A lot has been said about the JGB interest rates and others blaming new margin requirements, but in essence it just looks like the typical end of an extended wave 3 move. I do agree that it looks ominous over the medium term for the Nikkei with longer term targets still focused on sub 5000, but will stick with the count that we have some 4′s and 5′s yet to go through before it’s done.

An alternate count would have the wave C potentially finishing after the next iv and v rather than the larger scale 4 and 5, but that’s just a possibility for the moment. As long as price stays above 12,650 the count is alive for further upside.

(unfortunately these charts haven’t updated with yesterdays moves into lower 14,000 yet, but the picture remains the same for the count.)

As has been the want of this market over the last few months, I’ll exercise some patience in allowing it to confirm before calling it done and dusted.

As long as 86-86.20 isn’t breached the main count stands and is actually looking better as time progresses which is often a good sign. Let’s see.

The problem moving forward will then be identifying this upcoming wave 4 and its bottom. Whether it’s going to be a deep or a shallow retracement is the question, and for now there’s no way to tell. But I’m leaning towards shallow simply due to the endless extensions we’d gone through to get to the top of 3. Perhaps we’ll get more in time as it works out a triangle structure, however, this is a wave 4 and they are often the most difficult waves to trade as they can take many forms.

For now I’ll look for the bounces to get to around the 15,400 area and stay under 15,500 and target closer to 15,100-15,000 at least. The daily trendline still isn’t breached and would be a good added confirmation of the turn down, which is right at yesterdays low of 15,285 for today. Often wave 4′s like to move down to the price area’s of previous wave 4 or wave 2 lows. I have some circled zones on the daily chart as possible targets in those areas. Interestingly they coincide with a number of fibonacci retracement targets also.

There are a few extension projections between 15,700-16,100, but I am leaning towards those being hit in the vth wave not this iii. For now the trend remains strongly up which is typical for 3rd waves but we are coming into the zone where markets generally like to take a bit of a break. In general this isn’t the area to become aggressive with the upside, is probably the important point I’m trying to make here. It’s a place to consider taking profits or at least raising stops to lock in profits. There may be a better place to buy again when the larger wave 4 finds a bottom if we can identify some clear indications of a turn.

Although correlations are generally fleeting at best, and not for basing a true count on, coincidentally the Nikkei looks to be lining up fairly well with the USD/JPY count with a small higher high to finish off it’s larger wave 3 as well.

The count is full which has me looking for a top. In the short-term (inside the next 3-5 days) we can have a couple of 3, 4, 5 moves that take this closer to the next extension target at 15,659, but with highs yesterday of 15,405 we are well in the zone for a top for this wave 3, which should have the next set of major moves as the wave 4 down. Internal projections based on the wave (i) are at 15,396… 15,492… and 15,541, with the larger wave 1 projection at 15,502, placing a lot of targets in this 15,400-15,660 range for a top of the 3.

Support levels are now in the 15,280-15,300 range, which includes  yesterday’s low in the futures and the short-term trendline on the daily chart. It’s not uncommon in these ending moves to get a bit of a price blowoff higher so using the support levels will be the more conservative approach if looking for either buying or selling positions. Trading can still follow the buying at support levels with tight risk,  and when price breaks support for selling, allowing for tight risk and good reward profiles. If it fits your own plan.

The currencies have been enjoying some volatility and essentially haven’t traveled anywhere in what is typical wave 4 price action. The GBPUSD is about the only one that’s tested lower into it’s 61.8% fib target and holding there.

This can continue a little longer until the wave 5 breaks out of the wave 4 range and up to the targets. Price should hold above 83.04 in this wave 4, if broken  would be the first clue that this lot of upside moves was finishing and wave 5 is already in place. With 82.61 as the confirmation of the turn down.

The overall picture that the retracement higher is ongoing will depend on the 1.50-1.49 zone holding the downside. A bit of a bounce is developing this early Monday morning and would be looking for the next downside move to preferably target the 61.8% fib and then hold the1.5100 price zone before making new highs above 1.56 up to the preferred targets in the 1.60-1.64 range. There’s a lot of price action to get through before reaching any of those targets so will be looking to see where any of those assessments fail.

Any strong break of those support levels in an impulsive manner reverts back to the triangle is complete and targets of 1.35 and below come right into focus.

Targets remain in the 1230 – 1318 range for this next set of moves. Once this next lot of downside moves is done, the real test of whether Gold has moved into the longer term bear trend down to targets under 800 has arrived, or we’re in a simple 3-wave retracement similar to the ABC I have marked on the weekly chart will be the next set of questions to answer. Sentiment and COT positions are hinting that the downside is becoming unsustainable so the structure of the next lot of upside moves over the summer should help define which of the directions we should focus on.

For now, the trend is down and until that sequence is broken that will remain the focus.