Thursday, May 5, 2011
New trend or not just yet?
This big decline today is possibly the start of a new big downtrend. I was looking for a top slightly higher and wonder if this level is still reachable. For that to be true the decline has to be another X wave. With tomorrows NFP, price could still snap back up for a last rally, but don't forget even if that is the case, the top will follow that last rally. Another possibilty is that the NFP event will completly sink price and eurusd will have 2 bad days in a row.
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Hi Jeremy!
ReplyDeleteI am puzzled by the structure of this move. The first leg down to 1.4807 does not seem to be in 5 waves.
Anyhow, there might be a potential bottom at 1.4220-1.4230 which is a significant former top and the 55 days moving average.
For a trend change I was also expecting a divergence between the price and the indicators on the daily graph. None. This is why another top just over 1.50 shall not be dismissed yet.
Would appreciate your view on these.
Wish you a great week end!
Catalin
A night in the middle makes a more rounded thinking.
ReplyDeleteI now wonder if the last major leg up (Y) wasn't already retraced too deep to accommodate the idea of a possible complex triple three's?!
Complementary to an Elliott wave analysis, other two perspectives to judge are:
-the leg up from 1.18 to 1.4280 took 21 weeks to complete; the current leg from 1.287 took only 16 weeks to reach 1.493
- the trendline between 1.6030 and 1.4280 not yet broken. This trendline shall be met around 1.42
Am I just refusing to accept that there is a trend change already?
Regards,
Catalin
Hi Catalin,
ReplyDeleteSorry for taking so long to answer you, i've been really busy lately. There is always the possibility that there will be another high. If you look at some other pairs like gbpusd for example, a new high would be preferred. On the other hand, this was a very big decline and shows bears are very strong even leaving a weekly bearish engulfing candle. Sentiment was at extremes, indicators were overbought and showing divergence. When you look at trendlines, i think the trendline that started around the 1.30 low is of importance. It got broken to the downside, another bearish sign. the next target for confirmation is the 1.4156 low, which would be the first lower low for the year. If after that price rallies and fails to make a new high (lower high) and price then gets to a lower low, the trend has changed. But be carefull, since i think we might be ready for some price action like in 2008, where the countertrend rallies are very small and the declines very big. If this is true, a lot of money can be made...
Friendly greetings,
Jeremy
Jeremy,
ReplyDeleteThank you for your comprehensive answer.
That weekly bearish engulfing candle is a strong reason to worry about.
Wishing you a great week ahead,
Catalin
Jeremy,
ReplyDeleteI just want to raise one more perspective on the weekly chart.
The leg down (A) from 1.60 to 1.18 took 100 weeks
The last leg up (B) from 1.18 took until now 46 weeks. A Fibo time relationship would recommend 50 or 62 weeks for this B wave to last. This would be up to 16 more weeks to go?!
Now an (A) wave in 3 moves would eventually recommend a (B) wave in 3 moves and a (C) in 5 moves, this making out a flat.
Such a scenario might 'cover' those extra required weeks and a price target in the area of 1.60. This would be made possible by a larger W-X-Y move from 1.28 up to 1.60, accepting that the (W) had completed at 1.4930 and we are now in a (X) move.
Your insights will be highly valued.
Catalin
Hi Catalin,
ReplyDeleteYes you are correct that this could still be an X wave of some sort. Especially now that price from the top seems more corrective. However this can still be the start of a new trend down if you count price from the 1.60 top as a WXY correction, which i believe has more chance of happening now (look at previous comment for reasons why). I don't really believe in time relationships between waves, i've seen this work sometimes, but most of the time markets seem to turn when a certain price level is reached no matter what the time relationship is.
Jeremy