The count on the daily, which shows 5 waves down from the 2007 high, indicates that risk of a sharp advance is high. The count that I am working with now treats the rally from 1.35 to 1.4990 as wave A of a flat (flats have subwaves 3-3-5). B waves of flats retrace a significant portion of wave A, sometimes retracing more than 100% of wave A (in the case of an expanded flat). I wrote last week that “with this risk, being long at this point against 1.3990 is risky. Still, the next large move is expected to be up through 1.4990; it is unclear whether or not this occurs prior to a test of 1.35.” With this morning’s developments, expect a test of 1.35 prior to a low.
