Here we go!

If the channel holds, wave 3) is going to be a rocket!

Case of an end to the Euro Decline

Macro View

As one might expect, the Euro has sold off on the announcement of a EUR 1 Trillion Quantitative Easing program. National Central Banks will purchase EUR 60 billion worth of their respective governments' debt, in amounts proportional to their capital key in the ECB. The stated purpose of this program is to fight deflation. 

Central Banks will earn interest on the debt they purchase. This interest will flow back to the Euro-area governments. This mechanism is already in place in the US and the UK. The Fed/BoE pay the interest received on QE holdings back to the government (minus costs and interest paid to banks on excess reserves). Effectively these governments will obtain interest free financing on the QE purchases. 

A monthly decrease in interest payments will gradually reduce the pressure to retain austerity policies. Greater government spending will stimulate peripheral economies, and help unblock the transmission mechanism of ECB monetary policy. 

Capital that previously fled the Euro area in fear should begin to return home as sovereign financial distress eases. If these capital flows materialise as expected they should arrest the decline of the Euro.

Technical View

The EUR/USD and EUR/GBP pairs have been in well-channeled corrective declines since the 2008 tops. In Elliott Wave terms both pairs appear to be in a Double Zig-Zag corrective patterns counted as ABC-X-ABC. 

Both pairs are now approaching very long-term ascending channel bases, and the Weekly RSIs are at record lows.

EUR/GBP

My prediction for EUR/GBP in August 2013 calling for a decline from 0.855 to 0.75 has been achieved. See previous post here: http://elliottwavecounts.blogspot.co.uk/2013/08/eurgbp-breaks-below-uptrend-line.html. 

EUR/USD

A decline in EUR/USD was identified to the precise date of the top on 8th May 2014 at 1.3899 (see second chart). The measurement for A = C in the second zig-zag implies a low at 1.109. The Euro has traded down to 1.1115, which is good enough for me!  An extension of wave C could lead to a drop to parity if the long-term channel does not hold. Trail stops on existing short positions to capture any last spike down.

From: Arvind Damarla 

Subject: Fwd: EUR/USD

Date: 8 May 2014 15:22:58 BST

Here is a potential wave-count to go with the outside reversal in play today. What is at stake is a breakdown in the rising wedge that began at 1.333 last November, and potentially even the end of wave B  from 1.21

A sharp reversal below the wave 4 low (approx 1.365) is needed to confirm.

Inflation Expectations: TIP/TLT ratio

In 2013 inflation expectations were back on the rise after falling sharply in 2011 from the post-2009 reflation.  Most people expected the Fed would be able to meet its inflation targets due to steady economic growth. There was even talk of rate rises without a deflationary impact.

However, a calm look at the charts showed that this was just a wave B consolidation in the "inflation" bear market that has been in effect since 2011. See my previous post from Sept 2013 here: http://elliottwavecounts.blogspot.co.uk/2013/09/inflation-expectations-and-tiptlt-ratio.html

Not surprisingly, the bear market in "inflation" has re-asserted itself and Precious Metals and Miners have sold off. Any nascent expectations of inflation or of rate rises have now evaporated. 

The wave-count below suggests that this trend still has some way to go, and could easily continue into the late 2015 ECM turn date. 

USD view of Emerging Markets

EEM: MSCI Emerging Markets (USD) 

Despite the excitement of the last couple of weeks Emerging markets continue to remain a 4 yr-old contracting range (in USD terms). 

Same for the Weekly RSI.

FXI: China Large Caps (USD) 

China remains the bellwether market for EM and commodities. Key indicators like AUD, CAD, Copper, will take direction from Chinese demand. 

Continues in a pennant formation, which no clear view as to which way it will break.

INP: India (USD) ETF

Indian markets are at new highs in Rupee terms. In dollar terms the SENSEX has done nothing for 4 years. 

Now against long-standing resistance with an overbought RSI, the India USD ETF is at risk of an unpleasant correction.

RSX: Russia (USD) ETF

The wave count allows for further lows, but has done enough to be a completed decline. Weekly RSI is pretty oversold.

EWZ: Brazil (USD) ETF

The wave count here too allows for further lows, but when the Falling Wedge breaks this market can fly like a rocket. Weekly RSI showing positive divergence from oversold.

Commodities perking up

Encouraging signs for commodity bulls as the CCI held an important long-term support level at 500 (see longer term charts below).

 

The index is short-term overbought for now, but if the recent lows survive a re-test I expect a continued advance over the next few months.

 

 

 

Several Risk markets at technical support levels

S&P 500 at channel and trendline support since 

Eurozone ETF (USD) - since 2008 top

EMERGING MARKETS (USD) ETF

CHINA LARGE CAP (USD) ETF

USD JPY

Platinum at a significant support level

Trade away from $1360 ... buy a rally from channel support, sell a break.

OEW count (alternate take)

A good weekend update by Tony Caldaro's OEW group is posted here: http://caldaro.wordpress.com/2013/11/30/weekend-update-425/

My take on the OEW impulsive count on the Dow is below. Ignore the implications of a higher degree due to the labeling - it doesn't mean anything in my chart.

The modification I have made is to provide for alternation between waves 2 and 4. An Irregular Flat 4 indicates that the uptrend's momentum is strong, and that wave 5 will not be weak and truncated (already confirmed).

A similar count in the SPX has an Irregular Triangle instead of an Irregular Flat

GLD at top of declining channel

The decline from 137.5 peak in August is best counted as a corrective Double Zig-Zag (abc-x-abc) with the last declining "c" leg yet to unfold. The 

We are now at the top of the declining channel. If the top rail acts as a resistance we should see an impulsive decline. Support come in around 120 from the longer-term bear flag.

Tesla Downgrade

Appears to be the end of wave (3) and a good time to short this bubble stock!

Inflation Expectations and the TIP/TLT ratio

The ratio of ETFs TIP &TLT forms a useful inflation barometer. 

During the deflation scare of 2008 TIP under-performed TLT. The initial QE rounds resulted in a reflation that led to heightened inflation expectations. 

However since mid-2011 inflation expectations have cooled off. TLT has been in a downtrend channel relative to TIP starting with a sharp decline, and followed by a long consolidation. 

Now this ratio is in a resistance area defined by previous levels and at the top of a downtrend channel. A renewed decline from here would put pressure on inflation trades - Gold, EM, miners, banks, etc.

A breakout would be a very interesting surprise, given the shrinking effectiveness of the QE measures in stoking inflation expectations.

GBP/USD Triangle projects a decline to 1.25, stop at 1.6746

A Symmetrical Triangle in GBP/USD has meandered its way to completion over 5 years. A decline to 1.25 is projected here. Wrong above 1.6746.

Palladium risks drop to $485, needs above $775 to breakout

EUR/GBP breaks below uptrend-line

• A Double Zig-zag correction appears to be unfolding since the 2009 top. 
• Short EUR/GBP with a stop at 0.8769 targeting 0.75. 
• Additional confidence below 0.8164.

Currencies Update

Dollar Index at channel support. Likely paths for rally shown below. Also see contracting Weekly RSI range.

EUR/USD has multiple resistance lines just above. Good spot to fade.

Symmetrical triangle on GBP/USD. A break below wave D @ 1.4833 to confirm a decline along the projected path. 

EUR/GBP has the makings of a Double Zig-Zag which should decline to new lows (0.75). A decline below 0.8164 to confirm. The decline should remain contained within the declining channel.

USD/JPY resistance at 100-105 worked. Now looking for a possible Triangle wave 4. Wave 4 must not retrace past 87.36, otherwise the impulsive count is called into question.

The AUD/USD weakness projected last year has finally materialised. Oversold Weekly RSI suggests that this pair may get a respite for a month or two before resuming a decline.

SPX Update 2013/06/01

A corrective wave-count below suggests that the SPX rally from Nov 2012 is over. A correction below 1470 before a new high will strongly suggest that the nature of the entire rally from 2009 is corrective. One way for the rally to terminate would be an Expanding Diagonal (ABCDE) as show below.

Silver at long-term channel support

• Last week opened with a "washout" low in the early hours that nearly dipped to $20.
• Price was neatly supported by the lower boundary of the longer term channel from 1999 - see longer term chart below. 
• Now with slight positive divergence on the Daily RSI there is the potential for a bounce into the high twenties, and maybe more if the descending blue channel is taken out.
• For now, a close above $23.85 would be supportive of this view.

Crude Oil getting ready to trend

Compressed Bollinger Bands indicate an imminent breakout from of the narrowing range. Support around $85 and resistance around $100.

NDX bull count update

Valid as long as we stay above 2412.52

HUI approaching important support

The chart below shows channeling in mining shares for the rally that began in 2000. Now we are approaching the bottom rail of the channel, along with the 61.8% retracement of the post 2008 rally. Sentiment is in the pits and weekly RSI is oversold. If the channel holds, this maybe the perfect spot to load up on choice Precious Metal mining shares.