Cross-Market Comparison of Gold, Dollar, and Crude Oil April 26

Apr 26, 2009: 11:59 PM CST

As requested by a few readers, I wanted to take a quick cross-market look at the daily charts of the US Dollar Index, Crude Oil ($WTIC), and Gold.  Let’s see what may be the next major move in each of these inter-related markets.

US Dollar Index:

Let’s start with the US Dollar Index and make our assumptions from there.  The Dollar Index appears to be completing a large-scale A-B-C pattern, placing us in a possible Wave 3 of (C) down currently.

Laying Elliott Wave aside, we have a possible breakdown from a Bear Flag (and EMA support) which gives a price projection target of $81 (though price could target support at the rising 200 SMA as it did briefly in December).

Without getting too much deeper in analysis than that, let us assume the next likely “swing” in the Dollar Index would be down.  That would be bullish for most commodities, including…

Gold:

Though there are various Elliott Wave interpretations for Gold, if I just take the most recent swings and ‘fracalize’ them out, we get an “A-B-C” pattern down (forming a “flat”) into confluence support via the flat 200 day SMA and the 50% Fibonacci retracement of the November lows to February highs.  I mentioned this was likely to be support previously and indeed it was.

Now, it seems we can count a 5-wave fractal pattern down into these lows, implying the corrective period has ended and we’re ready to begin a new impulse up, perhaps to challenge the $1,000 level again.

This view would be invalidated with a close beneath confluence support at $860 per ounce.

Crude Oil:

Finally, Crude oil appears ready for a run at new highs towards or exceeding the $55 per barrel level.

On the daily chart, price is in a confirmed uptrend (as defined by higher price highs and lows, and a positive structure for the 20 and 50 EMAs).   Technically, price is in a rectangle (flat) consolidation now, but had a good day Friday, ending up almost 4%.

There has been a negative momentum divergence forming since late March which is a slight damper to oil bulls.

Keep in mind that Crude Oil has roughly traded in-line with the US Stock Market, so being bullish on Oil (and bearish the dollar) implies the S&P 500 will continue rising if the Dollar does fall as expected.

This represents a quick ‘fly-by’ analysis of these markets, so more analysis is required for any trading decisions.

Corey Rosenbloom, CMT
Afraid to Trade.com

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15 Comments

15 Responses to “Cross-Market Comparison of Gold, Dollar, and Crude Oil April 26”

  1. Anonymous Says:

    although $USD shows bear flag /dx (dollar futures) does not…. i think the dollar and gold will go up in this breakdown of the market. what are your thoughts. gold will be used as an Armageddon hedge and the dollar is inversely correlated to the market

  2. Corey Rosenbloom Says:

    Anon,

    The classic inter-market interpretations are a little off-balance in this environment, so it’s possible we see a stock market swing down (in the next swing) with gold being up, oil being up (which would be strange given a down-swing in the market) and dollar heading down.

    However, no, I don’t think if we get a downswing next in the market that it will be deemed as ‘Armageddon’ or even worrisome – seems the bulls gained a lot of confidence and will see any down move as a buying opportunity unless we break to new lows which could institute a panic.

  3. p Says:

    how about ung?

  4. Corey Rosenbloom Says:

    UNG (Natural Gas ETF) apparently is beating to the rhythm of its own drum – we didn’t get the nice Rounded Reversal pattern like we did in Copper and Crude Oil – it’s puzzling so many people. But, in a trend, we don’t know how far it’s going to go, so I suspect the lesson in UNG is “don’t bet against a trend” at least not without a stop-loss.

  5. p Says:

    wrong answer- you’re supposed to tell me it’s going to 50

  6. Corey Rosenbloom Says:

    P,

    haha! Well, nothing to say it won’t 🙂

    It’s like Crude Oil (USO, DXO). I got very aggressive in believing Crude was going to go higher in December last year mainly because of the massive positive divergence and Rounded Reversal pattern (and said so on the blog) and took some heat from people saying “It’ll never go up in a recession” and some of the comments were nasty.

    Crude did go up. UNG (Natural Gas’s) chart really isn’t different. Why didn’t gas go up with crude, as it had the same pattern? No idea – I wasn’t keeping my eye on Nat. Gas so I missed watching it (luckily) or I would have probably traded it as well. Patterns are just that – windows of probability into the future – not certainty.

    Perhaps UNG will go up from here, but it could be a bloody ride up.

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  15. Bill Andreas Says:

    Elliott Wave interpretations for Gold, if I just take the most recent swings and ‘fracalize’ them out, we get an “A-B-C” pattern down (forming a “flat”) into confluence support via the flat 200 day SMA and the 50% Fibonacci retracement of the
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