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A$, major top in place (or at least close).....

Fri, Oct 30 2009, 05:55 GMT
by David Solin

FXA

In the Oct 23rd email on the a$, affirmed the long position (rebought on Aug 20th .8310) and despite trading above the key rising trendline/ceiling of the large rising wedge from Jan (then support), warned of near term concerns (and risk of throw-over, false break).
The market did indeed reverse back below there the next day, breaking below the stop at .9150 (closed at .8970 for a 440 tick profit), and spiking the way down to a low at .8945 (50% retracement from the Oct 2nd low at .8575, see daily chart below). The market has bounced sharply from that support, but the action is seen as part of a larger topping (often lots of volatility at important turning points). Note too that the daily macd is in sell mode (see bottom of daily chart below), and adding weight to this topping/bearish view. So for now, would short here (currently at .9155) for a resumption of the declines back to the earlier .8945/55 low, the base of the large wedge (currently at .8800/50) and eventually below (likely sharply). Initially stop on a close back above the ceiling (currently at .9230/40). Though it would not change the view of a bigger top forming, it would suggest gains back to the Oct 21st high at .9325 and even above (though likely to be limited, and would be looking to resell at higher levels if that does indeed occur).

Longer term, no change as the market continues to trade within the large rising wedge that has been forming for nearly the last year. These patterns break down to 5 legs, suggesting that an important top is in place (or at least close, within wave v, see numbering on weekly chart below), and with a sharp, downside break of the base potentially ahead. Switched the longer term bias to the bullish side on March 15th at .6550 and for now given the rapidly increasing bearishness, would switch to neutral here (currently at .9155). Note too will be looking for further confirmation of a more important top (expected nearby) to switch to the bearish side.

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Published on  Fri, Oct 30 2009, 06:05 GMT