Weekly Wrap
The non-farms are in for November and the unemployment rate is down to 7% from 7.2%. Now everyone is proclaiming the end to QE – and the Fed will start tapering this month for sure. That’s the line being handed out.
If this is so, then why did the Dow rally almost 200 points yesterday and the Nasdaq make a new high? As with all knee-jerk conclusions that are almost universally made, I am quite sure the reality will be very different. I guess the improved data trumped the taper. The Fed meeting on Dec 17/18 will be a Christmas present for some, and markets will remain nervous until then.
Yesterday, the volatility was high. Gold sank $15, then rallied $30 and settled in the middle. That wiped out a lot of buy and sell stops in one fell swoop. Gold can be a cruel market.
The fact remains that the stock rally is long in the tooth and bullish sentiment is at an extreme. We are there.
DOW
We have a textbook five waves down from the high on 29 November – and now an A-B-C up:
There was a huge spike up on release of the jobs data yesterday which carried ot the exact Fibonacci 78% retrace. Isn’t that pretty? The remainder of the session was a mini melt-up and is now poised for the start of a massive decline in a large w3.
It is a similar picture in the S&P:
It has reached the Fibonacci 78% retrace at yesterday’s close. Remember, I have been pointing out the deep retracements whenever stocks have swooned? Also recall the S&P hit my EW target on 29 November at 1815 (see previous posts).
US stocks are now teed up for a dramatic decline.
AUS/USD
I have been fishing for a bottom and I have found one:
This is a two-week base formation and is ready to pop above my upper tramline. Note the strong positive momentum divergence indicating a very powerful move ahead.
Yesterday, the jobs report sent it down to the critical 0.90 level, found huge support and closed a full cent higher. My major target is the 0.94 level which is a 50% retrace of the wave down off the October high.
GOLD
Massive volatility last week but it has given me more highs and lows and I can draw in new tramlines. I still believe we shall see a very good rally, but I will need to see a move above the centre tramline to confirm.
EURO
Has been edging up lately but its days are numbered:
The November rally is clearly an A-B-C and is approaching the Fibonacci 78% level where it crosses my upper tramline.
I expect the decline to start in earnest next week.
USD/JY – My Trade for 2012, 2103 amd 2014
This continues to be a terrific trade and has just completed a textbook A-B-C correction:
It should go on to make a new high soon but is likely to have a setback next week. This could be a great opportunity for a trade. My major target remains the 105 – 106 area with potential for much higher in the 120 area (the 2007 high).
Have a great weekend!
