Thursday, July 6, 2017

The Big Picture Post

Big picture perspective can be illuminating, especially if it's been awhile.
The view from here;

 as QE is seen as most significant driver the last 8 years.

The last leg up, the C wave, is clearly finished with a retrace in excess of 78%.
Elliott Wave Theory then would NOT be looking for an additional up wave as an extension of the preceding structure. The overlap of the A wave termination point confirms that. Therefore it is most likely a 3 wave ABC up; a corrective structure.....and very likely complete.

Context is everything.

If the recent corrective move up is done...the bottom of the range comes into play, as these flag structures are typically exited in the direction of the previous trend.
Note that is a 5 yr chart.

And so on to the 20 yr. chart

Long Term Head and Shoulders Top pattern break down with a bounce failure at the neckline.
New lows take out support going back to 2010.

with rates going up can you really extend higher?
After all wasn't this a QE driven phenomenon?

Note the trendline penetration.
IF the is structure is to extend, the .382 retrace cannot be overlapped. That is because it would also be an overlap of what would have to be a minor -3- wave in any subsequent extension.
If this leg up, sometimes referred to as the Trump Bump, is rolling over in the face of rising rates, than we need to ask, "where are we in the Elliott Wave Count of larger degree, and what are textbook pullback rules?"

                                                                        20 yr chart

The Big Picture; 5 Elliott Waves up from 2009? Maybe not quite yet. It's a long way down for confirmation of that BUT....rules pinpoint the 4th wave of greater degree as support as well as Fibonacci retrace points.

Just because Bonds and Stocks might be getting crushed does not necessarily mean WTI will be.
Currencies, geopolitics, taxes, drillers going out of business, however...
The action up from the 26.05 low does not currently look like an impulse wave up. Not a V bottom.

 Note the recent low of 42.05 overlapped the low from Nov.16 of 42.20
Most likely it is in a corrective structure, perhaps with more to come, even to the upside, but testing of that 26 low is a high risk esp if it is in a long term basing mode.

Wednesday, March 15, 2017

Crude: Retrace or Trend Change?

The sharp drop in Crude over the last week suggests a new trend after a prolonged period of stability and relatively tight ranges. But is it?

 6 mo. chart
click to enlarge
Above we see the sudden widening of the Bollinger Bands, an oversold RSI, and a Fibonacci
.618 retrace. Short term risk of at least an upside correction appears high.

In this longer term chart please note the choppy nature of the up move, hitting resistance at the Fib 81% retrace of the last structure down. If the move up off the lows is an abc, c= 50% of a.
Some of this is discussed in the preceding posts of  Jan 30 and  Feb 15.
 The risk of a retest of the lows is high in this scenario.
1 mo. chart
click to enlarge
The fist hurdle for Crude to regain momentum will be the resistance at 50, but really it will need to exceed the .62 retrace at 52 to give the bulls breathing space. My guess is, a weighted avg for the spec length still out there, is just over that at around 52.50 as well.

Wednesday, March 8, 2017

The Real News; Bonds Resume Sell-off

Yup Sorry to folks but it's true; this morning the 10 yr. officially put in new lows for the month and year, after failing to break out on the upside. See Feb. 15 post Bonds Update.
 6 mo. chart
click to enlarge
The recent COT report suggests that the trade is pretty crowded with large specs and leveraged funds
definitely on the short side, and that may limit immediate follow through. 
The 14 day RSI is in neutral territory and showing no divergence.

 The recent low end of the range and previous lows from 2016 will very likely be tested in the short term. 
25 yr. chart
Measured 5th wave target comes in around 118, as does the support trend line and the .382 retrace is  around 119. IF it's a -5- and doesn't extend. The move down off the June 2016 highs could well be and most likely is, a 3rd wave of the new long term trend down. If that is the case then what we would be seeing is the possible sub wave  (1) of 3 nearing completion at the 118 target.

At the end of the day this may be the most critical news out there. A  reversal in the 35 year long trend of cheaper money will have global systemic effect. Some may identify this as a reflection of demand caused by an uptick in overall economic health.  Maybe. I suppose that"ss to be wished for and probably how it starts.

Monday, February 27, 2017

Natural Gas- Are We There Yet?

Natural Gas is off 32% from the Dec 28 highs of 3.902. Not a little. We are now in the period, Feb/Mar, during which NG often finds seasonal buying of a couple months duration. The question then,   "Are we there yet", once more arises.
 3 yr.chart
 click to enlarge
The answer I think, is the usual, "Not yet but we' re close. " 
Just under the previous lows in the above chart is the Fibonacci .618 retrace point at 2.48
With an internal sub wave measured move providing support around 2.50, new lows under 2.64 should run out of steam in that area, with shorts covering on all the above factors. 
It would be nice to see some positive divergence showing up on the RSI at that point as well.

1 month chart
 click to enlarge
Shorter term the choppy action since the Feb 22 low of 2.64 is typical of corrective waves and would be expected to resolve to the downside. That's not to say it will not have another little push to the weeks highs around 2.80 before heading lower.

Natty may well be making a very important pivot at the discussed levels with substantial upside potential based upon the very long term chart basing history. Stay tuned.

 25 yr. chart
 click to enlarge

Not a trading recommendation. Do your own research. Good luck.

Wednesday, February 15, 2017

Bonds Update

The Dec 12 post Bond Plunge Done was spot on and we have the medium term correction looked for.

6 mo.chart

click to enlarge
After what appears to be a rather modest retrace of the plunge down, upside momentum has run into trouble at the previous highs, and the 4th wave of lesser degree. 

Best case it now explores the bottom of the more recent range and extends the consolidation another month or two.

From an Elliott wave perspective this sideways structure is exactly what you would expect after a large trending move with many participants, the point of recognition associated with wave 3.
The completion of that primary impulse wave down, the break to new lows, will be wave 5.

 25 yr chart
 click to enlarge

The Fibonacci retrace points in the above chart roughly coincide with 5th wave measuring rules.
I am biased toward the 50% point as the lower number to complete a 1 of greater degree 3rd wave down.
The risk of a very long term change in trend for fixed income is extremely high after 35 years.

Pls do your own research and
This is not a trade recommendation merely Elliott Wave thoughts.

That Old Texas Hedge

Long physical, long futures. The oil market as a whole has got that position on; very high net spec length and very high stocks. Due to the extended sideways move since early Dec, it's at a relatively high number too.
A big bet on SOMETHING.
1 yr. chart
click to enlarge
While a choppy consolidation often breaks in the direction of the preceding trend, and that can happen at any time, there is definitely technical room for further choppy movement down, prior to any run for the highs. 
The overall length in the market, not to mention the prospective future exploration and production, will make tough going of the advance.
News that might propel the market to new highs, like an announcement of a border tax plan, will no doubt be seen as an opportunity to trim length.
3 yr. chart
click to enlarge
Note the Fibonacci  .382 retrace coinciding with the trendline resist around $57.20

Good luck and

This is not a trade recommendation.

Tuesday, January 31, 2017

All Juiced Up, Nowhere to Go, Hangover Tomorrow

Wall Street partied. Me too.  All will be awesome; lower taxes, repatriation, rolling back rules and regs.  Busting up to new highs in a thrust above the trendline cleared out all the shorts. But really since mid Dec, it's been a bit of a slog, with last weeks thrust 50% of the preceding one. 
Market Vanes Bullish Consensus has been at 65% for 3 weeks, and they see overbought as 75%.
 5 Yr.
 click to enlarge
 Note the negative divergence on the 9 RSI (I am pushing it here a little). 

 1 Yr
 click to enlarge
The negative divergence here is on the 14 RSI and clear. 
So at what point does the market realize it might have fully discounted all it's hopes, at least for this year?
How about when it overlaps that last thrust up from 2251.75?

 1 Mo. chart
 click to enlarge
Elliott Wave;
I've got the move down from the highs labeled a possible 1, some degree of a sub wave of course.
That would make the next wave lower a 3 after this consolidation up from yesterdays lows completes 2.
And a 3 wave down through the point of recognition would be textbook.

Just so you know there are NO trade recommendations herein. 

Monday, January 30, 2017

Crude Set Up

Crude is set up to cause a lot of pain. Fridays COT revealed further increases in spec net longs;  NYMEX+ICE WTI  +24 million bbl to 396 million bbl, bringing it up to near record levels.
 March WTI, meanwhile, has been pretty much going sideways in a choppy manner.

5 day chart
click to enlarge

1 Mo.
click to enlarge
While it is possible that this pattern is going to break up in the short term, all the spec length will make heavy work of it. This chart shows no evidence of any impulse wave action to the upside and in fact the pattern is more likely a consolidation of the move down from 56.18 to 51.59

 6 mo.
 click to enlarge
If WTI breaks down on the other hand, putting in lows under the .382 retrace at 51.78, the next Fibonacci support levels will get tested as the weak specs run.

The more interesting question is, will the 26.05 low get tested, or is this structure up from 45 going to have another leg after shaking out some length.
3 yr. chart
click to enlarge

Note the long term negative divergence on the RSI. 
 If this is an abc structure up from 26.05,  c = 50% of a. 
Considering the length in the market, it's going to take some doin' to make new highs.