"Any party which takes credit for the rain must not be surprised
if it's opponents blame it for the drought."

--Dwight W. Morrow

UPDATED 20060607

COMMENT #198

CHART #s 396-397

1. Earlier this year, this market peaked right here:

2. A nice sharp decline followed to the green MLC (Monthly Linear Time Cycle Index projected low) shown in the next CHART by the middle of the month.

3. From the mid-February low, a saber-rattling rally took prices to new highs and to the blue MIC (Monthly Inversion Cycle Index) box and projected turn shown in the upper right corner.

4. This high marked the high to date in the continuous spot futures contract shown.

5. Early next month, on the retest of the high, the December contract was able to exceed the late April high in the continuous spot futures contract as was noted here:

6. This intramarket divergence (see pages 171-84 of "The $upertrader's Reference Manual") was occurring amidst very negative positioning by commercial and large speculative interests as was shown in the bottom box of the following CHART:

7. The new unconfirmed high in the December contract was occurring at the WIC (Weekly Inversion Cycle Index) projected turn marked in the following CHART by the small blue box in the upper right corner.

8. Several other interesting relationships were also occurring at the time as was discussed in the COMMENT accompanying the CHART.

9. The price action divergence was summarized in the following CHART of the continuous spot futures market and in the December contract here:

10. The December contract had set the head-and-shoulders top formation on the dates shown.

11. Price had declined to the "Point of Decision", however, as was shown in the following CHART of hourly prices for the December futures contract:

12. A couple of weeks later, price had rallied up a bit from the lows shown in the above hourly contract.

13. A minor adjustment was made in the interpretation of the decline from the right shoulder high in the December contract.

14. It was suspected that blue Wave 1 - 2 sequence shown had formed followed by the red Wave 1 - 2 sequence and that price was ready to accelerate to the downside.

15. By the end of the day, however, today's CHART #396 of hourly December prices shows that price had moved to a new high and negated the setup.

16. The original presentation is shown in the #396 CHART.

17. Today's #397 CHART now adjusts for the new high.

18. The three red head-and-shoulders caps have been removed as the pattern has been negated.

19. The formation shown is presented based on the original interpretation of what was believed to have been going on in this market.

20. From the blue Wave 1 low, the market rallied in a 7-6-12=25 hour advance marked by the blue A-B-C shown in the CHART.

21. The 8 hour decline thereafter is now shown as a blue "X" wave.

22. From this blue X wave low, the market then rallied in the red a-b-c movement shown of 3-1-9=13 hours total or about ½ that of the 25 hour blue A-B-C advance.

23. The entire a-b-c-x-a-b-c corrective advance from the blue Wave 1 low to the blue Wave 2 high shown in the CHART thus lasted 25-8-13=46 hours.

24. The alternative interpretation is shown at the black horizontal line above the blue Wave 2 high.

25. From the blue Wave 1 low, the movement is shown as one A-B-C corrective movement of 7-26-13=46 hours.

26. Here we see 26 down and 20 up hours so that down / up = 1.300 (SQ RT PHI=1.272 and ½ SQ PHI=1.309).

27. We can see how the price advance has taken price back up to the upper up green channel trendline shown which defines the blue Wave 2 corrective advance.

28. The original red down trendline drawn off the head and right shoulder in previous CHARTS is now presented as the blue dashed down trendline for clarity.

29. We can see how the blue Wave 2 high in price has occurred at this blue dashed down trendline.

30. From the right shoulder high, the market declined 36 hours followed by the 46 blue Wave 2 rally, 82 total.

31. 46/36=1.278 (SQ RT PHI=1.272).

32. The upper red dotted horizontal trendline shown in the CHART is important as it relates the blue Wave 2 corrective movement to the blue Wave 1 impulsive price decline at the .786 price retracement level (1 / SQ RT PHI = .786).

33. In other words, both from a price and time perspective, the blue Wave 1 decline and blue Wave 2 advance are related by SQ RT PHI.

34. The blue Wave I decline of 15 hours and blue Wave II advance of 15 hours (15=15), 30 total, are now added to the CHART.

35. We can see that the 82 hour blue Wave 1 - 2 movement is related to the blue Wave I - II movement of 30 hours by 82/30=2.733 (SQ PHI=2.618).

36. At the top of the CHART, we can see that the vertical red lines show two segments of 56 and 57 hours from the head high to the right shoulder blue Wave 2 high (FIBONACCI #=55).

37. The low that divides price into these two segments was actually, at first, believed to have been of much greater importance than may be seen in today's CHART as is shown by the CHART at the time of the low:

38. In fact, it was from this low that the market was initially believed to have formed the blue Wave 2 high.

39. Today's reassessment shows how, although a bit more time was required to form the second a-b-c corrective movement (assuming the interpretation is correct), little further price advance was seen above the original assumed blue Wave 2 high.

40. A trade above the blue Wave 2 high shown negates.