Think it will hold??

I last posted about my CHF/JPY short trade here. I think this currency should continue to drop nicely.

Notice that the lower trendline has been very well respected. Every time price neared that level, it bounced off quickly and started a multi-day uptrend. Yesterday, the same price action occured. However, this time, instead of continuing higher, the market reversed to retest the trendline today. This shift in price behavior tells me that we'll soon break this uptrend line and head towards the 80 range.

Do you know what ED stands for?

No, it's not what you think. ED means ending diagonal, and ending diagonal means sharp selloff ahead. It appears that my sub-960 (on SPX) scenario will play out! Be very careful for a strong selloff in the next few days.

The chart above is the 1h /NQ (NASDAQ futures) chart. I'm posting it instead of SPX because the ED is excellent. Notice that the 5th wave in the rally from 1350 has unfolded as a picture perfect ending diagonal: it was super choppy, with each subwave in the abc structure. You can search my blog for other examples of these patterns, and you'll see that they all ended with sharp selloffs (at least on the short term).

Look out below!!

At this juncture, I see two possible scenarios for SPX: 1) it holds under 960; or 2) it pops to above 1000. In either case, I expect a multi-week downtrend to occur within 2 weeks. 

The above chart is the 3y daily chart for SPX. Notice the three trendlines which will act as resistance. Currently, SPX is making it's first test of the upper two trendlines. I see two important considerations regarding these lines. First, in my experience, price will never breach a trendline on the first pass without a correction, but it can temporarily penetrate it. Second, these trendlines have been oft-cited on the internet in recent months. This means that the market will either start dropping before reaching them (thus preventing everyone from going short because price never reaches their target), or price will temporarily shoot through (making everyone believe that the lines have been rendered worthless). I doubt we'll see price hit them perfectly and then retrace. I am personally hoping the below-960 scenario plays out, but if there are too many other people like me, I think we'll get that false break to 1000+.

CHF/JPY Update

I have been accumulating a short position in CHF/JPY between 85-90 for the past couple months. You can see my original analysis and post here. I still think that 92.50 will contain price action, and we should see a sharp selloff in the near future, so I'm holding my positions.

You can see on the 5y daily chart that a very long-term trendline is currently containing price action. Furthermore, the upper trendline of an ascending wedge should provide a second level of defense if price does break significantly above 90. 

I now think the rally from the 75 low could actually be a leading diagonal (because of the 5-wave structure). However, before price starts an uptrend in earnest, I believe we'll see a very sharp Wave-2 selloff, in which I'll be able to close out my short positions.

Live FOREX day trading

Enjoyed stealing 45pips from the market today.

Closing out AGQ for +20% profit

I posted here that I thought silver was ready for a quick rally because it broke a nice cup and handle pattern. I went long AGQ (2x silver ETF), and today I'm closing the trade for a 20% gain around $57.

In the chart above, notice that SLV dropped in 5-waves, and it has corrected that move in 3-waves. It is testing a strong resistance trendline, so I'm pretty sure it will correct before moving higher. Thus, I am closing my trade.

Some live Forex Day trading

Closing EUR/GBP Short for +600 pips

Back in December 2008, I opened a short trade on EUR/GBP because it was finishing a blow-off climax top. I was a bit early, and suffered early drawdowns, but I held tight. I'm closing the trade today at .8650 for a +600 pip gain.

You can see that price has retraced nicely after the climax. However, price action has been choppy, and not in the typical 5-wave pattern I like to see for an extended move. Instead, it looks more like a 3-wave correction. Price is currently sitting near trendline support as well as the 38.2% fib. It looks to me like the GBP could be setting up for another drop (EUR/GBP rally), so I'm taking my nice profit while it's there.

Divergences Galore

Today, SPX made a new high. However, MACD is forming the first divergence. See this chart:

Furthermore, the VIX (see below) did not make a new low. In fact, on a highly bullish day, VIX actually rallied. This is the second divergence:
Finally, XLF has not come close to making a new high to match SPX. This is the third divergence. 
Looks like a fakeout rally to me. Good luck!

ABC Flat nearly complete on SPX

I last posted about the overall market here. My record has been pretty bad over the course of this rally, but I'll offer some additional analysis now that we've popped to new trend highs. I believe the 950-975 zone should contain price action, and we should very shortly start a downtrend towards new lows.

The above chart shows the E-mini S&P 500 futures (/ES) over the past 2 years. I think we've seen an irregular flat ABC correction since the November 2008 lows, where Wave-b and Wave-c both overshot the bounds of Wave-a. This excellent scenario prompts the bulls to capitulate the end of Wave-b, and the bears to capitulate at the end of Wave-c because a "breakout" occurs. Ultimately, I think this recent bullish breakout will fail because prior to breaking above 942 (the December 2008 high), a triangle consolidation formed. Triangles normally occur before the final thrust in the trend. It all works out perfectly: the final thrust is Wave-5 (terminal) of Wave-c, it brokeout above the previous high (942), and now we have MACD divergence. When you take a look at current sentiment, it's not hard to imagine why a top is near.