Elliott Wave Update - October 8th

So today we had news that under normal market conditions would have caused a major sell off but instead we rallied. It should have been obvious a few weeks ago how the market could keep going up under such bad economic conditions but now we have the clear answer. The markets have been pricing in Quantitative Easing 2.0 but now that everyone aware of the real reason we are rallying (as opposed to lessening double dip concerns), there is a chance most of the QE is priced in. The market is now in a rising wedge which usually marks the end of a 5th wave of some degree so we'll see if the madness continues Monday or we wake up to a sell off.

I personally think what China signals over the IMF meeting this weekend will have a big impact on the dollar. If China stays put on their policy then the dollar will probably stop falling. The Remimbi is essentially pegged to the US dollar and when the dollar falls, so does the Remimbi which in turn make Chinese exports even more competitive around the world. So central banks will probably prevent the dollar from losing more value. However, if China signals they will be flexible allow the currency to appreciate then the dollar will probably continue to fall and the market will continue to go up regardless of good or bad news.

I was able to day trade SDS today to better my position a few points. My cost average now is 1106 so I am hoping to we'll get a retrace soon so I cover all shorts. This QE business is going to cause another imbalance to the markets and I'm afraid we're in for a few surprises in the next few months.. and that's in addition to the Foreclosure mess that will probably result in more bank loses and Bank Bailout 2.0