Hey Guys,

Here's a couple charts of the JPY crosses. The first is a weekly chart of CHF/JPY. Price looks to have broken down from an ending diagonal and has since completed wave (i) of the new decline. The second chart is an 8-hour chart of EUR/JPY showing a breakdown of the decline. This count shows the decline completed in five waves and currently correcting in a wave (2).

Over the next week or two, we should get an awesome opportunity to short the JPY crosses as they finish their corrective second waves.

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WASHINGTON - The Bush administration sketched out an effort on Friday to confront the worst U.S. financial crisis in decades, describing a plan that could cost taxpayers hundreds of billions of dollars to buy up bad mortgages and other toxic debt that has unhinged Wall Street.

President George W. Bush, flanked by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, acknowledged that the program will put a "significant amount of taxpayers' money on the line."

The administration is asking Congress to give it sweeping new powers to execute the plan. Paulson said it "needs to be big enough to make a real difference and get to the heart of the problem."

Paulson gave few details but said he would work through the weekend with leaders of Congress from both parties to flesh out the program, the biggest proposed government intervention in financial markets since the Great Depression of the 1930s. Members of the Senate Banking Committee said they had received no details of the proposal.

The government steps were clearly welcomed by financial markets. As Paulson spoke, the Dow Jones industrials were up over 300 points and at one point had soared by 450 points.

Before the markets opened, the government announced plans to temporarily insure money-market deposits and to block short-selling in financial securities. Short selling is a trading method that bets the stocks will go down.

Speaking to reporters at the Treasury Department, Paulson said that the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.

"I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said in a prepared statement.

"The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing," Paulson said.


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Live vote: Is the U.S. government doing enough?


Fannie, Freddie to purchase more securities
Paulson said mortgage giants Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. The government seized control of the mortgage giants this month.

Paulson also said Friday that the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crisis.

"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.

At a news conference in which he only took three questions, Paulson was asked the approximate dollar size of the government intervention. "We're talking hundreds of billions," he said.

Paulson did not address specifics about the plan to buy back bad debt or whether the government would take a direct stake in troubled banks in exchange for its help.

"These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted," Paulson said.

He said that the administration would present Congress with a proposed legislative package and then work with lawmakers "to flesh out the details through the weekend. And we're going to be asking them to take action on legislation next week."

"This is what we need to do. Because for some time we've been saying that the root cause of the problems in our economy and our financial system is housing, and until we get stability in the housing market we are not going to get stability in our financial markets," he said.



------ THE BIGGEST CRIMINALS OF OUR TIME --------- >>> THEY GET TO ROB EVERYBODY LEGALLY

I'm not completely buying into what the United States Government is doing, but at least they are trying something. They've got to at least try to salvage the economy before it's gone too far down. The market obviously liked what they are doing as the DOW is up today and has finished the week down only 0.8%. Given all that's going on, 0.8% isn't too bad.

-You hear all this talk about how taxpayers are getting shafted and how we're going to be paying off this debt and blah blah blah... But you have to remember that the stupid taxpayers are partly to blame for the state of the economy. After all, the taxpayers did go out and buy homes that they knew they couldn't afford. So maybe they should take responsibility and help pay down this massive debt. People seem to be blaming the banks, who aren't completely innocent obviously, but if a homeowner knew they couldn't afford a large house payment they shouldn't have taken the loan. Just because something is being offered to you, doesn't mean you have to take all of it.

-The other thing I'm curious about is what would happen if the government didn't step in and help these companies out? These companies, Fannie-Freddie-AIG-and whoever else is next on the list, are massive. If they were all to go belly up right now we'd surely be into a recession/depression. So maybe, even though it's not too popular right now, this decision by the government to step in may just help things a little. If nothing else, it may facilitate a slow decline rather than an abrupt and outright crash, which would be slightly easier to handle and brace for. I'd rather pay a little more in taxes over the next several years rather than see the economy go into a depression. So let's hope this intervention works out.

-Just my two cents... Have a good weekend.

i am starting to like that usdjpy short position, there is a perfect impulse down on 1min chart. a bit hard to put the count into it, since its small, but you can check it for yourself

as it is not sure whether this is B or 1 of 3 i will buy another lot on sunday`s open to apply a two lot strategy: the second lot with target around 105; still 200 pips to make..

there was some nice article where a trader mentioned that he is sceptical about the bailout plan, and he put the classic tale in the perfect place: buy the rumor, sell the news.

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Here's a few longer term charts of USDCHF to keep our heads focused on the bigger picture... This week closed leaving a huge bearish engulfing candle on the weekly chart at a prior multi-year support area that has obviously now become major resistance on the upside.. This weeks price action has now given us confirmation that the bear trend has returned and reversed this pair back downward. Price remains in a downward Multi Year Diagonal Triangle with much further downside left to play out over the coming years on the monthly chart as well...

Over the next 6 - 12 months or so I expect price to come back to the prior fib support zone around the 100.00 Handle...

We have about a thousand Pip target on the downside from current price

I'm long term bearish against 1.1417 Although I don't think the market will get back above 1.1279

It's uncanny how the market reversed right where it did... Just goes to show us that the market does have memory

QSX, my friend;
I like your charts and always read with interest your analysis.
But, can you put a timeline on your charts, or if impossible, at least a comment like 5 min chart, hourly chart, or similar?

Justy;
I do not disagree, but don't you think that the US government should have put tighter controls on the banks and financial institutions few years ago, before the problem snowballed to the size of the largest monster ever in the history?
The excuse that Paulson, or bush or greenspan didn't know about the coming crisis is totally invalid. I knew at least since 2005 that we are in a quagmire that will swallow the economy, why didn't they?
Even this year in May Bush was still in denial, making speeches that the problem does not even exist. Titanic was sinking and the captain lied.
I feel sorry for my American friends, who will pay dearly for the stupidity of their leaders.
Even today the speech from Bush was that it is a free market economy. Free to do what? Steal, plunder, rape? Nice guys, really.
And the fact that the bank president made 100 million a year will not even amount to 1% of the damage he created.

well, i was trying to make charts smaller as you all wanted, so i cut out most of it, hah. as i mentioned last chart was 1min usdjpy, last action before the close, drop from 108.

anyway, great charts everyone, i am really enjoying it here, i think together we fit quite good in solving the puzzles..

about the last topic, as elliotticians, we all should believe that mass psychology lead to those current effects, which standard economists dont believe. but how can you stop the crowd from selling? its like standing in front of a train, no matter how much government money you have. that all that has happend is wrong is clear, that someone has made alot of money of a credit mania is true, also, but what can we do about it? bernanke & co are trying the best they can from their point of view to stop the snowball, and thats all they can do. i think there is no use in talking about it, as it is the most natural thing to happen..
i am only concerned about credit conditions, that they probably shut down our forex trades or leverage in the future and we wont be able to make money out of it, but that is in a distant dark future..

nice weekend all.

Hey Big Mike (and all my fellow Ellioticians),

I hope theres room in that Euro bull camp for me. Yes, its finally happened. After all this time, I have become a Euro bull!...(at least for a few more weeks to months) The 3 wise men have spoken (monthly, weekly, and daily) and they all indicate a new high for the Euro. I believe Big mike has stuck with this count since the decline began and I have now adopted it as my primary count for the Euro. All subdivisions fit like a glove.

Looking at a monthly chart, Its crystal clear now why wave 4 (white monthly)fooled even the most astute of ellioticians. It appeared wave 4 came down in 5 waves when in fact, it was a c of 4. B of 4 is also 3 waves. PERFECT!

Now the weekly. I was reluctant to buy into Big Mikes count calling for a new high simply cause this decline looks way too large for a wave IV (blue). But here's the interesting part. Wave II (blue weekly) although it looks small in price, in time it was indeed 5 months (or eighteen weeks long). No other correction since then has come close in time...until now. Wave IV, with its expanded b, is 5 months long (or 20 weeks)...VIRTUALLY EQUAL IN TIME AS WAVE II. No other correction did that. When looking for wave structures within an impulse wave, I like to see wave 4 close to equal in time as wave 2. Although its not necessary, it does make for a good argument as to which wave is actual wave 4 within the impulse and that it may be time to start looking for a terminal wave 5. This will also help in distinguishing a bull trap (or bear trap) as the one going on with the Euro right now.

Now, this count means were headed for V of 5. That means, we need to look for comments in the media such as "the dollar is dead!". Once we see this, its time to HEAVILY SHORT THE EURO. This also means were might get a new high in gold and oil as well thereby reviving the inflation (or stagflation) argument at least until the dollar finally bottoms...so things are about to get interesting. Big Mike, I believe whole heartedly that you are correct on this one. Keep up the good work!

As far as wave 5 target goes, we should hit a minimum 1.6400. That is where wave 5 is equal to 100% of 1 through ORTHODOX 3 (remember wave 3 did not end where it appears to have ended due to the expanded FLAT wave 4...that's y I say orthodox 3) projected from 4 on the MONTHLY CHART.

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Hi Italm,

Thanks for your detailed insights into this pair. Your point is very well valid as it sppears that now we are in a upward channel after forming bottom at 1.3878.

Interestingly you also mentioned that there will be new highs for gold in coming months. EWI and other WS Experts are saying that Gold will touch 650 before making all time new highs. So can you pls review the gold in view of the last week's volatile movement. I am short in Gold from Friday with an immediate target of 800 in next two weeks? Cheers

Gbp/Jpy

The Bulls are having a Great Day ............ !

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Chart Below -----


Does any one have a stock chart of AIG ?
- Please post it if you can , thanx alot

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Eur/Usd


Short Term Wave Count :

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Hey SKS,
While I don't trade Gold, Im willng to try and decifer whats going on and perhaps show you what I see. I really think you nned to be careful with this one. See the monthly chart...the trend is FIRMLY UP and the price looks to have bounce back up after touching the yellow one ...(34 exponentianl moving average). Your going against the trend here so you need to be extra vigilant. I hope your using good money management. EWI wile they are the "leading experts" in Elliotwave and most of us began our journey as Ellioticians through them, we can't forget that they are LEGENDARY for picking tops and bottoms too early. your best bet is to look at the waves that have already transpired and see if you can see any clear impulse and corrective waves.

The way I like to look at the big picture is to consult the 3 wise men...(monthly, weekly, and daily chart). So we know the monthly trend is up. While I do see 5 wave, is wave 5 really over?

Well looking at the 2nd wise man, I don't think so. The weekly chart shows 3 waves up (yellow) but then it get unclear. (I suspect government intervention in markets that may cause a slight disruption in the ave count but at always ends up fixing itself...but thats a whole other story). Anyways, after wave 3 yellow, you clearly see 3waves down, then 3 waves up. Had that been the top, you would have seen a 5 down.

Now it where it gets confusing. So far price action looks like we have a 3 wave structure down. This is better seen on the daily chart. (its also the week we havd the most governmanet intervention). This three wave structure LOOKS BEARISH TO ME, but it couldbe some funky 5 wave down for C of 4. I put the bear count on the daily in dark blue and the bull count in light blue. So right now, itss too unlcear. Stochatics is bulls on weekly and daily but who know. I wouldn't touch it right now. Id wait for it to make a new high to short or wait until pattern clears up. Sorry I couldn't be more help. The first 2 wise men (monthly and weekly) look to be in agreement as we need another high, but the third wise man (daily) looks unsure. If I had to put my money somewhere, I wouldn't bet against the first 2 wise men. Better yet, Id wait to short.
Sorry I couldnt come up with a conclusive answer for you but I hope this helps. At the very least, at least we know to be extra vigilant with this one. Good luck!

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EURAUD turned down from a high and is in wave 3 lower at the moment... the 161.8 fib extension off wave 1 is at 1.7057 so we should see price drop to that level before sideways price action in wave 4

HOURLY CHARTS BELOW

Hi QSX,
I am also short usd jpy from 107.64 and I am targeting first 105.68 and then offcourse like you mentioned 105 is dueable!!
GL,