EURUSD breaks to new 16 months lows after a sharp reversal on November 7. Meanwhile, the late Friday correction in SP 500 has continued forward to today and points to lower levels.
The video above is a recording of a US Opening Bell webinar from November 12, 2018. We focused on the Elliott Wave and patterns for key markets such as SP 500, Dow Jones, NASDAQ, US Dollar Index, EURUSD, USDJPY, GBPUSD, and NZDUSD.
EURUSD Elliott Wave Chart at 16 Month Lows
EURUSD has broken through support, which has excited the bears. The number of traders positioned to the long side is lower now than when EURUSD bottomed on October 31. Meanwhile, the number of bearish traders has increased over this same period. Taken together, the sentiment reading has fallen from +2.07 to the current reading of +1.83. Sentiment is a contrarian tool and suggests this downtrend may be a temporary move.
The Elliott wave count can place multiple scenarios such that this EURUSD dip lower is a temporary correction and possibly a ‘B’ wave. EURUSD has just reached a level near 1.1240 where the down move since October 16 is equal in length to the September 24 to October 9 down wave. It is possible EURUSD may pause near here but it does not have to. ‘B’ waves are tough ones to trade so wait for resistance to get taken out prior to wading into the bullish waters.
See and read about EURUSD’s live sentiment reading.
US Dollar Index Elliott Wave Chart shows a bear run back towards 94
Opposite of EURUSD, we have US Dollar Index (DXY). DXY pivoted higher when tagging the upward sloping trend channel. This market can continue higher and still be considered within a ‘B’ wave. There are multiple wave relationships coming into play near 98. Therefore, if Dollar Index does not respect this 98 zone, then we will reconsider the more bullish Elliott wave counts.
If the current ‘B’ wave scenario plays out, then DXY may dip back towards the September low near 94. An abbreviated correction that makes it only to around 95 may tip off that an Elliott wave triangle scenario is playing out.
GBPUSD Elliott Wave Picture is a Little Cleaner Than EURUSD
GBPUSD typically moves in similar wave patterns as EURUSD. The recent GBPUSD waves appears to be in stronger one way trending moves. Therefore, it may be worthwhile for us to take some clues as to the dollar’s movement by gauging GBPUSD and if larger impulse waves develop.
It appears as though Cable may have continued weakness is the medium term and a shorter term rally to relieve that oversold pressure would be considered normal. A move below 1.2694 suspends this view.
SP 500 Elliott Wave Consolidates Implying additional weakness
In last week’s webinar, we highlighted how lows near the Friday October 26 low in SP 500 were important. This is due to it forming near the 78.6% retracement level of the April 2, 2018 up trend. On November 9, SP 500 broke down outside of the upward sloping price channel that had been supporting it all week. This breakdown warns of further losses to revisit last week’s low. In doing so, the entire uptrend is at risk as we highlighted the importance of the 2550 level. A break down below 2550 has larger loss implications for SP 500.
Elliott Wave Theory FAQ
How does Elliott Wave theory work?
Elliott Wave theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders analyze the waves for 5-wave moves and 3-wave corrections to determine where the market is at within the larger pattern. Additionally, the theory maintains three rules and several guidelines on the depth of the waves related to one another. Therefore, it is common to use Fibonacci with Elliott Wave analysis. We cover these topics in our beginners and advanced Elliott Wave trading guides.
After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.
—Written by Jeremy Wagner, CEWA-M
Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.
Communicate with Jeremy and have your shout below by posting in the comments area. Feel free to include your Elliott Wave count as well.
Discuss these markets with Jeremy in Monday’s US Opening Bell webinar.
Follow me on Twitter at @JWagnerFXTrader .
Recent Elliott Wave analysis you might be interested in…
Traders Net-Short Are 63.3% Higher from Last Week
TRADERS REMAIN NET-SHORT
US 500: Retail trader data shows 24.6% of traders are net-long with the ratio of traders short to long at 3.07 to 1. In fact, traders have remained net-short since Jan 07 when US 500 traded near 2473.53; price has moved 11.9% higher since then. The number of traders net-long is 1.7% higher than yesterday and 1.6% lower from last week, while the number of traders net-short is 5.2% higher than yesterday and 63.3% higher from last week.
For more in-depth analysis, check out the Q1 2019 Forecast for Equities
S&P 500 SUGGESTS STRONG BULLISH BIAS
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US 500 prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US 500-bullish contrarian trading bias.
— Written by Nancy Pakbaz, CFA, DailyFX Research
Follow Nancy on Twitter @NancyPakbazFX
On to the Next Big Levels of Resistance
S&P 500/Dow Jones/Nasdaq 100 Technical Highlights:
- S&P 500 nearing 2800-area, several swing-highs from last year
- Dow Jones 26k-ish stands between it and record highs
- Nasdaq 100 trading around resistance already
Check out the forecasts for Global Stock Indices and other markets on the Trading Guides page.
S&P 500 nearing 2800-area, several swing-highs from last year
The S&P 500 is continuing to show impressive strength since its v-bottom began the day after Christmas, with it having a few points along the way where it could have been stopped in its tracks. But it wasn’t, and this has levels prior to the December swoon in view. The area surrounding 2800 is a big one.
From 2800 up to 2817 there were three peaks created from failed rallies, a logical area, with the rally having come this far, to look for stocks to weaken from. Watching price action will be key, as always, but especially around the levels just ahead.
While resistance looks likely to get tested soon, the upward channel structure over the past month will keep stocks pointed higher for as long as it holds. If the S&P is rejected off resistance, to further bolster the notion of a sizable retracement we’ll need to see the underside parallel undermined.
For now, the top-side must be respected, but the time for material weakness may be nearing…
Stocks are rallying, but will it last in the long-term? Find out where our analysts see stocks headed in the Global Equities Forecast.
S&P 500 Daily Chart (2800/817 big spot)
Dow Jones 26k-ish stands between it and record highs
The Dow is nearing the 26k-area, a spot which is basically the equivalent of what 2800 is to the S&P 500. The zone runs up to near 26300. The focus is primarily on the S&P right now as it is the broader index, but depending on how price action plays out, the Dow may be the better index to short at some point if it shows relative weakness to the broader market.
Dow Daily Chart (26k-ish stands in the way)
Nasdaq 100 trading around resistance already
The Nasdaq 100 continues to lag behind, which is something to continue monitor given it was the bull-market leader with its leading group of stocks – FAANG – dominating price action and sentiment. The NDX is trading around the 200-day and near late-year swing highs equivalent to the ones discussed with regard to the S&P 500 and Dow. So far, relative weakness is making the 100 the preferred fade if the S&P finds material selling off resistance surrounding 2800/17.
Nasdaq 100 Daily Chart (trading around resistance)
To learn more about U.S. indices, check out “The Difference between Dow, Nasdaq, and S&P 500: Major Facts & Opportunities.” You can join me every Wednesday at 10 GMT for live analysis on equity indices and commodities, and for the remaining roster of live events, check out the webinar calendar.
Tools for Forex & CFD Traders
Whether you are a beginning or experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
Aussie Dollar Falls on RBA Minutes, US-China Trade Talks Eyed
TALKING POINTS – AUSSIE DOLLAR, RBA MINUTES, ZEW, TRADE WARS, CHINA
- Aussie Dollar, commodity bloc FX down on downbeat RBA meeting minutes
- Germany’s ZEW survey may compound worries about slowing global growth
- Trade wars in focus on US-China negotiations, fears of US auto tariff hike
The sentiment-linked Australian, Canadian and New Zealand Dollars weakened in otherwise quiet Asia Pacific trade. The move appeared to be inspired by an ominous tone in minutes from February’s RBA policy meeting. Meanwhile, the US Dollar corrected gently higher.
RBA officials cited “significant uncertainties”, noting that trade tensions and cooling domestic demand have increased negative knock-on risks from China. They added that consumption may fall if domestic house prices fall much further. They suffered the worst drop since 1983 in the three months through January.
TRADE WAR DEVELOPMENTS, GERMAN ZEW DATA MENACE MARKETS
Looking ahead, Germany’s ZEW survey of analyst sentiment may compound the downbeat mood, especially if it echoes the disappointing trend in regional data outcomes since September. A small improvement in the forward-looking Expectations index is nevertheless expected to keep it within a hair of six-year lows.
The tone of US-China trade negotiations may also be formative as a delegation from Beijing arrives in the US for continued talks. Both sides painted a rosy picture earlier in the week, but the Trump administration may be preparing a spoiler as the President ponders raising auto import tariffs.
What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!
ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
** All times listed in GMT. See the full economic calendar here.
FX TRADING RESOURCES
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
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