The Wolf is taking the family to Disney World tomorrow. But, after packing I wanted to share a quick update. There will be no update this weekend, and next weekend’s will be Sunday night and brief. We’ll be back to the normal Saturday updates the following week.
The market has done nothing to disprove our bearish view. The action down from the wave (ii) top looks impulsive, so allowing for a small bounce here before a potentially devastating decline for wave iii of (iii). It’s possible the bearish view is incorrect, but at a minimum we’d need to see prices above the down trendline, and only a push above the wave (ii) high would actually mean wave (Z) up was underway.
The pound has much less to be bullish about than even the euro. Yes, there’s support just below current levels, but it seems destined to give way after a small bounce for wave ii. RSI is pointing straight down after posting a Sustainable Bear reading (lower grey zone), followed by only a rally to the Bear Resistance zone (upper grey). The wave ii interpretation would only falter on a push above the 61.8% retracement level of wave i.
We said that the brief overlap of the wave i low, created some risk, and that the early week action would let us know which view was correct. We doubted that AUDUSD would be able to rally given the lower prices expected for EURUSD and GBPUSD. In fact, prices quickly reentered the channel, and the pressure to the downside continues. Look for one more chop lower towards .6750, and if we see bullish divergence from above the Sustainable Bear zone, we can start to look for a trade-able low.
The kiwi is definitely outperforming the other commodity currencies. Kind of like the tallest midget award, though. A push above the down trendline would alter the picture however. In fact, just looking at the action, we could argue a “reversal and follow through” pattern just developed over the past two days. That would mean we could take a bullish view against yesterday’s low. We’re not bullish, but we are watching closely.
Prices achieved a new high after tracing out a sideways irregular, running flat for wave 4. The wave 4 low also occurred right at the parallel line drawn of the wave 1-3 line, in classic Elliott fashion. Today’s spike higher and reversal now leaves a bearish shooting star candle. All that’s needed to take a contrarian bearish view is one further follow through day. I’m thinking we’ll get it based on the action on RSI. We’ve been seeing diverging new highs ever since late July, and the latest comes from well below the Sustainable Bull zone (upper blue). When you combine a mature count at several large degrees, along with our RSI study and today’s reversal, we can’t really argue with a bearish “starter” position. A break of the red channel and the wave 4 low suggests prices should move much, much lower over the course of the next several months. Is that bullish for oil? Why not mention how excited you are about the possibility for $65 oil and see how many believers you get. I’m not suggesting oil has to go to $65 for USDCAD to fall, but the reversal and action in NZDUSD does raise an eyebrow.
We thought the wave (B) triangle was complete at yesterday’s high, until today’s late rip to the upside. So, now, it seems, that wave E of the wave (B) triangle is itself forming a triangle. At least, that’s the view while prices are below 120.66. On a push above there, we’d likely have to turn the triangle upside down, and make it wave B of (B). Wave A of (B) is where it is now, while a triangle for B finished at today’s low, which means we’re trading up in C to complete (B). Ain’t Elliott grand! Some people say that these waves can’t possibly be true, otherwise everyone would know where the market was going to go. Forget about it! I have followed Elliott based forecasting and written intraday updates using Elliott for over a decade now, and I still can’t tell you which path USDJPY is going to take to get to 112.00 in (C). But, I think it’ll end up there.
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.