"When you are in the woods,
you cannot ever be lost.
You are surrounded by friends
and surrounded by God."

--Joe Coyhis, STOCKBRIDGE-MUNSEE

UPDATED 20060713

COMMENT #232

CHART # 462

1. It's been a few months since we last reviewed the following:

2. We were focusing at the time on how the narrowing of the spread to the horizontal blue lines had provided price support over the last year.

3. The green lines showed how rapidly the spread had narrowed this year from the record 60.4 reading of the last year for the upper line in late December, 2005.

4. As can be seen in today's CHART #462 update, the two lines converged a couple of weeks ago for the first time in years.

5. The period of time the upper line was above the lower line has set an all-time record.

6. Even now, a couple of weeks later, the lines have not crossed in the period since.

7. Values now stand at 38.7 and 34.4 making the spread +3.3.

8. When the spread was last presented in March, prices made one of the four important peaks of the year to date.

9. Those peaks occurred at the following:

10. (The dates of the first three highs can be seen in the 3rd of the 4 CHARTS).

11. Before done, the lines should cross by quite an extent and the spread should become quite negative.

UPDATED 20060713

COMMENT #233

CHART #s 463-467

1. A few days ago, we saw how the continuous spot futures contract traded above the June high here:

2. At the same time, however, the cash index was seen as being unable to trade above the June high here, thereby forming an important intramarket price divergence between the cash and continuous spot futures contracts (see pages 171-84 of "The $upertrader's Reference Manual").

3. Actually, the break of the June high was not as important an event for this market as was the above-described divergence.

4. The reason is that the retracement in both the continuous spot futures contract and the cash index was of the entirety of the decline from the May high as was seen in the following CHART:

5. Today's CHART #463 shows daily prices for the continuous spot futures contract and how the .618 price retracement level appears to have stopped the upward corrective price action.

6. The two small sloping red lines in the upper and lower boxes show how such momentum oscillators as RSI and Slow Stochastics failed to confirm the new recovery high at the blue Wave C of II intraday high of last week.

7. An interesting event occurred this week.

8. That is the event marked in the CHART by the black arrow.

9. In the past, such events have brought immediate price support and a short rally thereafter.

10. Many have speculated that these rallies were due to the action of the "Plunge Protection Team".

11. Yesterday's price action and new low for the last several days is thus of great interest.

12. The horizontal pink trendline shown in the CHART has become of importance to this market and is the next signpost along the way to lower prices.

13. We can see by the blue text in the upper right corner of the CHART that the decline-correction has lasted 35+23=58 calendar days (FIBONACCI #s=21, 34 & 55).

14. The ability of markets in this complex to trade above the June high is actually of greater importance to such markets as those shown in CHART #464 of daily prices.

15. Here we see that the high this month (so far) has been unable to exceed the June high.

16. The reason this inability to trade above the June high is important is that the decline that was believed to be in the process of being corrected from the June low was but the black Wave 1 decline shown in the following CHART:

17. In other words, what is seen in today's CHART #464 is that the blue-black Wave 1-2-1-2 sequence (which is very bearish) has not been negated and remains the favored outlook.

18. Let's now go back to the blue 5 wave impulsive decline seen in the above CHART (see pages 283-92 of "The $upertrader's Reference Manual").

19. The black text and arrows in the following CHART #465 of weekly prices shows how price has now overlapped the highs of early last year and late in 2004.

20. This negates the possibility that the June low is a wave 4 low of an impulsive sequence.

21. As the text explains, however, it does not totally negate all possibilities, especially given the amount of time spent in the decline / advance noted in the two black boxes.

22. When we look at a similar market in CHART #467 of weekly prices, we can see that this lower red up channel trendline is, just now, in the process of giving way.

23. Again, here we can see that the lows of June are well below those of late 2004 / early 2005.

24. Hence, it would seem of little likelihood that the market is about to find support and rally from here.

25. Nevertheless, we do want to note that the two downlegs shown are in PHI proportions in that 16=2 X FIBONACCI #8 and 26=2 X FIBONACCI #13.

26. On the other hand, the two advancing legs have lasted 21 & 37 months (FIBONACCI #s=21 & 34).

27. In the following CHART, it was shown how the market was believed, at the June low, to have ended the 1-2-3 sequence of an expected 5 wave impulsive decline.

28. The black Wave 3 downleg of this decline was seen as having also unfolded in a 5 wave impulsive movement marked in the CHART by the 5 blue numbers.

29. Today's CHART #466 of daily prices for the continuous spot futures price updates.

30. We can see that the upside progress from the June low was halted after a pretty clear a-b-c correction.

31. It is important that the black Wave 4 high was set on 630 as shown in the CHART just below the pink horizontal trendline just as was the black Wave 2 high on 407 was also set just below the pink horizontal trendline.

32. Price now is right at the pink horizontal price support line shown at the June low.

33. We can see that price has been moving down from the red WLC (Weekly Linear Time Cycle Index projected highs) from early in the month.

34. Although the possibility of price support here must be monitored closely, if the blue Wave I-II movement shown in today's CHART above is correctly interpreted, the support should give way and price should cascade lower.

35. When we look at other CHARTS of this market, we, in fact, see that most have already given way, including the overnight session chart in the lower right corner (see below).

36. One of the factors we have to be sensitive to is the possibility of a Thursday-Tuesday rout occurring.

37. Such routs occur in the midst of 3rd wave declines when a Thursday lower close produces enhanced selling on Friday for want of not wanting to hold positions over an uncertain weekend.

38. The much lower close Friday then produces margin calls over the weekend and enhanced forced liquidation next Monday and more margin calls.

39. The process in this short sequence ends Tuesday morning when the final forced liquidation results in the initial cleansing.

UPDATED 20060713

COMMENT #234

CHART #469

1. We had been following hourly prices of the following market:

2. The decline had unfolded in the blue 5 wave impulsive sequence shown (see pages 283-92 of "The $upertrader's Reference Manual") and had experienced an upward movement that was believed to be corrective in nature.

3. The short green line in the lower right corner suggested that the upside rally was not quite complete, but was close.

4. Today's CHART #469 of hourly prices for the same continuous spot future contract updates.

5. We pick up from the blue Wave 1 low of the earlier CHART.

6. We can see that the blue Wave 2 high required 43 hours following the 83 hour decline to the blue Wave 1 low, or about half the time.

7. The black arrow pointing to the blue Wave 2 high then shows that another 43 hours were required to get to the blue Wave 4 high.

8. The decline to the blue Wave 5 low then lasted 22 hours, or about half the 43 hour time span.

9. From the low shown, another 43 hour or so segment followed, this one lasting 44 or twice the 22 of the previous segment.

10. These relationships are marked by the green arrow at the bottom of the CHART.

11. Then 39 and 43 in the next two spans.

12. The three legs completed the blue A-B-C corrective sequence and blue Wave II counter-trend correction.

13. The 44+39+43 hour A-B-C correction lasted 126 hours total with 87 up and 39 down so that total / down = 126 / 39 = 3.256 (2 X PHI = 3.236).

14. The blue Wave C portion of the advance is marked by the 5 red boxes with the 5th red leg unfolding in the 5 wave sequence marked by the 5 blue boxes.

15. This 43 hour movement unfolded in 8-2-4-15-14 hours as shown by the red text with 26 up so that total / up = 1.654 (PHI=1.618).

16. As the blue Wave A advance covered 470 points, the blue Wave C 369 points and the total 599 points, total / Wave C = 1.623, total / Wave A = 1.274 and Wave A / Wave C = 1.274 (PHI = 1.618 & SQ RT PHI = 1.272).

17. We can see how the green up sloping short momentum oscillator lines in the upper and lower charts turned red at the final price high, thereby forming an important price / momentum oscillator divergence (see pages 171-84 of "The $upertrader's Reference Manual").

18. The movement presented is pretty classical.

19. Almost too perfect, in fact.

20. Nevertheless, it is important information for the complex and suggests that the blue Wave I-II sequence shown in the CHART is in place and is correctly labeled as shown.

UPDATED 20060713

COMMENT #235

CHART #470

(Posted noon, Thursday, 20060713)

1. In this CHART of hourly December prices, the market appeared to again be approaching an important selling area.

2. The high was made the next hour around the opening.

3. Today's CHART #470 updates hourly prices for the same contract.

4. We can see how this morning's new high has caused reassessment.

5. The new high on the opening on 707 is now relabeled as the blue Wave 3 high shown.

6. The decline after is labeled as a blue Wave 4 low.

7. In the upper right corner, the movement through this morning's high has formed several interesting relationships as shown in the CHART.

8. The market is obviously being affected by the news of the hour.

9. However, given the relationships shown, the question arises if much of the news is not already in the market.

10. The ideal would see the market pause here, correct a few hours to form a black Wave 4 low, and then advance from the black Wave 4 low about another 175 ticks (or the size of the black Wave 1 advance).