Friday, July 31, 2009

A Triangle In Ford


On 7/8/09 F completed wave e of a textbook 4th wave triangle at 5.24 3 ticks above the wave c low of 5.21. The standard measure rule for running triangles allows for the upper trendline to extend above the wave 3 high as shown. The measured target was then 7.31. F hit that target on 7/29, but the 5th wave did not look complete so I decided to give it another couple of days. The range expansion today probably marks the end of the run and provided a good place to take profits for a gain of 26% in 10 days. Frankly, I was surprised at today's move in F and counted it as an unexpected gift, not to be refused. Other approaches project F to as high as 9.30, but I am not willing to take that chance on a 5th wave at the current juncture in the market.

The wild swings continue in the Dollar, gold, and oil. I will stick to my current position respective to these moves as there is ample evidence that the Dollar is approaching an important low despite today's action. Looking only at price in gold, the directional odds are 50/50 as far as I can tell at this point, and when that is the case there is no benefit in switching sides until the odds change. Overall, the pattern for the bearish case would not be negated even if gold advances to the 975 area which is now a possibility. The seasonal pattern for gold is calling for a sharp spike into Monday followed by a decline for the rest of August. Also, the JJC is now close to resistance at the trendline drawn above the April/June highs. On balance, it seems more likely that the Dollar will turn up as the market turns down and that gold and oil will follow suit.

The Qs have closed at the low for two days in a row. I think the odds definitely favor the expected correction. All in all, I plan to just manage positions for the next couple of weeks.

Have a good weekend.

4 comments:

dave said...

This received little to no attention, that i'm aware of, 20E crossed 200E for SPX for the first time since late 2007 (when the bear mkt was beginning). This occurred Fri 24 or Mon 27.

Of course, this happened long ago for Q's/NDX at the end of May.

Regards,
dave

dave said...

"...ample evidence that the Dollar is approaching an important low despite today's action."

Waiting for a declining 5th wave to end is like a 45 y.o. woman waiting for her bf Godot to marry her. Of course, the 5th wave will end, but better money is made elsewhere.

Regards,
dave

R. Craig Pritchard said...

Agreed on the Dollar, except that I think when it turns, it will be dramatic.

dave said...

I liked Stephen Schork's answer, sometime in the 4thQ 2008, to the question when would crude bottom. He said that he didn't know when, but he could guarantee that he would still be short (at the bottom). I thought "Right on" ! Someone who understands that surprises are usually IN the direction of the trend.

Unfortunately, he has erred on the opposite side by being too bearish this year because of bearish fundamentals. Maybe, he was another permabear who was hitting the ball because that's where "they" were throwing it. However, when the mkt started throwing the ball someplace else he kept whiffing.

I made the "declining 5th wave" comment after seeing EWI's Dollar Index chart. Looks like plenty of room on the downside (sentiment included).

It constantly blows my mind how many traders, who have read the lit, ignore "Don't try to pick bottoms & tops"; & ignore "The trend is your friend" & are constantly scalping 4 or 5 ticks in the direction or against the direction of a 4 or 8 POINT move.

Regards,
dave