It’s Monday night, and index futures are doing what they do best — i.e., wafting higher on extremely light volume, nearly all of it short-covering. Since Wall Street is obsessed these days with just two things — China and the price of crude oil — there must be “good” “news” coming from China, since March Crude is only marginally higher at the moment. If the recent past is precedent, however, the E-Mini S&Ps are likely to get smacked down without getting past 1900.00.
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Last Friday I was looking with interest for the Canadian dollar to bounce off a very old support level found at .6867 to the US Dollar.
Eighteen years in the making, I mentioned here that I thought the potential existed for a modest CAD reversal and I did get it although thus far it has been more feeble than expected.
The Loonie actually breached that level and made a weak bounce from .6857 so I was off by .0010…… but hey, who is keeping track!
Anyway, it looks like the Canadian dollar might just reward with a double bottom seen best on the hourly chart.
So why is that worth talking about?
Well, in the fewest possible words, it has to do with the tight correlation between WTI crude and the Loonie and the obvious inference that when the Loonie bounces WTI may just follow. If the two were not tied at the hip lately I wouldn’t even mention the pair.
Getting to the point, if CAD does bounce off an anticipated bottom then we could finally be near a relief rally in oil. Everyone expects a short cover rally eventually (of course) but nobody knows when it will finally come. That includes me.
There are some tantalizing clues though. One I came across recently is found on the DWTI chart. Take a look at that on the 5 year (linked) and you immediately get the sense the steep decline in oil prices is near, if not imminent.
When I am in doubt about an idea I sometimes apply not one, but two or even three technical methods to try to confirm an idea. Its not everyone’s cup of tea but it sometimes works for me.
In this case the pivot approach was extremely effective for me with getting in tune with CAD. On the DWTI chart however I used Elliot Waves and by my calculation we are in the termination portion of a fifth wave up which suggests an interim bottom in oil is near at hand.
Anyone else here who uses other methods concurrently can easily judge this for themselves. So I linked a chart I am using that is suggestive that a WTI bounce is now in the cards and could be coming at any time. The Loonie and WTI need to be viewed together in my opinion for any of this to be valid.
We will know soon enough one way or another.
DWTI 5 Year Chart – Note the parabolic rise and 5 wave count.
http://finance.yahoo.com/echarts?s=DWTI+Interactive#{%22range%22:%222y%22,%22allowChartStacking%22:true}
I am working JYP upward, that’s the better SP market for the next year.
Looking 1565 SPX over the coming weeks.
DXy a major high here, which will mess up all the great thinking and dealing out there even better. 🙂