Weekend Update - Bonds, Crude, Dollar Index, Gold

Weekend Update - #2

30 YR BONDS
The bond complex had a nice reversal Thursday, leading to a nice upside week.

The 50% retracement level did give way as expected, however, it was short lived. Notice that the channel gave near perfect support.

There are several layers of resistance directly overhead. This includes the 50 sma, the broken base channel, and the small down channel.

One possibility is that structure may be tracing a small triangle here, with the Thursday low of 117-10 being the [b] leg.

If that's the case, this would suggest a zigzag, which means this would likely be an X wave. Any trade through the 120-15 H or 117-10 L would invalidate this view.

Of course, we have to watch for a flat as well.

Bottom line - If a little triangle scenario is play, we are likely range bound in this market for the next couple of weeks.

Price basis combined contract.

CRUDE
The crude market corrective continues. We have now registered 17 trading day's in a sideways market.

Although this chop has been difficult to discern from a pattern standpoint, it has been very tradable with plenty of range.

I show a simple (a)(b)(c) , though it's possible we are tracing a combination.

We have broken free of the 20 sma and appear headed for a meeting with the 50 sma, which is at 74.57 and rising.

This is one way of looking at the intraday structure.

If part of a combination, or (w)(x)(y), then we should be finishing up a sub-minuette c with the completion of an upcoming [5] wave.

If we are getting ready to finish a iii wave, then [5] will need to make a decent move down, as the price extreme of i is 76.71.

I suspect this is an abc that ends a (y) wave.

Bottom line - near-term it appears that we should see at least one more leg down. We can reassess at that point.

All prices basis continuous contract.

DOLLAR INDEX
New lows for the dollar this past week.

I have changed the labels to better align with the continuous contract. The continuous clearly shows a 4th wave triangle, while the combined would be considered a "cheater."

It appears that we had 5 waves down off of the spike high of 77.50. If it is a minute degree, structure would be complete. Any degree less, argues for a 1st wave.

Confirmation of a change in trend will come from:

1. a clean channel break
2. closing of price above the 50 sma
3. RSI break of the 50% level
4. a 5 wave move higher (impulse)
5. completed downside structure

Until the above 5 take place - I will assume the dollar continues lower.

Price basis combined contract.

GOLD
The gold market continues to subdivide higher, reaching new highs in the process.

It's apparent that we are getting very close to this leg finishing. I am assuming that this will complete a minute degree wave [v] coming out of the triangle. Remember that triangles precede finishing moves.

If this interpretation is correct, we will complete an intermediate degree (B) wave at this moves conclusion.

As posted in previous updates, my alternate view is that there was no triangle, but a series of 1's and 2's. This means we would be in minor 3 of intermediate (3) up.

I am anxious to see what type of price action we get when this leg finishes subdividing. Whatever it completes should be tradable.

Sentiment continues to maintain over 90% bulls according to the DSI readings.

Bottom line - We keep going up until we don't. If I were long, and I'm not, I would use Friday's low as a stop and perhaps trail it up.

Weekend Update - #2

30 YR BONDS
The 30 Yr failed its retest of the 50 sma, which resulted in nice downside price action for the week.

The 50% retracement level of the move off the 111-23 L, which I have labeled (X)?, supported price again. I believe this level gives way rather soon.

Equality comes in at 114-16. The minimum downside objective is 116-26.

My guess is that price wants to test the 114-26 pivot. The 78.6% retracement level is in the same area.

The bigger picture still remains unclear to me. If the 30 YR did put in an intermediate (X) wave at the 123-25 H, this would mean there is another (A)(B)(C) that should play out to the downside.

Bottom line - I still expect to see another 5 waves down of minor degree, at minimum. We will reassess at that point.

CRUDE OIL
The crude market continues with its corrective off the October 21 H. We have spent 12 trading days in this choppy sideways pattern.

Until structure suggests otherwise, I will continue to assume that we finished a minute degree wave [i] at the 81.99 H.

Friday's price action gave us a decisive close under the 20 sma. If we go back and retest the 20 sma with a failure, look for price to try and find its way back to the 50 sma, which is currently at 73.78 and rising.

I will reiterate from last weekend's update, this move off the 81.99 H in no way appears impulsive. This is suggestive of higher price.

The retracement levels of minute [i] (or whatever it turns out to be) are on the chart.

We are due a minor KoolsTools cycle low Wednesday.

Prices basis continuous contract.

DOLLAR INDEX
The greenback had a huge spike higher Tuesday, before spending the rest of the week retracing the move off the 75.085 L.

It appears that early morning spike was a "thrust" out of a (iv)th wave triangle. If correct, the 77.50 H completed a 5 wave structure that would be labeled minute [i].

The ensuing retracement would be the wave [ii] retracement. It is unclear if [ii] has finished or not. It has retraced 78.6% thus far, a perfect wave retracement in my opinion.

Notice that RSI has failed to breakout of the 50% level once again. This has become the rock of Gibraltar.

Also notice that price could not successfully close the 50 sma.

Both of these appear to be setup to give way when we get our next 5 waves up.

The 75.085 L is a critical level for this assessment. Should we trade through that price, we obviously have something wrong.

Prices basis combined contract.

GOLD
The gold market had hard upside price action this past week.

I stated last week that I was suspicious that minute [v] had in fact completed at the 1072 H. Those suspicions were confirmed with price action.

My best guess is that minute [iii] actually finished at the 1072 H, though I have it labeled as a minuette degree on the chart. It really doesn't matter, as this leg should finish off structure out of the triangle.

It appears that we should have one more small subdivision higher, though it certainly may be complete.

Once we can count a 5 wave move down, that will be our confirming evidence that intermediate (B) is finished.

Bottom line - it appears we are very near an intermediate degree top. Once in place, structure suggests that we should see price trace out an intermediate degree (C) leg down.

This should take price down to the price extreme of (A) around 700, assuming my interpretation is correct.

Price basis December contract.

Weekend Update - #2

30 YR BONDS
The bond complex caught a bid late in the week after weakness early on.

Notice how the 30 YR put in a reversal candle (bull engulfment) on Thursday, the same day we had an explosive equity market. Friday followed through to the upside, finding resistance at the 50 sma.

The lower boundary of the channel was broken, which setup a successful test of the 117-18 pivot. The 50% retracement level was in the same area.

It appears that we have a 5 wave structure down off the 123-25 H. If indeed a 5, then we know, at minimum, we will see another 5. I have labeled this leg as a minor degree 1 or part of an X wave.

Bottom line - I expect to see lower price after a retracement process.

All prices basis combined contract.

CRUDE
Strange week in the crude pits. Big reversal Thursday, followed by bigger reversal Friday.

Friday's price action confirmed my suspicion of this corrective being over.

I will keep my interpretation that we finished a minute degree [i] wave at the 81.99 H, though it is an educated guess at this point.

Support is very near with the 20 sma at 76.59. I have also placed the retracement levels on the chart.

I am considering the possibility that minor B has yet to complete, though it is a low probability at this point.

One thing is apparent, the price action off the 81.99 H is corrective - not impulsive. This suggests that we should see new recovery highs in this market once the retracement process is complete.

The dotted vertical lines on the chart are placed at the pivot lows starting with the wave (A) bottom. Notice the fairly nice symmetry between these pivot lows, though not perfect by any means.

Should this symmetry extend out to the next pivot, it appears that we are somewhere around the halfway mark currently.

Prices basis continuous contract.

DOLLAR INDEX
Strong impulsive upside price action for the bucky this past week.

It appears that structure has traced 5 waves up off of the 75.08 L. The question now is - has the dollar bottomed?

Though it's much to early to make that determination, everything is in place for this to be the case.

Notice how RSI tried to break out of the 50% level once again. Will it be successful this time? My guess is that it will, but it may need to pull back again to get a running start.

We are right at the upper boundary of the channel with the 50 sma directly overhead. Both of these are potential resistance.

The 78.085 L is critical support for a bullish case. Should price trade through that level, then obviously, the trend has not changed.

The 77.74 H would be the next logical important pivot that needs to be taken out to the upside.

Throwing the fibs on the impulse wave, assuming it is complete, yields targets of 77.615 (100%) and 78.629 (161.8%).

Bottom line - We should see another 5 wave move up, once the retracement process is finished, if not already. Regardless of whether "the bottom" is in, we should see higher price near-term.

Prices basis combined contract.

GOLD
The gold market turned down this past week, briefly breaking the channel before re-taking it with a big reversal candle.

This price action was unexpected by me. We obviously had no triangle, and hence no thrust. I took a stop on my calls. I only lost $.35 on the them, but I did have a decent amount.

On the chart, I show minute [v] completing at the 1069 H, in a truncated (v)th. This would finish minor C, and thus intermediate (B), if correct.

EWI has this thrust out of the triangle labeled complete, however, they have (v) ending at the high of 1072.

I have my suspicions that [v] is in fact finished. If complete, it is a very unsatisfactory (v) wave in my opinion.

We should know very shortly. If complete, we will start seeing impulsive downside price action.

If the bigger picture view of an expanded flat is correct, the downside objective would ultimately be somewhere around the 700 level, as this is where the price extreme of (A) is.

Should the expected scenario play out over the next several months, it should provide a nice opportunity to get long(er), as an investment.

Key levels to watch for the upcoming week are the Thursday reversal candle low of 1026.90, as well as, the wave (i) price extreme of 1011.10.

I also believe any trade through the 1068.80 H would be a good hint, or clue, that there is unfinished work on the upside.

All prices basis December contract.

Weekend update - #2

30 YR BONDS
The long bond filled its 10/13 gap, then had downside price action to finish this past week.

Price has again found the lower boundary of the channel. Should the channel give way, price looks destined to test the 117-18 L.

Sure has a Head and Shoulders look to it. If this is the case, then it would target out down around the 114-26 L.

If you look at this market on a wider scale, say since late 2007, it certainly has the appearance of a huge H/S topping pattern. Should this pattern be in play, it suggests much lower price.

Near-term, any trade through the 118-20 L, gives the minimum amount for 5 waves off the 123-25 H.

All prices basis combined contract.

DOLLAR INDEX
Fresh new lows for the bucky this past week - not unexpected.

My interpretation remains the same. Minuette wave (v) of minute [v] of minor 5 of intermediate (C). We inch closer and closer to an important bottom.

Price found support at the 78.6% retracement of the primary [A] leg off the 71.05 L. We are very near the minimum downside objective of 74.79, which is where 5 = 61.8% of 1 - 3.

Notice that RSI supported on its rising trend line, again giving positive divergence. Pay attention to the 50% level (upper trend line) to see whether it can finally break through.

I'm not sure this would signal an end to the downtrend, however, I do believe it would be meaningful.

Bottom line - As mentioned last week, this trend is very mature. It could end at anytime. Any upside price action should be viewed with suspicion, until an impulse has taken place with a channel break.

All prices basis combined contract.

CRUDE OIL
The crude market finished the week with another positive gain.

We finished something at the 81.99 H. I believe it was a minuette wave (v), which would complete a minute degree wave.

I'm entertaining the idea that it just may be a [iii] wave. The retracement will give us a better idea.

The 38.2% retracement level is 77.17, while the 50% sits at 75.68.

The triangle target is 83.99. The continuous contract numbers can change when they put on a new front month, which is why this number is slightly different.

Bottom line - the retracement process does not appear complete to me. Should price trade through the 81.99 H, then it will be obvious that (v) has not finished.

All prices basis continuous contract.

GOLD
The gold market continued its consolidation this past week.

My interpretation of structure has this market tracing a minuette wave (iv) of minute [v] of minor C of intermediate (B). An alternate view is that this is minor 3 of intermediate (3).

I believe structure is winding up for a nice thrust higher.

Drilling down intraday, shows that (iv) appears to be tracing a triangle. In fact, it may be complete, as of Friday's price action.

If so, it measures 28.30, which would give a target of 1078.70. This is right in the area of the B wave triangle target of 1076.80.

Notice the form that wave (ii) took, a sharp zigzag. The guideline of alternation (p. 63-64 Elliott Wave Principle) suggests that we should be looking for a sideways, and perhaps complex corrective for (iv) . Exactly what we got.

It is possible that this structure is not a triangle at all, but some type of combination. The ultimate result should be the same - upside price action.

I put on a moderate line of November 103 GLD calls today when price reacted at the lower boundary line. I will use a GC break of the c leg at 1048 as my stop.

Bottom line - It appears to me that we still have some upside pressure left for price. If I'm right in my assessment of structure, once we conclude our next leg higher, we should see an intermediate degree correction.

All prices basis December contract