Forex pairs

1.4038 completes the (V) of 3 of wave C, making way for the wave 4 correction which can take the pair till 1.3735. Wave 2 of C was a Zigzag and took about a month to complete. That bodes for a sideways churn not to dip below 1.3735 and the churn lasting for at least couple of weeks. This is where the dilemma lies. See the chart below for GBP/USD and EUR/GBP for more pondering.

EUR/USD 60 min


GBP/USD finished wave (3) at 1.5873 and a fla correction brought it to 1.5775 and now the wave (5) has begun. Wave (1) travelled 696 pips; the initial target of wave 5 is equal to 696 that is 1.6471 but truncation can also happen. We will wait to set that target. But a near term target of above 1.6080 is here.

So what do we see if take the chart of EUR/USD in perspective? GBP will be relatively stronger than EUR against the USD. That is where conflict arises. See the chart of EUR/GBP below the chart of GBP/USD for looking at the conflict.

GBP/USD 60 min



The chart of EUR/GBP is telling the story of wave 4 in the 5 wave impulse upwards. I could even count the a-b-c-d-e of the barrier triangle and conclude that we are at the end of wave 4 and should see a wave 5 higher. that means EUR will be stronger than GBP.
This is the conflict with count of EUR/USD and GBP/USD chart.
I am forced to ponder if the count is wrong somewhere. The form of EUR/GBP seems more clearer.

EUR/GBP daily

EUR/USD and GBP/USD currency pairs

52 week low on US Dollar index is at about 76.25, while it bottomed at about 78.80 in Dec 2008. It is not at 80.18. 76.25 is an especially important support level. It may coincide with our EUR/USD target of 1.44!
In the meantime, it looks like we hit iii of (v) of 3 of C at 1.3951.

The targets for v of (v) of 3 of C are 1.4077 and 1.4111. Thereafter we should see wave 4 of C (a correction in EUR/USD).

The target of v are derived from i and iii of same degree. Going short at about 1.4070 and stop loss above 1.4160 may be one of the techniques.

EUR/USD 30 minutes


I have revised the count for GBP/USD currency pair. Some labels are shown here. Looks like we are in (4) and it is expanded flat correction with wave c going to about 1.5735. Although previous wave 4 is in the area of 1.5777, the impulse has been very strong and Flat correction does not reach there unless it is a complex correction and a combination of corrective waves takes us down there.

GBP/USD 30 min

Crude Oil and Natural Gas

The decline of USD is one factor in rise of commodities epecially those priced in USD. But UNG is showing divergence. See the chart of Crude Oil, USO daily, UNG daily and UNG hourly. Crude oil is showing more strength than Natural gas. UNG did break out of the downward channel and as expected is trying to test the support at the upper end of the channel. The daily candle on UNG is a doji; market is trying to figure out its stance. This doji comes with a gap down. Morning Star pattern could be in the making; we will know when the market opens! If Morning Star is seen here, the stance will be near term bullish even though the dollar decline may pause soon.
Otherwise, this divergence in UNG means to take profits in USO!


UNG hourly



Notice the doji on daily candle.

UNG daily



USO has broken resistance of the ascending triangle and may test that support now.
USO daily



Crude broke out of the resistance level. A test of support will be the logical thing but markets have their own logic !

Crude Continuous Future

EUR/USD Forex Currency Pair

So far our Elliott Wave count looks OK for EUR/USD currency pair but some things are out of sync. The end of v on 5-12-09 marks the end of wave v of (iii) of 3 of C wave. Recall that the C is the part of a Flat correction. The recent v has been corrected with Zigzag abc with c finishing at 1.3428 that happens to be previous support and also .0028 away from the Head & Shoulder target of 1.34.
This was enough for me to go long today with stop at 1.3379. The idea is that wave 4 is finished today and a new 5th wave upwards should be on its way.
The items that are potentially out of sync are that within (iii) of C wave, wave 1(515) is so far larger than wave 3 (470). Now the 5th wave better be smaller than 470 for this count to be correct.
Also, 1 of C is 1,195 pips long. So far 3 of C has travelled 835 pips. With its last impulse with limited upwards allowance of 470 from 1.3428, the 3 of C will finish at 1.39 thereby advancing 1,020 which will be less than 1,195.
It appears that the counts needs to be re-evaluated. One area to look will be 5-4 and 5-7-09.
Besides, the advance of current wave v needs to be followed for validation.


EUR/ USD hourly

The cubes

The longer term picture may not be suitable for immediate short term trades but it does give historical background. Looking at the QQQQ's 10 year monthly chart shows the same Bearish/Bullish Zone for the Oscillator. This time Slow Stockastics is used. This idea was explained by Connie Brown in her book, "Technical Analysis for Trading Professionals".
One can see that the Oscillator stayed primarily in the oversold zone during the last bear market and stayed upwards during the subsequent Bull cycle. It is again hugging the lower boundry of the range.



QQQQ Monthly



The same picture is seen in SPY.

SPY Monthly



While looking at the daily chart of the cubes, we see that it did manage to jump across one level of resistance ($31.60) but bounced again the next level ($35.25) which goes back to 7-18-06.
31.60 level should provide support now. If the upward trend resumes, 35.25 level needs to be broken with high volume (> 200 M), the gap needs to close with a close above $36.07. That will be a sign of strength.

QQQQ Daily

Oscillator zone

RSI (Wilder) is well known and well followed technical indicator. It is an Oscillator that signals strength or overbought / oversold conditions. Below is a chart of $SPX going back to 2006. Notice how the RSI (Wilder), 14 days is toward the upper end of the zone, left shaded area. It went up and down but the overall picture was that it stayed in the upper zone. Compare that to the right shaded area. The glaring difference is of the Bear Market's influence on this indicator. See how it now shifts lower. More action is at lower zone.

$SPX daily with RSI



The chart below is the same chart but emphasizing the last two years. Ever since the significant bottom of March 09, 2009, RSI is trending higher. The key reading will come during and after the next decline. Will the RSI oscillate again to the lower Zone? Or will it make a higher low and start oscillating in the higher zone? The later condition will signify the shift away from Bear Market. This zone shift may not be a trade able signal by itself because of its lag but it does gives us the visual picture of the effect of the overall market on the oscillator zone.

In short, be cognizant of the overall market posture when looking at the oscillator's move.


$SPX daily with RSI

GBP/USD Currency Pair

Lets look at the GBP/USD currency pair. The price has been declining since reaching the peak of 2.10 in Nov 2007. The price came down to 1.3792 in Jan 2009 and thereafter the corrective action has began.

GBP/USD Daily

My primary count on the hourly chart is shown below.

After completing a Flat in the first week of March 2009, the next pattern is another Flat (double Flat). On 4-22-09, the next impulse move has begun and we are now in v of wave 1 up.

GBP/USD Primary Count

The alternate count in my opinion is shown below. It is a Flat, Zigzag and Zigzag correction. We are now in v of c of the last Zigzag.

GBP/USD Alternate Count