Is the US bear market back into play?

The DJIA seems clear from a wave perspective, It seems probable that the move the kicked off in March 2009 has completed and the move to the downside has started. Wave (A) of this correction has unfolded into an impulse while wave (C) has unfolded into an ending diagonal. Let us keep in mind that if the ending diagonal count is accurate a swift sharp move is expected to unfold to the downside which shall fully retrace the diagonal in less time than it took to form. The beginning of the diagonal was at 9664 (minimum target). Another point to note is the double divergence/ triangle that formed on the MACD which is typical of an ending diagonal. If indeed the 2nd wave (march 2009 - October 2012) has completed we can expect the decline to take us bellow the march 2009 lows as wave 3 unfolds.

Regards,
Ahmed Farghaly

GBPNZD The end of a 12 year impulse

Looking at this chart that dates back to the early 90's it seems evident that this currency pair experienced a flat correction to the downside. Unfortunately I dont have the data going back further which means the begining of the wave A(circle) to the downside can be something else. What we are certain of however is that the move that kicked off in the year 2000 has clearly unfolded into 5 waves down off the high wave 3 being 2.618 of wave 1 and wave 5 ending slightly bellow the thrust measurment  . The picture bellow shows a more detailed look at the 5 wave decline off the 2000.

The decline was a textbook impulse wave to the downside, the 4th wave unfolded into a running contracting triangle which signals to us that the following move to the downside is the last wave of the sequence and the move to follow would typically make it back to its terminus considering the guideline that states corrections usually end by the terminus of the previous fourth. Thats ofcourse IF the upcoming move is a correction. Also notice the divergence seen on the RSI 14 indicator. also notice the unfolding head and shoulders pattern as visible on the chart. Another point to note is the double bottom that formed on this chart as well. As of now this idea remains a possibility however it would become more probable if the standard chart patterns talked about above give way.

Regards,
Ahmed Farghaly

EURAUD a clear wave pattern

Posted above is a long term chart of the EUR/AUD the pattern that took place since 1999 is that of an expanded flat correction correcting a move dating back to the 70's. Points to note is that the pattern roughly ended and the 1.618x wave A (circle) which is a typical target for wave C of an expanded flat. Also notice that the move lasted 13 years which is a fibonacci number. Looking at the C wave in greater detail we can see that the the 5th intermediate wave was 0.382x the distance traveled from wave (1) through (3). Supposing that this pattern was not an expanded flat we can still expect a significant correction from the move that started in 2009 which lasted 3 fibonacci years. This chart is full of fibonacci time clusters which leads me to believe that the low seen this year is indeed a low of cycle degree and a significant move to the upside can be expected. Another point to notice is the strong divergence between wave (3) and (5) as highlighted on the chart above. also if you look closely into the chart you will notice that rallies of significance in this chart was accompanied by declines in risk sentiment. This currency pair rallied in 2000 as the nasdaq crashed, and rallied as well during the financial crises. All this evidence suggests that we are entering a long waited for risk off mode. Another technical aspect to notice is the potential inverse head and shoulders that is forming as we speak.

 looking at the 2012 rally it very much seems impulsive followed by a text book 5-3-5 zigzag which took us into the 38.2% retracement of the 2012 rally, we also made it back into the wave 4 vicinity of one lesser degree all of which suggest that a continuation of the uptrend shall occur from current levels the alternate count is that the decline is only wave A/W of a more complex correction however R.N. Elliott says that the simplest pattern is typically the right interpretation. A breach of the corrective price channel ( which contained the entire move typical of corrective patterns) on the upside would be the first confirmation of a move to the upside. This currency pair seems the clearest out of all, looking at my analysis on the EUR/USD the eur is expected to decline against the USD which suggests that the AUD/USD (which is not clear from a wave perspective) Shall fall harder and be of the biggest losers typical of a risk off enviroment. However I dont like to trade currencies in which I dont see patterns I recognize hence I would much rather look for clues on this pair for a move to the upside.

Regards,
Ahmed Farghaly

Also view: http://competent-trades.blogspot.com/2012/04/point-to-note-on-gold-and-audusd.html

EUR/USD a running flat?

Our count of a fourth wave triangle got invalidated at a breach of the 1.2880 mark. I am counting this wave C complete as of the OCT 17th high (5th wave of C was a failure). The pattern that the purple wave 2 unfolded as was a running flat, since the wave C failed to breach the end of wave A. Another point worth noting is that markets tend to put in thier high/low of the month in the first few days of that month. we have a significant high on the NOV 1st. the wave count plus other technical studies suggest that this is going to be the high of the month. Purple wave 3 is currently under way and shall take the EUR down to new lows for the year.


Regards,
Ahmed Farghaly

EUR/USD update

Following the EUR/USD count, It seems evident that the triangle is complete (critical support 1.2880). Our alternate count suggests that we are still in a wave d to the upside. One rule of a triangle formation is that only one of the legs are complex and the rest are simple zigzags, in this particular case the wave B was a complex double zigzag which means that the rest of the waves should be simple which is why I'm calling this triangle complete despite wave d and e's small size relative to the rest of the triangle waves. Any how this count forcasts a move towards the 1.3400-3500 range before we can look for a turn in favor of the US dollar.

we also have a bullish slingshot on the MACD which is reverse divergence, a lower low on the MACD vs. a higher low on the price chart, this is usually a signal for a turn to the upside.

Regards,
Ahmed Farghaly

EUR/USD Elliott wave perspective

Its seems evident that the EUR/USD is in a contracting triangle wave iv down as of the daily chart posted above. All of which are part of a wave C of an expanded flat correction higher as seems evident on the chart above. the iiird wave travelled 2.618x of wave 1 hence was the extended wave which means we can expect the fifth wave to resemble wave i which means it most likely will be a swift short thrust out of this triangle wave iv after completion (currenctly in wave d of the wave iv triangle)

Looking at the triangle in greater detail it seems evident that wave B was the complex leg (Double zigzag)of the triangle which signals that the ONE complex leg to be expected in the triangle is complete and the rest of its legs will most likely be single and simple zigzags.

looking at wave d of the triangle is greater detail my preferred count is the i-ii-iii count rather than calling wave d complete. I hold this preffered count for several reasons.
1) The move is not contained between 2 parallel lines which is typical of a i-ii-iii count
2) The wave iii travelled 1.618x wave i which is a typical target for wave iii
3) The wave ii retraced almost all of wave i which is not typical of a wave b which mostly is limited to 79% of wave a

Regards,
Ahmed Farghaly

USD/CAD analysis

 From an Elliott wave perspective it seems like we a tracing out a flat correction from the 2011 highs. The key pattern that screams out "correction" is the wave B triangle that occurred in the wave (A) down of this flat. My alternate count is that we traced out a double zigzag correction which would mean that the correction is complete. What I don't like about that count is that the wave C of the second zigzag down is quite large relative to the A wave. The count presented above is the one that satisfies the rules and guidelines of the wave principle. The leading diagonal wave 1 signaled an extended 3rd wave to come in wave C which is what occurred (wave 3 being almost 2.618 of wave 1). Ideally this is where one would expect that wave 4 bounce to stop since we are in the area of the previous 4th wave, we are also at the upper boundry line of the corrective price channel, we are also at the 38.2% retracement of the wave 3 decline and the AO indicator made it above the zero line which one would expect in a 4th wave bounce. I wouldn't suggest shorting this currency pair since the 5th wave I'm expecting is likely to be a small decline considering the extended 3rd wave. Now lets add in some standard technical analysis

Looking at this weekly chart it seems evident that there very well might be an inverse head and shoulders pattern in this currency pair. If you look closely you'll notice that it formed 2 heads making it of the complex type. If you are a conservative long term trader you can wait for a breach of the neckline of this pattern before going long for a sizable move to the upside. It could take months to get there but it increases the probability of a successful trade.

Regards,
Ahmed Farghaly