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 May 16, 2004 Commentary
(weekend edition)-
Today I am going to show something
that I am looking at right now. This is unfolding as we speak. It bears an
uncanny resemblance to the broader stock market, in a way. We have a powerful
trend that seems like it will never end, and then the framework of a potential
ABCD correction.
The thing I keep in mind when I assess such a situation is that
this ABCD would be set up to continue the trend. I like ABCD's set up in that
way, as my frequent readers know. But that also has my trade premise being that
I feel the trend is likely to continue. The fact that many feel the uptrend in
stocks, as well as in commodities, will certainly continue much, much farther,
bothers me quite a bit.
Let's look at what I first saw. I'll show a daily cash
chart of the CRB index.
This looks a lot like the current stock
market situation. I'm watching for a potential ABCD pattern to form. The arrow
points to a bad tick. I left the anchor lines on the chart so that it is clear
how I am setting up the potential ABCD, ignoring the bad data.
Once I saw
this, I went to some additional charts to see what various commodities and such
looked like. When I got to the grains I started to see something interesting.
Let's start with soybeans, which everyone was sure would hit the teens, and
perhaps never stop at all.
Beans look a lot like the CRB. I am just
putting the 1.000 price projection on the chart, as I have frequently been
doing lately, to give a general idea of what I am looking at. I will leave it
to the reader to form his or her own grouping(s) if desired. I use the
methodology I laid out in Kane
Trading on: Trading ABCD Patterns to do this. I'm trying to get readers
to do some work on their own.
Let's move on to corn.
Corn looks the same, but is much closer to
the 1.000 ABCD completion point. To make individual trading decisions I have to
analyze each of these issues with the full set of groupings on the chart (of
course), and evaluate them with regard to the 'context' of the broader picture.
I outlined this in detail in Kane
Trading on: Multiple Timeframes and 'Context'.
Let's move on
to wheat.
Wheat has moved through the 1.000 price
projection. I was watching some higher groupings and got nothing even remotely
resembling an entry trigger. I will be watching this for potential long trades
until the 1.272 alternate ABCD grouping, but it sure looks ominous. Many great
trades for me look ominous just before the reversal point, so I'm not ruling
this out for that reason. I'm just very alert to the rapidity of the
plunge.
Wheat also seems to have the greatest amount of price action to
take into consideration when forming the potential trade area. It is the issue
here that I am the most cautious about, too.
I will be watching the grains and
the CRB in here very closely for potential trades. I am also on the alert that
this may be the start of a much larger move down, just like I am keeping an eye
out for in the stock market. This may be a wave 3 of 5 in a much larger ABCD
pattern. The similarities here with the broader stock market indices are very
interesting. I strongly suspect that I will be able to find some solid
potential trades in here soon, one way or the other (if the ABCD's play out,
and if they don't play out).
The next commentary will be the mid-week
edition, posted on Wednesday.
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