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Charts that have my attention

 

Some charts that have my attention

$AUDUSD — on a closing price basis the advance yesterday re-completed the H&S bottom (black neckline) and there is follow through so far today. I will always try good pattern twice — and this one qualifies. I bought the June futures overnight at .9011.
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$GBPAUD — the cross is attempting to punch through the neckline of a 3-month H&S top. The 1.8118 level is key — although a close below 1.8196 would close below the lowest close of the right shoulder of the pattern. The right shoulder of the 3-month H&S is a smaller H&S top.  — and a weak close today would complete this smaller launching pattern. In fact, I would consider a decisive close below 1.8180 as commencing a Factor Move.
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Canadian Dollar — the weekly chart remains a disaster waiting to happen. The current 8-week congestion has been a trying period for the shorts (including me). I believe this 8-week triangle will be completed by a decisive close below .8940.
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Soybeans — The life-of-contract H&S bottom pattern in May Soybeans met its initial objective, but I believe the party may be just starting. Make no doubt about it, the weather, not the charts, will dictate Soybean prices. But if planting or growing problems develop, Soybean prices could easily trade at $16.
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Corn — Corn is at an all-time historical value to Soybeans. Thus, if Soybean prices advance, Corn prices could explode. I think the bottom is in place for at least the next few months. The daily chart is forming a small pennant. Another thrust up is possible.
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Palladium — I believe this market has entered a bull phase. I am hoping to get a dip toward 753 to establish a long position with more manageable risk. The 753 level would retest the January high and the upper boundary line. This market is thin and I have not wanted to chase the advance.
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Dec. 2017 Eurodollars (the interest rate, not the currency) — This could become the mother of all H&S patterns — this one dating back to mid 2012. The right shoulder, currently under construction, could become a double-type top (different than a real double top).
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Copper — the weekly chart has completed a massive descending triangle on the continuation chart with the first-notice-date roll-over (shown), but not on the continuation chart with the last-trading-date roll-over. I am looking for a low risk short trade. If the March contract expires with the May contract trading under $3, then both continuation charts will have completed the triangle.
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Silver — While my instincts (not to be trusted, by the way) tell me that precious metal prices have bottomed, I cannot rule out a possible bearish descending triangle in Silver.
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plb
$SI_F, $HG_F, $GBPAUD, $USDCAD, $ZC_F, $ZS_F, $PA_F, $GE_F
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Is $5 Corn just around the corner?

 

 

Rounding bottom, strong momentum indicators and cheapness to Beans all point to higher Corn prices

The advance on February 14 confirmed the completion of a rounding bottom on the continuation daily Corn futures chart. Note that the momentum indicator (MACD) is very strong. Downside reactions in Corn should be minimum and brief. The pattern target is 4.72 with a possible swing target of 5.08.

2.20_Corn

The 5.08 target from the daily chart also represents a test of the 2012 low on the weekly chart. The rally on the weekly chart is relieving the extremely oversold condition in Corn.

2.20_Corn_weekly

Corn remains historically cheap in relationship to Soybeans. The quarterly graph below represents the value of one contract of Soybeans minums two contracts of Corn. As this graph shows, Soybeans are near an all-time high premium to Corn. This fact does not mean Corn prices will advance, but it is a strong indication Corn would have limited downside potential.

2.20_Beans_Corn_quarterly

Traders should consider a long position in the Dec. 2014 contract, as shown below.

2.20_ZC14

There is a chance that the 2014 low has been registered in Corn.

$ZC_F, $ZS_F

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The charts I am watching this week

 

The PDF below is an example of the correspondence sent weekly to members of the Factor Email Service.  To receive information about the Factor Email Service, please send an email to:

  • plb.factorco@gmail.com
  • The subject line should read: Factor Service

If the PDF below does not appear, click here

[scribd id=207416514 key=key-wg86sti669zm4hh6g3a mode=scroll]

 

Markets: $SI_F, $GC_F, $SLV, $GLD, $USDMXN, $USDCAD, $GBPUSD, $AUDUSD, $CPST, $LIVE

 

Why I believe Corn prices are at or near a bottom

 

The price of Corn is at an historic low vs. the price of Meal

 

In a previous life I traded grains at the Chicago Board of Trade. My focus was on the price relationship of various grains and grain-by products — Corn vs. Wheat, Spring Wheat vs. Winter Wheat, Meal vs. Oil, Soybeans vs. Corn, etc. Extremes in historic relationships often yield excellent trading opportunities.

Presently the price of Soybean Meal is at an historic high conpared to the price of Corn. The first chart below shows the value of one contract of Meal minus the value of one contract of Corn. Obviously, this could be traded as a straight spread.

The second chart shows the value of a tonne of Meal minus the value of a tonne of Corn. There are 100 tonnes of Meal in each Meal contract and 140 tonnes of Corn in each Corn contract.

 

12.3_ZM_ZC contract value 12.3_ZM_ZC cost per tonne

I have no urgent desire to pick the top of this spread, although I believe history will show that we are at or near the top. Yet, I have a desire to be long Corn based on this market pricing structure. Here is why:

1. Meal supply is very tight. Meal spreads have been inverted for some time, with the nearby expiring December contract presently trading at a $25 premium to the March contract. As a general rule, it is never wise to be short a market that is inverted.

2. The nearby continuation chart of Corn displays a small H&S bottom (see below) — the individual contract charts do now show this pattern. A continuation chart tends to better reflect the cash market.

12.3_ZC057

For the reasons cited above I am prepared to be net long Corn futures and will continue to monitor the Meal/Corn spread.

$ZC_F $ZM_F $ZS_F

Grain markets may be on verge of final blow-off top

 

Grains are forming chart patterns that often lead to a blow-off

The grain markets have been in a bull trend since 2005/2006. From the 2005/2006 lows to current prices, grains have advanced as follows:

  • Soybeans – up 3.2 fold
  • Corn – up 4.3 fold
  • Wheat – up 3.2 fold
  • Meal – up 3.2 fold

It is the wrong time to become bullish on U.S. agriculture. In fact, it is the right time for grain farmers to sell their land for an outrageous price and retire to Hawaii. This is a post for another day.

Yet, the charts indicate there could be one more strong upthrust in grain prices before the top is reached. The daily charts of all the major grains display possible pennants. A pennant is a brief pause within a strong trend, seldom lasting more than four to six weeks. Pauses longer than six weeks often indicates that a more extensive congestion area will develop.

But for now, a move into new hights (Corn has already done this) should trigger a strong two to four week rally.

Markets: $ZC_F, $ZS_F, $ZM_F, $ZW_F, $RJA, $DBC

 

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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

 

Charts I am watching, week of April 2, 2012

 

 

[scribd id=87661021 key=key-16co339t4pmp1q8i8b75 mode=list]

 

Markets: $GLD, $GC_F, $SLV, $SI_F, $PL_F, $ZC_F, $ZW_F, $HG_F, $GBPUSD, $EURCHF

 

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Corn flashes major sell signal

 

Decline on Mar. 28 makes Corn a candidate for 2012 Best Dressed List

I have commented for many weeks that the 6-month congestion in Corn was due for a decisive resolution. The ADX index reached a level of 10 in late February, a level that normally precedes a major trend. Often the first thrust after a low ADX reading is the false move, followed by the real trend in the opposite direction. This is exactly what happened with the upward bull trap breakout in mid March.

The decline below the Feb. 16 low at 626 was the official sell signal in Corn. The target is now 4.65, and then 3.80. There may be rallies along the way — and the first rally could occur after the grain stocks report on Friday. A rally back into the 626 area would be a shorting opportunity.

Confirmations for this bear trend will occur by closes below 6.00 and then 5.84. May Corn should not close back above 6.34 or this analysis is placed into question.

Markets: $ZC_F

Disclaimers:

  • I currently have a short position in Corn.
  • My trading approach generates approximately 30 to 40 signals per year as candidates for the Best Dressed List. Half of these signals fail to materialize in a sustained trend.

Note to readers: On April 10 I will be hosting a special webinar to discuss the last two Boot Camps scheduled for the U.S. I will announce the details of this webinar next week.

My dilemma over the prices of corn & soybean meal

 

The long-term chart of Soybean Meal is outstandingly bullish. Yet, the chart of Corn is potentially quite bearish. Which one is lying? What does a trader do?

Being double minded is a dilemma every discretionary trader faces from time to time. It is not a fun place to be. It is where I am presently on grain prices.

The daily and weekly charts of Corn are quite negative (at least potentially). The daily chart (not shown) displays a possible H&S top. The weekly graph shows a descending triangle. In fact, the Corn charts point to a price target of $4.00 +/- $.25, pending the completion of the large top. I am short Corn. I have a strategy to add to this short position as my current holding becomes profitable.

Yet, the long-term charts in Soybean Meal are potentially explosive. The quarterly and monthly graphs display a potential 4-year continuation triangle that portends a price of $550 per ton.

 

The daily Soybean Meal chart is in a strong advancing trend — but is, in fact, quite overbought by just about every measure.

So, I have reason to be constructive about Meal and negative about Corn. There is reason to believe Corn can lose to Meal. The chart below displays the relationship of Meal to Corn prices (expressed in terms of the dollar value of the nearby contracts). Historically Meal remains cheap compared to the price of Corn. But there is no way Meal can go to $550 while Corn goes to $4.00. Such a relationship would become a new all-time high in the relationship by a country mile. And this is not going to happen.

Here is where I come out on this dilemma.

  1. Meal has met its upside target on the daily graph, so I will not chase the rally. It would take at least an 8-week consolidation period to interest me in the long side.
  2. The spread (one contract of each) has moved about $6,000 in favor of Meal in the past three months, so I am late to this party.
  3. The Corn market has given some early warning signs of a top, although a top is far from complete.

So, I will remain a light short in Corn, protected by stops. In the final analysis, my opinion is that each chart needs to be traded on its own merit. One of these markets is lying. But I can only trade what the market shows me at the moment.

Markets: $ZC_F, $ZM_F

 

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Shucks, it’s only Corn

 

The Corn market is not as glamorous as Gold or Silver or the stock market, but the Corn charts indicate that a sizable move is just around the corner

 

Note: Due to travel this is likely my last post until Sunday, March 5 or Monday, March 6

The Corn charts are extremely compelling. The market is setting up for a $1 per bushel or so move. The question is: “In which direction?” This market is a strong candidate for my 2012 Best Dressed List. But, trading this market will require some flexibility.

The weekly chart shows a line of very stout support at $5.75. This support line has been repeatedly tested since last July. A decisive close above $6.66 would complete a 5-month trading range. Also note that the trend-default moving average has turned up and the ADX indicator is below 11, a level at which a sustained trend could occur.

There are several features on the daily chart of May Corn worthy of note:

  1. If we include the June high the chart displays a possible 11-month H&S top with an extended right shoulder. I must point out that H&S top patterns are not bearish until they are completed — and even then they can fail.
  2. The right shoulder of the larger H&S top itself is a possible 5-month H&S bottom pattern. I define this phenomenon as an “interlocking H&S.”  The right shoulder of this pattern is extending.
  3. The ADX indicator has turned slightly higher after dipping below 10. ADX readings below 12 often precede sustained trends.

A decisive close above the Jan. high at $6.73 is required to complete this pattern. But, traders should also be alert for a H&S bottom failure. Cascading closes below the Feb. low, the Jan. low and then the Dec. low would all stack the deck for a bearish resolution in the Corn market.

Other markets:

There are only two other futures/forex markets I am concerned about during my current travels — Sugar ($SB_F) and $USDJPY.

Sugar is NOT ready to accelerate at this time. The upside breakout on Feb. 21 has lacked the type of follow through indicative of a pending moon shot. Nevertheless, I remain long with stops below the market. I have a trigger finger with my long position. Open interest has increased by 255,000 contracts or 55% since early October. Prices are are at October’s level. This is not encouraging, even though the CFTC COT data are somewhat constructive.

A bottom of some importance has been completed in $USDJPY. There are a cluster of targets from 83.50 to 85.20. A reaction to retest the late October high would represent an excellent buying opportunity.

 

Markets: $ZC_F, $SB_F, $USDJPY, $G6J_F

 

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