ended at 1.6599 or we need a little more upside towards 1.6658 and maybe even to 1.6719 before the final c-wave lower to 1.6399 is ready to take over? I think that we would see a little more upside before the final c-wave to 1.6399 can take over.
Diversanta asked me for the short term count in EUR/GBP, so here we go.
We are clearly in an uptrend and the decline from 0.8815 is corrective and is wave 4, but is wave 4 finished or do we need one more decline. The rally of the 0.8398 low is overlapping in its structure, but it could be a leading diagonal and therefore a wave i. However, to confirm that we are in wave 5 higher we need a break above 0.8551 and more importantly a break above 0.8598, that would confirm that wave 5 higher towards 0.8918 and possibly 0.9043.
The flip-side is a break below 0.8398, that would call for a decline closer to 0.8287, but this scenario is not the preferred one at this point.
With the rally to 129.34, the correction from 127.10 became slightly higher than I expected, but It did not change the larger picture in any way. We are currently testing strong support at the neckline at 126.50, but it should just be a matter of time, before this support breaks and we sees a continuation lower towards 125.77 and 125.20. My ideal target for the ongoing wave 2 is at 118.73, where wave 2 will have corrected 38.2% of wave 1 and it is also, where we find the bottom of wave iv of one lessor degree. Short term we will find resistance at 127.09, which ideally will protect the upside, but it will take a break above 128.17 to invalidate my bearish call.
My expectation of a top at 171.09 was clearly confirmed yesterday, as we broke below support at 1.6692 without any problems. I'm currently looking for black wave iv declining to 1.6399 before the final black wave v can take over. Short term I'm looking for resistance at 1.6934 to protect the upside for a break below 1.6798, which will confirm that the next decline lower is unfolding. However, if we break above 169.34 we might already have seen the bottom of black wave iv at 1.6537 and should expect a new rally towards 171.09.
I'm a keen Elliott wave follower. I do use, what you might call, standard technical analysis too, but my main focus is on the Elliott Wave Principel.
I use it professionaly as well as in my private affairs. To give you an example I sold my house in late 2005 and are currently renting a flat, not expecting to reenter the property market before 2012-2013.
I'm very much into long term seasonal cycles and demography too.
Waiver: I will not accept any responsability for any loss of funds because of any investmenst done on the basis of my analysis. The analysis herein are done with the utmost due dilligence, but can from time to time be wrong and point you in the wrong direction.
You are always wellcome to pop me a qustion or comment on my work and I will try to answer your question, but might not allways have the time to do everything.
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