Commodities – Page 114 – 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.

The June SPX High (by Springheel Jack)

By springheel_jack - 15 years ago (03, Aug 2010 8:20:38 AM)

I switched my primary intermediate term scenario to bullish a couple of
weeks ago, and I've seen nothing to change my mind since. That doesn't
mean I'm a long term bull of course. Current economic policies seem
certain to end very badly sooner or later, but that doesn't mean that
they will end badly in 2010.

Tim Knight posted a wonderful image last year that sums up how I feel about the current market:

There are quite a number of indicators and trends that led to my
changing my view. The ending of the USD rally, the breach of declining
resistance on SPX and many others. Here's one interesting indicator
telling us that a major bottom has been made. It is EEM, the emerging
markets ETF, and kemal_1 once suggested that I should watch it as a lead
indicator of market direction. It isn't much use for calling tops, but
it called the bottom last year with a very clear positive divergence
from SPX, very like the divergence in June as you can see on the chart:

Within that intermediate scenario I've been giving the market direction over the next few days a lot of thought. My friend Pug
is calling for a strong break up from here, and there are a number of
patterns to suggest that he may be right. Here's one of the main ones,
which is the extremely ugly IHS on SPX:

Now I don't like to take the other side of Pug's trades, as that (ahem)
tends to be expensive, but I have an alternate scenario that hangs
together very well logically and technically, and until we get a break
of the June high with confidence, I will be using this as my primary
scenario. I'm not seeing a slight break of the June high as significant,
as unless we see a very major break downwards, my intermediate scenario
will remain bullish.

I'm planning a post this weekend to explain my view of the next year or
two in more detail, and to flesh out the theoretical underpinnings for
my expectation that the market will continue to rally for at least
another year, and to a target well over 1300. I may be wrong of course,
but I have solid reasons for my view so try to suspend your disbelief in
the interim even if you have a strong short-term bearish bias.

My alternate short term scenario ties in strongly with USD and
commodities, but on the SPX side I am expecting a strong bounce off the
June high to make the right shoulder on a much better looking IHS
pattern:

This ties in with my view on USD, which has been in a steep swan dive
for the last eight weeks. I have a broken wedge target of 76 on USD but
I'm expecting to see at least one serious retracement on the way there,
and I think that we are close to starting that retracement. During that
retracement I am expecting SPX to trend down or sideways, which
obviously fits well with the scenario above. Here's the falling wedge on
USD with support in the 80.15 area if we reach it today, which I think
we may:

EURUSD is in a mirror image rising wedge of course, and I've explained
on the chart how a retracement might develop into a longer term
broadening ascending wedge to get EURUSD to the broken wedge target of
1.46 to 1.50. EURUSD usually forms wedges for large moves up or down, so
I'm not considering the possible alternate rising channel seriously at
the moment.

Bulkowski doesn't
rate rising or falling wedges highly as patterns, and from my
experience they are unreliable mainly because they have a tendency to
evolve into either channels or broadening wedges. That makes them harder
to trade, but with that proviso in mind, makes them much more reliable,
but with a wider range of possible targets.

Here's the EURUSD daily chart to show what I think is likely to happen on EURUSD over the next two or three weeks:

I posted a copper chart in a post ten days ago
showing an IHS on copper with a target at 337, Copper futures reached
339.25 yesterday and have since pulled back to 335. Oil is in a possible
rising channel or bearish gartley pattern with a likely reversal area
for either in the 82.5 to 83 area, and we have almost reached that now:

In summary, USD, EURUSD, GBPUSD, Oil, Copper and others have all now
either reached, or are close to, likely reversal areas, and ES/SPX is
just below the very significant resistance area at the June high. If we
are going to see a reversal lasting two or three weeks, then this is the
most likely area to see that happen and that is what I am expecting to
see start within a day or two unless the June high on SPX is breached
with real confidence.

If we see a breach with confidence of the June high, or we see ES close a
day more than a couple of points above the June high, then my alternate
IHS scenario is probably off the table, and the next likely reversal
area will be in the 1150 – 1160 SPX area.

Video Chart Analysis on Gold (Mike Paulenoff)

By TheTechTrader - 15 years ago (28, Jul 2010 5:45:41 PM)

Originally published on MPTrader.com

Bang! Margin Weighted DATR (by Trade Flight Plan)

By Trade Flight Plan - 15 years ago (28, Jul 2010 1:11:29 PM)

A couple months ago, we posted our last analysis of the dollarized
daily average true range (DATR) across the most popular futures
instruments. With the incredible moves in the markets lately, it's time
for another update.

At the suggestion of another sloper (excellent suggestion by the
way), we revised our analysis to reflect margin weighted
dollarized average true range (mwDATR).

We show the mwDATR as a percentage. This is the return on investment
percent (ROI) possible in a trading day, based on the dollarized
average daily moves of each futures instrument relative to the initial
margin/performance bond requirements set by the exchanges. Brokers can
differ in their margin requirements, but we use the exchange margin
requirements for a common baseline.

As an additional nifty feature, we now use Google docs to share this
analysis, so you can further slice and dice to your heart's content.
Liquid futures instruments favored by retail traders are highlighted in
yellow.

The margin weighted results are interesting, with the most popular
big indexes ranking toward the bottom. The Euro, oil, gold, and the
Russell are at the top of the list. For example, oil has been moving an average of more than $2,000 per contract each trading day.

We firmly believe that in putting our capital at risk every day, the
instruments we trade must be worth the effort, must be liquid, and must
respect repeatable trading strategies. The opportunity exists for
astute traders to make a small fortune each day. Of course, this
extreme bang for your buck can work both ways. We cannot stress enough
the discipline, focus, and diligent trading rules required to trade
these instruments.

Click on the image to access the Google docs electronic spreadsheet.

Originally published on Tradeflight.com

The Management Regrets …. (by Springheel Jack)

By springheel_jack - 15 years ago (26, Jul 2010 7:06:27 AM)

…. that the second showing of The Apocalypse planned for the summer may have to be postponed due lack of interest.

We broke 1099 SPX (and ES) on Friday and it seems clear that we are on
the way to 1130 SPX to test the June high. We are trickling up slowly
towards that target and we may well see it this week. Until we see that
tested I'm not expecting to see any major breaks downward and it is more
than likely that the strong support level at 1084.5 ES will hold.

I'm also switching my primary scenario to bullish now, as the evidence
is piling up that we have already seen the low for 2010, and unless we
see some strong evidence to the contrary, then I will be working on the
assumption that the trend for the next few months at least will be up. I
have a longer term view and rationale for that that I will be writing
up and posting in the next few days. It has nothing to do with a genuine
recovery or real economic health, and everything to do with our still
being in another asset bubble that is likely to expand further before
bursting.

In the short term I've been playing around with the angle of the rising
channel on ES this morning and am happy that I now have it right despite
the lack of a third touch on either side so far to exactly fix the
angle of ascent:

As we've now seen a second touch of the upper channel trendline we
would normally next see a touch of the lower trendline. We could see
that today at a little under 1080 ES, but I would be surprised to see
the strong support level at 1084.5 ES broken by much.

Copper too is trickling up towards the obvious short term target just
over $326. As and when it reaches it we should see some retracement on
copper and most likely on equities too:

Oil is not in a rising channel and I can't see a workable pattern
either, but it has established a strong rising support trendline that I
would be surprised to see broken in the near future. Support is at
$76.75 as I write and rising gently:

One of the few strong indicators that the bear scenario for the summer
might not be finished yet is on 30 year treasuries, which are still
holding the strong rising support trendline from the breakout in April.
I'm expecting this to break in the next few days, and after that
happens, I'm expecting a retracement of much or all of the advance from
114:

The ES Forecast (by Springheel Jack)

By springheel_jack - 15 years ago (21, Jul 2010 9:51:07 AM)

I've been on a roll recently. I forecast the low near 1000 &
predicted a likely rally to the 1070 – 1090 ES area. Once there I called
1099 as the likely rally top and this week I predicted on Monday
morning that we'd most likely start the week with two days of rally with
a likely target at 1084.5. Not bad going, though I'm not expecting to
match that performance all the time of course.

For the low target I was using a rough declining channel on SPX, for
last week's high a rising channel from that low, and yesterday's high
has been a key support / resistance level on SPX for quite a while now.

My main tool for assessing likely immediate market direction was Alex
Grant's excellent ES
forecast, which he sends to his subscribers by email for a very
reasonable $30 per month. I've been checking it regularly since he
warned his bearish blogger friends last year that the ES forecast was
predicting a sharp rise off last July's low lasting for several months.
Alex has given me permission to publish his current daily forecast here
and so here it is:

The forecast is a mechanical forecast using Alex's proprietary
indicators, and reverses sometimes, so that it then does the opposite of
what the forecast predicts, but as a tool for assessing likely market
direction I rank it very highly, as I know that there is no such thing
as an infallible crystal ball for market trading, and if there was, I
wouldn't be expecting to get access for $30 per month. The targets given
on the forecast are also very rough, so I tend to use my own channels,
patterns and support / resistance levels to call these.

If you're interested in subscribing yourself the link is here.

As you can see the ES forecast is now forecasting a strong bearish tilt
for the next few weeks taking us into the 900s, which as long as it
doesn't reverse direction of course, gives us the likely timeframe to
play out the bear scenario if it is going to play out.

That fits my overall bear scenario on the SPX daily in which we are back
at the top of the main SPX declining channel:

This gives a model short entry here in my view, with potential
downside here of 220 ES/SPX, and a stop at 1101 ES as that would be a
break above my SPX declining channel, and would also deliver the bulls
their higher high to go with their higher low, though only a break of
the June high would finish off the summer bear case altogether in my
view.

As for today you can see that the ES forecast is projecting sideways to
down over the next few days, and we may fill intraday the open gap at
1093 ES. I had a broadening bottom on ES yesterday that broke up with a
target of 1103 ES, but only 59% of these make target, and I'm not
expecting to see last week's high broken:

That isn't to say that it won't be broken of course, the risk/reward is
very good for a short entry here with ES at 1087 at the time of writing,
but the bulls are still in with a good chance and the indicators I
watch are very mixed on market direction at best.

'Dr Copper' has a scarily bullish chart, and I was disturbed to see that
break up through resistance this morning. Here's my take on that:

Recent action in long term bonds is solidly (equity) bearish of course,
but EURUSD up from my broadening descending wedge last week and has't
reached my obvious next target near 1.32. It is retracing at the moment,
but that may just be a retest of the broken wedge upper trendline near
1.27:

Oil and CADUSD have also had bullish breaks up this morning and AUDUSD
is testing a key resistance level. The bulls are still in with a very
real chance here, but I'm not expecting last week's high at 1099 ES to
be broken, and until it is, I'm expecting us to fall hard from here over
the next few weeks.

If not, we should know very soon and I'd be out or considering exit
strategies on all shorts at 1101 ES.