No Stopping the Commodities

Oct 29, 2007: 8:38 PM CST

The $CRB (commodities) index made new highs, after having advanced four trading days in a row, three of which opened at the low of the day and trended up to close on the high of the day, indicating decisive strength.

Price is now at the top of the Bollinger Band after an extended move up, and so odds are starting to favor a pullback, but the trend is so strong that higher prices are likely yet to come.

Also, the lower-pane momentum oscillator is failing to confirm the new price highs, most likely because the two most recent price swings have not been as dramatic as the price swing from index level 300 to 335 from mid-August to mid-September.

Typically, a trend will get ‘three pushes’ and then consolidate. Elliott Wave lovers, this would have been a perfect 5-wave impulse were it not for the fact that the first wave (leg) was the longest wave (typically, Wave 3 should be the longest).

Let’s look at Crude Oil:

(chart courtesy TradeStation)

I’m showing the most up-to-date price for the futures contract, (as of 8:33 Central Time), and Crude Oil Futures have breached $93, coming off the intraday high of $93.68. Price is literally ‘off the chart,’ or at least off my scale.

If you look closely at the chart, you’ll notice that we have a “Measured Move” which has just played itself out, and we can perhaps expect a bit of a pullback. In addition, we are seeing the slightest momentum divergence (look at the most recent peak in the ‘blue’ oscillator – it is lower than the previous price swing peak).

Again, measured move completions and swing divergences do not indicate a change in trend, but signal a consolidation or retracement at best is ahead. I’m sure the overall market would welcome lower oil prices, but it seems like Oil at record levels (though not inflation-adjusted records) has had little real effect on the S&P 500.

This next chart of Orange Juice Futures is more for fun than for analysis:

(chart courtesy TradeStation)

I’m pointing out a pronounced momentum divergence that has resolved itself quite nicely with new price and momentum highs.

It appears that orange juice may be on a course to break its prolonged daily downtrend. To confirm a new uptrend, price would need to swing back up and trade above the $160 level to establish a higher low and then trade above the most recent swing high.

Anyway, I thought the divergence analysis would prove enjoyable to see.

In other brief news… The US Dollar Index made new lows again today… but what else is new?

If the “Fed” cuts rates as they are widely expected to do, expect new index lows to continue on the US Dollar Index.

FOREX traders, take note! Other currencies relative to the dollar – such as the Euro – are making new relative highs as the dollar index makes new lows.



2 Responses to “No Stopping the Commodities”

  1. Jonathan Says:

    Hey Corey,

    Interesting charts as always. One question. Any thoughts on platinum? I’m noticing a momentum divergence in the latest runup. Is this a valid momentum divergence? Any analysis is appreciated.

  2. Corey Rosenbloom Says:

    Hey Jonathan,

    Yes, the Platinum futures contract is showing very similar characteristics to gold and oil for that matter. All are showing daily momentum swing (sell) divergences. These divergences are appearing to work themselves out on the lower time frames, and we have just recently (almost) pulled back totally to the rising 20 period daily EMA, which would be the initial target for an observed momentum sell divergence.

    For those who follow Linda Raschke’s work, a “Holy Grail Buy” may be forming on – at least – the platinum futures contract because the 14 period ADX stands at 45, well above the 30 threshold to trigger the Grail Buy setup. I’m honestly not a fan of the Holy Grails, because too much ‘trend action’ has elapsed before these initial trade setups develop. I haven’t had much success trading them, but some people love them and there’s a clear one forming here.

    I may post a chart analysis later this evening. It looks like a good educational lesson here.