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The stock market was higher in the past week and pushed the U. S. dollar index down towards the 8
4. 00 support region.

The overall price action however, was very slow on forex, even when the Wall Street session saw a bounce for more than 3% on Wednesday, the most since May 11th 2010.

The Eur/Usd moved higher from 1. 2555 Sunday open to 1. 2722 weekly highs, but on a very thin volume and slow price action.

The reason for a slow, upward price action could be a falling trend line from 1. 5140 region (December 3rd, 2010), which in fact reacted as a huge resistance on Friday during the European session when the Eur/Usd fell from 1. 2722 highs towards the 1. 2600 region.

The weekly close on the pair was around 1. 2640, 80 pips below the trend line resistance, and that could be a bearish signal for the start of the coming week (Monday, Tuesday), as traders were unable to push the pair above the trend-line. [I:http://articoolz.com/wp-content/uploads/2010/07/GregaHorvat0.gif]Dollar, however, will strengthen only if stock market finds sellers. But for the mid-term, that could be a problem, especially because of the S&P 500 wave structure. From an Elliott Wave Perspective a bearish run on S&P 500 from 1. 2220 top is not over yet, no doubt, but the question is how to count a decline? ! Well, we are monitoring two wave counts and important price points that will confirm the correct count. Anyway, what we know, and what is the most important, is that a recent bounce from 1010 region is only a correction, a short covering rally from an oversold bounce. But where this correction will end? ! It may trade up even to 1140-60 region, IF YOU COUNT A DECLINE FROM 1220 A LEADING DIAGONAL as shown on the chart below. [I:http://articoolz.com/wp-content/uploads/2010/07/GregaHorvat1.gif]Well, if 1140-60 region is reached while the 1010 support holds, then optimism will come back into the market, and investors will move from Short into Long positions and they will be sure that a decline from 12220 was only a correction and that new highs are next. But at that time it will be too late to buy the market! ! Market will reverse and will fall like a stone, because when something is fully expected, the opposite reaction is seen! ! Like the past week per example; a lot of traders and investors, even I, were expecting a huge move lower after the 1040 was broken, but market made an opposite move, it bounced higher and took out traders that were looking for a huge Short move and also those who were positioned Long with stops down there! ! If you are an Elliott Wave trader, then you exactly know what I am talking about.

The Elliott Wave

Theory is a detailed description of how groups of people behave.

It reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific and measurable patterns. Elliott Wave

Theory gives you an ability to predict the Long-term and Short-term market moves with some very simple rules and guidelines.
If you do not want to miss a trading opportunity, or if you don't have time to analyze the charts everyday and monitor the intra-day wave counts. . . we are here for you! ! Check out Our Elliott Wave Service now and Register today.

Articoolz.com > Stocks > U.S. Dollar And Stocks “From Pessimism To Optimism”