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Trader's Tip
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No matter what your trading timeframe -- be it an active intra-day trader or a longer-term position trader -- you should examine longer-term weekly and monthly charts to gain that important bigger-picture perspective on markets. During trending moves in markets, prices do tend to gravitate toward highs and lows scored on the longer-term charts.
- Jim Wyckoff | |
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Today's Featured Article
Hello Fast Break readers. It's a pleasure to show you some of my recent work. It's my goal that after reading my Fast Break analysis you will take away at least one valuable "nugget" to improve and enhance your own trading plan of action. Today I'm going to show my latest bi-weekly newsletter, in which I do take a longer-term perspective on selected key markets.
The New Year has found some compelling clues that investors are regaining some risk appetite after months of socking away their money (what was left of it after the stock market took a nose dive) in safe-haven U.S. Treasuries or under their mattresses. The recent sharp declines in U.S. Treasury bond and Treasury note prices, from record-high levels experienced last autumn, are one clue that investors are now looking elsewhere for investments as 2009 begins. The past few months had seen U.S. Treasury yields drop to record lows, with the shorter-term U.S. T-bills yielding virtually nothing as investors were not worried about a return ON their money, but just a return OF their money.
Many commodity futures markets, including grains, livestock and international foods have seen significant rallies recently, as the larger speculative "fund" traders are again seeking out higher returns. For nearly 80% accurate* market forecasts for any of these markets go here. Many commodity futures markets had experienced steep price declines since last summer, with some losing 50% or more of their value since last summer's highs. Now, bargain-hunting buyers have emerged in these recently beaten-up markets.
One notion espoused by many traders is that price inflation will re-emerge in 2009, and possibly in a big way. Reason: The big injections of liquidity into the world financial system by central banks the past several months will re-ignite inflationary pressures. Indeed, central bankers and economists were so worried about their economies sinking into a Great Depression-like deflationary cycle that they were willing to risk an inflationary period by pumping vast amounts of money into the world financial system. Importantly, this is a bullish portent for raw commodity markets in the coming year. My bias is that there will be good buying opportunities in the commodity futures markets the
first half of 2009. And my bias is also that the bullish commodity market train has not already left the station and left would-be market bulls behind.
The recent rebounds in many commodity markets have not been so strong as to again put those markets into a price range that is "too high" to climb on board the long side. However, I don't like to chase markets higher, or lower. What is likely to occur in the coming weeks or few months is some significant downside price pressure in most commodity markets that will offer good buying opportunities for the bulls. As always, my job will be to point out to you, my valued readers, the very early clues on potential trend changes and bigger upcoming price moves. | |
Continuous Commodity Index:
A look at the monthly continuation chart for the Continuous Commodity Index (CCI) shows just how steep was the decline in raw commodity prices during the last half of 2008. From a key Fibonacci technical perspective, the CCI dropped down to a two-thirds retracement level of the price move from the 2001 low to the 2008 high -- and then rebounded. This is a longer-term technical clue that the raw commodity price sector has put in a general price bottom and that prices during 2008 will enjoy at least a modest rebound.
If you cannot view the CCI Chart,
go here.
Crude Oil: As was the case during most of 2008, the crude oil futures market will be a proxy for most of the raw commodity markets. As goes crude oil, so will also likely go most of the other markets. See on the weekly continuation chart for nearby Nymex crude oil futures that a very steep downtrend remains in place from the July all-time high. There are no shorter-term or longer-term technical clues to suggest the crude oil market will embark upon a solid price uptrend any time soon. Keep a close eye on the weekly chart for crude (and other markets you follow). Trading crude oil and want to know more about its related markets?
Go here. It was legendary trader and analyst W.D. Gann who said the weekly chart was his favorite to examine for clues on potential significant trending price moves. It would take multiple daily closes back above major resistance at $50.00 a barrel, basis nearby crude oil futures, to suggest that a market low is in place.
If you cannot view the Crude Oil Chart, go here.
U.S. Dollar Index: All currency futures and FOREX traders should keep a close eye on the U.S. dollar index futures. This index is a basket of major currencies weighted against the greenback and is an excellent gauge for the overall health of the U.S. currency, and even the U.S. economy. See on the weekly continuation chart for nearby U.S. dollar index futures that prices are still in an uptrend from the summertime lows, although trading has become very choppy in recent weeks.
If you cannot view the U.S. Dollar index Chart,
go here.
U.S. T-Bonds: The very steep recent declines in the U.S. Treasury bond futures market has inflicted some near-term chart damage to begin to suggest that a major market top is in place. See the weekly chart and the support and resistance levels I have marked. A push back above solid chart resistance at 138 even would be significantly bullish to suggest a move back above the all-time high scored in December, with an upside objective of 150 even.
To receive a complimentary recent forecast for the U.S.T Bond go here. A drop below solid longer-term technical support at the 131 23/32 would produce serious longer-term chart damage to suggest a price move back down to the 120 even area, or below.
If you cannot view the T-Bonds Chart, go here. | |
Gold:
The weekly continuation chart for nearby gold futures shows that prices have pushed up against downtrend line resistance and have not been able to push above it. Bulls will have to push nearby gold futures prices above the downtrend lines seen on the weekly chart to gain solid longer-term technical strength to suggest a challenge of the 2008 all-time high, or above. A drop back below major psychological support at the $800 level would produce fresh longer-term chart damage to suggest that prices would continue to trend lower in the coming weeks. The heretofore close inverse trading relationship between gold and the value of the U.S. dollar has become somewhat disconnected.
If you cannot view the Gold Chart,
go here.
Soybean Oil: The weekly continuation chart for nearby soybean oil futures shows that a steep longer-term downtrend in prices has been penetrated on the upside and negated and a fledgling uptrend has developed. Recent price action in bean oil does suggest the market has put in a longer-term bottom.
Trading soybean oil and want to know more about its related markets? Go here.
If you cannot view the Soybean Oil Chart,
go here.
Corn: See on the weekly continuation chart for nearby corn futures at the Chicago Board of Trade that recent price action has penetrated on the upside and negated a longer-term downtrend line, and that a fledgling uptrend has developed. See, too, at the bottom of the weekly corn chart that the Moving Average Convergence Divergence (MACD) indicator has just produced a bullish line crossover signal, whereby the thick blue MACD line has crossed above the thin red "trigger" line. See, too, that the last time the MACD produced a bullish line crossover signal was in September of 2007, after which time the corn market embarked on the biggest bull run in futures trading history.
If you cannot view the Corn Chart,
go here.
Wheat: See also on the weekly continuation chart for nearby Chicago wheat futures that recent price action has penetrated on the upside and negated a longer-term downtrend line.
To receive a complimentary recent forecast for the wheat go here. See, too, at the bottom of the weekly corn chart that the Moving Average Convergence Divergence (MACD) indicator has also just produced a bullish line crossover signal, whereby the thick blue MACD line has crossed above the thin red "trigger" line. For all the grain futures markets, I suspect in the very near term they will see some downside selling pressure as the seasonal "February Break" phenomenon approaches.
If you cannot view the Wheat Chart,
go here. | |
About the Author
Jim Wyckoff is the senior market analyst with TraderPlanet.com, a Tampa Bay, Fla.-based financial social networking site, provides individual traders of all skill levels a one-stop destination for financial information and trading tools. TraderPlanet.com is the only financial social networking site that offers its members a full suite of market data feeds, advanced technical analysis tools and exclusive analyst commentary across asset classes, while enabling members to give back to the broader world community through gift-giving to charitable causes. Designed to level the playing field between institutional and individual traders, TraderPlanet.com's fully interactive, multi-media rich platform is designed to promote the free-flow exchange of ideas
through questions, answers and comments designed to improve trading strategies and investment performance.
Jim has spent nearly 25 years involved with the stock, financial and commodity markets. He was a financial journalist with what is now the Dow Jones Newswires service for many years, including stints as a reporter on the rough-and-tumble commodity futures trading floors in Chicago and New York. As a journalist, he has covered every futures market traded in the U.S., at one time or another. Not long after he began his career in financial/commodity market journalism, Jim began studying technical analysis. By studying chart patterns and other technical indicators, Jim realized the playing field could be leveled between the "professional insiders" in the markets, and traders/analysts like
himself. As a proponent of Intermarket Analysis, VantagePoint Intermarket Analysis Software is one of the tools in Jim's tool-box. | |
Special Message from Our Author
Complimentary Forex Trading EBook!
In today's global economy, markets drive and influence each other. Still, many traders are only analyzing a single market at a time and ignoring related markets. VantagePoint Trading Software uses intermarket analysis to predict market trends for over 600 world markets with nearly 80%* accuracy. As an added bonus traders can also receive a complimentary Forex EBook
, along with their complimentary market forecast provided by VantagePoint. Go here now to receive both. | |
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