Gold and Silver
Gold bulls have every reason to feel that they have dodged the bullet. From its 17 March high Gold ran down to 876.30 on the June contract making an obvious 3 leg pattern in the process. Moreover the 3rd minor leg was close to a recognizable fib ratio of the first leg. Ellioticians will be sanguine that we are seeing an ABC correction and now await a trade above the apparent minor B at 960.30. The importance of a 3 as opposed to a 5 wave structure for those not versed in the arcane laws of wave counts is that a 3 wave structure is assumed to be part of a corrective pattern whereas a 5 wave may imply an impulsive move.
You can see a fractal of what Gold bulls are hoping for in the circled pattern which occurred in November last:
For those of a macro bent the evidence for a mere correction as opposed to an end to this bull market is even stronger. As GSEs and Fed cohorts of all persuasions scramble to right the unrightable by postponing the day of reckoning in the housing collapse and associated fiscal skullduggery, the odds on a major credit market event continue to shorten and that augurs well for Gold and Silver. Additionally the Fed's one eyed strategy of transferring impaired bank and quasi bank credits onto the public purse ensures that inflation so obvious in soaring commodity markets and apparent to every housewife in the western world will continue to ravage households and savers (if there are any of that endangered species left to be found).
Soaring and more importantly, ignored inflation is fuel for alternate assets like gold and silver and increasingly (and wrongly in my view) the argument is being made that commodities at large are an inflation hedge.
Silver is faring even better than Gold and is happily trading in a consolidation range and has just turned from its Daniel number resistance at 1842.5.
The missing link in this back of the envelope type of thinking is that it fails to take into account the 600lb gorilla in the room; the US Dollar. I have made the point in previous weeks that Gold is now powerfully entwined as a carry trade with USD and although by no means looking healthy the Dollar has carefully followed its Danielcode script halting its headlong plunge as forecast in previous Financial Sense articles at 70.70 against its weekly Danielcode target of 70.40. On the daily chart below you will see how DX bounced off its Daniel number support at 71.35 testing this number for four days before rallying to a minor target given to my subscribers at 72.79, testing there for a few days and now declining again.
For those of you with a mind for detail look at the lockstep inverse correlation between DX and Gold on a daily chart since 17th March. DX up: Gold down. Until investors grapple the initiative from traders, Gold remains hostage to the almighty Dollar. While forecasting the future is an exercise in futility we can make some general assumptions about the probable behaviour of DX based solely on past performance and from that we can take a rough stab at likely events in Gold (see previous article in my FSO archives). Note that this week's news of impending major Gold sales did nothing to Gold trading and negative balance of trade figures and the logical consequences of ongoing credit events did little to materially affect DX.
Markets do what markets do and despite a whole industry dedicated to linking market cause and effect to news, the fact is that markets happen and news follows the markets.
S&P and Dow
The S&P turned nicely at 1388.5 on Monday to be less than a point from its DC target. Our downside target for the week was 1347.40 and Wednesday's low of 1351.50 was just outside our normal variance in this index of 3 points.
Danielcode traders had an even better trip in the Dow as Monday's high came right at the DC target and Wednesday's low penetrated the first Daniel number target by just 14 points before reversing to close near the midpoint of the day.
Crude Oil continued to use the Daniel sequence to define its consolidation. Look at the precision of the turning points. 111.80 in March, down to 98.65 against its DC retracement of 98.61, then back to 112.21. Three major turns all made with precision against this amazing price seeking sequence.
Other commodities continue to roar. I showed you the levitating Rice chart in this week's edition of "Charting around Asia" for Financial Sense (2nd tab from right at the top of their home page); Munehisa Homma, the Trading Samurai would be proud. For his story and how he cornered Rice in the Osaka markets see http://financialsense.com/asia/danielcode/2008/0120.html.
Corn gapped up to its next Daniel sequence on the weekly chart and is now at 597 having been turned back by the Daniel sequence at 616^6 and supported by the previous number of 591^6. If you have been confused by these markets, try looking at them with the Daniel targets and retracements and they will make complete sense.
Wheat, like all markets continues to be ruled by the Danielcode as it plunged from its twin targets in February and March to find support right at its downside target. Future price targets have been deleted from these charts in the interest of subscribers.
Forex continues to be a source of surprise to traders but not if you know the Daniel numbers. The following chart of just one of the 16 forex pairs I cover, loved the Daniel number at 1.5905 so much that it has embraced it three times. While most of you wondered what was happening in this space my traders knew both the target and the support with the precision you see.
Thursday's forex update prompted this comment on my website:
I have just updated the daily Forex charts. We have had 9 significant and tradeable turns on the daily charts this week. 8 of those turns were made within 40 ticks (pips) of the Daniel number and 1 was made at 70 ticks which is outside our normal parameters. 8 out of 9 qualified setup bars gives an 89% strike rate.
My trusty webmaster Tim, has added a new feature to the website so you can keep track of the value subscribers are getting. The precision of market turns at the Daniel numbers which I continually highlight in these articles is matched by the range of markets I cover. This week according to our new counting feature I have created 116 separate Daniel number charts for subscribers!!
Nothing in the Daniel sequence tells us which of the numbers will provide temporary or terminal support or resistance so you do need to be a competent trader to reap the benefits of this mystic number sequence, but the best way is always to learn by doing.
I invite Financial Sense readers to visit the Danielcode Online and claim your free chart if you will kindly register (also free). We have some fascinating and potentially profitable Asia/Pacific indices charts that you can browse. FSO readers have now claimed thousands of free Daniel number charts and this program will end next Wednesday. New charts are available before Monday's open so claim your free chart if you have not already done so when they are posted. The website indicates the day of posting.
Copyright © 2008 John Needham
About John Needham
John Needham Archive
|02/09/2012||Major Market Update||story|
|05/24/2011||Long Term Trend Charts: Major Markets and Stocks||story|
|05/10/2010||Rise of the Machines!||story|
|05/03/2010||Danielcode Major Market Update||story|
|12/02/2009||Knowing the Trend - S&P, Gold and DX||story|
|11/16/2009||The 401(k) Dilemma||story|
|08/31/2009||Mariners and Markets - S&P||story|
|06/05/2009||Master Class II - Timing Gold||story|