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Sunday, June 8, 2014

Elliott Wave Analysis of EURCAD

The next bounce will help both ideas, if a crappy move that fails around 15050 if can setup for a bearish "3rd of 3rd", if a strong bid above 15050 it will suggest the move from 15587 was a simple ABC decline and likely setup for a move to new yearly highs.

15050 is a big area for both bulls and bears. the winner of that area should ultimately decide the next larger move.

The move so far is a bit scrappy, although we can actually count it as the start of something bullish it needs a lot more upside to suggest a bullish setup.

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Are Bonds Telling Us a Message?

One problem for any bearish idea on USDJPY is the fact the 10yr yields may have put in a significant low.

Initially I was looking for a larger decline for USDJPY under 100, as you can see the TNX did its part, but USDJPY failed to follow.

But the concern for the bears on USDJPY is if TNX has put in a low, the likelihood is USDJPY will follow higher, so we see a "risk on bid". That's important as it will also confirm the move we have seen in US stocks, if you recall bond yields have been moving lower, US stocks have been moving higher, totally ignoring the move in bonds.

Whilst the world was convinced bond traders had it right, it maybe that bond traders actually have it wrong, if those bond traders are forced to puke that trade, that $$$ could eventually end up in risk markets such as US stocks, as well as seeing the 10yr yield back towards 3%.

You may of noticed bond yields have been moving lower as US stocks have been moving higher, that relationship i suspect was temporary. What we have seen over the past few days is US stocks continue higher but yields finally reverse and follow higher, that in turn has seen USDJPY follow higher in sync, thats the normal relationship that you would see if we saw a "risk on" bid.

If that continues from here, i suspect it will see a bid for USDJPY and US stocks to move higher. Its worth watching to see if the 10yr yields continue higher, if so we should see US stock as well as USDJPY move higher, as it will confirm that the market is happy to buy risk markets again.

You can see the 3 markets are now aligned once more, so if US stocks did have it right and bond traders were wrong, the trade will be to sell TLT, ZN, & ZB as the i think there is more value in the selling the bond trade as opposed to buying US stocks.