The current rise in equities and commodities exhibit the concept of "all in one" whereas it seems that everything is pegged to the US Dollar trade. With the FED's announcement this week, it is clear that Keynesian economics is still very much alive. Hopes for a full recovery and the re-inflation of assets are dependent on quantitative easing (QE) that further devalues the Dollar. The Market seems to favor this continued approach. We will not debate this issue but in my humble and subjective opinion, only a bottom in the US Dollar can derail this rally. I want to be clear that I am not changing my long term bearish bias. I'm merely stating my perspective regarding the current rally.
The following weekly chart shows a target box for termination points for wave 2 (blue). Price has also reached the previous 4th wave, a typical termination point for corrective price structures and the .618 retracement. Should prices fall below this area then my expectation is for a termination to be at the lower end of the target box.
The two SMA's, 30 and 10 represent cyclic activity. While no attempt has been made to determine the dominant cycle, both moving averages seem to match price bottoms and tops quite well. Notice that both cycles topped at wave 1(blue) and are now hard down. Regression analysis indicates that a low may be struck at 77.37 which is well within the target box. So we have two methods pointing to near term lower prices, then bottoming.
So how does this analysis fit into our e-mini trading? Simply put, I expect higher prices. Looking at the daily chart level, several target areas are evident such as:
1. 1150.75
2. The open gap at 1156.75
3. The previous 4th wave and reverse fib extension at 1172.5
4. Wave (c) =wave (a) at 1158.
As I mentioned earlier this week. The stage has been set for a turn. The information that has been provided herein provides key areas that you may want to consider for trades. As always, consider your risk and speak to a licensed broker or investment advisor before taking any investment action.
Best of Trading
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