Weekend Update #2

CRUDE
Crude finished a 3 wave structure to the downside on Monday and then spent the remainder of the week going up in impulsive price action.

It appears that she is tracing a double zigzag for minute [b]. This means that the Monday low would be a minuette (x) wave. From that low, we should see an abc up of minuette degree to complete [b]. If this is the correct structure, we will see 7 waves.

It appears that the first leg, which is minuette (a) , has completed, as there is clearly 5 waves up that finished at the 74.31 H.

It is unclear if minor B will take the form of a triangle or not. It sure has the look and feel, as previously mentioned.

Upside targets include 76.30, which is the 61.8% projection of (a) and 78.93, where (c) = (a). Basis October contract.

The 2 bar daily projection comes in at 74.97. Basis continuous contract.

It should be noted that the combined contract made new yearly highs this past week.


DOLLAR INDEX
It appeared that all systems were a go on Monday. Turned out it was really a no-go, as the dollar got kicked around the rest of the week.

Where are we at now? Well, she better save herself fast if the 77.52 L was a bottom. You can make a decent case that structure has been tracing out an expanded flat.

That is my preferred count, unless the 77.52 low is breached. I really think the odds favor a break at this point, however, I will let price action determine that.

If the flat scenario is to play out, the dollar needs to start heading to the upside soon. There isn't much room for error down here.

From a bullish standpoint, it does appear that the (c) leg may have finished. This would complete minute [ii].

I don't know folks. For you poker players, we might be looking for maybe a 2 or 3 outer here. In other words - don't count on it.

GOLD
Monday had a big gap down, which appears to have saved me some frustration and money. If you recall from last week, I wanted to be short gold via puts.

Fortunately, I did not chase (see mid-line on chart). My plan at that point was to put on a short line with a backtest of the broken up-trend line. I came close to pulling the trigger on Wednesday, but thought there needed to be another leg higher.

Friday was another gap, this time over the trend line. Bottom line - no action for VO this week in the gold market.

I show two different counts. One is bullish, the other bearish, which is still my preferred at this point. I need to see price action take out the channel and the 974.30 H to change my opinion.

There is actually a third option that may very well be in play here. For the last two weeks I have talked about the possibility of a triangle tracing. Structure may have been telling us this all along with the slow choppy price action.

One thing is for sure, it is coiling up to bust a move. If a triangle, it measures 144.30, which targets up around 1075 (basis continuous).

If you play this market, I think the conservative thing to do is wait for a break of either the 994.50 H, or the 907.20 L to place a bet. If your aggressive, like me, you can use the 974.30 H and the 927.60 L. Or better yet, do your own due diligence and come up with a game plan.

Edit: There are 2 prices on the chart that are incorrect due to rollover. The 996.50 H and 930 L. I failed to change those as I put them on manually. It's been a long day and I'm not going to update the chart as it's a hassle.

30 YR BOND
As expected, the 30 yr had some unfinished business on the upside to complete an expanded flat.

Notice the near perfect 138.2% extension of [a]. This is a very common extension for an expanded flat. Friday finished with a very bearish candle and more importantly, did not take out 121'11.5.

If my assessment is correct, bonds should be heading lower over the next several weeks.

The first order of business is to take the channel. Then we need to see decisive price action through the 114'25.5 L.

3 = 1 at 114'17. The 161.8% projection of 1 sits at 110'18. This would be a more likely target, if not lower. Ultimately, I think we probably see par.

Watch price action closely as we get to the channel. As mentioned last week, this could turn a triangle.

Weekend Update #1

SOYBEANS
This is the bigger picture view that I'm currently working from. Basis weekly composite.

Beans completed a large degree wave [III] (white) in early July 2008. A cycle a wave completed in December 2008. We are in the process of finishing cycle b.

When complete, cycle c down should ensue. That will in turn finish a supercycle degree (a).

This long-term count is taken from EWI.

After a hard down Monday, beans found support at the 61.8% retrace of 3 and rebounded nicely.

As mentioned last week, price action looks impulsive from the 1113.25 H. This bounce, so far, has taken on a corrective look. Both of these argue that minor 5 finished up at 1113.25.

We need to see price action confirm this view by decisively breaking the channel. Until this happens, I will assume that 5 is unfinished.

Should beans still need to trace out a minor 5 leg, the minimum objective would be the 61.8% projection of 1 - 3 at around 1121. Basis daily continuous contract.

WHEAT
This is the bigger picture view I'm working from. Basis weekly composite.

The wheat market completed a large degree [III] (white) wave in February 2008. It appears that the first 4 cycle waves are complete.

Wheat is in the process of tracing out a cycle V wave. This is turn will complete a supercycle (a) wave.

This long-term count is taken from EWI.

The wheat market continued selling down this past week.

Notice that price has been unable to get above the mid-line of the channel. Price action looks very similar to the June [3] leg.

My initial minimum downside target still remains at 437.50, the 61.8% of [1] - [3].

Notice the new alternate count at the bottom. When studying the weekly, it clearly looks like a 1 and 2 wave have completed and price has entered a 3rd. This would bode even worse for an already beaten up market.

It's just an alternate currently. One reason I'm hesitant about embracing that view, has to do with the steepness of the decline between this leg and the previous, which I have as primary [3].

Notice how the downside momentum (based on price action) is not as strong in this current leg. The angle of descent is not near as sharp - at least at this point.

This leads me to believe that maybe this is a [5]th. It is something I will keep an eye on.

For now, the trend is still down and any upside price action should continue to be nothing more than a counter trend move.

CORN
Here is the bigger picture view I'm working from. Basis weekly composite.

Like the other grain markets, corn completed a large degree [III] (white) wave in mid 2008. A cycle a wave finished in December 2008. It appears that cycle b has completed and we are in the process of tracing out a c leg.

This will complete a supercycle (a) wave.

This long-term count is taken from EWI.

It appeared that price was going to take out the 7/22 low at 304 on Monday, however, it was spared for the time being.

I have changed my labels to reflect that intermediate (1) completed at the 304.25 L. If you drill down intraday, I think that structure argues this.

Friday saw price get rejected at the 38.2% retracement of (1). Friday also put in a bearish candle. It's unclear whether this retrace has finished or not.

I would not be surprised to see additional upside pressure for a few more days. There is also the possibility that [4] could still need more work. This would call for a triangle, or some type of complex structure.

Based on how the structure looks, my guess is that [4] is completed.

There is also the outside chance that the 5 wave leg down to 304.25 completed primary [5] (truncated), thus completing cycle c and supercycle (a). I don't believe the odds favor that, although, it can't be ruled out.

Once price takes the 304 L, I expect price to achieve the 270 level. This is the 61.8% projection of [1] - [3]. (3) = (1) at 267.75.

Crude

Crude finished down on low volume. Range was a very smallish $1.54 (31 ES handles).

They call these consolidation days.

Not a whole lot to report about. It appears that we are working a complex corrective for minuette (b). 5 waves down should complete micro [Y] .

Even though today was very small for crude action, there were still .30 - .40 moves all day. It was very tradable.

If my interpretation of structure is correct, we should finish up (b) sometime tomorrow. (c) up is next.

The bigger picture should clear soon as well.

ES

ES finished the day higher (in case you fell asleep). Range was a smallish 13.50 handles, while volume contracted from yesterday.

I had to make some minor changes with the degree's, but so far so good with the beginning of minor C. It actually counts fairly well - until we get to the 1003.75 H.

It appears that we are in the process of tracing an expanded flat for minute [ii]. minuette (b) reached the 138.2% extension of (a) to the tick. This is exactly what you should expect with a flat that expands.

There are other options, but I'll go with this for now.

I don't really expect a very deep retrace for minute [ii] for several reasons, although I could be dead wrong. I will be happy if they can get it to the 50% retracement level at 990.25, but I'm thinking the 38.2% may be all she gives.

You will remember that minute [ii] of A retraced a full 99%. The big difference there was that we had a deep retracement in terms of price and time from the 950's. Momentum was clearly to the downside.

Complete opposite up here. We have had a very shallow retracement that has not taken much time at all. There is very little downside momentum imo. I believe the odds favor a small retrace.

It is possible that I may need to ratchet my degree's back down. [i] of A was 19 handles. [i] of C measures 27. I'm satisfied that I have the correct degree's, but you never know.

My alternate remains that this is part of a complex correction for minor B.

Smallies did a good job of bailing at the highs, but it appears they were covering into the close.

Tomorrow is expiry. Not sure what, if any, tricks are up their sleeves. I keep hearing how "max pain" is significantly lower around 970.

We may very well get there, but structure doesn't suggest it.

We could have a cycle peak tomorrow based on the daily days of 8/12 and 8/17. Monday is showing up as a low fwiw.

Crude

Crude exploded higher by 4% today. Another monster range day at $4.53 (over 90 ES handles). Volume was equally impressive.

Well folks, I think they are throwing a double zigzag on us. This means minute [b] is still in progress.

It appears that we have finished, or nearly, minuette (a). We should see a retrace, and then another 5 wave structure to complete [b]. If I'm correct in my assessment.

I had mentioned last night that maybe (c), and thus [c], might have completed. I just can't believe that, although, I suppose it's possible. The degree's just wouldn't make sense.

We have a nice 5 wave structure off the 67.42 L. All the subwaves are clean with no overlap - that is an impulse.

I show sub-minuette v completing at the 74.31 H, however, it's possible it has a little bit of work left.

The retracements are on the chart. This assumes that the 74.31 holds as the high.

I do have an alternate at the bottom. There are a couple of other options as well. No need to delve into those unless we have to. I'm comfortable with my preferred, at least until tomorrow :)


No question, this is by far, the best trading market out there. Huge volatility, ample liquidity, and trades technically sound for the most part. What more could you ask for? Yup - this has become VO's market.