Commodity prices, as measured by the CRB Index, staged an impressive recovery after it seemed all hopes were lost on the shorter timeframes. Actually, in the grand scheme of the weekly chart, it was just a simple, elegant pullback.

Notice how the ‘collapse’ as some called it of March was just a mere pullback against the steepness of the weekly trend. Stocks in strong uptrends often find key support about their rising 20 period moving averages, just as this example demonstrates.

No, the commodity bull is not dead yet. Commodity prices are creeping ever so slightly higher, raising renewed fears of inflation and causing potential economic uncertainty as prices for goods and services are potentially on the rise as well.

Let’s look at the daily chart to see how dual time frame analysis is necessary to capture the larger picture:

Price has recovered back above its 20 and 50 period moving averages, and there was no crossover (which would have been a long-term sell signal). Instead, price has found support after forming a triangle consolidation pattern between the key averages.

Pullbacks are normal in strong uptrends, and actually give traders a clean entry for those who are nimble enough to recognize them.

Keep an eye on commodity prices to broaden your awareness of intermarket relationships.

For the first time in the contract’s life, Crude Oil prices have closed above $110 per barrel.

Price has completed a consolidation pattern, and this is the critical level which will determine if price remains above this consolidation ‘value’ zone, or if it has built a sufficient base to trade higher and seek value at a higher level.

A positive momentum divergence preceded the most recent up-move, as the contract has stayed in a solid and confirmed uptrend.

Let’s look at the structure of the weekly chart:

Price appears to be headed higher, if a sufficient base was formed at the $100 level. Higher oil prices drag down consumer and business spending, putting further pressure on an already potentially weak economy.

Traditionally, reduced economic expectations will serve to decrease demand, and decreased demand drives down oil prices. The chart seems to be denying this reality at the moment and it is uncertain which ‘reality’ will play out in the end.

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Even if you are an ‘equity only’ trader, always keep an eye on what commodity prices, especially crude oil prices, are doing and where they might be headed.

Recently, to counter Microsoft’s (MSFT) offer to acquire Yahoo (YHOO) at $31 per share, Yahoo is now in talks with both Google and AOL Time Warner (TWX) to determine if a more favorable offer can be generated.

According to a Business Week article entitled Yahoo’s New Strange Bedfellows, “Yahoo is showing just how far it’s willing to go in efforts to fend off an unwelcome takeover attempt from Microsoft—or at least extract a few more dollars from the software giant.”

Not to be outdone by this development, “Microsoft is in talks with News Corp (NWS) to make a joint offer for Yahoo.”

What would the new potential Yahoo deal entail?

“Step one in Yahoo’s plan is a freshly announced test to team up with Google (GOOG) to make its Web-search business more profitable. Moreover, Yahoo is discussing a possible combination of operations with Time Warner’s AOL (TWX). Under terms being considered, Time Warner would merge much of AOL’s operations with Yahoo”

Moreover “pairing with Google could give Yahoo a way to cut costs and boost revenue—and demonstrate that it has options besides acquiescing to Microsoft.”

It appears to be a story that keeps getting interesting.

Previously, I addressed earlier developments in this topic in my post “Charting Microsoft and Yahoo” and here I wanted to update developments, and throw in two additional stock charts that are now part of the ongoing saga of acquisition and strategic compromises.

First, let’s look at Time Warner (owner of AOL – America Online):

The stock has positive momentum going into a potential right triangle consolidation pattern, forming as the stock languishes beneath its two key moving averages. The stock is currently in a confirmed downtrend and may be forming a reversal pattern. Recall that companies offering to buy other companies often experience lower share prices as the deal develops, while the stock of the company being acquired frequently rises (Yahoo’s stock is up for the day, after an overnight gap).

Finally, let’s look at impressive stock Google (GOOG):

Google is slowly ‘creeping’ higher with extremely shallow retracements, which is a sign of strength. There has been a lengthy positive momentum divergence which is currently resolving as expected. Price is trapped beneath its two key moving averages, but is finding support from the rising 20 period. A break above the 50 (blue) average and above ’round number’ resistance at $500 would be a boon for the bulls in this formerly high-flying stock. Google has significant support beneath $425.

Will there be any new companies to join this ongoing story? And what will the effect be for the overall market as investors continue to pay more attention to these developments? Time will tell!

The VIX (Volatility Index) has now formed clear and distinct channels from which to assess current conditions.

I found drawing trendlines on this chart to be difficult, and you may have your own method for drawing a trend channel, so be aware of this when looking at this chart.

Right now, the VIX seems to be contained within 32 to the upside and 23 to the downside. If this is correct, then the VIX has either broken slightly to the downside of the channel, or is set to reverse back to the upside.

Keep in mind that the VIX is said to measure ‘fear’ in the marketplace, as it measures the implied volatility of index options (specifically the S&P 500). Higher VIX prices correlate with lower prices in the index, but more specifically large volatility (often downside) moves.

What this means is, IF the VIX is testing the bottom of its trend channel, and IF the VIX reverses to the upside after testing this level, THEN we would expect to see higher volatility and (potentially) sharply lower US Index prices.

Keep in mind that the Markets have bounced up against resistance and are forming a potential consolidation triangle, meaning a large volatility move is not out of the realm of possibilities.

I recommend studying and learning more about this important index and what it might mean for the broader market.

I’d like to ask you a quick favor – What would you like to hear in a podcast?

I’m toying around with the idea of producing a weekly (free) informational podcast and I would like to know your thoughts on what you would like discussed.

Please take a brief moment and let me know through a comment on the page your thoughts on the following questions (you don’t have to provide your email address or even your real name):

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2. What would you like me NOT to discuss?

3. What are some examples of other online podcasts (if any) that you enjoy? Also, would you benefit from an audio service/podcast?

4. How long should the podcast be? Also, how frequently should it be released?

I would greatly appreciate any feedback at all to these questions, and any tips, pointers, or suggestions you may have.

Thank you in advance for reading and participating!