Triangulation galore — Gold and British Pounds are set to move


The Cable ($GBPUSD) and Gold ($GC_F, $GLD) are forming classic triangle patterns on the charts

The symmetrical triangle is the least reliable of all major chart patterns. The symmetrical triangle is also the most commonly misdiagnosed pattern by novice chartists. But when a symmetrical triangle works, it is a thing of beauty.


The dominant pattern in Gold continues to be the POSSIBLE 10-month descending triangle on the weekly and monthly charts. But remember this, you novice chartists, this descending triangle does not become a descending triangle until it is completed. Until then it is only a possibility. A close below $1500 (+/- $10) is required to complete the descending triangle. This would establish a downside target of $1150 or so.

A nifty little 10-week symmetrical triangle on the daily graph is forming near the lower boundary of this descending triangle. This symmetrical triangle would be completed by a close below the June 28 low at 1547 or above the July 3 high at 1626 — however, a close above 1615 would nick the upper boundary of the triangle. Such an event would stack the odds for an eventual completion with a target of 1700 (+/- $10).

Interestingly, the chart for Gold expressed in Swiss Francs displays a textbook symmetrical triangle. A close above 1600 would complete this triangle and establish a target of 1740 CHF/oz.

British Pound ($GBPUSD, $G6B_F)

$GBPUSD presently represents the grand daddy of all symmetrical triangles. The monthly chart displays a possible 43-month triangle. The problem with this pattern is that we are working too far towards the apex. Valid triangles should breakout no more than 60% or so the distance to the apex. This pattern is pushing its limit.

The daily graph displays a possible 9-week symmetrical triangle bottom. Symmetrical triangle bottoms require five contact points, the first of which must be a low under classical charting principles. This is unlike Elliott Wave whereby a high can count as the first point for a symmetrical triangle bottom.

A close by the daily chart above 1.5730 and especially above 1.5800 would complete this triangle and set up the possibility that the multi-year triangle is ready to be launched.


Markets: $GLD, $GC_F, $USDCHF, $G6S_F, $G6B_F





Charts I am watching, week of July 22, 2012


I will periodically share a copy of the weekly market update I have sent to a private list of professional traders since 1981. I send this as part of a “market-idea exchange” among the group of these traders.

[scribd id=100773085 key=key-10o0fxuqbpm5630fvyot mode=list]


Markets:  $ZM_F, $ZC_F, $ZW_F, $ZB_F, $GC_F, $SI_Z, $NG_F, $USDCHF


Treasury Bonds in final blow-off stage of 30-year bull market


Final top in T-Bond futures should be in the 155-00 to 160-00 area.

I believe that the T-Bond market (basis the futures) is in the final blow-off of a bull trend that began in the early 1980s. This current advance should accelerate to the mid to high 150s before the final top in prices (low in rates) occurs.

The  advance in mid May completed an 8-month rectangle on the weekly and daily continuation charts (daily chart shown below). This pattern has an unmet target of 158-00 to 158-16. Following the mid May breakout the advance in the market stalled and the upper boundary of the rectangle was retested in mid June.

The daily contract of the Sept. futures shows this retest in close up. Note that the retest has taken the form of a 5-week symmetrical triangle. The advance on Monday penetrated the upper boundary of this small pattern, thus confirming that the retesting process is complete. The target in the Sept. contract is 155-00 to 156-00.

I went long the Sept. contract today. My risk is a close below today’s low at 149-26. A close below 149-26 would negate my short-term analysis.

While I am long for a swing trade, my extended-term macro view of the market is that this current advance is the final leg of an historic bull trend — and that when completed, Bonds (and all other global interest rate futures) will become the short play of a lifetime.

The chart below shows the 10-year T-Bond yield since the late 1790s.

Interest rates are at an all-time low level in yield. Remember, Bond prices and yields trade inversely — when yields go down, prices go up. A bottom in the yield is the same as a top in price. The fiscal and monetary policies that are manipulating this ZIRP are also sowing the seeds of higher interests (lower prices) down the road.

While some of the more astute readers of this blog may disagree, I do NOT believe interest rates (at any duration on the yield curve) will go below zero. Such a development would put tremendous downward pressure on the U.S. Dollar — which in turn would force the hand of debtor countries such as China and Japan. Eventually market forces will overpower the attempt by the three stooges (“Little Timmy” Geithner, Obama and “”Uncle Benny” Bernanke) to keep interest rates near zero.

The U.S. government’s Zero Interest Rate Policy (ZIRP) will not go on forever. The forces of market discipline will not be kind in the end. Geithner and Bernanke will not be viewed with favor by history. They will be revealed as the baboons they are.

The chart below shows the quarterly bar chart of Bond futures. The market is presently “overshooting” the upper boundary of a channel. This is price behavior consistent with a blow off.

Te final chart is the quarterly graph of the Eurodollar (interest rate, not forex pair). Over its history, the Euro contract at the IMM has had the largest volume of ALL futures contracts.  A volume in excess of three million contracts per day is not unusual.

The Euros will NOT close above par 100. I know some of you disagree. But it will NOT happen. There is no upside potential — only downside risk — in Euros.

In summary, I am presently long Bonds for a swing trade because I believe the market is driving to the final high. Whereever this high is, it is likely to be a high for 50 or more years.

Markets: $ZB_F, $GE_F, $TMV, $TLT, $TNX, $TMV, $TLH


Charts I am watching, week of July 8, 2012


The following is a report I email weekly to select group of friends and fellow chart traders. This report provides a status update of chart patterns that are strong candidates for my annual Best Dressed List (these are the patterns I am interested in trading). Periodically I will also point out shorter-term patterns of interest.


July 8, 2012

Ongoing moves

Ongoing special situation moves include:

  • Soybean Meal
  • Canadian Dollar futures
  • Natural Gas

Soybean Meal

The grains are locked in a classic weather market. If the weather in the corn belt remains hot and dry the grain markets will continue higher. Wide and plentiful rains with cooler temperatures will cause a sharp decline in grain prices. Charts are of little usefulness in a weather market. Nevertheless, the Soybean Meal chart has emerged from a 4-year trading range. The upside target of 630 is very achievable given certain growing conditions. Cooler, wet weather in the corn belt will negate the implications of this chart pattern.


CAD nearby futures

The rising wedge continues to have a target of .9360 to .9400. A bear flag may be developing. 

Natural Gas

A close below the late June low at 2.659 would indicate that a much more prolonged bottom process is likely for Natural Gas.



Pending Factor move


The dominant pattern in Gold continues to be the violated multi-year trendline on the weekly graph and the pending 10-month descending triangle on the daily chart. The trendline violation projected a thrust to the December low (which was met). A decisive close below 1500 would establish a target of 1200. The chart is building a textbook top. The daily chart is forming a possible 6-week continuation triangle.



Gold/Swiss Franc

I continue to view this as the leading indicator for Gold. The daily chart shows that the price of Gold in Swiss Francs has not broken down and remains in a tight continuation pattern.



Similar to Gold, Silver could be developing a top of major significance. A close below the support line at 26.00 could lead to a substantial decline.



The dominant chart development in this market is the ongoing construction of a possible H&S top on the weekly chart.


 Short-term chart developments

 There are several short-term chart developments worthy of note.


TheUS$ has completed continuation symmetrical triangle patterns against the Euro and the Swiss Franc. The daily charts provide targets of 1.2063 in EURUSD and .9900 in the USDCHF.


U.S. 30-Yr. T Bonds

The daily continuation chart of T-Bonds displays an unmet target of 158-17 based on the 8-month rectangle completed in mid May. The market has been holding just above the upper boundary of this pattern. The daily continuation chart and chart of the Sept. futures display a 4-week continuation triangle. A close above 150-18 would complete this pattern in the Sept. futures and likely lead to the fulfillment of the daily continuation graph target. Because of the construction of the rectangle on the daily continuation chart, the completion of the small triangle on the Sept. chart would qualify as a possible Best Dressed List candidate.



Concluded patterns


The target of the massive “W” bottom at 8.43 in Dec. Wheat has been reached.

Markets: $ZB_F, $USDCAD, $G6C_F, $GC_F, $SI_F, $GLD, $SLV, $SI_F, $ZM_F, $HG_F, $EURUSD, $USDCHF, $ZW_F


Time-lapse video of Colorado Springs fire

I’m home!

I am finally home after a five day mandatory evacuation due to the Waldo Canyon fire. Home has never looked better.

The YouTube video below is a 16-minute time-lapse video covering five days. Make sure you watch through at least Tuesday night.

Two things to be aware of. First, the video camera ran out of battery power on Tuesday between 3 PM – 5 PM, the two hours of the most intense spread of fire. Second, the camera view is from northeast of the city. A camera view from central Colorado Springs would have shown the much more dramatic spread through Queen’s canyon, the most dominant path of fire into the city.

Click the top photo to see the video.

 The photo below provides reference points, including the approximate location of my home.

Reference key:

  1. Air Force Academy
  2. Rampart Canyon
  3. Blodgett Peak
  4. Queen’s Canyon
  5. Approximate location of my home

Tremendous credit goes to the National Park Service and all other first responders. This fire could have been much worse. The photo below shows the mass exodus from the Mountain Shadows neighborhood on Tuesday.