Analys från DailyFX
Dow Jones Industrial Average Drops for Second Day in a Row
After 10 consecutive days of higher closes, Dow Jones Industrial Average hit the skids for 2 days. The Elliott Wave pattern suggests a continued correction lower towards 20,000-20,400.
It appears DJIA may have just finished the third wave higher. In Elliott Wave terms, third waves tend to be the longest and the strongest of the five wave impulse. This suggests the meat of the move higher in DJIA may be behind us.
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One clue that hints a correction is looming is the RSI divergence. DJIA has been carving higher highs while the Relative Strength Index (RSI at the bottom of the chart) registers lower highs. This is indicative of a tiring trend and suggests the current wave is losing momentum.
If this wave count is correct, then a fourth wave correction may have begun. It is common for fourth waves to retrace 38% the length of the third wave…that calculation comes in near 20,223.
In addition, fourth waves tend to retrace back to the fourth wave of one lesser degree. In the case of DJIA, that wave is the March-April 2017 correction. Therefore, it hints that a retracement may correct back to 20,371-21,200.
Bottom line, a correction to 20,000 – 20,400 and even lower levels would be normal under the current wave pattern. Day traders may be able to find tradeable opportunities to the short side, but let us not forget the trend is still pointed higher. The better strategy would be to see how price behaves if it makes it down into the support zone.
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—Written by Jeremy Wagner, CEWA-M
If you are interested in more in depth study of impulse patterns which DJIA is in, watch this one-hour long webinar recording specifically on impulse patterns (registration required).
Discuss this market and others with an eye towards Elliott wave in Jeremy’s US Opening Bell webinar on Mondays.
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Other Elliott Wave articles:
Crude oil prices stuck in a sideways triangle consolidation.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
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You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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