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If the market is going to roll-over, stocks like OPEN can't be making new highs … Not to worry though as EWT tells us we are at the end of wave 5 …. Beep …. Beep …. Beep … that is the sound of Tim backing up the truck on another EWT-based trade (LOL)!!
Cheers … Leaf_West
The market is a funny thing. Last Friday riots in Egypt were a major market-moving event and this week those worsening riots are old news. I read that Egypt is the world's largest importer of wheat and that much of the unrest is due to rising food prices. Looking at the wheat chart I see that prices have doubled since the low last June and show little sign of turning down anytime soon. Is this inflation exported from America in the shape of another worldwide commodity bubble? More than likely and if it continues no doubt we will see more unrest in poor countries.
We've been tapping up against resistance on ES and NQ for several days now and that resistance looks likely to break soon. More than likely that will happen today. On NQ there is a clearly established broadening descending wedge, and that's a bullish pattern with a 79% probability of breaking up. Though it's a big pattern it only actually indicates back to the January high on NQ, and that's at 2346.75. It's safest to take this long after the resistance trendline breaks as the lower trendline of the wedge is now in the 2230 area:
On ES we have the rising channel from the November lows. Channel support is in the 1272 area, and the upside target is in the 1324 area, but main ES rising resistance is in the 1314-6 area and I'm expecting this next push up to reverse there:
EURUSD has reversed again, and this time it looks as though it may be for real, backed up by the ECB pouring cold water on a rises in european interest rates in the near future. The obvious next move is to form an H&S with the neckline in the 1.357 area. After that the right shoulder would have a target in the 1.376 area:
On silver there has been a clean break up from the declining channel and a gently narrowing rising wedge has formed with three touches on the upper trendline. The next upside target is in the 30 area:
Copper has also established a gently narrowing rising wedge and the next upside target is in the 480 area. There is very serious multi-year resistance in the current area, but copper has stabbed through that once already this week. Once copper clears 460 it will be in breakout territory:
I'm leaning long today but I'm waiting for upside resistance to break on ES and NQ. Once NQ retakes 2326 though, the next move up should be starting.
I've written a post on the very interesting setup in the long term treasuries market and I'll post that after the close today as a weekend post.
Click graphic below and check out the inflation 'heat map' at the WSJ, which I first came across @ Zero Hedge).
First off, a qualification. This is not a map of inflation, it is a map of the global effects of inflation, including places like Egypt, like Pakistan, like Venezuela, like Nigeria, where the effects (chronically high prices) have saturated and become deeply embedded.
Egypt is a country in which around 40% of the people live below the poverty line. Add the effects of inflation, rising and battering day after day, month after month, year after year… and you have a cauldron more than ready to boil over. Not that the people in the street are economists or even financial students like us, but consider that the global economic revival currently in progress is aimed at asset owners and the most powerful financial entities – at the expense of people the world over just trying to make their already stretched Pound (Egypt's currency), Rupee, Rial or what have you – buy the necessary things in life.
Check out the sedate looking 'inflation effects' status of the US, which the Fed Chairman either pretends is real or worse yet, is stupid enough to actually believe, and you can clearly see why he has an implied carte blanche to keep on the current inflationary process of monetizing debt and printing money. Deflation is the handy dandy threat used to support this. The question is, when will the US saturation point be attained? When will the same happen for other developed nations?
In NFTRH, this is the overriding long term theme as we move further along the continuum of conventional slumber we currently enjoy. Things change, and sometimes they change radically and seemingly out of nowhere. But we know better. We watched the 2008 mess put a punctuation on years of degradation. We do the same now for what comes next.
Money supply will eventually be followed by supply/demand dynamics, with prices getting out of control to a degree that even the official, massaged numbers will look bad. Asset owners are being rewarded and speculators are being encouraged the world over.
Our ultimate trigger, the monthly EMA 100 on the long bond, along with several other indicators, is at an inflection point but not yet activated. So, there remains an opportunity for the guys who EVERYBODY KNOWS are wrong – the deflationists – to get very right in the interim. Think about it, from a contrarian perspective, EVERYBODY is (rightly) concerned about inflation.
It's a crowded trade, to say the least. And now whole countries are starting to boil over. Like I said, 2011 is going to be one supremely interesting year and you just gotta love this or get the hell away from it. Pretend it doesn't exist and let your financial professional handle the murky details. Because the Devil is in the details.
As hard as Uncle Ben tries to trash the US$, the charts look right now like the US$ is going to bounce off support …. remember Bernanke speaks today at 12:30pm eastern.
Watch the currencies after Ben opens his trap!!
Cheers … Leaf_West
Nice breakout above a symmetrical triangle here:
