Weekly Market Overview

08.10.2022 02:15 GMT

Hello Traders

World Indices remain to be in larger degree pullback to correct cycle from March 2020 low in 3, 7, or 11 swing and thus Stage 3 remains in progress. $DAX has broken below previous low on 3/7/2022 low at 12438.85 and now shows bearish sequence from 11/18/2021 high favoring further downside towards 8695 – 11077. While DAX hasn’t reached the target area, World Indices have scope to see further downside in 4 hour cycle and rally can fail in 3, 7, 11 swings. In 1 hour cycle however, cycle from late March/April 2022 peak has completed in $DAX while cycle from January 2022 peak ended in US Indices and Indices have scope to extend higher in larger degree 3, 7, or 11 swing before the decline resumes.

Yen pairs ended correction to cycle from March 2020 low and already trading in Stage 4 in the weekly time frame. However, near term they can be sideways to lower waiting for Indices to end the correction lower and $DXY to peak. $EURJPY is correcting cycle from 3/7/2022 low in larger degree 3, 7, or 11 swing while other Yen pairs like $AUDJPY, $CADJPY and $GBPJPY correct larger degree cycle from 2021 low. Pullback however should continue to find support in 3, 7, or 11 swing for further upside to resume the Stage 4 rally.

Within USD Group, $AUDUSD shows an incomplete bearish sequence from February 25, 2021 high, suggesting USD still trades in Stage 3 and continue to be supported. $USDX is still trading impulsively in wave ((3)) of v within the cycle from February-2018 low in daily time frame and should continue to stay supported in 3, 7, 11 swing before ending the larger cycle from 2008 low. Once the Dollar Index finishes larger cycle, it should end Stage 3 and do larger degree correction to cycle from March 2008. We like buying US Dollar pullback in 3, 7, or 11 swing.

We can divide our strategies into 3 different stages corresponding to different time frame: 1) In Stage 1 (the nearest term), we continue to like buying pullback in US Dollar at the extreme area. If selling GBPUSD from the 4 hour blue box extreme area, position is currently already risk free now. If US Dollar is doing a double correction, we like buying USD again in 7 or 11 swing by selling EURUSD, selling GBPUSD, buying USDCAD, etc at the next extreme area 2) In Stage 2, we can expect USD to extend higher, and commodities to extend lower. At this stage, we like buying Gold $XAUUSD and Oil $CL_F at their daily/weekly blue box. Finally 3) In Stage 3, we can expect Indices and Yen pairs rally, USD to pull back, and commodities to rally. At this stage, we should see Indices such as $DAX shows 3 waves rally, and we like selling $DAX in 3 swing against 3/29/2022 high for further downside.

Indices

World Indices remain to be in larger degree pullback to correct cycle from March 2020 low in 3, 7 or 11 swings. DAX has broken below previous low on 3/7/2022 low at 12438.85 and now shows bearish sequence from 11/18/2021 high favoring further downside towards 8695 – 11077. Until DAX reaches this area, rally in Indices can fail in 3, 7, or 11 swing. In 1 hour shorter cycle, cycle from late March/April 2022 peak in DAX has ended, and cycle from January 2022 high in US Indices have ended, so they can extend higher in larger degree 3, 7 or 11 swing to correct that cycle before they resume lower. $YM_F Dow Futures cycle from 1/5/2022 high has ended and the Index is correcting that cycle 3 or 7 swing before further downside to resume correction to cycle from March 2020 low. Near term, cycle from 6.17.2022 low is near complete, and Index can see a 3 waves pullback soon to correct that cycle but while dips stay above 6/17/2022 low at 29610, Index can extend higher in 7 swing to correct cycle from 1/5/2022 high. $DAX has now broken below previous low on 3/7/2022 low at 12438.85 and shows bearish sequence from 11/18/2021 high. Near term, while below 14925.25, rally should fail in 3, 7, or 11 swing for further downside. We like selling the rally in 3, 7, or 11 swing at the extreme area when blue box is presented.

Risk Management:

Regardless on what trading system one uses, getting stopped out of trades is a normal part of trading. That’s why it’s very important to keep your risks as low as possible. Position size should be adjusted to trader’s capital properly based on entry level and stop loss so losses are controlled. We advise to risk only 1%-2% per trade. This is to ensure that sufficient capital remains in your account to continue trading when taking into consideration the occasional stop loss getting triggered.

The highest probability trades are the ones with green/red right side tags or bullish/bearish sequences combined with a blue box. Black turning arrows on charts show the highest probability path at the time of the chart being printed however the highest probability path is not the same as the highest probability trade. This is why we focus on the green/red right side tags or the bullish/bearish sequence combined with blue boxes to trade.

Trade Safe & Good Luck!

Hendra Lau

Elliottwave-Forecast Team