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i i  
 | 89.62 Because the development down from 89.62 looks more like a
(Z) correction than an impulse, I¶m left with this count as my preferred
88.46 model: the Primary -B- Wave will become a big Triangle of some
(Y) sort.




77.69 (E)
› alt: - B -
74.75 for 138.2% of ( A ) = ( C )
72.19 for 161.8% of ( A ) = ( C )

³b´ MThe longer term picture/trend on the DXY remains bullish, so longer term traders (er,
³investors´) should continue to hold bullish bets on the US Dollar. However, because of the
short term risk of a correction to 78, it might make sense to be holding only 25-33% of a
(A) maximum long position, with an eye toward adding length on any pullback to 78. Shorter
term traders can attempt to short the DXY, but it would seem prudent to use 81.91 as a ³stop (C)
loss´ on short trades.


w? x?

w x ³e´
77.69 (B)

z of ³c´

This would have to be the bullish interpretation of the price action: We
i have finally complete the Intermediate (B) wave triangle and are now
witnessing the beginning stages of a powerful (C) wave. The (B) wave (C)
concluded with what looks like an ³irregular´ triangle--it¶s not unusual for
³b´ the e-wave of a triangle to be a triangle itself. › %   %
"# %    $. It would take a break
(A) below 82.71 to invalidate this count.

y d
x 81.34

c ³e´
w a (B)

w x

z of ³c´

% 5
This is a ³closer´ look of the bullish count on the previous page. It looks like
we¶re about to complete an ³impulsive´ move which began at 81.17. We should
see some sort of small scale triangle followed by one more push to new highs
(Wave 5). On that next new high we should only see a Wave ³2´ correction of
some kind. Under this model, 82.71 is important support as well as the 81.17
level. A violation of these points would invalidate this wave count.

81.34 2

c (B)

The ³bearish´ interpretation would be that we still have not concluded the (B) wave
triangle. We might be witnessing a ³d´ wave that is taking the shape of an expanding
i triangle (maybe a diametric), which would explain the extremely volatile nature of the
last leg higher and the extremely high bearish sentiment towards the Euro (see next
page). Even this ³bearish´ interpretation is not very bearish, because all we should
³b´ see is some sort of corrective ³e´ wave that should not be able to take out 79.50. This
89.62 is the reason that my last update on the DXY suggested longer term investors remain
(A) long the Dollar, even though I thought a pullback might be coming (wrong)--"   
"# "  % #"#  %'


x c

d (B)
w x

z of ³c´

!"! #!!$

aarge speculators remain certain that the Euro is about to unravel as they are carrying some of the
largest short positions ever seen on the CME. This sort of bearish bias extreme should make Euro
shorts a little nervous about some kind of bounce that washes out the new (fast) money. 1.3132
looks like the ³key´ resistance level in the near term. It¶s the 23.6% retrace of the larger move down
and is in nice alignment with previous support. Bears have no problems until this level gets violated. %ullish Harami?
That stated, this market looks primed for some sort of short term bounce.

³Commercials´ are very long.

³Speculators´ are very short.

’ ()#*+,
-% c
aeft a
Shoulder e Right
-c- -a- 1208 Shoulder


-b- -b-
b g
³x´ Maybe we get a more ³complex´
right shoulder to give better
e symmetry to this formation.

All of the action in the last few weeks looks like a ³topping formation.´ Given this
model, 1208 would have to be considered key resistance. There also appears to be a
³head and shoulders´ top in play. 1176.75 looks like classic chart support for bulls, but
c the slanted ³neckline´ could also be considered some support. The whole picture looks
bearish right now and would become even more so on a break of the neckline (green-
dashed line). Bears should consider 1208 as a ³stop´ on the June futures.

’ ()#*+,
c Ãave probably
a e ³y´ finished here.
1208 g

b d b?


I¶m going to have to ³cop out´ on the S&P count this week because I¶m still trying to
reconcile what we saw last week. I won¶t be able to understand the wave count until we get
some more price action. It seems pretty clear that ³something´ concluded at 1202 with
1168.75 looking like medium term resistance. The action last week should have served as
a strong warning to investors that it¶s probably time to get defensive for the next several
months. New bears looking for the ultimate ³Primary 3´ societal collapse phase should
have some ³reservations´ given the similarity between this collapse and the 1987 Crash.
After that ³eventful´ day in October of 1987, the markets started to grind unrelentingly
higher, frustrating anyone who was looking for the ³next wave down.´ In terms of a trading
posture, the risk remains to the downside. Traders should be bearish this market but must
accept the fact that ³volatility´ seems present for the next several months. In other words,
be prepared for big bounces. I don¶t expect 1202 to be bettered for a long time. That looks
like a ³top´ for at least the next several months.


0 %0 
It¶s interesting how these two ³market dislocation´ events share similar looks and trajectories. S&P bulls can only hope that we get a
similar outcome--the end of the 1987 crash was a µdecent¶ time to be long stocks. Unfortunately, we¶re in the midst of a completely
different set of circumstances today, so bulls looking for this kind of silver lining seemed destined for disappointment. In the meantime,
we now know for certain what computer driven self-feeding panic looks likeM.

i ,›&0 ’ 
.+ , / 0 !

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