The break of the 8/5 high left a clear three wave decline from the 8/2 high, and we think higher is still to come. In fact, we’ve altered our larger count, now suggesting that prices are in wave (E) of ((X)) up from the low. That means the near term down trendline may break, but actually, that will likely not spur bullish action. As we’ve pointed out multiple times before, the European banking system is toast (take a look at DB, CS and SAN). The euro is likely to suffer as there’s another banking crisis coming, which likely means activity by the ECB. We still think the euro is headed below par longer term.
The pound’s suffering continues. And, either a tiny wave (ii) has traced out, or equally as likely, an expanded flat for wave (ii) is ongoing which may return to the 1.3200 area prior to the next wave down. You couldn’t convince me that the upside is worth trying out though. Remember, the trend is your friend.
We have a clear five down from the wave (B) high, and the action since the wave 1 low is overlapped. The late week reversal here suggests the wave 2 top is in place, and we’re aggressively bearish against that level. A break of up trendline support is still needed, but we like the downside. If indeed our top count is right, something very interesting is about to happen down under.
Here too, the late week stall that prices saw suggests bulls have been exhausted. A break of the wave b low is needed to cement the count, but all the action up from the low looks to be corrective. Notice the action of RSI which isn’t anywhere near Sustainable Bull Territory (upper blue zone), and a break of the up trendline will likely see prices back at the critical .6900 area which has been a key pivot.
It’s hard to believe that CAD is going to strengthen materially with the positions of NZD and AUD. So, it seems one of two things is going to happen. Either we’re wrong on NZD and AUD, in which case our USDCAD count should be sold; or, our Aussie/Kiwi charts are on track and wave (B) is still ongoing here. A break of the up trendline here would likely mean wave (C) was underway, especially if the base channel from the wave (B) high is broken to the downside.
There’s nothing to indicate a low is in place yet, although we think the downside is muted from here. Allow for a few more squiggles to the downside, and it is interesting to note the divergence between Japanese stocks and USDJPY. I mentioned that at some point we’re going to see the correllation of “USDJPY = risk on” breakdown, and we’re now seeing it, as risk assets have been up, yet USDJPY languishes. Recent BOJ comments have been non-committal for more easing, but the Keynesian/Monetarist fools at the BOJ and running the government will ultimately cave to weak currency policies. They have no other choice at this point, the good options are no longer on the table, and the yen will join the currency dustbin of history far sooner than the USD or euro.
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.