| stock market trading chart pattern research |
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| Saturday, March 18, 2006 |
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Sunday March 19th 2007
Weekend Update - $USD, $GASO, $COPPER, $GYX
Good Morning. You may recall that 3 updates ago, I discussed the reasons why the market may go lower and then reverse higher from those upcoming lows. At the time, I stated that the QQQQ's (cash indexes) were making new highs. However, NQ futures were not confirming those highs. This is called non-confirmation and it caused a sell-off in the Nasdaq. Now the exact opposite is occurring. This past week, the cash indexes on the $INDU and $SPX made new lows. However, YM and ES futures did not make new lows along with the indexes this week. Futures did not confirm the move lower, meaning that futures have bottomed and are ready to reverse upwards next week.
If you want to check futures, just click on the link that says Futures Update on the Member's Homepage. I update the Futures page every single day. I update the S&P 500 Futures which is ES, NQ is Nasdaq futures, Dow is YM futures. In the futures update, you will also get all sorts of different commodity futures updates. I typically update, Gold, Crude Oil, Natural Gas, Heating Oil, Platinum, and the XRB, which is the symbol for RBOB gasoline futures.
In this update, I want to talk about some of the things that I am seeing in the charts of certain commodity and currency sectors. I will talk about what I am seeing and what has me sitting on the edge of my seat from a technical analysis point of view.
The US Dollar Index ($USD)- Daily Chart Looking at the daily chart, you can see that the dollar has remained in a bearish trend so far this year. When you look at the daily chart you can see that the $USD rallied up to back kiss the 200 EMA and then promptly reversed course and has been going down ever since then. The $USD has gotten clobbered in the past 2 months. In fact, on Friday the $USD made new 2007 year lows at $83.03. This is bearish. Now it remains to be seen if the December '06 $82.35 lows will be taken out. From the chart it looks like those '06 lows may be taken out. The indicators and oscillators remain in a bearish trend reversal and are pointing down illustrating that the $USD is going lower from here. Nothing good can come from the decline in the dollar. This will result in a debasement of our currency and a rise in tangible assets such as all commodities and in particular, $Gold, which people will seek out as an investment to hedge against the deterioration of the $USD. Commodities will rise and our dollar will deteriorate and it will loose it's purchasing power for basic goods. We are going to need more money to buy basic necessities. I fail to see how this can be positive. What good can come of this? The only good that can result form the dollar's decline is to invest in commodity based stocks that will rise while the dollar drops. Now let us have a look at the $GASO chart. The dollar is bearish.
$GASO - Unleaded Gasoline - (Continuous Contract End of Day)- Bottoming Triangle Pattern I am updating$GASO because I am excited about this chart. Well, not really, because who want's to pay more at the pump? But, when the analysis is, let's say is parabolic, it is hard not to update. You can see that this year's move up in gasoline has been quite significant. $GASO has outperformed all the other commodities in it's recent parabolic up move. It is also worth noting that unleaded gasoline is reaching new swing highs for 2007 at $1.955, while the dollar goes down. $GASO has not seen this price level since August of '06. August of last year! Remember when 11 hurricanes in the gulf was a coming? Yep. We, we are back to those levels. $GASO is in a bullish bottoming triangle pattern. The indicators and oscillators are showing bullish divergence and it is in a 123 bullish trend reversal. $GASO is bullish.
In addition, commodities have outperformed the broader market indexes so far this year. The commodity sector has just been on fire! Now, looking at the commodities, I also want to mention that as far as gasoline goes, and as far as a lot of commodities go, like gold and Silver, we are going back to highs we have not seen since last may of last year in gold and silver. This is why our portfolio is overweight the commodity sectors. Now let's have a look at $copper.
$COPPER - Weekly Chart - Symmetrical Triangle Pattern. The daily chart illustrates that $Copper has been in a waterfall downwards ever since it placed it's highs at 394.90 in the spring of 2006. $Copper has now placed it's lows at 238.50 and has held it's long term uptrend line this year. It has completed it's impulse wave 3 to wave four counter trend move, which contains a lettered ABC zig zag move down to the uptrend line. $Copper is now ready to resume it's 5th wave uptrend. $Copper gained 8% this past week! However, it still needs to take out the downtrend line to confirm that the 5th impulse wave up move is in place. Look at the PPO, at wave 3, it moves in tandem with the wave count and price moves. The PPO has bottomed is reversing up now getting ready for the 5th wave up move. The chart looks bullish going forward. I also want to point out that $copper prices are also related to D - Ram which is also a commodity. $Copper, like all the other commodities, is going up. This up move in the commodity sector points to inflation. Just as the dollar decline points to inflation. $Copper stocks are front running the metal and outperforming it. $Copper is bullish.
$GYX - Weekly Chart - Industrial Metal Prices - Symmetrical Triangle Pattern - The daily chart illustrates that it is in a bullish symmetrical triangle pattern. It is very similar to the $Copper chart. In fact, the $GYX made new 2007 highs this past week at 467.66. This is bullish for the base metals sectors. It has completed it's impulse wave 3 to wave four counter trend move, which contains a lettered ABC irregular flat move down to the 50 EMA. The indicators and oscillators have bottomed are reversing to the upside. The $GYX is now beginning it's impulse wave 5 up move.$GYX is bullish.
Elliott Wave Structure
I also want to talk about wave structure. Wave structure defines the difference between impulse and a corrective waves. It is important to realize that when it comes to wave structure, numbers can never follow numbers. Numbers can only follow lettered waves. For example you have 5 impulse waves up, followed by a lettered corrective move down. Here is an example: Numbered impulse Waves up 1,2,3,4,5 followed by a lettered corrective ABC down, which is then followed by another impulse wave 12345 up move. That is why it is important to know wave structure because it defines the difference between impulse moves up or down and corrective moves up or down.
To conclude, I believe that these 4 charts indicate that inflation is here or arriving shortly. As traders we can hedge against inflation by investing in the bullish commodity sectors.
Edited by :Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com
daisy@trending123.com
$USD--IT'S AWFUL (NEW 2007 YEAR LOWS)
$GASO--NEW SWING HIGHS (NEW 2007 YEAR HIGHS)
$COPPER (NEW 2007 YEAR HIGHS)
$GYX--INDUSTRIAL METALS (NEW 2007 YEAR HIGHS)
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