Hewison Describes Energy Fields on Gold Chart

Jun 29, 2009: 10:49 AM CST

In a unique chart interpretation, Adam Hewison of Market Club released a video today that describes what he calls “Energy Fields” on the Gold weekly chart and what they might mean for the next move in gold.  It’s a free four-minute video that is applicable to all who follow or trade gold.

From what I can tell, Adam is using the principle “Price Alternates Between Periods of Range Expansion and Contraction” to indicate that markets “build energy” during periods of contraction (highlighted in the chart above) and then release it during expansion moves (which are the beautiful trend moves we as traders are hoping to capture).

These reflect classic price breakout plays where you buy (or short) after an observed period of contraction (consolidation) in price.

Adam describes this technique and then discusses why he feels the current “Energy Field” is primed for a move “much higher” in gold prices going forward, particularly if the resistance at $1,000 is broken soon.

Corey Rosenbloom, CMT Continue Reading…

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NewsFlashr Editor Picks for June 27

Jun 28, 2009: 3:49 PM CST

It’s time for the weekly Editor’s Picks from the NewsFlashr Investment/Trading Blogs!

From Mish at Global Economic Analysis, a discussion on why “Deflation is the Cure” including various links and quotes.

Dr. Steenbarger at Trader Feed shares with us a post “Gaining a Feel for Market Immersion by Historical Trading Patterns” which discusses preparation for the trading day and observing many patterns.

A Dash of Insight shares a ‘crib sheet’ for interpreting Government Data along with a readers guide and links.

World Beta takes a look at “Combining Rotation and Timing Systems” in terms of developing an investment strategy. They describe their approach and answer top questions from readers.

Want to know where the US stands in terms of inflation year over year as compared to other countries? Wall Street Nation has the answer. Venezuela has the highest rate at 27%.

Precious Metal Investment asks the question “With Gold’s Drop to $929, is this just the beginning of the Summer Doldrums?” or something worse.

The Dividend Growth Investor lists the “Largest Stock Buybacks for 2009” in a list and then explanatory post.

I try to be open to all market views – here’s the “Case Against Inflation” as presented by the News to Use Site.

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Sector Rotation Money Flow off the June 11 High

Jun 27, 2009: 5:13 PM CST

Often, to get a closer look at the market money flows, it’s helpful to look at relative and absolute sector performance from key swing highs or lows.  Let’s take a look at the Sector Returns off the June 11th high to present (June 27).

I’ve subdivided the chart (from StockCharts.com) into “Offensive” or aggressive sectors which do well when the market is rising, and “Defensive” or protective sectors which do well (or at least outperform on a relative basis) when the broader market is falling.

We see that from the peak, HealthCare is the only sector to be positive (up 3.25%) which is benefiting in part by being a ‘defensive’ sector during a market downturn and via possible changes to the Health Care/Insurance industry via Congress.

The other two ‘relative strength’ performers were Consumer Staples and Utilities – though both slightly lost a percent.  The broader S&P 500 fell almost 3% during this time period.

Technology also lost 1.5%.  The other sectors – particularly in the ‘offensive group’ suffered with Materials falling the most.

Energy – thanks to a drop in crude oil prices and other supply/demand factors, was the sector that declined the most during this period, falling 11%.

What the sector money flow model is telling us is that funds may be positioning for a defensive swing down in the market as they could be expecting volatility ahead.  Either way, this is clearly not the picture of internal strength bulls would like to see to keep this market rallying.

Caution (on the buy side) is perhaps the best strategy going forward.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Quick Look at EEM Emerging Market ETF June 26

Jun 26, 2009: 11:04 AM CST

Per reader request, let’s take a look at the current movement and structure in the EEM Emerging Markets ETF and see a possible fractal Elliott count as well as simple support levels to watch.

Notice first that the EEM (MSCI Emerging Markets) bottomed ahead of the US S&P 500 and has rallied stronger than the US (S&P was up roughly 40% while EEM peaked at roughly a 75% increase).

As this shows, Emerging Markets can be more volatile (and profitible during up-moves), so guard your risk closer.

We had a strong move off the early March lows that – so far – has terminated in early June.   A quick note on the Elliott structure – it probably counts better as a correction – but for now I’ll keep the main count as a 5-wave fractal structure that appears to be in a corrective “B” Wave up which is awaiting a “C” to come.  We’ll keep watching it closely.

The key thing to note is that price supported each time we tested the rising 20 day EMA (offering good low-risk buy-in opportunities) and now have finally formed a clean negative momentum divergence.  If this count is correct, the volume divergence has formed on the terminal (fractal) 5th wave which suggests a pullback/retracement is due – which appears to be what is happening.

Volume has held roughly steady, declining somewhat from March while the SPY and other US ETFs have clearly shown a negative volume divergence.

Key levels to watch:  If we break above $34, then odds are we’ll continue higher – but do be aware that – like the S&P 500 – a bearish head and shoulders pattern could be forming (placing us now in the right shoulder).  $33 could also be resistance due to the prior highs from May.

Otherwise, the $30 level is obvious support which, if broken, would lead to a possible continuation move lower.

Until then, let’s keep watching the chart for additional clues as they develop!

Corey Rosenbloom, CMT
Afraid to Trade.com

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Perfect Intraday Elliott Wave Lessons from SPY June 25

Jun 25, 2009: 6:00 PM CST

What a day!  We got an unexpected “Type II Trend Day” up which just so happened to form a text-book complete Elliott Wave pattern.  Let’s take a look and learn from some of today’s lessons, including a “Three Push” pattern and Bull Flag.

Mid-day, I published a post on the “Perfect Bull Flag Lesson” so take a look at it for additional lessons.

The thing that should jump off the chart at you is the “Three Push” reversal pattern combined with the Elliott Structure all day.

When price makes three subsequent highs on lower peaks in the 3/10 Oscillator, that’s a very bad sign (for bulls).  In so doing, you should also be able to count out a simple 5-wave (1 up, 2 down, 3 up, 4 down, 5 up) pattern based on Elliott Wave Theory, which helps in trading and analysis – you don’t have to get complex with Elliott to be effective as an extra trading tool.

What’s nice about this example is that each retracement/pullback stopped (with nice dojis) at the rising 20 EMA, giving you a low-risk, high probability entry on Waves 2 and 4.  The Bull Flag that I highlighted and traded earlier was an extra bonus.

Remember from my free educational post on “Best Trades in the Elliott Structure” that the best trades come from buying a suspected Wave 4 and shorting at the end of Wave 5 (which should have some type of divergence).

In this case, we had a “Three Push” Negative Momentum Divergence along with a negative TICK Divergence (not shown).

This is how “structure” helps determine the trading strategy and trade opportunities you take – not based on indicators, but based on concepts.

For my advanced readers who love Elliott Wave, or newer traders interested in a “wow” moment, let’s step inside the price to see the complete subdivisions on the 1-min chart (in near-perfect Elliott Wave fashion – a concept that was first introduced to us in the 1930s!):

(click for full-size image)

As I mentioned in the “Wave Labeling” Cheat Sheet, Impulse Waves (1, 3, and 5) subdivide into their own fractal 5 waves while Corrective Waves (2 and 4) subdivide into 3 wave affairs.

It never ceases to amaze me how applicable Elliott Wave is in today’s markets.  Don’t use it as a stand-alone strategy – overlay what you already know with what patterns you see forming and go for the “weight of the evidence” model instead of using a single tool.

Additional intraday posts with Elliott Wave Examples/Lessons:

Elliott Wave Lessons and Structure in SDS

Multiple Confluences Mark Intraday Low Lesson

Perfect Elliott Wave Intraday Example and Lesson May 22

Please join me as the MoneyShow.com rebroadcasts my presentation “Idealized Trade Set-ups for the Intraday Trader” on July 1st at noon EST – I’ll be there on a free live chat to answer questions through the presentation.

Corey Rosenbloom, CMT
Afraid to Trade.com

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