Due to the seemingly broken correlations that many have been witnessing regarding the USD, it has raised many questions regarding the direction of the USD. Many people believe that the USD is headed much higher in the near term. This mass confusion seems to be due to the fact that the old correlations between the USD and so-called “risk” assets are no longer holding as true. But, that may not continue for very long.
However, the USD has been acting exactly as expected within our Elliott Wave analysis over the last several months, and almost to the penny. As of late, the USD bottomed exactly where we expected it would in late February, and then topped exactly where we expected it would a little over a week ago.
Based upon this pattern, the USD is now setting up for a strong decline that will probably begin within the next week. However, it may still have one more small upwards retracement before its next expected precipitous drop.
Are the embolden bulls going to continue their torrid rampage through the narrow streets of Pamplona, skewering every petrified bear that stands in their path? Is the energizer bunny going to simply hop, skip, and jump directly to Dow 15,000 by Easter Sunday? Will the mad mad mad market mavens, falling all over themselves, calling for the traditional, pitiful, end of quarter window-dressing ramp, be proven correct once again? Is our future so bright, that we will always have to wear shades from now on?
Given the action in our good friend AAPL, I thought I would do a little look back at other parabolas and see if there were any similarities that may give us an indication as to when this thing is finished. I see a couple of things that I think we can take with us.
- 1. Volume spikes tend to occur with breakouts and are initiatory in the beginning of these moves, but occur with the tops as the move progresses (but you usually see the volume pick up a little on price resistance breakouts).
- 2. If any resistance lines are formed they tend to be the best points to take profits.
- 3. If there is an ascending triangle or rising wedge to form, it tends to happen near the middle of the move.
- 4. Outside reversal days a.k.a. bearish engulfing patterns, often mark tops with above average, but not necessarily the highest volume.