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Trader's Tip
Do some contrary thinking. Try doing just the opposite of what is the "general public's" opinion of a market. There's an old market adage that if the Wall Street Journal publishes a bullish (or bearish) story on a market, then the top (or bottom) is close at hand. The masses are usually wrong when it comes to trading markets.
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Jim Wyckoff |
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Special Message from Our Author
Today's Featured Article
Hello again Fast Break readers. It's my pleasure to be able to show you some of my latest work, on behalf of the fine folks at Vantage Point. In today's issue of Fast Break,
I'm showing you a portion of my latest bi-weekly newsletter email report from last week. My bi-weekly newsletters provide a longer-term perspective on selected markets. In this latest issue, I focus on the key "outside markets" that have been impacting most other markets so heavily recently: crude oil, the value of the U.S. dollar and the U.S. stock indexes. This "outside market" phenomenon is also called Intermarket analysis. This concept has been studied for decades and has also been developed into a market analysis program the respected markets veteran
Louis Mendelsohn. Indeed, veteran traders have known for many years that markets are all inter-related to some degree.
I'm happy to answer any questions you may have. Just email me at jim@jimwyckoff.com and I always respond in a prompt manner.
Crude Oil: Futures on the New York Mercantile Exchange last week hit a fresh 2.5-month high of $54.66 a barrel, basis the nearby May futures contract. Prices are in a solid six-week-old uptrend on the daily chart, from the mid-February contract low of $39.42.
A rebounding U.S. stock market and a flagging U.S. dollar versus its major counterparts have been key supportive "outside markets" for the crude oil market bulls recently. The solid rebound in the stock market of late has given crude oil traders some optimism that the worst of the worldwide economic crisis is behind, which would likely mean an increase in demand for liquid energy products. However, with crude oil traders so closely looking to the stock market for direction, any pullback in equities prices is very likely to find crude oil prices selling off, too. We've seen that just this week.
Interested in seeing a complimentary market forecast for oil? Go here.
Importantly, there has been renewed speculative buying interest in crude oil futures -- and in other raw commodity futures markets -- the past few weeks. There is a growing camp of investors that believes actions in recent months by the major central banks of the world to inject huge amounts of liquidity into the world financial system will ignite inflationary price pressures at both the wholesale retail levels.
The surprising March 18 announcement from the Federal Reserve that the U.S central bank will purchase large amounts of U.S. Treasuries and U.S. mortgage debt only exacerbated notions of inflationary fires being stoked amid devalued major currencies of the world. Inflationary price pressures are a major bullish fundamental factor for commodity markets.
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Commodity market bears who view the current world economic environment with a deflationary bent have been confounded by crude oil's rally recently. Oil supplies in the U.S. are currently at the highest levels in years.
To find out more about crude oil and how its related markets affect it, go here.
An examination of the longer-term weekly chart for nearby crude oil futures shows the market is regrouping after a massive decline of over $100.00 a barrel from the July 2008 all-time high that was scored above $147.00 a barrel. The posture of the weekly crude oil chart still cannot be construed as bullish. However, it does appear that a major market low is in place. My bias is that nearby crude oil futures prices will trade in a wide range between $40.00 and $60.00 a barrel in the coming months. Importantly, crude oil traders will continue to take their trading cues from the U.S. stock market.
 If you cannot view the Crude Oil chart,
go here.
U.S. Dollar Index:
Price action in the dollar index has been choppy recently. See on the weekly continuation chart for nearby U.S. dollar index futures that a very choppy uptrend line is still in place from the 2008 lows. However, prices have backed well down from the highs seen in recent months and now a bearish double-top reversal pattern has formed on the weekly chart. A drop in nearby U.S. dollar index futures prices below strong longer-term technical support at the 83.50 area would produce serious longer-term technical damage to suggest sideways to lower price action in the coming weeks or few months.
 If you cannot view the U.S. Dollar Index chart,
go here.
Dow Futures:
The U.S. stock index futures have seen a solid bear-market rally the past few weeks. See on the weekly continuation chart for nearby Dow stock index futures that recent price action has penetrated on the upside and negated one downtrend line, but two others remain firmly in place. It would take a push in nearby Dow futures above major longer-term technical resistance at the 9,000 area to provide the bulls with better longer-term technical strength to better suggest a major market low has been posted and that the index can sustain a longer-term price uptrend. The bottom line, at present, is this: The stock indexes have made a decent recovery from the lows. But the bulls have much
more heavy lifting to do in the coming weeks to strongly suggest the present rebound is nothing more than a bear-market bounce in prices. Go here for complimentary recent forecasts for the Dow.
 If you cannot view the Dow Futures chart,
go here.
Continuous Commodity Index:
Trading in many of the commodity futures markets has become very choppy and non-trending in recent weeks or months. An examination of the weekly continuation chart for the Continuous Commodity Index, which is a basket of a dozen and a half major commodity futures market prices rolled into one composite index, shows the bears still have the longer-term technical advantage. See on the weekly CCI chart that a bearish symmetrical triangle pattern has formed. Symmetrical triangle patterns are continuation patterns. Given that the most recent major trend in the CCI on the weekly chart has been down, technical odds do favor a downside breakout from this triangle pattern. However, an upside
breakout from this pattern on the weekly CCI chart would be a longer-term technically bullish development.
 If you cannot view the CCI chart,
go here.
Gold:
Prices have backed down recently as investor risk appetite has increased and the safe-haven status of gold has diminished a bit. See on the weekly continuation chart for nearby gold futures that prices are still in a choppy longer-term uptrend. However, there is strong shorter-term and longer-term technical resistance at the $885.00 level, basis nearby gold futures. A solid push in prices below that key technical level would be a fresh bearish clue to suggest still more downside price pressure in the coming weeks. Any further deterioration in the U.S. stock market or any fresh financial market shock would very likely see a sharp rally in gold.
VantagePoint can provide you with nearly 80% accurate market forecasts for gold.
 If you cannot view the gold chart,
go here. |
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U.S. T-Bonds:
The choppy trading in the T-Bond futures market recently has frustrated both the bulls and the bears. However, the shorter-term and longer-term technical charts still favor the bond market bulls. See on the weekly chart that a choppy longer-term uptrend is in place. It's been my bias for many years that the safest-haven investment is not gold. It's U.S. Treasuries. It would not surprise me at all, in the coming weeks or few months, to see another financial market shock that once again quickly drives investors into T-Bonds and T-Notes. However, sustained up trends in the U.S. stock indexes would be a significantly bearish development for T-Bonds and T-Notes.
 If you cannot view the T-Bond Chart,
go here.
Corn:
This week's price action has been impressive for the bulls. The weekly continuation chart for nearby corn futures does show that a longer-term downtrend line from last year's highs has been penetrated on the upside and negated. Also, a fledgling uptrend line is in place on the weekly chart, from the December and March lows. If nearby corn futures prices push solidly above solid longer-term technical resistance at the $4.25 level, then that would turn me more bullish the corn market. Right now, I'm still of the opinion that rallies in the grains are good selling opportunities, as recent price history has proven this strategy to be prudent. There will still be some good opportunities
to buy call options in corn and soybeans heading into the summertime, when weather markets usually provide for at least a decent pop in prices.
If you cannot view the Corn chart, go here.
Soybeans:
The weekly chart for nearby soybean futures shows the bulls and bears in a battle for the technical advantage. Downtrend and uptrend lines can be drawn. But one of those trend lines will be negated soon, and the direction in which nearby soybean futures prices push above or below the trend-line resistance or support will very likely be the next longer-term trend in the soybean market. Also, a push in nearby soybean futures above solid longer-term technical resistance at $10.40 a bushel would suggest further upside price potential in the coming weeks or few months.
 If you cannot view the Soybean chart,
go here.
Chicago Wheat:
The weekly soft red winter wheat chart also shows that a longer-term downtrend line has recently been negated and that a fledgling uptrend line is in place. However, the bulls have more work to do in the coming weeks to suggest that prices can embark on a solid trend higher. Multiple closes above major psychological resistance at $6.00 in nearby Chicago wheat futures would be longer-term technically bullish to then suggest prices can continue to trend higher in the coming weeks.
On all the grain futures, one important thing to keep in mind is that they are still held hostage by the key "outside markets" that include crude oil, the value of the U.S. dollar and U.S. stock index prices. These intermarket relationships are key when trading. VantagePoint Trading Software finds hidden patterns and relationships between twenty-five related markets and the target market. If the outside markets turn bearish again (weaker stock market, weaker crude oil prices and a firmer U.S. dollar), then it can be assumed the grains would start to trend sideways to lower. There are no clues to suggest the grains or other commodity markets will anytime soon become divorced from their close trading relationship with these key outside markets.
 If you cannot view the Wheat chart,
go here. |
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About the Author
Jim Wyckoff is the senior market analyst with TraderPlanet.com
. TraderPlanet.com, a Tampa Bay, Fla.-based financial social networking site, provides individual traders of all skill levels a one-stop destination for financial information and trading tools. TraderPlanet.com is the only financial social networking site that offers its members a full suite of market data feeds, advanced technical analysis tools and exclusive analyst commentary across asset classes, while enabling members to give back to the broader world community through gift-giving to charitable causes. Designed to level the playing field between institutional and individual traders, TraderPlanet.com's fully interactive, multi-media rich platform is designed to promote the free-flow
exchange of ideas through questions, answers and comments designed to improve trading strategies and investment performance.
Jim has spent nearly 25 years involved with the stock, financial and commodity markets. He was a financial journalist with what is now the Dow Jones Newswires service for many years, including stints as a reporter on the rough-and-tumble commodity futures trading floors in Chicago and New York. As a journalist, he has covered every futures market traded in the U.S., at one time or another. Not long after he began his career in financial/commodity market journalism, Jim began studying technical analysis. By studying chart patterns and other technical indicators, Jim realized the playing field could be leveled between the "professional insiders" in the markets, and traders/analysts like
himself. As a proponent of Intermarket Analysis, VantagePoint Intermarket Analysis Software is one of the tools in Jim's tool-box. |
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