Live Cattle charts confirm a major top

A major top has been confirmed on the Live Cattle price graphs, projecting significantly lower prices.

The weekly continuation graph completed a 14-month H&S top on Aug 21. The general target of this top is sub-120.
9.16_LE057_W
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The bearish case in Silver is back on the table

Seven month symmetrical triangle has been confirmed

Decline on August 25 triggerd an 8-week H&S failure

In recent weeks I have presented to members of the Factor Service the possibility that  why The Silver chart is a textbook example of the veracity of classical charting principles. Some of the features on the weekly graph include:
  • The blow-off top in April 2011 accompanied by record blow-of volume
  • The rising wedge retest of the top completed in September 2011
  • The continuation H&S pattern completed in April 2013
  • The descending triangle completed in September 2014
  • The symmetrical triangle completed in June 2015
8.26_SI_W Read More

A preview of the August 23 Factor Update — S&Ps

Initial draft of the S&P section of the upcoming weekly Factor Update

[Note: Each week Factor LLC issues a chart analysis of the markets in which it carries a position or is considering a position. The following is the initial draft of the analysis of the S&P 500 for this weekend’s Update. To become a member of the Factor Service, click here or the Subscription tab in the menu bar.]

S&Ps

[Subject to change pending the close on August 21, 2015.]

The morphing referred to in recent Updates may be over. The decline on Thursday completed a near perfect 8+ month complex H&S top. I consider the top to be complex because each component is multi-faceted. There is a double left shoulder; the head is an independent H&S pattern; and, the right shoulder took the form of a horn or sloping top. The horizontal nature of the neckline adds to the potential power of this top. The initial target of the H&S top is 1937, although support in the area of the Dec and Jan lows at 1970 could provide a short-covering rally. On a daily basis the current decline seems to be overdone. Yet, on a weekly chart the current decline is nothing out of the ordinary. A retest of the Oct 2014 low would be 1813. On a worst case scenario, a decline could retest the Jun 2013 breakout of a multi-year rectangle at 1600. Factor is short. I attempted to add to the position on Friday with a limit order at 2033, but I was fishing behind the net. Note: Had I added a layer of shorts at 2033 today I would have covered it at 2003.

8.21_ES_D

8.21_ES_M

8.21_SPX_Q

Other markets currently considered for the August 23 Factor Update include $AAPL, US Dollar/Chinese Yuan, Mexican Peso, Natural Gas, Crude Oil, EUR/USD, Silver, Gold, Soybeans, Live Cattle, T-Bonds and NZD/JPY. The August 23 issue will also have commentary of the most common mistakes made by novice traders and on the dangers of trading the 24-hour markets.

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Afraid to short S&Ps because it is oversold?????

 

Traders become accustomed to the recency and expect recency to extend indefinitely

S&Ps have sold off 60 points in just two days. Only fools would short a market that is so deeply oversold.

8.20_ES_D

But is the market really oversold?? Really?????????

8.20_ES_W_v2

 

I am not predicting a top. I trade possibilities, not probabilities, and definitely not certainties.

$ES_F, $SPX, $SPY

Chinese Yuan (USD/CNH) experiences historic breakout — next stop 6.8000

 

Mark your calendar at August 11, 2015 as the day $USD/CNH reversed its multi-year trend

[Note: The Factor Service has been dedicated to classical charting principles for a time covering five different decades. As a proprietary trading firm willing to share our market analysis, we based our trading solely on chart construction. We do not take into account global macro fundamentals, research by brokerage firms or the type of nonsense jawboning featured on CNBC and Bloomberg. We are unabashedly committed to chart analysis.]

The Factor Service makes some very bad calls under our operating principle of “strong opinions, weakly held” — and I am not hesitant to admit it when wrong. But, we also make some marvelous calls — so I will not be shy when admitting when providence shines its face on us.

For weeks and months the Factor Service has regularly pointed out to research members the massive bottom under construction in the $USD/CNH. Accordingly, Factor has been buying this crossrate. When the IMF recently announced that any move off the peg by the Yuan was not to occur soon, we were not persuaded to exit our trade commitment.

Let’s review the charts.

The monthly graph shows that the Yuan has been gaining against the USD steadily since the early 1990s, declining from 8.7xxx to the 2014 low at 6.04xx. We have viewed this trend as pure manipulation by the Chinese government.

8.11_USD.CNH_M_close

The weekly chart can be read in two ways, depending upon which school of charting one belongs. I have read the bottom as a 19-month ascending triangle, as shown below.

8.11_USD.CNH_W_v2

Another reading is that the weekly chart formed a massive 33-month cup and handle whereby the handle was an independent 18-month cup and handle.

8.11_USD.CNH_W_v3

In either case, the conclusion is the same — the USD/CNH has completed a massive reversal bottom. There was a sign in recent weeks that the devaluation of the Yuan was at hand, despite the insistence of Chinese authorities that the peg would remain in place. In the 1920s and 1930s, a technical trader named Richard Wyckoff spoke about the concept of the “hinge.” A “hinge” is a sign that a large price thrust is close at hand. A hinge is signified on a price chart by an extreme narrowing of a trading range with reduced volume or turnover. A look at the daily graph of $USD/CNY displays a 4-week period of hinge days.

8.11_USD.CNH_D_v3

 

The initial target in the Yuan is 6.50xx or so, with a longer term price target of 6.80xx. Ultimately the $USDCNH could reverse the entire trend since the 1990s and move to 8.27xx.

Members of the Factor Research Service receive regular analysis of chart developments in global equity indexes, futures markets and forex. For information on Factor members, click here.

Dislaimer: Factor is long USD/CNH

Markets: $USD/CNY, $USD/CNH

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History of Gold in Charts — Updated Version

 

This document presents a view and analysis of the history of Gold prices through the lens of classical charting principles

Factor LLC believes that the Gold market is the ultimate market for classical charting principles; that Gold has never made a major move without first announcing its intentions through chart construction; and, that the present chart construction of Gold suggests a continuation of its bearish trend.

[scribd-doc doc=”273818570″ key=”gaeXdHhikEj7be8IcV8O”]

 

$GC_F $GLD #GOLD

Even if Gold and Silver are driving to the final low, so what? It still is no reason to be long.

 

It could take many months — or even years — for the precious metals to form a bottom

I am on record as stating my opinion that the current down thrust in Gold, Silver and Platinum is likely to be the final leg down in their respective bear trends. If you inappropriately still own precious metals from higher prices, please do not take comfort from my belief we are headed for a low.

There is a huge difference between the end of a bear market and a bottom. Even if the precious metals find a final low, you could grow old and die before the next bull trend bails you out.

Let’s look at history.

The bottom in Gold following the 1974-1976 bear trend required 14 months to bottom. There was no reason to be a bottom picker during this bear trend.

7.20.Gold_W_1976 bottom

The bottom in Gold following the 1980-1999 bear trend required more than five years to bottom. There was no urgency to pick the bottom of this 19-year bear trend.

7.20.Gold_W_1999 bottom

Bottoms require time, especially in raw material commodities. SELDOM do raw materials create “V”-extended lows. Take a look at the current Gold chart. What possible reason is there to become a Gold bull even if a low might be near? Answer — ABSOLUTELY NO REASON!

7.20.Gold_M

Based on history, there is even less urgency to be an owner of Silver. It required 20 years for Silver to bottom after the 1979/1980 bull market, finally completing its bottom in 2005. I remember this well — I became a major bull in Silver in late 2005 based on classical charting principles.

7.20.SI_Q

When I think about Gold and Silver entering the final stages of their bear trends, my frame of reference is short covering, not trying to pick a bottom as a buyer. Even if the precious metal markets are in their final down thrust, it could be many months or even years before it is time to seriously become a bull again.

$GLD, $GC_F, $SI_F, $SLV, $PL_F

 

 

A bearish chart case for RB Gas

Bear market rally is likely over — a longer-term retest of $1.23 to $1.30 could be underway

 

The rally from the Jan 2015 low in RB Gas can be viewed as simply a retest of the 3-1/2 triangle top on the weekly graph, as shown below.

7.15_RB_W

The daily graph of Sep RB Gas has completed a H&S top pattern with a down-slanting neckline and abbreviated right shoulder. Both of these conditions are characteristics of internal market weakness.

7.15_RBU_D

The targets in Sep RB Gas are 1.6344, then 1.5315. Eventually the market should retest the low established in Jan at 1.23xx.

 

$RB_F, $UGA

 

S&Ps — a breakaway down gap is very possible

 

Will the June 29 down gap in S&Ps become a breakaway gap of major technical importance?

Gaps in almost all markets are unimportant because of their frequency. But unfilled gaps in some markets carry serious technical significance because of their rarity. Uncovered gaps in such markets as Gold ($GC_F), S&P futures ($ES_F), $EURUSD and $USDJPY are extremely rare. When the possibility of an unfilled gap develops, traders must be on high alert.

With the “No” vote in Greece, global stock markets may come under strong downward pressure when they open just a few hours from now. A sharp downward move in the S&P futures would set up the very real possibility that the June 29 down gap — presently unfilled — will become a breakaway gap of major technical importance.

7.05_S&Ps_D

Unfilled gaps in S&P futures are extremely rare. The last unfilled daily gap occurred with the advance on January 2, 2013, as shown below. This gap resulted in an advance by the S&Ps of 49.9% to the May 2015 high.

7.05_S&Ps_D_Jan13

An unfilled gap also occurred on July 15, 2009 (see chart below), resulting in a 62.4% rally to the September 2012 high.

7.05_S&Ps_D_July 2009

Perhaps the Greek vote will be viewed as a positive for U.S. stocks — we should know this within the next few days. But, the longer the June 29 down gap remains uncovered, the more technically significant it will become.

7.05_S&Ps_M

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US Dollar is set to gain against the Chinese 元/圆 (Yuan)

Yuan symblolYuan

USD/CNY crossrate is currently at 6.2121 Yuan per USD

Within 12 months the crossrate should trade at 6.50xx Yuan per USD

 

Global macro reasons

  • It is in the interest of Chinese manufacturers and exporters to have a weaker Yuan (stronger USD/CNY)
  • China is a massive USD long, owning $1.25 trillion in U.S. Bills, Notes and Bonds. A bull move in the USD/CNY would greatly benefit China

Of course, the above reasons do not guarantee a bull move in the USD/CNY.

Chart reasons

A multi-year chart is presented first to provide perspective.

6.11_USD.CNY_M

The weekly chart displays a possible 30-month cup and handle bottom (black lines) wherein the handle is an independent 12-month cup and handle pattern (red lines).

6.11_USD.CNY_W_cup handles

From a classical charting framework, the weekly graph displays a possible ascending triangle dating back to the Jan 2014 low. Ascending triangles are typically resolved by a bull trend. A decisive advance above 6.30xx would complete this bottom and launch a bull trend in USD/CNY.

6.11_USD.CNY_W_asc tri

Caveat: Timing will be everything in this trade. An advance from 6.2100 (current rate) to 6.500 represents a 4.7% price change. However, the cost to carry the trade at present is 1.7% per year.

$USDCNY

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About Peter Brandt and Factor LLC