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Posted: 29 Jul 2012 06:06 AM PDT
The Commercial traders as of this week's Legacy Commitments of Traders report in the Dollar Index are 10 to 1 NET short. When the commercials build a position like that the clock is ticking for the "pin to get pulled".
There was a heavy looking topping pattern on the 30 minute chart that developed above a "gap" up that started the week. See left hand side chart below. For those who were long a position going into the week, beneath that trendline became a good location to lock in some profits from a "Trade Management" perspective. For those who went long at the beginning of this week with a position or swing trade, that trendline also became a good location to limit losses from a "Risk Management" perspective. The dominant pattern on the Dollar Index is still the bullish "Cup with a Handle" on the weekly chart. See right hand side below. If the current consolidation area near the breakout point for the past two months fails to continue to offer strong support, this pattern becomes very shaky. More importantly if the "handle" gets taken out to the downside, it could be "bombs away" especially if the commercial traders are still selling or holding steady, since the rest of the traders who need to unload a large long position will be in desperate need for new traders to step in and buy from them. A breakout to new highs and short covering from the commercials would be a very bullish development in my opinion. (Click on chart to expand)  My most recent post on the Dollar Index can be found here: http://scottpluschau.blogspot. twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated   |
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Posted: 29 Jul 2012 05:57 AM PDT
Gold made a breakout from a significant multipoint triangle consolidation pattern, see right hand chart below. The main focus for me going into next week is on long trade setups in GC in the smaller degree timeframe as long as we are above the breakout area. The pressure next week should be on the bears.
What is important to mention is that I do not have any plan to put on an intermediate term trade until the major upper trendline of the dominant "descending triangle" pattern has been taken out with authority. I have no issues paying up in order to increase my probabilities for longer term success. In the near term, the current high volume node (purple line) of the daily chart is at 1,663 and that is about where major trendline resistance should come into play. Initial support in my opinion should be at the apex of the smaller triangle, around 1,580. Next week's COT report will be important as the cutoff was prior to the breakout. This week's legacy report showed the commercial traders covering 18,696 short contracts and going long 3,878 contracts. (Click on chart to expand)  My most recent post in gold can be found here: http://scottpluschau.blogspot. twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated   |
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Posted: 29 Jul 2012 05:45 AM PDT
Emini S&P 500 futures are still in a perfect upward sloping bullish parallel channel (see right hand side chart below), although it has widened with this past weeks price action. Volume was increasing the last two sessions with consecutive large "gap" ups in the cash market since failing to break the neckline on a potential "Double Top" bearish reversal pattern.
The S&P 500 next formed a "Double Bottom" on the daily chart and has made the breakout through the neckline. I prefer double bottoms that form in a downward trend. First target for the bulls is still the "Return Line" resistance in the channel around 1,400. The "Measured Rule" of the double bottom puts the S&P 500 mini futures at new 52 week highs. As long as equities stay inside the channel, bearish short term trade setups on the smaller degree timeframes will most likely be ignored, as failure to follow through continues to be a lethal squeeze play. Failed patterns are very strong signals. In these scenarios, a bearish pattern that doesn't reach its target tips the bears hands that they are "weak", and the bulls will pounce on that with the current structure of the daily chart. Is it a guarantee? No it isn't. That is why it is critical for me to study the auction only in terms of probabilities, and measured to the reward to risk with my system. A breakdown of the lower trendline support in a strong channel such as this one may only put the S&P 500 into a sideways neutral consolidation pattern. The higher probability short trade for an intermediate term trade would most likely be a breakdown from there in my opinion. There was a rather large 20,954 NET long change in the position of the Dealer Intermediary category in this week's consolidated S&P 500 Traders in Financial Futures Commitments of Traders report. (Click on chart to expand)  twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated   |
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Posted: 29 Jul 2012 06:08 AM PDT
In Silver the volume has barely been 40,000 contracts lately on the daily chart, and "Open Interest" is around 120,000 contracts. Those traders who currently have a big position in Silver have a "ruling" hand right now. Should large orders "at the market" come in to cover shorts, or liquidate long positions it is likely to cause violent price action out of nowhere. Volume has been anemic off the breakout in my opinion. While silver is breaking out of a very tight pattern on the daily chart, (see right hand side below), the dominant pattern on the daily chart makes this one look miniscule in the grand scheme of things. I don't believe there is a reason for the bulls to pop the champagne corks just yet.
I am bullish as long as silver stays above the breakout point, and I would say that initial support is the apex of that triangle pattern around $27.00, but silver is by no means "out of the woods" in my opinion. I would be super conservative day trading silver going into next week the way things stand as I write this. It looks to me like $29.90 is the next level of strong resistance. There is not much to talk about as far as changes in trader positions in the latest Commitments of Traders report, but one thing I think is worth mentioning is "Open Interest" in the weekly COT report has increased 11 out of the last 15 weeks for a total increase of 9,192 contracts. There is some stealth positioning considering the recent range trade and low volume, and the big question is who has the strong hands in this fresh open interest? (Click on chart to expand)  My most recent post in silver can be found here: http://scottpluschau.blogspot. twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated   |
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Posted: 29 Jul 2012 05:05 AM PDT
The Nasdaq 100 had a sharp breakdown from a bearish "Head and Shoulders" pattern on the 30 minute chart early last week (see left hand side chart below), but the fact that this short term pattern took place right above major support in the larger degree time frame didn't help the bears. The failed breakdown was a strong signal to get out or go the other way.
The index has now formed a potential bullish "Double Bottom" pattern on the daily chart and is approaching the extremes of a well defined "Rectangle" balance area. I prefer double bottom patterns that form in a downward trend, and not in sideways consolidation. The Dealer Intermediary category went NET short 3,159 contracts in this week's consolidated Nasdaq 100 Traders in Financial Futures Commitments of Traders report. They have a nearly 7 to 1 NET short position as of this past Tuesday. (Click on chart to expand)  twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated   |
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Posted: 29 Jul 2012 05:05 AM PDT
Treasury Bonds had a major selloff on an increase in volume. This is like a "warning shot across the bow" that trends do not go on forever. Treasury bonds found support above the extended lower trendline of the prior "Coiled Spring" and for now I would still respect the bulls.
A breakdown below this trendline on another significant increase in volume would be a near term bearish development in my opinion. There is an eye opening short position in the Dealer Intermediary category of the Traders in Financial Futures Commitments of Traders report in Treasury Bonds. As of this week's report they are long 15,269 contracts and short 160,850 contracts. This is greater than a 10 to 1 NET short position. (Click on chart to expand)  twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated   |
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Posted: 29 Jul 2012 06:02 AM PDT
The dominant pattern in Natural Gas is the bullish "Head and Shoulders" reversal pattern.
What makes this pattern a potentially strong one is that it takes place after what seemed like a never ending downward trend. The IH&S can also be considered a very large base. The "bigger the base the bigger the move" is the classic saying. There are two things that have me concerned with the strength of this breakout. One is that the volume has been somewhat tame. Two, there is also a potential large bearish "rising wedge" pattern on the daily chart. Starting at the neckline prior to the forming of the right shoulder you can draw a rising trendline connecting the recent highs to form the top of the wedge. Draw a second lower rising trendline off the low of the right shoulder of the IH&S, connecting the rest of the swing lows. Low volume is what you want to see in a wedge as it approaches the apex. The proper breakdown of a wedge should take place past the 2/3rds point or final third of the pattern. Should this pattern fail, I think volume will pick up to the upside and really send natural gas flying. Nearly all of the "Open Interest" that had been put on to the short side in year 2012 is now in the red. Closing out losing short positions is buying pressure, and adding that to the new trend buyers stepping in gives added fuel the fire to keep this trend alive. The "Producer/Merchant/Processor/ I prefer to keep the focus of this blog on Futures and not Exchange Traded Funds, but for a different ETF perspective on Natural Gas here is a link to a recent article of mine on the web: http://www.etftrends.com/2012/ I also have a post on the blog that identified the pattern in Natural Gas futures prior to the break in the trendline here: http://scottpluschau.blogspot. (Click on chart to expand)  twitter/ScottPluschau Consulting? ScottPluschau@gmail.com Members to Scott's blog are appreciated |
July 29, 2012
Scott Pluschau's Weekend Updates: DXY, GLD, SLV, SPY, QQQ, T-Bills, Natgas
