"All human activities have three distinctive features: pattern, time and ratio - all of which observe the Fibonacci Summation Series" (R.N. Elliott - "Nature's Law - the Secret of the Universe" - 1946)

Tuesday, April 30, 2013

SPX - Close to a temporary top breakout

SPX is testing the top and the structure is inclined to break it; if this occur , the main scenario (Cycle Top) is invalidated in favor of the first alternative one  (Alt: x in progress).
The hypothesis illustrated on the 15 minutes chart is that of an irregular (or expanded flat) with wave b/x complex type [w]-[x]-[y]-[x]-[z] .
As I wrote a few posts ago, I still think that the benchmark index at the end of this Cycle wave, as happened in the past, is the DJIA (that is clearly bullish) and not the SPX...
Have a great trading day...with care!


Saturday, April 27, 2013

Stock Markets Outlook; still interesting Zurich, London and Tokyo

The technical situation of the World's stock markets is contrasted.

In the U.S., the major stock indices show diverging dynamics; below an update after the structural analysis made ​​in the post of April 06.

The DJIA does not seem to have reached the Cycle's Top, nor Primary or Intermediate, but only a Minor top (wave a) ; the daily chart shows the expected start of a sideways correction, wave b  flat or three type, which should last a few more weeks, with potential targets in the area of ​​14,400 or 14,000.

The SPX, in the other hand, shows a darker pattern , more difficult to interpret,   that does not exclude the possibility that has already been reached the Cycle Top with the start of a long-term downtrend; this scenario requires however some confirmations such as, at least, the breakdown of the MM 50 dd and the fall below 1,530 , which have not yet occurred.

The alternate scenario considers the continuation of the current uptrend, after the end of this congestion, labeled as Alt:(x) .

The NASDAQ index is the weakest of the three major U.S. indexes, even for negative drag determined by Apple that has lost 40% from their highs; the last bullish movement has not been able to overcome the previous top, due to the pressure applied by resistance band between 2,860 and 2,880.
The preferred scenario is bullish: we could be in wave 2 of 5 of (c)

Whatever happens, the U.S. stock exchanges are not far away from a Cycle Top, then prudence is, more than ever, a must.
In Asia , from few months, the driving stock market is the Japanese one.

Nikkei index, in the medium-long term, is in the bullish impulsive wave [C] Primary of wave B Cycle of wave [IV] SuperCycle; in the short-term is in wave 3 minor of (3) Intermediate in completion, which will be followed by a correction in wave 4 , like a sideways pattern (flat/three or triangle), that should be carefully monitored in order to open (or increase) a long position on wave 5 if there will be a valid and clear bullish setup.

In Europe , the main stock market, the German stock exchange, is in retreat.

DAX index is the only index of the old continent that has tested its highs as SPX;

my main long-term scenario is bearish , because it would have already reached the Cycle Top of wave D , starting the last wave E of a triangular wave [IV] of SuperCycle degree.
the first alternate long-term scenario is bullish; the wave Alt:E has already reached and now we are at the beginning of a new SuperCycle Bull market; we are inside the Alt:[1] Primary, where wave  Alt:(2) of intermediate degree is underway and then will start the bullish wave Alt:(3) .

For now I don't see an interesting pattern setup.

The FTSE 100 index of the London Stock Exchange has a similar settings but it seems to still be able to go higher.

In the medium term, the main scenario is bullish because it was not yet reached the Cycle Top (wave D); we could be in wave  [C] Primary with wave (2) Intermediate in progress; for a potential long setup, wait for the completion of b and c minor waves, preferably like a flat and not below 6,200.

However, is the Swiss stock market the one that presents the best setting; the SMI index is in a powerful uptrend.

The weekly chart shows a potential Running Triangle pattern in wave [IV] of SuperCycle degree, with wave [C] Primary of D Cycle in completion.
The daily chart shows a wave 4 minor of (3) Intermediate in progress, with targets in 7,300 - 7,500 area; a potential bullish setup is close.

Finally a look at the Italian stock market index, the FTSEMIB , that is not going bad at all (like the negative situation of fundamentals, confirmed by Moody's, let assume).

 Preferred scenario: FTSEMIB is in wave [C]/[Y] Primary of second X wave Cycle of SuperCycle wave [IV] .
The daily chart shows a minor uptrend in progress, labeled wave x minor of (b)/(x) Intermediate, which after a break of one or two week, could bring the index to test the highs of January 2013.
In a future post, we will focus on the analysis of the BRIC and others Emerging stock markets that in perspective, will almost certainly be the most promising markets of the next multi-year bull market Cycle.


My 5 P.S. :

1) "The trend is your friend until the end".
I follow a trend-following approach; generally, I open long on the sideways breakout of a previus uptrend, occasionally on a controlled pullback, never on a reversal , that is counter-trend (short otherwise);

2) for a profitable trading, a strict money management and a disciplined psychological and behavioral approach are much more important than any model based on fundamental and/or technical analysis;

3) at least 50% of losing trades (or not winning) have a culprit: the trader, who has committed an incorrect analysisa wrong header for excessive ego, a failure to compliance with its rules or stops, etc ...; always reflect on trades made​​, remembering, however, that the market, in the end, does what it wants and is always right;

4) in trading there are neither Gurus nor the Holy Grail; no certainty, only humility, hard work, perseverance, patience and discipline;

5) pray (for believers) or hope (for atheists and agnostics) not to run in the Black Swan; who had been long on Wall Street in September 11, 2001 would not have stood a chance ... and in trading, as in life, good or bad luck are crucial!





Friday, April 26, 2013

SPX - Topping of minute degree.

Preferred scenario; SPX has reached the top of wave b/x minute, now down move in c/y wave.
Alternate scenario: the top is wave [y] of b/x , and the ongoing pullback the second wave [x] of a double complex; new upward wave in [z] that ends wave b/x .

Have a great trading day...with care!


Thursday, April 25, 2013

SPX - Still in the upward wave of minute degree

Short-term Preferred scenario: SPX is in corrective wave b of [y] of b/x of a/w minor; when it will be finished, small final upward move, then correction.
Short-term Alternate scenario: the Alt:[y] and wave b/x of minute degree is already ended, so the bear move in c/y is in progress.
Medium-long term Preferred scenario (neutral/bearish): the Cycle Top has already occured so we are in the first downward (a)/(w) wave of intermediate degree.
Medium-long term Alternate scenario (neutral/bullish): we are in (Alt:x) of [Y] od B/X/D , so the Cycle Top has NOT yet occured.
Extreme caution because SPX diverges from DJIA, which has a bullish medium-long term preferred scenario (see previous posts).
Have a great trading day ... with care!


Wednesday, April 24, 2013

SPX - Still bounce

Despite a small flash-crash of a few minutes, the market continues its intraday uptrend.
The alternative scenario is invalidatedthe breakout of 1574 increases the probability that the rebound will continue and  that the top of April 11 is not a Cycle top.
I remember that my long-term alternative scenario considers this top as  Alt:y wave of intermediate degree, in harmony with the bullish outlook of DJIA preferred scenario.
Main count: we are in [c]/[y] wave of b/x minute wave; perhaps a flat / three or triangle is underway.
Have a great trading day ... with care!


Tuesday, April 23, 2013

SPX - Bounce in progress

To highlight the difficulties of trading even in intraday time span, it is enough to see that in yesterday's opening session was broken upwards a H & S pattern, immediately denied with a quick down move to capture the stops of the day-traders.
Preferred scenario: the wave c is ending thus the wave [a]/[w] finishes with an a-b-c zig-zag pattern, then downward wave [b]/[x] will start.
First alternate scenario: we are a degree above because it is the wave Alt: 2 that is ending.
Although both scenarios are bearish it is not yet time to trade; there isn't a clear pattern setup, unless the market does not build a five wave pattern (i)-(ii)-(iii)-(iv)-(v) of wave c that ends @ 1574, where I might consider a short.
Have a great trading day...with care!


Monday, April 22, 2013

SPX diverges from DJIA

The "provocative scenario" presented on Friday, the achieve of the Cycle Top, is kept even if it contrasts with the main scenario for DJIA that considers the bull market still in progress. 
Preferred count; the first down wave a/w of minute degree is ended; now bounce in wave b/x .
First alternate count; SPX is in Alt:2/b of a/1 .
Given the divergence between the two indices and the extreme difficulty of correctly interpreting the ongoing pattern, I stay out.

Have a great trading day ... with care!


Saturday, April 20, 2013

GOLD: deep pullback or Bubble's burst?

In the last week, Gold has experienced a real fall in prices of 13%; the sell-off was fueled by sales of gold reserves of the Central Bank of Cyprus to operate the bailout agreed with the Troika.
Is the Cycle bull market over or is it just a deep pullback?

In terms of the overall context, it was already since last October that the price of Gold appeared under pressure as a result of the liquidation of long positions of many institutional investors who are attracted by the outperformance of the U.S. equity markets, preferreing to invest in NYSE and Nasdaq stocks instead hold futures contracts on gold or physical gold.

In the week before the crash last Friday, four major banks as Société Générale, UBS, Deutsche Bank and Goldman Sachs, had issued reports in which they identify an expected decline in gold prices; in particular Goldman Sachs in a report issued on April 9 provides that in the second half of the year there will be an acceleration of economic growth in the United States that will keep real interest rates at the current level, consequently estimate a decline in the price of gold to 1,450 Dollars per ounce at the end of 2013 and to 1,270 Dollars per ounce by the end of 2014.

In just three days, between Friday 12 and Tuesday 16 April, the market fell to $ 1,322 projecting well below the year-end target identified by GS, so we have to be ready to purchase gold?

The reports of fundamental analysis should always be evaluated with the eye of a medium-long term  investor, and the institutional (excluding hedge funds) are not traders, they build positions that maintain over the time, for them the timing is relatively unimportant, while for a private and small investor, thing is a bit 'more' complex; any trader knows the suffering of hold positions against the trend of the market, the slow and inexorable decline in the value of their investment, with a single but necessary painful action to be done: cut the loss.
So, the timing is very important.

With regard to the main factors of fundamental analysis which influence the trend in Gold prices, we try to understand what is the position of the Bulls and the Bears and then the potential outlook for price developments.

1) U.S. unemployment and inflation and Fed's monetary policy.
The gold buyers believe that, despite improvements in the employment situation, the unemployment rate is still far from the target value of 6.5% that guiding the ultra-expansive monetary policy of the Fed and that this will not end its quantitative easing program; long with all the money put into the market (4,000 billion dollars), inflation will start to rise, so that the gold will become a haven assets. The Bears, on the contrary, note that within the Fed grows a certain discontent with the current QE program with purchases of bonds and believes that by the year it ends; this will be greatly reduced or cooling potential inflationary pressures (which are very dormant).

2) the sovereign debt crisis in the Eurozone.
The gold bulls think that the crisis is not yet over, that after Cyprus there will be Slovenia and then maybe even Italy, which is not even able to elect the President of the Republic, and after more than 50 days before the election has not yet a Government that can ensure the continuation of structural reforms necessary to reduce the public debt (2,000 billion Euro !)
The Bulls also note that in Germany is growing a wave of Eurosceptics, especially those who do not want the money of German taxpayers are intended to countries in difficulty.
Instead the Bears do not see any particular risks of Euro-break because they feel that ECB will provide all the unlimited support that promised and that Germany will remain pro-UE because it can not afford a double European currency with a new Marc very strong would block its exports, the only real engine of economic growth.

3) supporting the growth and austerity contrast.
In Europe it is reviving the debate on the mobilization of the gold reserves to boost growth and counter the austerity measures, which may not necessarily occur with the sale of reserves in the vaults of Central Banks but also using the stock standard for the issuance of Eurobonds guaranteed in gold.
European Central Banks have become accustomed to use gold; from 1999 to 2004 the Bank of England has sold 345 tonnes of gold (not doing, in hindsight, a great bargain since the rise in prices from 250/300 $  also only to current $ 1,350 , not to mention the top at 1,900 $ ...).
Italy is the third country in the world for gold reserves (after the USA and Germany, the fourth considering IMF) and its dynamic use could be a solution to counter the severe economic crisis that afflicts us.
The Bears believe that new Euro crisis and the debt will cause the Central Banks (just the Italian one) to sell gold to avoid using more fiscal leverage and to cut public spending (maybe touching public salaries and pensions); the Bulls think that this can not happen.

4) Currency war with Japan exacerbated by the devaluation of the Yen against the Dollar (-25% in six months), which also puts a strain China and Korea, who see increased competition in exports of Japanese goods by reducing the strength of its own and could be induced to simulate actions of expansionary monetary policy that would support the gold.
Even in Japan traders sell gold despite the sharp easing program put in place by its Central Bank.

5) the supply and demand for physical Gold.

As well written by Ed Liston on Seeking Alpha:
"Gold demand mainly comes from the following sectors:
  1. Jewelry sector: This sector consumes around 68% of the total gold supply. Usage of gold is highest in countries in the Middle East and Asia. Seasonal demand, in case of festivals like Chinese New Year and Indian Diwali and wedding season, also affects gold prices.
  2. Manufacturing and Medical sector: This sector constitutes around 14% of the global demand. Gold is used in new technologies like chemical process, nanotechnology and electrical devices.
  3. Investment sector: In countries experiencing rapid economic growth like China and India, governments use their reserve funds to buy gold to reduce their exposure towards US bonds. This also acts as a demand driver of gold.
Gold supply comes from the following sectors:
  1. Production in mines: Mines produce around 60% of the total gold produced each year. South Africa is the world's largest gold producer at 14% followed by the US, Australia, Latin America etc. Supply from mines is crucial to the price determination of gold as lower supply will cause an immediate price rise. Recently companies like Barrick Gold (NYSE: ABX) have faced issues in their Pascua Lama mine which decreases their future estimate of gold production. Limited supply will put an upward pressure on the gold prices.
  2. Recycled gold: When gold prices rise, supply of recycled gold increases and the amount of this gold can affect the limit of price rise.
  3. International Organizations: Organization such as the International Monetary Fund (IMF) hold around 25% of the total gold reserves. Central banks in North America and Europe also hold some of the reserves. If these institutions release gold in the market, automatically that will distort the demand-supply equilibrium triggering a price correction."

6) the international geo-political tensions , such as those that may be generated in oil-producing countries in the Middle - East or rebellious countries like North Korea ; they support the price of gold as a safe haven;

7) the bubble in the bond markets
the prices of Bond and Bund arrived at levels unimaginable just a few years ago; as long as they will be considered a safety, gold bears have the upper hand; when the threat of bursting of the bubble will be more and more concrete, Bulls begin to accumulate resources in physical gold as safe haven and  prices will inevitably rise.

From the point of view of  technical analysis , integrated with the Elliott Wave Principle , the gold is in a long-term uptrend since the end of 1999.


Looking at the monthly chart, in 1980 Gold ends the previous Bullish Phase, which began in 1971, with a top to S 873 , qualified with the Elliott Wave Principle as main scenario, top of SuperCycle Wave [III]  (such as Alternative scenario: Alt: [I])
From 1980 to 1999 Gold develops a  SuperCycle Bear Market, the Wave [IV] (or Alt: [II] ) structured as  A-B-C in which wave B takes the form of a triangle pattern , [A]-[B]-[C]-[D]-[E] ; this corrective wave ends with a bottom at $ 251.
In 1999 a new SuperCycle Bull Market begins, the wave [V] (or Alt: [III] ), which in my opinion, according to the main scenario, is still in progress.

The weekly chart's analysis shows in detail the structure of this SuperCycle wave [V] , which according to my preferred count, is being developed as wave I extension of Cycle degree, with top in march 2008 to $ 1.024, close to Fibonacci's extension of 100% compared to the wave V of [III] starting from [IV] , fast correction in wave II until October 2008 to $ 682, new uptrend of wave III ( [3] extended), ending in September 2011 to $ 1.921 close to a Fibonacci price cluster given by: 200% wave V of [III] from [IV] & 1.618% of I from II .
Since autumn 2011, I think it is developing the Cycle Wave IV and the breakdown of the parallel line to the up-line from tops,  which took plase on 02 April,  could mark the final stretch of the wave  [C] of Primary degree, with the first target in $ 1.300 area (50% Fibonacci retracement of wave III), the second target in S 1.150 (61.8% Fibonacci retracement) and final target not below  $ 1.033 ; the breaching of this level would invalidate this preferred scenario for the Alternate one, that considers the top at $ 1.921 the end of wave Alt: [V o III] of SuperCycle degree.

In the short-term (daily chart), I updated the count to the breakdown of parallel up-line occured to April 02; until that time, I thought was possible and imminent the end of the wave [C] of a triangle pattern.
However, it's interesting to note that as the oultlook for the short-medium term was already bearish, working in trend-following approach, traders should not have long positions in their portfolios.
The breakdown of the strong static support at  $ 1.527 occured a week ago, support that had held the pressure of the Bears on three occasions (September and December 2011 and May 2012), constitutes an important signal confirming the primary bearish trend in progress.


Traders who work with "a breakout or a pullback approach", should refrain from opening any long position; only the bravest traders operating in "reversal logic" can think of opening long if the $ 1,300 support hold, still taking a very high risk of loss (personally, I don't use Elliott to find bottoms or tops on which to open new long or short positions, but rather to close the ones (short or long) already open).

"The trend is your friend until the end";
Primary and Intermediate trends are bearish, traders should act cautiously opening short on controlled and well-structured bounces (to 2/4 / b) or with the break-down of congestion phases (flat type , triangle or three), but beware:
the Cycle Bull Market does not seem finished, in the long term is likely to see higher prices to existing and even to historic Tops.
If so, when?
We will see that just living ;-)



Friday, April 19, 2013

SPX - Top of high degree

Sorry for the lack of yesterday's post, I was far away from the civilized world ... no internet connection...
After the main scenario was invalidated, the first alternative scenario is shocking because it foresees the end of Cycle Bull Market , that is the top of wave z minor of (z) intermediate of [Y] Primary of B/X/D Cycle.

For now, this scenario is a provocation many other signals are needed for a confirmation, but I think the top of April 11 remains for several weeks and it's a top of high degree.

In the short and medium term the preferred scenario is bearish.

Have a great trading day ... with care !!!



Wednesday, April 17, 2013

SPX - Waiting for the uptrend's recovery

Good bounce, even if in light volume, with structure that could also be impulsive and therefore prevent the alternative scenario (which includes the top of the Cycle); however, this hypothesis would be (for now) dismissed only to the break-up of the level of 1580.
Preferred scenario: wave [2] of c has ended, we are in wave 1 of [3] .
The optimal situation would be the construction of an ending diagonal that would be a signs of  reversal (but in the markets, between what we want and what really happens , there is very often a great difference ...).
The markets could be close to a Top so be always on your guard!
Have a great trading day ... with care!

Tuesday, April 16, 2013

SPX - First rehearsal of a Cycle Top

Yesterday was one of the worst days on the market for many months;
gold collapses, commodities fall, China's gross domestic product grew less than expected; SPX, DJIA and NDX slide on high volume.
Are these the first signs of the Cycle Top?
Preferred scenario; yesterday my outlook was wrong but until the market does not drop below 1.540, I keep this main scenario that considers wave [2] of c in progress.
First alternate scenario: Thursday, April 11 there was the Top , with a "kinky" wave c .
A big doubt:  the last downward intraday move  appears impulsive...and this is no good...

Have a great trading day ... with care !!!


Monday, April 15, 2013

SPX - After the pullback, another upward wave

 The Preferred scenario has been confirmed; Friday I predicted the end of wave [1] and I was waiting for a pullback; the market has lost 15 points before picking up something.
Now, or wave [2] is already ended or we are in Alt:a of [2]

But be careful! I refer to the considerations of the last post.

Have a great trading day .. with care!

Saturday, April 13, 2013

Elliott Wave Analysis for major Currency pairs: EUR/USD, EUR/GBP, EUR/JPY, AUD/USD, GBP/USD , USD/JPY - Update

In the FOREX page you could see the long-term scenario on weekly charts
and the previous short-term outlook on daily charts and on 4 hours charts.

It's remains the Currency pair with the scenario most confused among those considered.
My preferred count is a correction phase like b/x wave of minor degree;
a first down move as wave w of minuette degree seems to be ended, so a bounce in wave x is in progress (now we could be in wave [a]/[w] ) .


I have changed my preferred scenario because there was a retracement below 85;
the new main count is always bullish (wave 5 minor of wave (1) of intermediate degree), but pay attention: the bounce doesn't appear as an impulse pattern...
The first alternate scenario is bearish: the uptrend (Alt: (x) ) is over; now we are in Alt:b/x of Alt: (z)

My Preferred bullish scenario has been confirmed but the upward move was so fast that the target (a Fibonacci price cluster) is already achieved so I think that wave 5 and wave (1) could already be finished; if so, a pullback in wave (2) is in progress.
Alternate scenario; we are in the wave Alt:3 of wave 5 , so the uptrend continues.


My preferred scenario (very bullish) is confirmed: we are in wave [ii] of 3 of 1 of (1)
Alternate scenario; the intermediate triangle pattern is still underway.



January 2, 2013 has completed the multi-year triangle wave [B] and started the downward wave [C] of primary degree; the wave 1 of (1) is finished, now we are in the wave 2 minor .
New preferred scenario; wave [y] of wave y of minute degree is ending and after the completion, the downward move continues.



My bullish scenario was correct, but now  the intermediate wave (3) could be ended, so a retracement in wave (4) is starting.
First alternate scenario; we are in wave Alt:1 of  5 , so wave (1) is not ended.


Have a great weekend ;-)