Wednesday, August 18, 2010

ES ~ Overnight Update 18 August 2010

Overnight not much happened, the ES is down a few handles currently trading at 1086.

Even though I think that wave (ii) has already ended there is an inverse H&S in the EUR/USD. And if the EUR/USD rallies to 1.30-1.305 I suspect that the ES will rally, too:

(Neckline at 1.29)

If you're Swiss, today is a national donation day for the flood victims in Pakistan. So instead of giving all your money to your broker, make one trade less today and give the commission instead to your broker to the flood victims... : )

And if you're not Swiss there's some reading for you ; )

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count

August 17, 2010

By Elliott Wave International

In the August issue of his Elliott Wave Theorist, market forecaster Robert Prechter alerted readers that the U.S. stock market was slicing the neckline of a classic head-and-shoulders pattern in technical analysis, and that this may send the market into critical condition.
Prechter said that when the Elliott wave count and a head-and-shoulders pattern are saying the same thing about the stock market, it's best to pay attention.

Here's how the August issue of the Elliott Wave Financial Forecast, the sister publication to Prechter's Theorist, described the head and shoulders pattern unfolding in the stock market:
"The weekly Dow chart [below] shows the development of an intermediate-term, head-and-shoulders pattern from the January high at 10,729.90 to the present. The January high marks the left shoulder, the April 26 high at 11,258 is the head, and the right shoulder is now ending. The April [Theorist] discussed the pertinent characteristics that Edwards and Magee used to define this technical pattern ... all apply to the current formation. Observe how weekly stock trading volume has contracted during the development of the right shoulder, a necessary trait of this pattern. The downward-sloping neckline -- exactly as on the big ten year pattern -- displays market weakness, which is consistent with our interpretation of the wave structure."
This chart shows the head-and-shoulders pattern.

Total U.S. Stock Market Volume

Here's what Robert Prechter himself said in a recent Elliott Wave Theorist:
"Generally, when the neckline slopes downward, the right shoulder does not rise to the level of the left shoulder ..."
Please look at the chart again -- then re-read Prechter's quote.