Crude poised to break from triangle

CL

After breaking down from the ending diagonal pattern with a sharp $20 move as wave A, Crude Oil appears to have formed triangle wave B.

Triangles are continuation patterns so CL seems ready to break down in a sharp C wave thrust out of the triangle. The projected move is shown in red.

The initial thrust is expected equal to the width of the triangle so this would take the price down to the H&S neckline. From here wave C is expected to continue to the $82-$84 area, which is the H&S target, where wave C = wave A.

An alternate count is shown in blue. The triangle could be a 'b' sub-wave of a larger B wave. In this case it would break upwards to around $107 which would be a 61.8% retracement of wave A. It would then break down to around $87 (H&S target, C = A) or carry further to 1.618 x A.

So wait for a clear breakout from the triangle to see which pattern is playing out before taking the trade.

Silver is having a great run. I've been bullish since the breakout of the congestion at $20 (cup & handle pattern) but I did not expect this much strength.

I think the 2008 low was the Major Wave II for silver's bull market and we may now be in Major Wave III. Within Major Wave III we may be in Primary Wave (3), and within that in Intermediate wave 5. For commodities, fifth waves are the strongest, usually driven by fear - in this case fear of inflation, dollar devaluation, COMEX defaults, industrial shortages, etc. An example of an extended 5th wave was in the NASDAQ in 2000. See http://www.safehaven.com/article/20661/y2kqe for a comparison of NASDAQ under the Y2K spell and Silver under the QE2 spell.


Late last year Silver thrice tested the top of the multi-year consolidation/uptrend channel (light grey) that it had established since the 2008 shakeout. In Feb this year it broke out of that topline and established a steeper channel (white). At the moment it is testing the upper boundary of the new channel. If it ultimately crosses over and finds support on the top of the channel, Fibonacci ratios suggest an optimistic target of $63 for the current run to a Major Wave (3) top. As long as the price remains in the current narrow (dark-grey) channel I feel good about the $63 target. We might see a speed bump at the 1980s all-time high of $50 as that is an obvious point of resistance.

Wherever it tops, Major Wave (3) will probably retrace up to 50% (!) of its advance (from $20 to $60) => retrace to $40 for Wave (4) before wave (5) begins. That would take silver to dizzying heights. However that is probably many years into the future.

SENSEX Long term count

SENSEX on a Wave 3

After many months of near sideways movement there was a huge H&S breakout in the BSE Sensex today. I think this is the beginning of a third wave up. It targets many thousands of points higher. Stop loss at 18,200.


From a fundamental viewpoint as well Indian stocks should do very well in a high-inflation plus high growth scenario. Demand driven inflation allows companies to preserve margins. Although costs rise so do sales and the nominal values of profits increases. An added kicker to stock prices is the high growth in the economy which means that the number of units of the products sold also increases (assuming constant marketshare).

Keynes vs Hayek Hip-hop

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Fractal correction patterns playing out of Dow & SPX

Gold inflexion point at 1115

Last stop for impulse count out of triangle is 1115 where wave 3 could become the shortest of the 5 waves. This is a critical spot.

After that we would have to consider the move off $680 to be an impulse with a series of very bullish 1-2-1-2s and see then we should see much higher highs.

Although gold is looking extremely bullish right now, the divergence created by no new highs in gold miners (GDX) and silver (SLV) makes me worry that this is a blowoff top.