Does $USD - JPY Have Room To Run?

$USD-JPY  has progressed nicely and looks to have completed w.(3) of an ongoing advance that should unfold in five waves. Currently, w.(3) =2.618 w.(1). Should my assessment of this currency pair and preferred wave interpretation be proven correct then a fourth wave should be underway. Prints above 99.947 would negate my bias and be subject to re-evaluation of subsequent price action. 

According to the guidelines of elliott wave theory, 2nd and 4th waves typically alternate and are usually Fibonacci relationships to each other in both time and length. Since w.(2) unfolded in zig-zag, I'm looking for w.(4) to unfold in a time consuming sideways to down affair whose extent would target the most common Fibonacci relationship of w.(4) = .382 w.(3) or 91.04. Thereafter, a final impulsive rally should unfold in five waves to complete w.1 circle.

With regards to time, w.(2) took six months. Accordingly, w.(4) should be a Fibonacci multiple of w.(2) or put another way, w.(2) is a Fibonacci multiple of w.(4).  

Let's leave it there for now and see what develops.

Best of Trading

======================================================================

ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blogsite.   

======================================================================

Fair Disclosure Notice: I do not have a position in any of the aforementioned futures markets or securities related to this article. 

ES Update: How I'm playing it!

Technicals Point To Another High 

At the weekly chart level (not shown) my technical indicators point to another recovery high. As such, I'm looking for a way to marry the short term 60 minute chart pattern with the larger degree trend. 

The initial decline was easy to identify as a three wave corrective zig-zag pattern. 

Note: I have highlighted the current price action from the termination point of the zig-zag. We will be evaluating that region.

Building The Trade Plan 

According to the Elliott Wave Principle, corrective patterns that begin in three, have the following corrective patterns associated with them:

1. 3-3-5 Flat - Under this pattern the second part of the pattern will be another three wave structure. The possibilities are another zig-zag, a flat or a triangle. 

Right of the bat, I see the market is sideways and any sharp (zig-zag) can be eliminated. Secondly, a flat would retrace most of the initial decline... which it doesn't. 

That leaves us with a triangle in the w.b position!

The following chart illustrated the triangle interpretation. Under this scenario, I'm looking for the market reaction to the jobs report and ECB to be muted. As enthusiasm wanes, the market will drift lower in w.(d).

2. 3-3-3-3-3 Triangle - You will find that this pattern is very similar in nature with respect to the middle part of the pattern but the resolution is to the upside. 

Each scenario promises more sideways price action, therefore that's my clue that my interpretations are correct. 

Solving the Directional Issue

Since there is no way to be certain of the direction of the thrust that accompanies these (2) triangular patterns, I am taking a conservative approach and playing the breakout once the respective (d) waves are exceeded.  

Let's see what develops

Best of Trading

======================================================================

ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blog site.   

======================================================================
Fair Disclosure Notice: I do not have a position in any of the aforementioned futures markets or securities related to this article. 

Natural Gas Chart Update

The chart above is what I left readers in my video.....  Elliott Wave Live: Is It Really Time To Be Bullish Natural Gas?

From the weekly chart, price action has not made any significant advance that confirms a bullish w.1 and negates a w.(4) counter-trend interpretation.

Dropping to the daily chart level, what we do know, as of the time of this post, is the following:

• Price remains within a corrective price channel.
• The move from w.(3) low appears to be in a sharp, three wave zig-zig.
• Price traded to 3.06, very near the level where w.c = w.a @ 3.088

While each bullet point favors a corrective interpretation, only price can confirm a wave count. A price break of 2.659 (key support) may bolster my interpretation, but other bullish scenarios could be applied. Therefore, according to my personal trade plan, I can afford to remain market neutral as described within my original post. 

Best of Trading

======================================================================

ElliottwaveLive is not an investment advisory service or broker dealer. None of its contributors are registered investment advisors, licensed stock brokers or CTA's. The author may hold short term and long term positions in the futures, stocks and ETF's discussed herein. The author may also trade around those positions which may be in direct conflict with your positions. Complete trade disclosures of the contributor’s holdings are posted at www.elliottwavelive.blogspot.com. See Trader Disclosure. 

Trade at your own risk. The blog site, Newsletter and all other information, material and content accessible from this Site (collectively, the "Content")  provided herein provides the context for market analysis with respect to a market's, a security or a commodity's general position utilizing the Elliott Wave Principle. The Content contained herein are the opinion and general comments of the author and is based upon information that Mr. Sinibaldi considers reliable but neither ElliottWaveLive nor he warrants it's completeness or accuracy and it should not be relied upon as such. Mr. Sinibaldi or ElliottWaveLive (collectively, referred to as “EWL”) are not under any obligation to update or correct any content provided on this website. Any statements and or opinions are subject to change without notice. The content and comments contained herein neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person's investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. 

A more and comprehensive Risk Disclaimer and Disclosure Statements is available within the left margin of this blog site.   

Market Swings and Deep Retracements

Do recent market swings and deep retracements have you confused? If so, bring clarity to your trading by taking a top down approach rather than focusing on the time frame that you trade.... much like working a puzzle.

Start your analysis, the same way you work a puzzle... that is, look at the picture first !  Looking at quarterly, monthly and weekly charts will allow you to gain insight as to how the lower time frame wave pattern fits into the  "BIG PICTURE". 

Let's look at an example that is possibly unfolding right now in currencies. The markets have been highly correlated to the EUR-USD pair and therefore I'm looking at the Euro for clues to explain the deep retracements and overlapping waves.

Did you miss this contracting triangle?

Triangles are important to an elliotician as they forewarn that an advance, or decline has about run it's course. The pattern, is considered a continuation pattern and occurs prior to the final wave in a wave sequence. As such, triangles can be found in waves B, X or wave 4 positions. At the quarterly chart level, we see a possible triangle occupying the w. B circle position that may be followed by a five wave sequence to complete w.C circle.

Dropping to the monthly chart, we can see the subdivisions of the pattern. Notice that each wave is made up of three wave zig-zag patterns that are common to triangular formations.  That being said, the question that remains is whether the pattern is complete as indicated in the quarterly or requires another up sequence to complete w.(E) as shown in the monthly chart.

Now review your weekly, daily and 240 minute chart levels and you should be able to accurately forecast and anticipate the next move in multiple markets.

I hope you found this trading lesson helpful.

Best of Trading

The Market Pulse

ANNOUNCEMENTS

A bit of housekeeping is in order before moving forward with tonight's call.

• In Sunday's edition of Heard on the Street the following charts of the emini S&P where provided and I need to clarify a point. If you look closely at the charts, you'll notice that w.(1) is located a different price locations on the charts. This is not by accident but a failure on my behalf to properly identify that one is an alternate count of which I will address in tonight's call.

• In this chart of the Canadian Dollar, I interpreted the structure as a flat correction, primarily due to the fact that w.B circle has retraced near 90% of w.A circle. However, the structure can't be identified as such as w.A is clearly five waves and therefore the correct identification would be that of a zig-zag. (5-3-5). While the retracement level is not ideal,the pattern is valid since the only requirement for a zig-zag is that the B wave can't go beyond the origin of the A wave.

At the daily chart level, impulsive behavior to the downside confirms the count and another round of selling is required to complete w.(1). A print above .998 before making a new low would bring into question that another pattern is developing.


S&P




There are multiple ways to count the advance from 1068 in the ES_F or 1074.77 in the CASH. In the absence of any sizable retracement to hang my hat the daily chart level offers the clearest count.

Here I'm working a five wave advance and looking for a small retracement tomorrow or in the ON session followed by another rally to complete the advance. Notice structural resistance comes into play just above the market.

Yet another possible count is where w.(2) unfolds as a simple zig-zag. I have placed three expansion levels on the chart for your review. Notice how price disrespected the first level of resistance... a sign of strength. Price is approaching the second target and I'll be watching how price reacts to 1202.25, where w.c=w.a. Should a decent retracement not occur, odds are the market will push to the upper target, which by the way fits with the 2007-2011 analogy i.e. a retest of the neckline.

Let's see what happens tomorrow.

Best of Trading

Is It Finally Time for Natural Gas to Shine?

I've Pulled The Trigger and

Bought Natural Gas Today...

I've had Natural Gas on my watch list for quite some time. With the seasonal trend up beginning on September 2nd (not shown) and the fact that the Commercials are adding to their long positions, I've been waiting for the completion of w.e of the triangle within w.Y. I am viewing the slight break of the lower boundary of the triangle as a throw over. Any subsequent break of w.c (3.39) would negate the triangle interpretation and my bullish view.

At the daily chart level, from the 3.85 low, I was looking for a five wave advance to confirm the weekly interpretation. If correct, price should thrust from the w.e low. Two sets of technicals are supportive of my analysis. The MACD shows divergence as prices made new lows and the RSI broke through 50-60 levels on the rally to 4.02 signaling that the rise was most likely not a counter trend move.

Subsequent price action is in a three wave zig-zag and the market has found support at the .618 retracement  of w.i. I level.

Trading the futures in Natural Gas is too my for my blood so I prefer using the ETF, ticker symbol UNG .

As to properly disclose to my readers, THIS IS A REAL TRADE, NOT SIMULATED! I will be adding ticker symbol UNG to my trade disclosure. You can locate that disclosure about 3/4 of the way down on the left hand margin of the site.

I've indicated my entry which front ran larger orders at 9.93 and the figure where w.(c) = w.(a) of 9.84 which is a reasonable entry level. Risk on the trade is minimal (.24) per 100 shrs. I'll be watching how price reacts off 9.84, unless the structure of w.ii is already completed. My target is a challenge of the 10.14 with much higher potential.

Should price decline from 10.14 and in a five wave move, the analysis is flawed and so is the trade. As such, from a risk management view, I'd be looking to cover on the next three wave rally up.

If you are interested in following the trade, I'll be making regular comments to this post.

Let's see if I can make some coin.

Best of Trading

As always, following this trade is strictly for educational purposes! Please familiarize yourself with the Risk Disclaimer and Disclosure Statements make within this blog site.

The Market Pulse : A Trap Brewing?

Could There Be A Trap Brewing?

I want to expand on my weekend edition of Heard on the Street.... but first if you missed it, just click on the link.

Tonight I would like to review the 2007 swing that we can measure using the 2007-2011 analogy and compare it to the expectations for the termination of the current advance from 1097 and the wave count.

I think you'll find the road-map is crystal clear.

From the weekly chart, the swing from 1262 - 1397.75 was 135 point and a two week (bar), A-B-C zig-zag. Transposing the same measured move, we can estimate that the rally from the current 1097 low still has room to run and could reach 1233. This fits well with my weekend call i.e. the up, down sequence that I'm looking for.

Another key point, is the possible similarities between the 50% retracement levels. If history repeats, the current rally would stall at 1225.

So in comparison , I have established a range of 1225-30 as a termination point.

Also note, that in 2007, price traced a w.b that terminated within the range of the first bar (w.a) of the zig-zag. We should expect the same in 2011.

One last point on today's trade. Even though the analogy is working beautifully, the 10 pt opening gap is a concern, as they are typically found in third waves. It may also signal an exhaustive move (see below). Therefore, while I still have bearish bias, I have set critical resistance at 1252. 25. Any print above this level negates and most likely means that my larger degree wave count is flawed.

Dropping to the intraday chart levels, we now want to look at the internal subdivisions and expansion series to see if they match the 2007-11 analogy script.

First, the current interpretation called for a w.iv = .382 w.iii at 1191 and where w.c = w.a at 1192. Both levels have been exceeded as the count looked incomplete... signaling that the internal subdivisions were still subdividing.

Today's trade and opening gap could signal the end of the move as buyers have exhausted themselves. Certainly, the ending diagonal (wedge pattern) that I called to your attention in the later part of the day on Twitter would support such a conclusion. If w.iv is complete, a loss of 1170.5 should be the first sign that the larger degree trend has resumed. As always, look for a five wave impulsive move to confirm the break.

However, counting the move from 1113.75 (w.(b) low) doesn't count well and after reviewing the analogy, the w. b zig-zag (not labeled --- 1262-1397.75 in 2007   -- see weekly chart above) was small. Therefore, I'd like to offer this alternative interpretation (notice I didn't say alternate) that better suites both the analogy, current price action and termination levels of 1225-30 established by my earlier analysis.

From a trading perspective, the later count, if correct, will play out as inexperienced traders get caught in a a bear trap, thinking that the ON session or early weakness in the daily session will lead to new lows. It might but we know that 1170 MUST FAIL to bolster the near term bearish view.

We'll leave it there for tonight and see what develops.

Best of Trading

The Market Pulse: Why it's so important to make another lower low!!!

On Monday I left readers with this chart showing my expectations for the remainder of w.4. The Market continues to follow my preferred count of an expanded flat. With three waves complete, the Market has arrived at a critical juncture.

A Bullish Stampede

If the Bulls are to make a run to new highs, then today's high of 1293.75 must be taken out tomorrow and price must enter into the territory of w. 1 low of 1308.75 (red dashed line) to negate any further bearish stance. Should this happen, wave overlap would occur and confirm that the decline from 1367.25 was in three waves... a corrective move that will eventually be fully retraced regardless of what larger pattern develops.

A Bearish Mauling

If the Bears are to remain in control of this Market, it is imperative that a lower low be made during the next swing down. My reasoning is that a new low meets the minimum criteria of a five wave structure that would confirm that an interim trend change had occurred.  Several of the wave relationships for the termination of w.5 would place a new low at or just slightly below 1252.25 that I am considering a lower probability at this point. However, since w.2 was a zig-zag, w.4 should be a sideways correction due to the rules of alternation. I can't rule out the possibility that the move from 1252.25 - 1293.25 is actually part of a more complex pattern where w.4 isn't complete.  Only a print below 1261.25 would confirm that w.4 was complete and that w.5 was unfolding.

If w.5 is unfolding, the more likely termination point for w.5 is where w.5 = .618 w.{1-3} @1222.75

Let's see what develops tomorrow.

Best of Trading



The Market Pulse

At the 360 min chart level, the market has finally reached the vicinity of our target of 1257. The subdivisions count well for an initial five wave decline from w.2 to complete w.i circle. 

For the ON session and into tomorrow's trade look up. A print below 1259.5 would invalidate this view. If w.3 is subdividing, then w.ii circle should be a sizable retracement to either the .5 or .618 retracement of w.i circle. The correction should unfold in a zig-zag where w.a should have decent thrust to the upside that should carry to the previous forth and test the underside of the channel line at 1295.5. At a minimum, the pattern should not complete before 6/16/11.

Let's see what develops.

Best of Trading



Today's Trade Provides a Practial Application on How to Use an Alternate Count

If the objective of every trade plan is to identify levels for buying and selling the market, then according to Robert Prechter Jr., "without Elliott, there appear to be an infinite number of possibilities for market action. What the wave principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths" (1) thus the preferred wave count. An alternate count is nothing more than my second best wave count that also describes either the past, present or future movement of the market but in another context.

When I'm providing a wave interpretation for this blog, I'm always utilizing the preferred count. I remain open to evaluating price structure that is contrary to my preferred count and adapting an alternate wave count that realigns price with a known wave pattern. Should my analysis be unable to identify a clear count, readers are made aware of the uncertainty of the analysis.

Conversely, as traders, we do not have that luxury. The preferred wave count is my template for how I believe the trade should unfold. While I can't be certain that the market will oblige my best wishes, I MUST trade what I see NOT what I want to happen. Should the market's price action prove my preferred count wrong, either I get stopped out or the adoption of an alternate count allows me to stay with a trade, albeit defensively, depending on my entry, existing profit/loss and stop placement.

On June 5, 2011 call, ElliottWaveLive called for continued weakness in the eminis for Monday's trade.

At the 240 minute chart level, the close of yesterdays trade as well as the market technicals and subdivisions of the most recent wave called for for a three wave countertrend rally to end w.iv circle for today's trade.

A Hypothetical Trade

In the ON session, the market began to rally and traced out w.(A) and w.(B) providing the initial evidence that price action may be following the preferred count. A trade initiating a long trade at 1286 STOP 1283.5 (1 tick below the origin of w.(A) would be targeting the predetermined levels of 1298 - 1299 and unfold as a zig zag.

Price reached w.A circle at 1293.75 and began to fall. According to the previous chart, I was looking for a zig-zag to unfold and complete near the 50% retracement of 1288.5. While w.B circle actually was a flat correction, the fact that the corrective phase ended at the target and just below w.A circle provided a trader with the confidence in real time to stay in the trade. Here's why... the low of w.B circle was 1288.25 and overlapped the high of w.(A) at 1288.75...  another clue that the entire move is corrective.

Price then rallied from the w.B circle low to new highs.  At this point, price hit 1294.75 , where w.C circle = .618 w. A circle. The protective stop is moved to one tick below w.B circle at 1288. The retracement from 1294.75 was deep and took out the 1291 swing low... a warning sign that something may be wrong.

It's here that trading what you see must take over. Subsequent price action is choppy and contains numerous overlapping waves. My trade plan called for a five wave advance for w.C circle without overlap.... it's not.....  a second warning that the entire corrective move from 1283.25 to 1294.75 may be complete or that a more complex correction is unfolding. At a minimum,  I'm moving stops to just below the last swing low  of 1289.25 and lock in profit while looking to identify an alternate count that realigns me with the price action. I may also consider trailing my stop in a defensive manner under each higher swing low and let the market take me out of the trade.

In conclusion, the trade plan accurately identified an area suitable for buying the market, yet price has failed to reach our price objective at this time or do so in the manner that was called for. By having a clear expectation of what should unfold we remain flexible, objective and know where we're wrong as traders.

As part two of this lesson, I'll provide updated charts in a separate post so the trade can be followed.

I hope you found this information helpful and best of trading.



(1) Elliott Wave Principle, Frost and Prechter, page 94.