Copper is forming a 30-month descending triangle
The monthly and weekly graphs below display a possible descending triangle in Copper dating back to the late 2011 low or mid 2011 high, depending upon how the upper boundary is drawn. A decisive close below $3.00 would complete this pattern and generate a target as low as $2.04.
An immediate completion of this descending triangle top raises an important question about trading psychology. Should Copper close decisively below $3.00 this week (let’s say we get a $2.95 close), how difficult would it be to short Copper following a straight-line 25 cent decline? If you are like me, I would say that shorting a 25-cent decline would be a difficult trade to execute. Yet, often times the most difficult trades to enter become the most profitable trades.
Decline in Copper today does major damage to the charts
There are two possible interpretations of the Copper chart. One is bullish, the other is bearish. I will touch on the first and discuss the second.
From a bullish perspective, it is possible to interpret the daily and weekly charts as a possible 7-month H&S bottom. Under this interpretation, the decline today would be a drive toward the right shoulder low. Under the H&S bottom interpretation, the market would form an extended right shoulder with a low in the 305 to 310 zone before prices turn back up
From a bearish perspective, the H&S formation continues to be the focus, but the decline today represents a completed H&S bottom failure pattern. The right shoulder is a completed 3-month symmetrical triangle top with an initial target of 304. The H&S failure objective would be 285.
It is also possible to interpret the weekly as a 30-month descending triangle. This pattern would become more seriously considered if and when the market closes decisively below 293.
Markets are fast approaching chart targets
The weekly Gold chart is well on its way to the target of 1266 establsihed by the April completion of a 19-month rectangle. The daily chart has now completed a continuation 9-week triangle. This triangle has a further target of 1221.
The weekly Silver chart has a target of 1615 established by the April completion of an 18-month rectangle. The daily chart is forming a possible wedge pattern. My guess is that this wedge pattern will serve as a launch to the final low in this bear market.
The montly Platinum chart displays an 18-month rectangle. Should this rectangle be decisively resolved by a downside breakout the target would become 1024.
The dominant pattern in Copper is the completion on the weekly chart of an 18-month symmetrical triangle in March. This pattern has a target of 273. My guess (or perhaps my hope) is that the daily chart will hold at the April low and a rally back toward 320 to 325 will occur. This would set up the possibility of a continuation H&S pattern. However, we would need a right shoulder rally for this to occur.
The target of the weekly and daily H&S top in the Dec. 2017 Eurodollars has been met. Meeting a downside target is not a reason to become a bull. A major trend change has taken place in the interest rate markets. Further downside targets exist at 96.51 and 94.40. The 94.40 target (representing an interest rate of 5.6%) is probably a year or so away.
The bearish implications of the completion of the 2-year symmetrical triangle on the weekly Australian Dollar chart cominue to play out. The target in this market is .8342. Do not rule out a period of congestion and short-covering strength along the way.
I am quite certain that the brief completion in recent days of the 10-month “triangle within the triangle” on the weekly Crude Oil chart will prove to be a giant bull trap (yes, for the record, I got nipped for 65 points). Yet, the bear trap is not yet official. A full bar close below the upper boundary of the triangle is required to spring the trap.
Allow me to whet your appitite with a weekly chart of the Canadian Dollar futures. The market is forming a massive 3-year H&S top pattern. The key price is 9568. A decisive close below this level would complete the pattern and establish a target of .8470.
One final chart – $AAPL. A decisive close below 415 or so would complete a 4-month H&S failure pattern with a target of 358.
Markets: $GC_F, $SI_F, $GLD, $SLV, $PL_F, $GE_F, $CL_F, $USDCAD, $AUDUSD, $HG_F
Silver bulls are all talk and no action
I have traded futures markets since 1975. For those of you who failed basic math, this means I have traded for almost 40 years. I have seen every conceivable market situation.
Every market has its perpetual bulls and perpetual bears. But of all markets, Silver attracts the most fanatical bulls of all. When Silver bulls are right (BTW, that is not very often — Silver has experienced significant price gains in only five years since 1972) it is because they are brilliant. When Silver bulls are wrong (nearly 85% of the years since 1971), it is either because they have been victimized (by the exchanges mostly) or because most other market participants “just don’t get it.”
So, Silver bulls, here is your chance to scoop up your worshipped metal at an historical bargain price. The charts you publish on your blogs verify this fact. Relative to the vast ever-increasing glut of fiat money printed by central banks, inflation-adjusted pricing or the standard set by some robed Spanish king 500-plus years ago, your metal has never been cheaper.
So, it is time for you to put your money where you mouth is. As a trader I do this every day. I am presently short Gold and Copper. If I am wrong on these trades I will count than as loses, not as part of a grand conspiracy against me. Losing trades are called losses. When I lose on a trade, I am a loser, not a victim.
I have put my money where my mouth is to be short precious metals. If I am wrong — so be it, I am wrong on more than 60% of the trades I do. If I am right, also, so be it. A trade is a trade is a trade is a trade. Silver is something to trade, not an idol to worship. So, it is time to put up or shut up!
A review of the metals charts is in order.
The daily Silver chart has penetrated an extremely important “line in the sand” at 2615. The longer term chart would indicate Silver is headed toward a retest of the 2008 high at 2150+. But, here is the good news, Silver bulls — the market is probably much closer to the lows than to the highs. After all, Silver is getting closer to zero than its 2011 high of $49.
Actually, the charts in Gold looks more bearish to me than do the Silver charts. Now, this is interesting because I am on record as being a super-cycle bull on Gold. Wait just a minute! I am a long-term bull on Gold, yet I am short! To a Silver bull, this is would be sacrilege. To a trader, this is a trade. That is the major difference between traders and Silver bulls. To traders, markets are just a tool. To Silver bulls, Silver is an idol to worship.
The massive decline on Friday completed a massive top on the daily, weekly and monthly Gold graphs. The charts can be defined by a single word — UGLY! Should Gold rally, short sales in the 1520 to 1540 zone would be highly appropriate. There are various downside targets in Gold depending upon whether one uses a closing price chart, a candle chart or a bar chart. The lowest target I have is around 1131. Do I think Gold can go that low? Not really. But a decline to the low 1300s is very possible. In fact, two days like last Friday and we will be there.
The longer-term chart in Platinum is also negative. The decline on Friday would indicate that the market is headed toward the lower end of its broad trading range at 1375 or so.
The weekly Copper chart also remains quite bearish, although as I pointed out this past week, the CFTC COT data are extremely constructive. Yet, price is always king, and the burden of proof is belongs to the bulls.
Finally, let me point out another fascinating chart development — in Crude Oil. The Crude Oil weekly chart displays a symmetrical triangle within a larger symmetrical triangle, as shown below.
A case can be made that the shorter-term triangle was completed this past week, along with a H&S top pattern. However, this breakout is not yet convincing. The chart indicates a possible target of 77.35. Conventional wisdom holds that there is only one way energy prices can go — up. This is why the 77.35 target is probably correct.
$SI_F, $GC_F, $PL_F, $GLD, $SLV, $HG_F, $JJC, $CL_F, $OIL
The extremely bearish Copper chart is verified by the fundamentals
Copper prices are currently above the levels of June 2012. Yet, deliverable stocks have expoded. Either stocks will soon sharply decline, or prices will.
Shanghai deliverable stocks, in metric tons
LME deliverable stocks, in metric tons
Markets: $HG_F, $JJD
A strong down day today could place a top on the Copper market
The Copper market is in technical trouble. The market has been coiling within a symmetrical triangle pattern since October 2011, as seen on the weekly graph below.
The decline today, if it follows through, would close below the lower boundary line of the triangle and also below the early March low. The solid boundary line connects the orthodox weekly lows, the dashed line connects the lowest Friday closes.
The daily chart mirrors the weekly chart and shows the import of today’s current decline. The market has one more major hurdle before we declare it a full-fledged bear market — the November low at 340.30 must be penetrated on a closing basis. Should this occur the target would become a minimum of 300.00. The red dashed line once again is the boundary line based on the closing price chart (not shown).
Markets; $HG_F, $JJD
Copper has a history with the compound fulcrum pattern
All chartists know about the H&S pattern, triangles, rectangles, trendlines, wedges, etc. But, what about the compound fulcrum? This is a rare pattern originally used with point and figure chartists.
Copper has a history with this pattern. In the 1970s Copper formed the pattern, as shown by the P&F chart I was keeping at the time (yes, I used to keep charts by hand). Copper eventually went to $1.40 from this pattern.
The daily Copper chart is completing an 15-week compound fulcrum, pending a decisive close above the early July high.
Markets: HG_F, $JJC
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 special situation moves include:
- Soybean Meal
- Canadian Dollar futures
- Natural Gas
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.
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.
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.
EURUSD and USDCHF
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.
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