Elliott Wave Charting: Catching a bear market rally - Feb 7 10 15:51 EST
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Elliott Wave Charts
Catching a bear market rally
Usd traded significantly higher in the second part of the last week, when stocks and commodities turned sharply lower. The Usd gains looks have been powerful against the majors, which could be just a small part of Usd bullish moves in 2010, if stocks and commodities continue to decline.
The most widely traded pair, Eur/Usd, was extremely weak over the past week, after financial concerns came from Greece and other European nations.
The 4-hour Eur/Usd chart shows a sharp decline from the 1.4578 top to Friday lows at 1.3583. That move can be counted in two ways, where both look valid and suggest lower levels to follow over the coming weeks, and months if equities hold lower, and economics continue to weigh on sentiment for global growth.
Eur/Usd 5min review
Both main wave counts #1 and #2 below, signal for at least day or two of a Euro recovery, before Usd bulls may accelerate on the strength of global risk aversion and weak equity market trade. The lows on Friday were reached at 1.3583, from where we can count a five wave move on the up-side on a five minute chart.
TheLFB Charting: Eur/Usd 5min view
This is clear evidence that a near-term Long move is in process, even if it is just a part of an upward correction, or larger impulsive structure. The two main wave counts I and II below show how this could unfold.
In the current bear market it is the time to watch a three wave, upward correction (wave count #1 or #2 described below), and to eventually trade Short from the resistance area. This allows a near-term long play that can be banked, and then reversed if equities cannot break and hold resistance.
Wave count #1
The first wave count presented below is showing an impulse Short, red wave III that has been in progress since the 1.4025 highs were reached last week. In that Short red wave III we are expecting to see five sub-waves of decline (black labels), in similar structure as shown in the red wave I, that all starts with an initial, near-term, Long break.
This wave count is a primary wave count, which gives a short opportunity if a corrective, black wave II) (sub-wave of a red wave III) moves higher, near to the 1.3800 zone. At that area it may be possible to switch to the second wave count it things continue higher.
TheLFB Charting: Eur/Usd 4h wave view
Wave count #2
The second wave count also signals for a near-term, Long reversal move, but much higher than to just the 1.3800 resistance zone. In fact, a decline from 1.4578 top can be also contended as a five wave move, which suggests a coming corrective reversal. The Elliott Wave Theory always suggests a correction once five waves are completed. This wave count now signals for a Long, corrective move towards the 1.4000 zone from where a down-trend continuation will be expected if fundamentals stays as they are.
TheLFB Charting: Eur/Usd 4h wave view
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