Technicals | Apr 03 2013
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Bottom Line 02/04/13
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Technical Discussion
Dr Copper continues to fail to give us the 'thumbs up' we are looking in relation to it being a key gauge on the condition of the economy. Hard to believe really with the DJIA and S&P 500 recently probing into historical highs. I guess for the moment it just can't be defined as a resource lead recovery. Not according to Copper prices, nor for that matter precious metal prices. And therefore no real reason to look any further as to why our own XJO is still well below its pre GFC highs. All that said, I'm still not all doom and gloom here just yet. The overall pattern we continue to see as a double three corrective move. And what that means is that the second half of the pattern can unfold in a couple of different ways.
The two standouts are some form of triangle, or a flatter type A-B-C move . The symmetrical triangle is still hanging in there as is the descending triangle formation. Yet as soon as the Wave-A low is broken below circa 328.25, we can kiss both of these goodbye, and purely focus on the flatter pattern only. A pattern that is likely to fully test the significant support line just above 300.00. Type-A bullish divergence right here has also come into play, so this could really go either way as to what unfolds more immediately. Overall though we continue to have medium to longer term bullish aspirations on this. Be it the details on the way this pattern finally completes, continues to lack clarity. And of course all bets are off below 300.00. Not that this outcome sits within our analysis right at the moment.
So lets describe the look and feel of the expected pattern options we have forwarded here as the larger corrective move looks to finally come to a close. Firstly the symmetrical triangle and the descending triangle. In Elliott terms, very little difference in many ways. What we need to see is 5 internal swings before either of these patterns finally complete. As the original labelling of the symmetrical triangle has now failed, price is now only potentially working its way through the Wave-C third swing. Yet as mentioned, if the Wave-A breaks down below 328.25, then all triangle options fail and we move onto the flatter type formation. From a resolution perspective, this is now the pattern I would like to see unfold. It just means the convicted upside move we are expecting, will start to evolve quicker than the proposed triangles . Its been a long drawn out process this larger corrective phase, so I guess patience is starting to wear a little thin. Wave-A vs Wave-C equality on the latter targets 304.85. And a nice price confluence aligned to major support. If we get there, I'm expecting buyers to start charging in. And not before time.
Trading Strategy
Our aggressive trade failed on us with the recent drop below 342.20. And our more conservative pending position that was to trigger above 381.00 has seen the initial pattern labelling fail. The pattern was the symmetrical triangle as per our previous reviews labelling. It could still be in play of course as outlined in our review tonight. Yet it means a more drawn out process is likely to take shape over the coming months before it can be seen as complete. The other options we have forwarded tonight have also put a temporary hold on any short term trading aspirations we have had, be it the flatter type scenario, if it transpires, has the shorter lead in time for a potential turnaround. So for now we just need to sit this out and exercise some patience until price can provide a clear outlook for us short to medium term. This one continues to be a real slog I'm afraid !
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