Expect Some Fireworks In The Next 24 Hours–Here’s Why

In Elliott Wave,
there are at least a dozen possible path
s a correction can take. What first
looked to be a straight forward "ABC" correction then took on the life of an "ABCDE"
triangle. But the marginal new high in USDX also allows for a more complex "zig
zag" formation of "XYZ." — that simply means we are still in a correction as
far as pattern recognition is concerned.


Recall that EUR/USD had a choice on
Monday to break down at the open around 1.2120 and confirm the triangle
scenario. Instead, the move above 1.2150 set up a breakout on the weekly charts
which forces us to stand aside for now until the pattern clears up. EUR/USD is
now being squeezed between key resistance at 1.2250 and trendline support at
1.22. Either way we expect there to be fireworks in the next 24 hours as the
market decides who is boss. 


The dollar index needs to hold above
the 88 handle to consider both the "triangle" and "zig zag" formation still
valid. If the dollar were to hold above 88 this week then we would still lean
towards the final spike higher in August. However, a solid daily close above
1.2250 would put a serious chink in the USD bullish argument. Agressive traders
may look to short EUR/USD on a move below 1.2200 with stops above 1.2250.
Alternatively, one could buy the "breakout" if we go above 1.2250, but we
consider that a dangerous move.





 No change: We
bought the VIX last week for an averaged rate in the spot index at 10.50. The
S&P 500 is testing the key 1245 target we had mentioned back in October and with
numerous momentum and sentiment divergences with these new highs, we continue to
favor the topping scenario as oposed to the mainstream that sees a goldilocks


 No change: Bond
yields rose above 4.3% today but only a move above 4.6% in the 10-year yield
would indicate bonds are headed lower.




Jes Black


Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at

to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four
years as a senior currency strategist he went on to found
FxMoneyTrends.com – a research firm catering to professional traders.


Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces
for Futures magazine and regularly attends industry conferences to speak
about the currency markets.