Cable is trying to consolidate after last week’s plunge to 1.3505, a level not seen in nearly 14 years. Though there is scope for another day or 2 of ranging and even slightly higher prices nearby, the recent gains are seen as a correction (wave 4 in the fall from the Dec 17th high at 1.5720) and with eventual new lows below 1.3505 after (within wave 5, see numbering and “ideal” scenario in red in daily chart below). Note too the daily macd remains in sell mode, also suggesting that no important bottom is in place (at least so far). For now, would use nearby gains toward 1.4210/25 (both the previously broken falling support line from Nov and a 38% retracement of wave 3, from the Jan 8th high at 1.5370) as a chance to short. Initially use a wide stop on a close above the multi-week bearish trendline (currently at 1.4575), but will want to lower it more aggressively with the market and especially new lows below 1.3505,l as further declines may be short-lived, and part of a longer term bottoming (see longer term below).
Longer term, no change in the long held, longer term bias as the market has achieved the next target at 1.3690 (June 2001 low) and still view the market as within the final downleg in the whole fall from the March high at 2.0395. Note too that the market is oversold after the sharp declines over the last year (down over 35%) while the weekly macd is near a new buy signal, and suggests that risk is rising for at least 3-6 months of correcting higher and a minimum 15-20 big figure bounce. However, the nearer term downside pattern is still not “complete” (see shorter term above) suggesting at least some further downside ahead. For now, would maintain the long held, longer term bearish bias but will be looking for signs of a potentially major bottom (and chance to reverse to the long side) on new lows below 1.3505.
Longer term, no change in the long held, longer term bias as the market has achieved the next target at 1.3690 (June 2001 low) and still view the market as within the final downleg in the whole fall from the March high at 2.0395. Note too that the market is oversold after the sharp declines over the last year (down over 35%) while the weekly macd is near a new buy signal, and suggests that risk is rising for at least 3-6 months of correcting higher and a minimum 15-20 big figure bounce. However, the nearer term downside pattern is still not “complete” (see shorter term above) suggesting at least some further downside ahead. For now, would maintain the long held, longer term bearish bias but will be looking for signs of a potentially major bottom (and chance to reverse to the long side) on new lows below 1.3505.
