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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.
- Jim Wyckoff |
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Special Message from Our Author
Today's Featured Article
Hello Fast Break readers. It's a pleasure to show you some of my recent work. My goal is 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, out late last week, in which I do take a longer-term view on selected key markets.
U.S. Dollar Index:
Last week saw gold futures produce a new all-time record high above $1,100.00 an ounce. Crude oil futures have pushed above $80.00 a barrel for a fresh 12-month high. Other commodity futures markets have recently established fresh multi-month or multi-year highs. Meanwhile, the value of the U.S. dollar against other major currencies is hovering near a 14-month low. This is a perfect example of inter-market relationships and how one market can have an affect on another.
Go here to see how intermarket analysis can give your trading an edge.
This divergent trading relationship between the U.S. currency and the commodity futures markets has become the paramount factor in market price action recently. The media is calling this phenomenon the latest "carry trade," in which one currency is heavily sold against the others due to keen interest rate differentials between the currencies' countries.
Many commodity futures markets at present are focusing more on how the U.S. dollar index is performing on a daily basis than on their own individual supply and demand fundamentals. The U.S. dollar index is a basket of six major currencies weighted against the greenback via a composite index price.
Importantly, as long as the U.S. dollar index continues to trend lower (as it has for the past eight months), commodity futures markets are likely to continue to see their prices trend generally higher.
Investors worldwide have chosen to sell the U.S. dollar and add commodities to their portfolios. Most investors presently reckon that if the world's major economies are on a solid recovery track, increased industrial demand for raw commodities will continue to support higher commodity market prices.
As well, investors have in the back of their minds the notion the U.S. will at some point in the not-too-distant future have to "pay the piper" for the massive infusion of money the Federal Reserve pumped into the financial system during the past 12 months. Read: higher and likely problematic producer and consumer price inflation is coming. During inflationary periods, holding physical assets (commodities) is generally preferred over paper assets (stocks and bonds).
One early technical clue that the eight-month-long decline in the value of the U.S. dollar has ended, or is close to it, would be if the U.S. dollar index produced two strong price rallies in a row -- 75 points or more.
 If you cannot view the U.S. Dollar Index chart, go here.
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Gold:
The weekly continuation chart for nearby gold futures shows that prices are in a solid uptrend, and this week they hit a fresh all-time record high. The next upside price objective for the still-powerful, gold-market bulls is to produce a close in nearby futures prices above psychological resistance at $1,200 an ounce. A close in nearby gold below major longer-term technical support at $1,034 would begin to produce longer-term technical damage to suggest a major market top is in place. A close below what is now major psychological support at $1,000 an ounce would produce psychological damage to the gold market to better suggest a major market top is in place and that prices would
then trend sideways to lower. Go here to see complimentary recent forecasts for the gold market.
 If you cannot view the Gold chart, go here.
Crude Oil:
This market will continue to be a very important "outside market" for which many other markets will follow. The weekly continuation chart for nearby Nymex crude oil futures shows that prices remain in an uptrend from the 2009 lows. There are no early technical clues to suggest the uptrend in crude will end any time soon. A close in prices below solid technical support at $70 a barrel would begin to produce some longer-term chart damage to suggest a major market top is in place. Importantly, the crude oil market will continue to be a follower of the U.S. stock indexes. If the stock indexes back down further, that would strongly suggest crude oil prices would do the same. Markets
drive and affect each other, which is why you need to be aware of intermarket relationships rather than just focusing on a single market. With VantagePoint's daily forecasts at your fingertips, you'll reduce the risk and stack the odds in your favor on each trade.
 If you cannot view the Crude Oil chart,
go here.
Natural Gas:
The daily chart for natural gas futures does show some near-term chart damage has been inflicted recently, as prices have backed down from the recent highs. However, the weekly continuation chart for nearby natural gas futures shows that after a rare and bullish gap-higher move a few weeks ago, the market has basically paused and has traded sideways. This pause is not bearish. However, the natural-gas bulls do have to show some fresh upside power very soon by pushing nearby futures prices above the recent highs of $5.35, in order to continue to suggest a major low is in place and that an uptrend can be sustained.
 If you cannot view the Natural Gas chart,
go here.
Dow Futures:
The daily charts for the U.S. stock indexes are just starting to show prices "rolling over" from the October highs, but no serious chart damage has occurred and the recent downside price pressure is so far just minor downside corrections in the overall price uptrend. The weekly continuation chart for nearby Dow stock index futures shows that prices are still in an uptrend from the early-year lows. It would take a close in nearby Dow futures below solid longer-term technical support at 9,300 to begin to suggest that a market top is in place in the Dow. It would not surprise me to see the stock indexes experience some more significant price weakness the last two months of the year.
The indexes exhibited contrary trading action in September and October by rallying to fresh highs despite those two months being historically bearish for the stock market. With the last two months being historically bullish for stocks, if the indexes sold off they would be holding true to their recent form.
 If you cannot view the Dow chart, go here.
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U.S. T-Notes: The T-Note and T-Bond bulls have faded the past couple weeks. However, a look at the weekly continuation chart for nearby T-Note futures shows that prices are still in an uptrend from the 2009 lows. But the T-Note bulls do need to show some fresh power soon in order to keep the longer-term uptrend in place.
 If you cannot view the U.S. T-Notes chart,
go here.
Corn:
The weekly continuation chart for nearby corn futures shows prices are still in a fledgling uptrend and that a bullish rounding-bottom reversal pattern has formed. Key shorter-term and longer-term chart support is located at $3.59 1/4. A close below that price level would be significantly longer-term and shorter-term bearish. And for the bulls to gain fresh shorter-term and longer-term technical strength, they would have to push nearby futures prices above the recent high of $4.13 1/2. Seasonal studies do show corn futures prices rallying into the end of the year.
When trading the grains markets like corn, soybeans, and wheat successful traders should have a broadened intermarket perspective, with a tool like VantagePoint.
 If you cannot view the Corn chart,
go here.
Soybeans:
The weekly continuation chart for nearby soybean futures still favors the bears, as a downtrend line drawn from the summertime highs remains in place. Nearby soybean futures prices will have to push above solid trend line resistance at $10.50 a bushel to negate the downtrend line and to gain fresh longer-term technical strength to then suggest a longer-term uptrend can be sustained. A push in nearby beans below strong longer-term technical support at $8.78 3/4 would be significantly longer-term bearish to suggest soybeans pushing down to psychological support at $8.00, or below.
 If you cannot view the Soybeans chart,
go here.
Wheat:
Chicago soft red winter wheat futures have seen a solid rally fizzle the past couple weeks. For the wheat-market bulls to get their uptrend in prices jump-started again, they would have to push nearby futures prices above strong technical resistance at the recent high of $5.75 a bushel. Worldwide supply and demand fundamentals in the wheat market cannot be considered bullish. However, with prices backing so far down from the highs of the past 18 months, there are still speculators that view wheat prices below $5.00 a bushel as a "value buy."
 If you cannot view the Wheat chart,
go here. |
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About the Author
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Jim Wyckoff
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.
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