The Euro finally started taking a dive this week, and the US equity market started sliding to the downside.  Is this the end of the bull-run and the beginning of the major pullback??  Let's see if we can make some sense out of this price movement.

EUR/USD Price Projection

Back in Feb 6, I laid out a possible path of the EUR/USD pair as follows.  Coincidentally, the US equity market made a short term bottom as of Feb 5th.

Here is the look of the EUR/USD pair as of Friday.  Although many people may be pointing out a disconnect between this pair and the US equity market, you can still recognize an important market signal from this pair.  While the US market was climbing steadily for the past month, this pair has been waiting patiently forming a rectangular pattern.  Once it reached to the other side of the channel, and started selling off, the US market started sliding at the same time.  I'm not saying that this is the short term top for the US market, but this could be very well the end of the impulsive move for the major indices. 

Now, I know that many of you may be speculating the major indices are making a short term top right here, right now, and this is the end of the wave whatever, but I would have to consider this as the end of the impulsive move, but the beginning of the consolidation going forward.

Just like the EUR/USD pair was waiting patiently while the US market was climbing for the past month, now is the time for the US market to wait on the sideline while this pair is taking a spot light.  Although I illustrated a possible 28 days in total for this down leg, the actual sell-off could be much shorter and it could more like 18 days (that's how long it took last time to reach a=c point), which would take us to the beginning of April.  Of course, we need a confirmation to break below the Friday's low to continue the down trend.

Possible mini H&S Pattern Formation

Now, below I laid out a possible consolidation pattern during this time period (for the coming weeks).  This is really based on my observation and more of my imagination at this point, so please don't quote me on this if this doesn't pan out, but I could possibly see a formation of a mini H&S pattern right here, which could be possibly developing into the left shoulder of much bigger H&S pattern later on.  Sound familiar?

Unless you are day-trading, or very good at picking directions, you might as well look for a better financial vehicle (like forex, individual stocks, etc.) and stay away from the major indices.  If you do, expect a lot of whip-saw price movements going forward.

Here is a look of the weekly chart.  

Moving on to the Whip-saw Stage

I have also illustrated a possible path going forward – if we were to take the same path as the previous leg.  Easy money was already been made and what is waiting for us could possibly be a lot of chops, whip-saw, and sideway markets and our life would never be easy in either direction.  If you are willing to trade this market, please be prepared.  .

If this is the end of "relentless buying" stage for sure, then it really puzzles me as this rally was not as strong as the previous rally, regardless of the number of the "up" days.  If you take a look at the chart below, you can see that it took much longer to climb up much smaller price movements. 

This is telling me that this leg up may not be able to make it to 100% extension as I laid out in my last week's post and could possibly make a turn much sooner.

 
  
If it turns over much sooner, you know what to look for.  Here is the INDU monthly chart update.  Watching 61.8% fib and 200 SMA.