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 May 21,
2006 Commentary (weekend edition)-
Now, that's
something you don't see every day. The 'talking heads' on financial television
called the 'blow-off' move in the metals, and they hit it dead on (for now). I
suppose if you guess over and over and over about things, perhaps you say the
right thing at the right time once in a while? I generally use this 'wrong way
crowd' for contrarian confirmation for my usual premises at the time. But it
gets even more interesting. I had just seen a bit on Friday on the local
news about the metals getting crushed. A short while after I got a call from my
better half, and she said 'Hey, I just heard on the radio that the metals
market crashed???'
As you might expect if you follow my methodology and the
metals closely, the first thing out of my mouth was: 'I bet they didn't mention
all those ABCD's, huh?' Keep in mind my better half is not a trader. Her
knowledge is limited to being forced to listen to me ramble endlessly about the
market and trading. A brief explanation filled her in on what I was seeing. We
will get to that shortly, as well as in Jim's Chart of the Week. I have no idea
what will happen here, I can only watch for setups, and see what the issues do
at those points. I can say that it is very curious the 'public' is being
informed the metals have crashed, and I see setups across the board.
Let's get to
work. I'll start with last week's Jim's Chart of the Week. Initially, I was
going to wait to show anything on this one, but the more I looked at it, the
more I felt it would be educational to dig into it a bit.
Here's last week's chart of the week, showing
how corn had hit the upper parallel and 1.272 external retracement area. As I
mentioned, what I do in a case like this, as far as management, totally depends
on what my initial trade premise was. Did you study the 'context' and form your own
possible trade premises for this one?
It isn't the best way for me to teach to just
give all the answers. After all, this isn't high school any more. You're here
not because you want the easy way out and because you are a slacker, you're
here because you want to attempt to make the number on the bottom right hand
side of your brokerage statement get as big as it can be for you and your
skills, and you are willing to bust your hump to do that. If you don't fit in
that category I can't imagine why you are reading this, except maybe you like
my dry wit?
Let's see what happened.
Regardless of what my premise was, corn was
acting strong, and not like it was going to roll over. That, generally, has me
watching closely, to see what it does. No matter what my trade premise is, I
never take anything off at a 'profit target', and that goes doubly for an issue
that is still moving, or isn't checking back essentially at all.
I added a
second set on here, which I didn't show before because I didn't want to confuse
things too much. Notice the warning line support for the initial trade area.
Corn 'tested' that upper parallel twice before backing off. It hit a key .382
here, with that .447 just below. There is a lot more going on here than I can
discuss in this commentary, and some things out of Kane Trading on: Four 'New' ABCD Pattern
Variations may be coming into play, too. Point is, if corn is going to
blow this out to the upside, a key area and setup are coming together for me in
here. If it is going to roll over further, clues should be coming at me very
soon.
Let's look at something in beans.
Beans have an ABCD coming together right at a
median line lower parallel. I put a few fibs on there to show how beans 'see'
the key numbers. I also added a 'old' trendline on there. It should be clear
how important this spot is to me. Not only that, there is a short trade in
progress in soy meal, and that is now at a critical test point for that move.
That setup is one I am extra wary that it may blow out to the upside (although
it does look very weak right now), so you can see how I am watching all these
products as they form various setups and hits critical areas. And we all know
the kind of move wheat has made recently. I am really enjoying the grains
lately.
Let's move on to metals. I'll show copper.
All the metals, and I mean every one I watch,
have formed patterns at key lines and areas right in here. I'm not sure I have
ever seen such a convergence across the board. This, as the term 'crash' is
used in the non-financial, popular media. Gold is my primary focus, although I
watch them all.
I saved gold for Jim's Chart of the Week. Although that chart is
meant to be presented without explanation, let me just say that there is a lot
more going on, as far as all my lines and areas, than what I show on that
chart. That chart shows the basic concept, but I watch several areas, and I
watch the price action closely, and I never do anything without an entry trigger. Nonetheless, this
whole metals scenario is one of the most interesting I have seen in a long
time, and the intermarket analysis leans me towards metals getting started
again. We will discuss that more in a minute.
Let's follow up on the
Euro.
The Euro went straight to my first area,
right at that upper parallel, and 'stalled'. It actually has done more than
stall, it has formed a pattern. Drop down to the lower timeframes and look this
over. This is not acting weak, it is acting like it is forming a 'launchpad'.
Time will tell, but so far, I'm not seeing the signs of a reversal at all. That
leaves me in management mode, and it has intermarket implications. One thing is
for sure, I'm hearing a lot of Euro bears out there...
Now, one more
thing here for this mix. I don't have chart space so you can check this out
yourself. The 10-year (and 30-year) have 'popped' up a bit, and the 10-year is
out of the 'channel' now. Still, do some line work, and look at where the
obvious .382 (and .447) come in. I need to see what happens there, or if this
forms an ABCD after a pullback. Now think intermarket. Can you see how this is
all lining up? This is going to not only be very interesting, it will likely
lead to some fantastic opportunity real soon.
Let's wrap up with some follow up
in cotton.
This one just keeps getting better. You all
recall how I mentioned this one way back, advising everyone to do the work. It
formed another pattern and rolled right off the .447, right to the lower
warning line again. As I always say, too, this is just my framework. Now, is
this thing something, or what? Do I have a lot to work with here? I'll say. If
everything just behaved this nicely all the time, I'd be able to buy myself a
small little island (like Hawaii) in no time (yes, that's a joke). At least
enough things behave well enough, enough of the time, to keep me happy. Ah, the
methodology at its best...
As I wrap up, let me say that at least I found a new
intro for this week's commentary. But, it's only so different, because I'm
going to repeat myself here instead. This week was just awesome. Look at that
mini Russell. Friday's action was remarkable, in my opinion. And I'm not the
only one. As soon as Friday got under way I started getting charts from many of
my students, one after the other, basically pointing out just about the same
things. I can't tell you how good it feels to get charts like that, with
comments thanking me profusely for sharing my work. I expect I may add one of
those comments to the testimonials page shortly. So, get ready for another
explosive week, because summer upcoming or not, I think the action is going to
be 'sick', as one of my students said his young son would call it.
The next
commentary will be next weekend's edition, posted by Sunday evening, May 28,
2006.
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