Market Report: Waiting for Waddle
QE or not, this is the question that most want the answer to come Wednesday 20th June.
Frankly to me it makes no difference as an Elliottician, I follow price and make my decision based on what the waves create.
Many are going into this weekend calling for the end of days as if Greece getting a new government sends the world into mad max.
Yet ordinary folks around the world will get on with their lives as the Greece elections take place. Some probably will never even know Greece has an election this weekend.
Regardless of the outcome of both those events, we will trade it as we see it. The same as we always do, we look for high quality low risk reward trades.
Back towards the end of May I was actively looking for a reversal in the markets as the world was preaching the end of the Euro zone and a crash was around the corner, well crash or no crash, I felt it got a little too bearish and those late to the party bears needed a harsh lesson about staying out too late.
The chart above shows that we were actively looking for a strong reversal to correct the move that started from the May 1st time period.
With a suspected 5 wave decline in the EURUSD and GBPUSD, and a 5 wave advance in the USDCAD and DX (US$) it was time to be looking for a risk reversal and change of trend. Once a 5 wave move is seen Elliott Wave analysis suggests a correction should be seen.
So by using the power of Elliott Wave we accurately forecasted a reversal in risk and back to "risk on". This is the move we have seen the over past 2 weeks or so.
This is what I wrote to members on 30th May.
"With a 5 wave move suspected on EURUSD coming to an end from May 1st, we also have what appears as a 5 wave move on GBPUSD, you can see how these have mirrored each other, and opposite the DX and USDCHF markets."
If we fast forward to today, we can see that correction as I suspected has taken place, all that remains is that we figure out where it should top out and reverse for a new leg lower and "risk off" kicks back in and the bears come back out of their caves again.
So how does this fit in with US stocks?
Well again back before this latest rally I was looking for a low around the 1270SPX.
Look carefully, do you notice the dates? Right its right at the same time as I was expecting a strong reversal in the US$ and other forex pairs, so as I was looking for a "risk on" move to the upside in assets, it was always going to be the case that if the forex markets signaled the low was in then stocks would rally as well.
If you recall it was a very bad jobs report from the NFP, but I was already looking for a move higher in risk markets, so ironically we end on bad news, yet I am at my most bullish. That's normal, and that's a small part of how Elliott Wave works.
Why is that? Well seeing a 5 wave move on the US$, was forecasting that we needed to correct the advance, and see a corrective decline.
The bearishness was getting silly on EURUSD and other markets, all sort of lower targets were being suggested, yet it's so easy to suggest lower targets after the move has already happened.
I ask you, what good is that? We were looking for a reversal before the move, and to look for a move higher in markets like EURUSD, GBPUSD, AUDUSD, NZDUSD, US stocks etc.
Once again Elliott Wave nailed it for us, and it appears that Elliott Wave is potentially setting up the next big trade for us.
We are nearly at our targets, as long as we hold above our caution line, we can still look for our target band to be hit.
Were you one of the bears that sold near 1270SPX and now were forced to cover as the market pushed on higher as the media was still bearish, yet I forecasted the bounce with a high probability before the move even started.
That's the key word probability, as no system has a 100% track record, but Elliott Wave used in the right hands, is deadly as a cobra.
So if our next setup is setting up we feel it offers a high quality low risk setup, we know what we want to see, and what to look for.
If the idea works out well, we can be looking for a minimum target of 1200SPX or as low as 1060SPX.
But for now we will stick with the 1200SPX.
Of course nothing is ever a certainty in the markets, but using our "bag of tricks" and sticking to what we understand, we will be able to confirm if our next idea is setting up.
Traders need to focus on what happens next on the US$, now it would be foolish of me to say the FED has no bearing on the US$ as that is not true, but it's what traders do that I am more interested in as opposed to what the FED does.
If traders want to buy the US$, that will be a "risk off" event, likewise if traders sell the US$, then risk will be bought and "risk on".
So this coming Wednesday I suspect we help us decide our next set of big trades in many markets.
Is 1200SPX is coming? We find out soon.
If you're looking to follow our next ideas, then sign up and be part of a community that is interested in being on the right side of the markets.
No egos, just the cold hard facts.
Finding setups for members to trade with high rewards based on low risk ideas.
If that sounds like your sort of trading strategy then come and join us, you never know you might just be a believer of Elliott Wave after all.
Elliott Wave used in the right hands makes sense.
Until next time,
Have a profitable week ahead.