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 November
26, 2006 Commentary (weekend edition)-
I want to
once again welcome all the new visitors to the website. I've broken all
previous traffic records, and if I 'pro-rate' the action from the most recent
times, I'm far into unprecedented territory. I've 'met' some interesting new
people via e-mail lately, and so far it looks like my work is quite
well-received. I did get to two new free articles, and when I get time I will
post more. I'm working on a follow up, a 'Part II' if you will, to the Realistic Expectations
article. I'm also working on an options article. I'll post them as soon as I
get them ready, and I'll make a note in the What's New section.
Today I'm
going to switch gears from the Russell and the mini's, and look at some
currencies, gold, and the 10-year. I got some e-mail asking about my
intermarket analysis, and that got me to thinking about today's commentary.
Although I'm not going to delve very deeply into the details of my intermarket
analysis, those that follow me closely know I keep a close eye on this. I watch
how money flows from various areas, and I assess how this lines up with various
trade premises that I may be constructing. I get into this in great detail in
the members archive,
if you want a resource for this material. For today, I mostly want to focus on
what I saw recently in some of the key intermarket components.
Let's start
out with last week's chart of the week on the Canadian dollar index.
Let me start with a quote from last week's
commentary: "I chose to update the Canadian dollar for this week's chart.
Recall back when I last showed this on the weekly timeframe, and said it will
be awhile (if it gets there), but I wanted it on the table. It's moving in the
direction, still, and may be getting close to an action spot. Do more work on
this one, and keep an eye on it." Did you do the work? Did you see the line
intersection this had hit? Did you see if the next 'sub-grouping' up from the
one shown was in this area? I hope you watched this.
I'll add my
additional grouping onto the chart, and zoom in a bit.
I added back on the next 'sub-grouping' from
the one I had shown. On my 'working charts' I had this one, and some others,
already on my chart. If I show everything in here the charts will be too
cluttered, given their small size, and too chaotic for people new to my work.
Hence, my hint last week. The Canadian saw the area, and bounced very strongly.
Drop down in timeframes and take a look at this. Now, is this a 'reversal', or
a bounce and then down to a lower area? I have no idea. I know what tends to
happen, based on probability and experience, but now price action is key. The
point is, I knew this area was one to watch, and I mentioned it in here in
advance, and that's really all I can ask for.
Let's look at the Pound. I'll use a
240-minute all-sessions chart. I suggest you work this up with a tick chart. As
I have said, I can't show those in here due to limitations with my data
collection system right now, but hopefully that will change in here not too far
down the road. My 'working charts' for issues that trade around the clock will
almost always be tick charts.
In the series I am going to show here I just
want to create a theme of how 'clear' some of the areas were for these. I will
just show some basic factors for these, and hopefully the concept will be clear
by the end. Note the median line
'adjusted set' lower parallel highlighted by the arrow here, and the
Pound's reaction there. Isn't this what I am constantly pointing out in here?
Was I ready for this possibility, watching closely right there? Was I seeing
what other intermarket issues were doing here and leading up to here?
Let's look at
the Euro.
On this one I showed a key .382 retracement,
and a 1.000 price projection. Was I ready to watch here as it was, even without
this area? Do the additional work on this one, and the picture starts to get
even more clear.
Let's look at the dollar index, which really made the financial
news Friday as it dumped. Was I expecting it may dump, well before the talking
heads found it?
Does this look a bit like the Euro turned
upside down? A little? Are you kidding me? Scroll a bit so both charts are on
your screen, and do a comparison. Sure, the Euro is the most heavily weighted
component of the dollar index, but still, that is remarkable. Hence, the same
.382 retracement and 1.000 price projection. Was this dump unexpected?
Let's jump
over to gold.
Recall that gold is 'dollar-denominated', and
hence moves inverse to the dollar, just from a 'revaluation' standpoint. In
other words, gold will 'automatically' be repriced based on the movement of the
dollar. It may also do its own moves, based on factors specific to gold,
outside of the currency moves. You can easily calculate the expected movement
due to the currency change and see if gold is 'intrinsically', or 'net', moving
up or down. Anyway, here's a key set I have had for awhile, and a nice, tight
.300 and .382 retracement overlap, from key swing points. Hmmm, starting to see
my point? Was I watching for this run in gold to possibly start there?
I'll finish
with a chart that will help get everyone 'caught up' for what I showed in this
week's chart of the week. Here is the 'old' chart I showed way back, on the
10-year index.
The 10-year index is still moving off the
area I showed. I put a daily/weekly set on there, with a key .382 retracement.
This is in the 4.40% area. I want to see how rates act in this area, if it is
reached. I might expect a bounce there, but what happens after that is
critical. I wanted to show this on the weekly chart for better detail, but I
had to show this 'context', and I didn't have room for another chart, so I
combined them. I suggest the reader do the work on the daily and weekly charts,
to see the area in the best detail.
If you look at this week's chart of the week
now you can see how the break there might be the push to this area on the above
chart. It hasn't set a new high for the move, though, and did 'snap back' after
testing that trendline (but keep in mind the holiday trading). I showed candles
to give that perspective. Look at the 30-year for some contrast, too. This
surely seems to be a critical area to watch.
As I close, keep a close eye on all
these issues I have shown here. I didn't show much 'context' to assess what the
bigger pictures may be on all these. Do some work in this area and see what you
come up with. Look at that Aussie dollar and see what it did recently, and try
to figure out why it did what it did from the spot it did it (great sentence,
huh?). There was something there.
Look back at the housing index, one of the
previous charts of the week, and see what you can find about where it took off
from for this last 'pop'. I might show this in an upcoming commentary. And
lastly, watch those commercials. The next report will be out Monday, delayed
because of the holidays. I like that all I have heard so far is how invalid all
these numbers are. Hmmm, a 100% track record in extreme positions from a group
that is actually betting huge money doesn't sound all that
invalid...
The next commentary will be next weekend's edition,
posted by Sunday evening, December 3, 2006.
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