So (finally), today was the day. The Federal Reserve is going to begin ‘the taper’. 10 billion dollars to be exact and to be honest, I have not got a clue what that means for the stock market, the bond market, the dollar, or the commodities market. I don’t even know exactly what a ‘taper’ all entitles either, do any of us truly do anyway?
However, what I do know and what I pour my time into studying is the price action of these particular markets.
(Click to ENLARGE charts)
Starting with the stock market, $SPY closed at NEW all time highs. By strictly looking at the chart it looks like close to a perfect touch of the 50 sma (not shown) and a nice month of consolidation. Of course, like many technicians say and not to sound cliche, but I will anyways ‘the bigger the base, the higher in space’. This directly applies to $SPY this past month, combined with the potent candle today – it is hard not to be bullish on an intermediate (swing) basis.
The precious metals ($GLD) have been absolutely horrible this year and after today, one could say – ‘yup, looks like crap and is doing what is has done all year, gone down.’ This is really all there is to say about this space, the charts are still down trending and a case could easily be made for a bear flag in GOLD (as seen below) next to long-term support.
The bonds ($TLT), the bonds are something that everyone loves to talk about and talk about in a way that make others think they know what they talk about. As I stated above, I don’t know much. I know price action though, and what I know about the price action of bonds is that they are still in a macro downtrend but are trying to base out here the past couple months. We (right now) do not currently know if this is a bear flag for continuation or a base to blast off from into 2014. However, by bias is still short. The levels of interest for the bonds are 102 (downside) and over 104 to the upside.
Crude Oil ($USO) has hardly been a big focus this year, not really doing anything. On a weekly basis it looks more like an oscillator than a commodity, which makes sense given it’s nature the past few years. However, from a more micro perspective it looks like it bull-flagging and holding higher after a potent move off the lows, I am looking at the 35.25 area for potential action with a stop around 34.75. But, be for warned, it can trade pretty sloppily and I will likely miss this ideal entry.
Coffee ($JO), I love my coffee, black of course. Disregarding my personal consumption preferences, coffee again simply based on the price action is in a macro downtrend and has been for multiple years now. However, there is a hint of hope for the coffee bulls, ever since the double bottom or higher low (whatever you want to call it) from last week coffee has been ripping higher and has most definitely seen a change in character. It is currently looking alot like Crude Oil does, bouncing off the lows and now holding higher in a flag. I am interested in long coffee as long as the 22.00 breakout level holds, but I’ll be patient right now as it could need some more basing to let the MAs play catch up.
Copper ($JJC), Copper is something that I rarely ever trade. This is in part due to the fact that it is in a horrendous downtrend (like many other commodities). It has however, bouned nicely from the recent lows and if it can hold higher (bull flag) above 40.15 for the next couple of weeks, there could be nice breakout trade over 40.80. This set up needs alot of work though. Be patient.
The Dollar ($UUP). This is another entity that I do not know anything more than the technicals so do not ask me much about the monetary policy or all the meetings that go behind it. Today’s candle looks very similar to that of the stock market but it comes in a completely different context, the dollar is not at all time highs. The dollar is downtrending and sloppy, currently it is in a falling channel pattern and can breakout over 21.70, but of course it would look better it would bull flag out first before the breakout.
Corn ($CORN), this is a commodity that I rarely ever look at, maybe like once every couple of weeks but I thought that since I am writing a post strictly of broad markets, I felt like it should be included. Unfortunately, there really is not much to be said about CORN right now, it is still in a horrendous downtrend with now signs of bottoming it. It either needs to form a base or potent move lower to create capitulation, if this happens then perhaps we can start talking about a ‘bottom’.
There is my thoughts and trade set ups for the commodities, bonds, dollar and stocks. As always contact me if you have any questions or comments!
Twitter (@BenCBanks) – https://twitter.com/BenCBanks