USD/JPY (black) vs. Gold price inverted (red)...nice correlation of late...
No change to current view: Looking for a correction lower as in the B Wave--61.8% to the 90-level; then higher in larger Wave (2).
Chart View GBP/USD Daily: 1st leg of correction complete?
3 May 2018/3:14 pm ET
The decline from 1.4375 high to the 1.3532 low appears to be a three-wave affair labeled A-B-C. Note that Wave C is almost exactly the length of Wave A so far; evidence a bottom may be in on the first leg of this correction lower; i.e. Wave (A) and setting up for a rally in Wave (B) with scope to 1.4053 or 61.8% retracement. Aggressive players may wish to nibble on the long side here with a stop below the low at 1.3532.
What to Expect at a Critical Market Point: End of a Wave 2 Rally
"Most investors are convinced that the bull market never went away."
By Elliott Wave International
The great game of Wall Street -- where huge amounts of money are at stake every trading day.
Many speculators play this game by watching for events outside of the stock market that they believe will "trigger" the next big move in prices.
However, the real driver of all those green up arrows and red down arrows is nothing more or less than investor psychology. This famous Kal's cartoon sums it up perfectly:
First investor: "I've got a stock here that could really excel."
Second investor: "Really excel?"
Fourth investor: "Sell?" -- and the crowd goes, "Sell, sell, sell!"
First investor again: "This is madness! I can't take it any more, good bye!"
Second investor: "Good bye?"
Third investor: "Buy?" -- and the crowd goes: "Buy, buy buy!"
As random and unpredictable as this cartoon makes it look, EWI's research reveals that investor psychology actually goes through similar phases during every market cycle. So, if you know the current psychological phase of the market, you can make a high-confidence prediction about the next phase.
This leads us to what we call Elliott waves, which are simply reflections of these psychological phases. In other words, each wave represents a set of investor attitudes, sentiments and behaviors during a specific phase of the market cycle.
The Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, states:
... a knowledge of wave personality can be invaluable. Recognizing the character of a single wave can often allow you to interpret correctly the complexities of the larger pattern.
Specifically, EWI's analysts have observed that the stock market trend develops in five waves, while the reaction against it develops in three waves. So, in a bull market, expect five waves up, followed by a downward move of three waves. In a bear market, expect five waves down, with the upward correction occurring in three waves.
With all of the above in mind, consider these recent expressions of investor psychology. The news excerpts were compiled by the editors of our Elliott Wave Financial Forecast and shown in the March issue:
Do these positive investor sentiments seem odd in the face of the stock market volatility that occurred after the January 26 DJIA high?
Well, there is an explanation.
The March Financial Forecast said:
The bullish response to the market's decline is exactly what the Wave Principle suggests should occur at a trend reversal. Near the end of a second-wave rally in a bear market, Elliott Wave Principle by Frost and Prechter states that "investors are thoroughly convinced" that the bull market "is back to stay." In the current case, most investors are convinced that the bull market never went away.
Since that analysis published, the DJIA's Elliott wave pattern has provided our analysts with even more clues about the stock market's next big move.
If you are prepared to take the next step in educating yourself about the basics of the Wave Principle -- access the FREE Online Tutorial from Elliott Wave International.
The Elliott Wave Basic Tutorial is a 10-lesson comprehensive online course with the same content you'd receive in a formal training class -- but you can learn at your own pace and review the material as many times as you like!
Price action (choppiness) suggests maybe the dollar bottom may be delayed. We say that as we expect a major bottom in the buck soon; then a counter trend really of multi-month variety to wrong-foot the dollar bears. A triangle pattern as shown below, would keep the market guessing before a final thrust lower in the dollar. We are seeing this near-term pattern in some key currencies—notably the euro and pound. Below is a look at a triangle pattern setup for the pound.
E-Mini S&P 500 Index View (June) Hourly
Wednesday 28 March 2018/10:59 a.m. ET
As an FYI- I personally trade futures (not ETF nor options) and spot forex. Thus, the suggestions I share on the various ETFs we cover in Key Market Strategies are predicated on the equivalent futures contracts I follow and trade (though my trading is in shorter term time frames than we target in the KMS service).
Below is the hourly chart I am tracking for what is called the E-Mini S&P 500 Index futures contract. I am looking for one more extension down to complete near 2569. If I see a near-term reversal pattern in that area, I will go long E-Mini S&P...