When focusing on the bigger picture, there is little evidence to suggest that the USDJPY is headed higher. There is nothing to suggest that the rally from 95.72 is not a 4th wave. A 50% Fibo at 105.18 coincides with the lower region of a congestion zone; which should act as resistance (right now). We are bearish as long as price is below 107.20. An unexpected breach of that level would cause to re-evaluate.
The structure of the rally from 95.72 is additional evidence that the larger trend is still down. The advance consists of overlapping waves and can be counted as a double zigzag (W-X-Y); which is two 3 wave segments connected by an X wave. We’ll be looking to confirm a top next week or the week after.
Analyzing the Dow can help confirm or refute a Yen count. Since the October 2007 top above 14,000, declines in the Dow are impulsive (5 waves) and advances are corrective (3 waves). This is evidence of a bear market in its early stages and wave iii of 3 is ready to begin. The area just above 13,100 has acted as support and resistance since May 2007; today’s high at 13,132.30 could be the top of wave ii of 3. If so, then a major decline is upon us.
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