Commodities – Page 112 – Slope of Hope with Tim Knight

Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Be Careful What You Wish For … (by Springheel Jack)

By springheel_jack - 15 years ago (13, Sep 2010 3:31:35 AM)

…. as you might just get it!

I was concerned last week that we hadn't yet reached the key reversal zones necessary to make a major interim top on equities, but SPX didn't reverse, and we are clearly now going to see key resistance or support tests across the board this week. At that point we will either see a major interim top, or if those levels are broken, a major bull breakout.

I won't bother reposting the SPX rising channel or the ES rising wedge today as the next trendline targets for both are a long way above the key resistance levels of 1130 SPX and 1128.25 ES. I will post, on the bull side, the massive IHS that has almost finished forming on ES with a target of 1253.75 ES. I posted in late July that if we were to see a major bull breakout then I would expect a reversal to make the right shoulder on this pattern and well, here we are. That doesn't mean we will break up from here but it underlines the potentially very large scale of this breakout if we do:

On EURUSD my declining channel held when tested on Friday, and again when markets opened yesterday, but broke on the third test. There was a strong divergence between EURUSD and SPX at the close on Friday, and I wasn't expecting that to last long. EURUSD is pausing at declining resistance from the August high at the moment, but if that breaks and it reaches key resistance at 1.292 then it will have finished forming an IHS indicating to 1.325:

I'm going to post seven charts today as I'm trying to define all of the resistance and support levels that I see as important this week. Possibly the most important of the other charts is 30yr treasuries and there we have reached the rising channel support trendline and, since I did this chart, are poking through it. If this closes a day at below 130'15 that would look very bullish for equities, as would any break of 130:

On AUDUSD we have reached the reversal zone for the huge broadening formation that I posted last week. Short term resistance is at the upper trendline of the rising wedge in the 93.5 area. If this wedge breaks up, as they do 31% of the time, then the wedge target would be over 98.7. The broadening formation target would be in the 107 area of course:

I don't think CADUSD is particularly key, but I've found a very interesting rectangle bottom on this chart. Resistance is in the 98.5 to 99 area and on an upward breakout we would have a target of 104, on a downward breakout the target would be 89.5. These break downwards 55% of the time:

Oil and Copper don't have the very firm reversal levels of long bonds and AUDUSD, but on oil the next key resistance level is the broken rising channel trendline in the 77.75 area, and I would regard a break of that as a fairly bullish signal:

Copper has been underperforming equities in recent days, and I would see the recent high at 352.5 as the key resistance level. If broken then the next obvious target is in the 400 area:

Momentum is irrelevant at this point in my view, as momentum is generally with the other side in a key reversal area, and obviously if the strength of the economy was the key factor then we would see a reversal here. It isn't though, as we're in a mainly technical market, so the possibility of a major bull breakout here has to be taken very seriously. My personal feeling is that the bulls have a very real chance here, and it wasn't at all encouraging for the bear side that declining resistance from the April high was convincingly broken on Friday, and that long treasuries have failed so far to reverse at support overnight.

If we see a break down, then the downside potential is very big, and if we see a break up, then the likely targets look to be a long way up. On SPX we are looking at a likely break of 90 to 125 points in either direction. Only the bull breakout would look definitive though. If we reverse here then we are just continuing to trade the range that we've been in for months, but a bull breakout would most likely take us to new highs.

I'm mainly planning to play this area on the short side, but that's only because the risk/reward here is better on the short side. If we break up I'll reverse and make back my losses on the long side. That's just a strategic view though. Putting aside the bearish bias common to most of us who have read a lot of economic history I would say that the bulls have the technical edge this week, and a break up through resistance wouldn't surprise me.

SLV Chart Analysis (by Mike Paulenoff)

By TheTechTrader - 15 years ago (07, Sep 2010 4:20:47 PM)

The iShares Silver Trust ETF (NYSE: SLV) continues to act well. The series of higher highs and higher lows off of the August 24 low at 17.39 continues today, with the SLV making new rally highs at 19.58. Let's also notice that the SLV has experienced two intraday sell-offs — to 19.23 early this morning, which preserved Friday's pullback low at 19.07, and again later this morning to 19.30, which held 7 cents above the earlier low.

The ability of the SLV to create a higher-low price configuration intraday after a 13% upmove in two weeks is the sign of a still-powerful underlying uptrend. As long as today's two-successive pullback lows remain intact, the SLV will be in very good technical shape and points to higher prices in the upcoming hours. My next optimal target zone is 19.90-20.00.

Originally published on MPTrader.com.

Retracement Targets (by Springheel Jack)

By springheel_jack - 15 years ago (07, Sep 2010 3:30:06 AM)

I posted on Sunday at slope that my expectations early this week were that I was 'expecting a pullback testing 1084.5 ES on Tuesday, with a slight further deterioration to the support floor / wedge target in the 1074.5 – 1077 area on Wednesday / early Thursday.'

I've not seen anything overnight to change that view. Here is the broadening ascending wedge on ES that I posted on Friday, and which has broken overnight as I was expecting:

I could paint a picture here that we may have made a major interim top, and there are some arguments for that, but not enough of them, and it seems more likely to me that after a retracement we will be retesting the June and August highs at 1130 soon, so I'm just looking at short term retracement targets today.

That's not to say that I'm buying the argument that we are about to see a bullish breakout from 1130 yet. I'm struggling to believe that a major upward breakout could happen with the current economic backdrop, but this is a mainly technical market and it could happen. We'll see how it looks when we get to 1130 but until we see that breakout we're just bouncing within the 1040 – 1130 range that we've been trapped in for most of the last four months.

Short term I gave a target of 1.29 to 1.292 for EURUSD to reverse and it did reverse there. That isn't a good thing from the bear perspective as that is the neckline for a building IHS, and this reversal is probably the precursor to more upside. In the short term I have two retracement targets marked on the chart, and I'm favoring the lower one in the 1.2685 area:

I posted a falling wedge on GBPUSD at the end of August, and said that I expected it to evolve into a declining channel. It has done that, but other USD currency pairs are looking bullish enough that I'm doubtful about the channel holding. The next channel target is 1.51, but I think a higher target at 1.5275 looks more realistic for this week:

Teich50 alerted me to a rising wedge on AUDUSD on Friday and we were kicking round targets for a retracement this week. Overnight the rising wedge has broken and I have marked the two most likely retracement targets on the chart with my rationale. In the event that the wedge plays out closer to the classic wedge target I'm seeing main rising support at 89 and I have an upside (longer term pattern) target afterwards in the 93.85 area so this is looking like a very attractive spec long on this retracement:

I'm seeing a likely major equities interim top coming in the next two or three weeks on my SPX:Vix indicator, and two other charts I am looking at that may support that by then are copper and 30yr treasuries. On the copper chart we have seen a reversal at the 352.50 level I predicted last week, and are retracing to a likely retest of the 340 area. There is an argument that we may have just seen the top of the right shoulder on a huge H&S pattern, but I doubt that, and I'm expecting to see the 352.50 area retested and broken in a few days. On that break the obvious next upside target would be the upper trendline of the megaphone or broadening top in the 390 area, at a new high for 2010. Copper has been much more bullish than SPX over the last two months, and if we hit that target as my other indicators are peaking, that will be a powerful argument that we will see a major interim top there:

On the 30 year treasuries chart the recent top confirmed a rising channel from March, and we are now retracing to the lower trendline of that channel and should reach it within a couple of weeks. What happens then may define equities action for the next few months. If the channel holds then we should see a major interim top on equities there while treasuries start another wave up. If the channel breaks then the equity bulls could get the upward breakout that they are expecting:

In the very short term I've been considering the possibility that we might see a gap fill at the open this morning. ES has been stronger than the USD currency pairs overnight, and it looks possible at the moment that we could see a gap fill and broken wedge trendline retest in the 1104.5 ES area this morning. I'm writing this over three hours before the open though, and if we break down through 1094.5 ES before the open, then I wouldn't expect the gap to fill today.

Chart on Oil (Mike Paulenoff)

By TheTechTrader - 15 years ago (03, Sep 2010 11:09:03 AM)

My pattern work is warning me that all of the action in crude oil off of the Aug 25 low at $70.76 is a digestion period of the major downleg from the Aug 4 high at $82.97 to the Aug 25 low at $70.76.

If that proves to be an accurate description of the price movement, then it should be labeled as a "Bear Flag" type of formation, which when complete will resolve itself to the downside with the initiation of a new downleg. The downleg should break both the Aug low ($70.76) and the longer-term support line from the Jan 2009 low, which cuts across the price axis around $71.15.

Such a violation of support should trigger serious long liquidation in crude oil.

Originally published on MPTrader.com.

Bonds Tiring, Gold Moving Higher (by Mike Paulenoff)

By TheTechTrader - 15 years ago (27, Aug 2010 3:00:13 PM)

What might Bernanke's speech have said or implied that triggered the market response that we have witnessed so far today? How about: Don't fight the Fed…The economy is anemic, and the outlook might be uncertain-to-poor, but the Fed will pump, buy, and do whatever it takes to turn it around. The Fed will keep short rates at ZERO for a long time, and force companies and investors to take risk….

If anything expressed above proves reasonable and accurate, the risk trade is where investors have to be make any return at all! Cash will continue to be trash and treated as such indefinitely. It is as if Bernanke held up a big sign that says: "Buy stocks, buy gold, buy commodities, buy houses, and, perhaps as a corollary, SELL BONDS — and take the money and put it into riskier markets…

With the foregoing in mind, let's have another look at my updated comparison chart of Bonds and Gold, two markets that could provide the most insightful reaction to the GDP data and to Bernanke's speech, are gold and 10-year bonds. Purely from a price perspective, the bond market is showing signs of exhaustion since its mid-Aug peak, while gold prices appear poised to continue higher towards a retest of the June highs at $1263/65. If my perceptions about the technical set up reflect "reality," then my sense is that Bernanke is "desperate" to create inflation, which argues for higher gold, and lower bond prices ahead.

I don't know exactly "why" bonds are weak and gold is firm, but I do know that the technical set-up coming into today's session suggested that such a scenario was increasingly likely. Right now, bonds appear to be heading for a test of the rising 50 DMA at 124-15, which amounts to another 0.50% on the downside. If the equity indices strengthen into today's close, we could see the bonds at 124-15 before the end of the day.

Originally published on MPTrader.com.