After having pin-pointed the top to 0.8836 we have been looking for a strong decline. We saw the first five wave decline from 0.8836 to 0.8646, which was followed by a running flat correction and we should now expect extension in wave 3 lower. The minimum target for wave 3 is at 0.8411, but I think wave 3 will extend even further towards the 361.8% extension-target of wave 1 at 0.8030. Longer term we should ultimately see a break below the November 25- 2011 low at 0.7369.
Short term Resistance is found at 0.8597, which will ideally protect the upside for a continuation lower, but only a break above 0.8708 will invalidate the bearish long term count.
EUR/USD break below the long term trend-line support seen
We have seen the first daily close below the long term trend-line support, which indicates much more downside to come. We already had an impulsive count towards the downside, so the break below the trend-line support is no surprise and just confirms, what we already was looking for.
Short term we will be looking for a decline to 1.3444 as long as minor resistance at 1.3478 protects the upside, but the short term downside pressure is maturing fast and from 1.3444 or upon a break above 1.3478 look for a correction towards 1.3500 and likely even 1.3528 before lower again.
Remember that corrections during third waves tend to small or even sub-normal.
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Coffee has more or less behaved like an Elliott Wave textbook chart since late April, but something out of the ordinary happened Friday last week. We saw a major gain of 5.22% and that was not what the textbook normally would have us to expect, so maybe something else than first expected is going on here.
Instead of blue wave (ii) being over at 185 in late June, it could be that it was only wave a of blue wave (ii) and the decline from 185 to 159 was b of blue wave (ii) and now we should be looking for wave c of blue wave (ii). If this is the case, then we should first of all see a break above 175, which would call for wave c higher to 191 to end blue wave (ii) and set the stages for blue wave (iii) lower to 103.
However, if resistance at 175 protects the upside for a break below support at 163, then look for a strong decline 97 in blue wave (iii).
For now we will have to stay flexible and let the market tell us, which count is correct.
Yesterday we saw another new all-time high for the DJI index and once Again the S&P 500 index did not confirm the top. We have now seen four new all-time high days in the DJI, which has not been confirmed by the S&P 500. Non Confirmation is an old but quite reliable signal.
However, trusting this signal alone is not advisable, therefore I would like to see a break below the ending diagonal support-line near 16,915 and more importantly a break below support at 16,805.38 in the DJI as Confirmation, that a top is in place here.
For the S&P 500 index I would like to see a break below support at 1,952.86 and more importantly a break below support 1,944.69, which will indicate that a top is in place.
Once the tops are confirmed, that should terminate the rallies from March 2009 and we should be looking for major declines.
EUR/GBP at its long term target, bottom should be seen soon
With a low printed at 0.7887, we are just 4 pips above the target-area between 0.7868 - 0.7883. Whether we will see a perfect test of the target-area or not it not important to my, what's important is, that a long term bottom should be expected soon for a major rally.
The first strong indication of a bottom being in place, will be a break above minor resistance at 0.7920 and more importantly a break above resistance at 0.7980, which will confirm that a bottom is in place for a rally to at least 0.8155 on the way higher to 0.8467 and higher.
You might wonder, why I expect a long term bottom in the 0.7868 - 0.7883 area?
The first reason is, that at 0.7883 wave 2 will have corrected 88.6% of wave 1. Second waves area allowed to correct 100% of wave 1, but a bottom will often be found near the 90% corrective target.
The third reason is, that we can see a clear divergence between price (making new lows) and the indicators (not making new lows). This is a sign of loss of momentum and tells us, that a bottom could be seen soon.
All together indication of a possible bottom being in place soon. Only a break below the starting point of wave 1 at 0.7763 will invalidate the long term bullish count.
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Brent Crude Oil triangle support about to be broken
Brent crude oil has been locked within a triangle consolidation since the mid-2012, but it should just be a matter of time before the triangle support is broken and the next decline towards 81.56 is seen. A break below the triangle support-line at 106.27 will call for a decline to 103.95 and 96.75 as the next targets on the way lower to 81.56.
If the triangle support-line is able to cause a correction more, then expect resistance at 107.76 to protect the upside for the next attempt to break below the triangle support-line.
USD-Index has broken above resistance and a minor invers S/H/S formation has been triggered
After a nice 61.8% correction of red wave i to 79.75, we have following seen a break above the resistance-line from the 81.02 high and at the same time a small invers S/H/S formation has been triggered, this tells me that red wave ii is over and red wave iii is developing.
Third waves is normally the strongest of the impulsive waves and therefore I would always expect extension to happen during the third wave. Extensions can also be seen in the first and the fifth wave, Just look a little to the left, and you will see that during red wave i it was the first of the sub-waves (blue wave i) that extended. The minimum extension I would look for is the 161.8% extension of wave one. It can be discussed whether this represents a real extension, but this is the most common extension you would see. If this target is broken clearly the next real extension target is the 261.8%, but you should always calculate the 200% extension target too.
If we calculate the 161.8% extension target of red wave i that would give us a target of 83.17, but as you can see red wave iii is already being sub-divided into smaller waves and we already have blue wave i and ii in place, which means, we can calculate the extension targets for blue wave iii and the first extension target is at 80.97, where blue wave iii will be 161.8% of blue wave i. As I said above, blue wave iii could easily extend further, but there is no way to tell how far it will extend, so all we can do, is keep a close eye of the structure of this rally.
As said before, not only has the resistance-line been broken, but a small invers S/H/S bottom-formation was trigger yesterday, which also is a very strong indication of a change of the smaller degree of trend from down to up. That said, an even bigger invers S/H/S bottom could be developing and a break above the neckline near 80.30 will activate this formation for an even bigger rally.
This is as bullish a configuration that you can get and expect a strong rally higher soon.
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