Overdue Washout Grips Markets-Stocks to Open…Down?!

DailyFX   |  February 10 2012 8:30 EST

In general, expect more 2 way action during the US session as is typical following a sharp gap down. AUDUSD levels to watch range from 10600 to 10715.

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Morning Notes:

In general, expect more 2 way action during the US session as is typical following a sharp gap down.

US Indices – Futures are down sharply overnight as complacency takes a backseat to panic (especially for those that bought at the top). Downside levels to watch for the S&P are 1329.75, 1319.50 (futures) and 1333.47, 1321 (index). Structure of the decline will tell us if an important top is in place. For now, watch mentioned levels for support.

USDOLLAR (Ticker: USDOLLAR): Has ticked up sharply and is testing the February high. The next resistance is 9835. The sharp move off of the low could be the beginning of an impulse. Waves 4 and 5 would need to unfold from here.

EURUSD – “Of note however is the 5 wave structure from the 2/6 low. A corrective decline into 13170-13200 would present an opportunity to get long.” The EURUSD is already below 13200 and it feels scary buying sharp weakness but it should. Support extends to 13140. A drop below 13026 or a 5 wave decline from the top (it’s just 3 at the moment) would signal that the trend has changed from up to down (whichever one happens first).

Prepared by Jamie Saettele, CMT

AUDUSD – The AUDUSD has finally come off sharply. Initial support at 10690 has been broken so focus is on the 20 day average at 10600 and channel support at 10570 (also the February low and 1/23 high). I’ll treat this drop as corrective until proven otherwise. Resistance for today is 10680 and 10715.

Prepared by Jamie Saettele, CMT

NZDUSD – “The long wick above today’s candle may signal the beginning of a corrective decline (4th wave) down to 8250. 8250 is former resistance (1/27 high) and Elliott channel support reinforces this level (at 8235 Thursday and 8254 on Friday).” Channel support and 8250 have already been reached so focus is on the 20 day average at 8200. Resistance today is 8275 and 8310.

Prepared by Jamie Saettele, CMT

USDJPY – The USDJPY is up for a 4th consecutive day and the advance is unfolding in an impulsive manner. I’ll use hiccups to add to longs. Support is 7740 and risk on longs should be kept to 7670. Of note is the 200 day average just above current price at 7808 and the December/January highs at 7830.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

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