Commodities – Page 113 – 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.

Still in No Man’s Land (by Springheel Jack)

By springheel_jack - 15 years ago (19, Aug 2010 7:44:47 AM)

Bears were very excited about the pullback from the double-top
yesterday. I've been considering this carefully this morning, and the
evidence for an imminent pullback doesn't look overwhelming to me as
yet. The bear case for the next few months is very compelling, is
supported by numerous patterns, and it has economic logic behind it, but
it still isn't necessarily going to happen.

One of the most compelling patterns for it is the possible bearish
gartley pattern building on SPX. Here it is in its full glory:

This pattern came into focus when the move from March 2009 peaked at
an almost perfect 61.8% retracement of the 2007-9 bear market. While
most would doubt that we could move down to the 870 area and then move
back up to challenge 1350 to complete the pattern, I think it looks very
feasible as the first leg up would be QE1, and the second would be QE2,
with the whole forming an ABC corrective move before another bigger
move down. If SPX drops back below 900, I would expect that there would
be another big stimulus package and the quantitative easing printing
presses would be run round the clock to try to reinflate asset prices in
the fond hope that this would revive the economy. That would probably
work, for a while at least.

After a year or so of QE2, and the unprecedented fiscal blowout that
went with it, I'd expect a bond market revolt to rein in government
spending and to shut down the printing presses, and then we'd have the
final bear market of this secular bear market cycle, uninterrupted by
these tedious and counter-productive keynesian interventions.

I'm working on a full post fleshing out this scenario and will definitely have it posted this weekend.

Short term I'm seeing no technical damage as yet to the multi-week
uptrends in the two most important markets that I am watching, namely ES
and EURUSD. ES is still in the rising channel that I proposed as a
likely candidate at the beginning of last week. Support is at 1074.5
today, and only a close below it would unambiguously open the path to
new lows. The increasingly impressive looking IHS that I suggested might
form three weeks ago with a bounce off 1130 ES to make the right
shoulder is now well advanced and looking increasingly scary from the
bear perspective:

EURUSD is much closer to a breakdown, and tested support on the
broadening ascending wedge again last night, but support held, and only a
close below that lower wedge trendline, currently at 1.279, would open
the path to new lows for 2010:

Short term on ES the double top that we have seen on ES the last two
days, coupled with the three bounces off the strong resistance turned
support level at 1084.5 since ES broke up through it, give the look of a
(70%) bullish rectangle with a target at 1112.5. A break downwards with
conviction through 1084.5 would open the way to a test of main rising
support since the July low at 1074.5. A conviction break of 1074.5 and
close below it would clear the technical path towards new lows for 2010
with a likely target IMO below 900 SPX, but I'm not going to get excited
about that until I see it happen:

The copper chart still looks fairly bullish, as the broadening
descending wedge defining the recent pullback broke upwards last night,
and the action over the last few weeks has something of the look of a
bullish pennant. We hit a major resistance area overnight though, and we
could easily see a pullback here:

As I write I see that ES has plunged down to test 1084.5 again, but it
is holding so far and EURUSD has been moving up while ES has fallen.
We'll see how that develops today, but on a swing trader basis, there's
nothing to see here yet.

Chart on Silver (by Mike Paulenoff)

By TheTechTrader - 15 years ago (16, Aug 2010 9:03:42 AM)

It is interesting that silver prices and the iShares Silver Trust (SLV) are up nearly 2% this morning, in sympathy with higher gold and a pullback in the dollar, but perhaps most importantly in sympathy with a sharp upmove in the Shanghai Composite Index (+2%), which suggests strongly that China is not slowing down nearly as much as the financial press would like us to believe and could very well become an increasingly supportive factor for industrial (and precious metals).

Let’s notice that the SLV is pushing up against its near-term resistance line at 18.12, which if hurdled and sustained should trigger a run at its more important May-Aug resistance line, now at 18.43. In that all of the action off of the May 13 high at 19.44 has taken the form of a large coil-type congestion pattern, a sustained upside penetration of 18.43 will argue that the price structure is emerging to the upside from the coil and is in the early stages of a new upleg that has measured upside potential into the $20 area next.

Only a failure to climb above key resistance, followed by a downside violation of last week’s low at 17.43, will damage the developing bullish pattern.

Originally published on MPTrader.com

Climb in UltraShort Crude ETF (Mike Paulenoff)

By TheTechTrader - 15 years ago (13, Aug 2010 12:28:03 PM)

From a near-term perspective, the August advance in the UltraShort DJ-UBS Crude Oil ProShares (NYSE: SCO) has climbed sharply to and actually pierced above its May-August down trendline today at 14.85/90. Perhaps more impressive is that the price structure is consolidating (so far) above the trendline, which is a potentially bullish sign of still more upside directly ahead, that projects to 15.25, and then 16.25/50 thereafter.

Should such strength emerge without much if any pullback, then the intermediate-term picture will morph increasingly into a multi-month accumulation (base) pattern that is propelling prices towards a confrontation with significant resistance at 17.50-18.00. At this juncture, let's not be surprised if a bit of profit-taking occurs that corrects the near-vertical August upmove into the 14.60/20 area prior to the resumption of strength that propels the SCO considerably higher.

Originally published on MPTrader.com

Looked Like a Wave 3

By springheel_jack - 15 years ago (12, Aug 2010 8:50:11 AM)

That was a very impressive decline on SPX that continued after hours
yesterday, and the wave down bottomed at 1074 ES, making it a peak to
trough move of slightly over 50 points on ES in slightly over 24 hours.
Very impressive indeed.

I don't do EW much myself but I have read a couple of books and am
familiar with most of the rules. I've put a possible wave count on ES
since the high last week:

I'm using the bull count taking this as an ABC move from the top. For
the bear count you just change ABC to 123 and assume an extra two waves
to follow of course. On this count we saw 3 of C yesterday and we have
started 4 of C. As you can see from the chart I'm considering the
possibility that wave 5 down has already started, though we could
technically have a rally under this count that went as high as 1106, but
would go no higher than the low on Tuesday.

In the very short term on the 1min chart ES formed a broadening
ascending wedge from the low last night but as I write has broken down
from it, which suggests to me that we may well see more downside this
morning:

The main USD currency pairs are suggesting that too, as they rallied for
a while overnight with ES, but then diverged to make new lows after the
overnight peak on ES. EURUSD is now most of the way towards my target
for a longer term bullish scenario on EUR. A break below it would look
very bearish to me and would suggest that we may see a new low on it
this year:

GBPUSD has also made it most of the way to my target.
Again, a break below would look very bearish and suggest that we may see
new lows:

Oil has made it most of the way towards the lower trendline of the rising channel:

I have noted the exact target levels on all of these if these were to be hit today.

Copper hasn't been falling as fast ast the others, and is only halfway
to my target. Like ES, at the time of writing it is somewhat above the
overnight lows:

The ones I'll be watching most carefully this morning apart from ES are
EURUSD and GBPUSD. If the bounce at my target levels that would only to
be expected, as they are the natural levels to see a reversal of course.
If they break down through them though, then it would suggest strongly
on both that we have been watching a rally on both of these since they
bottomed in early June, and that they are both still in a major bear
move. If so, that would suggest strongly that we haven't seen the low
this year for equities either so it is very significant if those levels
fail to hold.

I'll also be watching those levels because at the low in February the ES low was made at almost exactly the same time as my EURUSD trendline target was met. That didn't happen in July of course, where EURUSD bottomed almost a month before ES did, but it is something to watch regardless.

If that is the case, and this is an ABC correction as I have marked
it up in my EW count, then we may be very close to the low on ES, with
just one lower low yet to come and if so, then the relative strength of
copper overnight also has a bullish look to it.

EURUSD Breaks Support (by Springheel Jack)

By springheel_jack - 15 years ago (10, Aug 2010 7:46:39 AM)

EURUSD finally broke support on the rising wedge overnight, and not
before time. I am expecting to see a good sized retracement now. My
target is in the 1.28 area, though technically of course, the target is
1.22. I've mentioned before that rising wedges often evolve into
channels or broadening wedges, and I'm expecting this one to evolve into
a broadening ascending wedge, and have drawn in the rising support line
on the chart:

GBPUSD, which has resolved into a clear broadening ascending wedge now,
is retracing back towards the 1.55 area. I'm somewhat doubtful about
this pattern breaking down and support there may well hold:

AUDUSD broke the rising wedge on the daily that I posted the other day.
Nice catch braddurden for pointing it out. I'm seeing some support at
0.90 but I think it's more likely we see a fall to the main rising
support trendline in the 0.87 area:

Oil completed the bearish gartley pattern I posted, though it was
Keirsten who first pointed it out of course, and reached the top
trendline of the rising channel. I'm seeing some support in the 79 area,
but am expecting a fall to rising support in the 75.50 area:

Dr Copper has broken support overnight and looks likely to return to
rising support in the 310 area, and to the extent that copper is a lead
indicator for equities, it is currently pointing firmly down:

So far, so bearish, but where does that leave equities? Well, that's all
about the rising wedges. In the short term the second of two rising
wedges on the ES 60min broke downwards last night. The first wedge broke
down last Friday and played out to target at 1104 ES. The second wedge
has the same target and with a bit of help from EURUSD, should have no
trouble making it there:

If ES can make it back to 1104, then the main rising wedge on ES will be
broken, and that is very much the main prize here of course.
Technically the rising wedge target indicates back to the July ES low,
but more likely in my view we will retrace either to the 1070 or 1084.5
area, or to the 1040 ES area to make the RS on a big IHS that should be
obvious on the chart below. I have listed the full range of targets on
the daily chart and I am hoping that channels or patterns formed during
the descent will make it easier to call this on the way down:

For a number of technical reasons, as I've explained in previous posts,
I'm expecting this to be merely a retracement in a larger bullish
picture. In EW terms I think we have just finished wave 1 up of a new
move up on equities from the July low, and we will have to retrace a
long way before I start to reconsider that seriously. That's not because
I think the recovery is real or that current economic policies are
putting us on the road to sustainable prosperity, but while the rotten
fundamentals will bring down this market sooner or later, I'm doubtful
about that happening in 2010.

For a good picture of the current EW picture from the bull side, my friend Pug posted a publicly viewable summary
last night that I think is well worth a read, and the scenario I have
outlined today fits very well with his alternate scenario.