NASDAQ AMAZON – Wave Strength Analysis On Daily Chart

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NASDAQ AMZN has started an impulsive cycle from 81.33, and the price is forming the final wave (5). The price has accomplished a corrective wave (4) and formed sub-waves of the impulsive wave (5).

Wave Formation & Fibonacci relationships:

Wave (2):

  • Wave 2 has formed an expanded flat with a 3-3-5 structure.
  • Price retraced 78.6% of wave (1).

Wave (3):

  • Wave 3 has constructed a motive structure.
  • Wave 3 is an extensive wave with a 3.618 multiple of wave (1).
  • The sub-structure and element structure is visible.

Wave (4)

  • Wave 4 is a zigzag formation and can be mentioned as a triangle by changing the labels.
  • Wave (4) retraced 50% of wave (3).

Wave (5)

  • The structure of wave (5) does not look like an ending diagonal. So, the last option for us is to assume it is an impulse.
  • The common Fibonacci relationships are:
    – Wave 5 = Wave 1
    – Wave 5 = 0.618 reverse Fibonacci of wave 4
    – Wave 5 = 0.618 X Waves 1 through 3
    – The upper band of the parallel channel and throw-out out in many cases.

ADX (average directional index):
The ADX (14-day setting) shows strength coming but doesn’t advocate the cause of the shart surge. Traders must note to take high probability traders after ADX crosses 30. It only measures whatever trend it is, should one trade or not, by measuring the strength of the trend.

ADX level of 22 shows that the market can be choppy in many instances.

Weekly Trend:

The weekly trend looks strong, as the price has broken out a crucial resistance zone at 143. If the weekly trend & Daily trend are bullish, day traders can take long traders to be within the trend.

To look in-depth, we have to analyze the shorter timeframe. This way, we can get a clear story of wave (5) before initiating any position.Continue reading

Market overview: US unemployment claims below forecasts

us-unemployment   The monthly unemployment report is likely to be a victim of the US government shutdown

  1330: Initial weekly US unemployment claims rose by 1,000 to 308,000 in the week ended on September 21st, versus the 315,000 expected by economists.

  1320: Vodafone’s CFO will step down from his role of nine years once the sale of its stake in Verizon Wireless completes. The stake, which is being sold for 80bn pounds, is expected to be sold by March 2014. The FTSE has risen 24 points to 6,461.50.

 1242: Overnight the Chicago Mercantile Exchange (CME) hiked its margin requirements for operators in the Dow Jones, SP 500 and Nasdaq E-Mini futures contracts by nine per cent. According to Zerohedge that may be a result of President Obama’s remarks to the effect that Wall Street has not yet recognized the seriousness of the current impasse on Capitol Hill.

1120: A little more colour on Aviva, in remarks to Sharecast Ronni Chopra – Head of Strategy at Trade next – pointed out that in the medium-term the stock might still be a potential take-over target. FTSE 100 up 17 to 6,454.

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Currency Strength and Central Bank and Gold?

gold-investorsThe crucial story for gold investors is not the pure inflation rate of the dollar, but something much deeper. When you focus on gold, you should sharpen the focus of your lens on the dollar system. As history confirms, gold can both increase and decrease under inflationary circumstances. It is also the case when considering the opposite scenario, which is deflation. It all depends on how well the dollar system is performing (how well is both dollar as a currency and dollar understood as dollar denominated assets; bonds, stocks, derivatives, credits etc.).

The easiest way to look at the dollar is to compare it as a currency against all the other currencies. This, in fact, was the best way to assess the dollar from 2002-3, when it started to lose its value against other currencies and gold began its long and spectacular upward climb. This took place while a bubble formed in dollar denominated assets, especially real estate.

In 2008 there was a radical shift. Shortage of liquidity in the financial markets lead to massive selloffs of assets in all markets, with emerging markets being hit the most. That’s when the dollar got a gust of air in its sails, and increased significantly in value. Under current circumstances, the dollar – as a currency – does not appear to look that bad. Even when compared to other strong currencies, the dollar looks firm. The central bankers who print the British pound and the Japanese yen seem to be devaluation devotees, and the euro is still recoiling from the turmoil of numerous internal problems.

Therefore, when looking purely at the currency markets, the dollar does not appear as endangered as it may seem. However, as we hinted at the beginning, this is not the whole story. We have to assess not only the dollar against other currencies, but the entire dollar system, that is dollar denominated assets. The dollar may be a better investment than the British pound, but the big question is whether gold may be an even better investment than the dollar even when it outperforms the pound.

So how is the dollar system performing internally? One of many possible things to focus on is the interventionist policy of the government, especially the central bank. This can tell us how firmly the economy stands.

In recent years we witnessed tremendous expansion in the Fed’s activity. Since it all comes down to money creation (supplied for financial papers and bonds), this influence is rather negative for the whole dollar system. This means that from the economic point of view, the outlook for gold is quite favorable for the coming years.

Globle: Short term analysis

In my opinion the top of the up leg from the November lows is in place.

We will have the absolute confirmation when price establishes a lower high.

Below I show you the SPX weekly momentum indicators, where we can see that the RSI has breached the trend line support in force since the November 16 low.

The next intermediate buy signal usually should occur when the RSI and the Stochastic retest the 50 line.


I rule out a major reversal, instead I maintain the scenario of a retracement of the advance from the November lows.

As I discussed last Friday the major reasons that suggest that price has not established a major top are:

  1. The up leg from the November lows has unfolded a corrective 7-wave structure ===> A corrective EWP cannot establish a major Top.
  2. The current pullback is also unfolding a corrective pattern, ===> The intermediate trend remains up.
  3. Retails investors are extremely bearish (I have never seen a major top with an extremely low AAII Bull ratio)

Regarding the potential target, at the moment, since we are in the initial stage of a corrective pattern I can only say that price should establish a bottom in the range 1485 – 200 DMA. (which today stands at 1453)

Once a lower high is in place, the next down leg should aim at the 0.382 R = 1500, where probably a large rebound will take place. If bears maintain the sequence of lower high/lows then the following down leg will reach the target box.



Therefore, I reiterate that the above “road map” looks very probable as long as the bounce, which began last Friday, establishes a lower high.

Regarding the long-term count, I maintain the Triple ZigZag wave (X) scenario. As I have discussed in previous weekly updates since the assumed wave (Z), which began at the November 2012 low is not impulsive I am suggesting that it should unfold an Ending Diagonal, if this is the case on April 11 price has completed the wave (I).

  The summation Index, which, peaked at the end of January is already oversold (RSI has crossed the 30 line) and on Friday it has breached the 200 dma. It is remarkable that SPX has been able to establish higher highs with such a weak breadth performance.

Going forward since price has just begun a corrective phase, an already oversold Summation Index should prevent a major decline.



Lets move on to the current price action.

It is reasonable to expect that the rebound from last Thursday LOD to reach the target box delimited between the 20 DMA = 1564 and the 0,618 retracements = 1574.

If it tops at the 20 DMA the 1×1 extension target for the following down leg would take us to the 0.382 retracement of the advance from the November lows at 1500.

EW wise price would be unfolding a ZigZag therefore if lower prices were in the cards probably this initial ZigZag would morph into a Double ZigZag



Lastly, VIX on Friday has “issued a Bollinger Band buy equity signal”. Friday’s drop has been larger than I initially thought, moving back below the 200 DMA. I still expect a bottom in the range of the moving averages (10-20-50) or in the worst-case scenario at the rising trend line support in force since the March 14 low. The lower is the retracement, the larger will be the assumed SPX wave (B) rebound.

I still think that the pattern that VIX is unfolding does not suggest a major move to the upside, but as long as the sequence of higher lows/highs is maintained the trend remains up.


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