| The
World Commodity Outlook provides a daily Elliott Wave based
look at the technical condition of the major agricultural futures
markets. With a concentration on the active futures contract,
the analysis is based upon the Elliott Wave Principle, but also incorporates
cycles, Fibonacci relationships of time and price, sentiment, key
moving averages, momentum oscillators, and weekly Commitments of Traders
reports in order to provide subscribers with information that will
aid them in their daily decision making process.
[Support and
Resistance]
The support and resistance prices listed are based upon several
methodologies, including Market Profile, Fibonacci retracements and
extensions, Andrews Channels, key moving averages and classic chart
analysis. The degree to which they hold or give way should be taken as
an indication of a market's strength or weakness on any given day. The
"goal" is for one of these prices (often the second one) to represent
the day's high and/or low. As a rule, support once violated then
becomes resistance and vice versa. Prices arrived at via different
methodologies will often be listed separately, though they may be
closely grouped. Occasionally, an important area of support or
resistance will be separately (bracketed).
[Mathematical Trend]
The “Trends” listed as “Short Term,” Intermediate Term,” and “Long Term”
refer to the day’s close relative to three key moving averages: the
10-Day Exponential, the 40-Day Simple, and the 40-Week Simple. The
10-Day and 40-Day are calculated on the daily chart of the active
contract, while the 40-Week is calculated on the weekly continuation
chart, which uses the nearby contract. In order for a trend to be
listed as “Up,” the close has to be above a rising moving
average For a trend to be listed as “Down” the close has to be below a
declining moving average. If a close is above a declining moving
average, it is listed as “Bottoming” at that degree of trend, while a
close below a rising moving average is listed as “Topping.”
The 10-Day Exp MA is
used by many short-term traders who wish to “trade with the trend,”
regardless of their primary methodology. It can be useful in providing
a guideline for staying with sharply or persistently moving markets.
The simple 40-Day MA
is the “Mother of All Moving Averages!” Given the large amount of
trading that is done by trend-following futures funds, it is useful to
be aware of its location and direction at all times. While there
have been myriad methods used to determine the “trend” of a market for
trading purposes, it is amazing how often this one moving average will
tip the direction of a substantial portion of the trend-following
money. As a general rule, no self-respecting “trend-follower” will be
long a market that is closing below a declining 40-Day MA (Intermediate
Trend “Down”) or short a market that is closing above a rising 40-Day MA
(Intermediate Trend “Up”). One need only to observe the violence that
often accompanies those rare days when the Intermediate Trend changes
direction in one day (without moving to “Topping” or “Bottoming” status)
to see this concept demonstrated.
Finally, the simple
40-week MA corresponds closely to the 200-Day MA used in Stock Indices
and has a similar effect to that of the 40-day MA for the very long-term
trend followers. (As is the case with regard to the other moving
averages) the length of time since the last change in trend status often
determines the significance of a change. (Markets will occasionally “go
bonkers” in a thin Friday trade because they are closing above or below
the 40-Week MA for the first time in months.)
[Outlook]
This is usually a one-sentence “Big Picture” statement that is also
listed under “Summary.”
[Analysis]
This section often starts with a description of the “Big Picture” wave
count and then refines the preferred wave count down to the daily
situation, usually giving its immediate implications if possible. The
preferred wave count is shown on the daily chart of the active contract
in blue while the best alternative possibility is shown in red. Often,
a labeled intraday chart is also included in this section. A question
mark following a symbol is indicative of a situation where the minimum
requirements for that price leg have been met but it is not clear that
it has ended, or that the label will remain the same given further price
action.
[Long term
Commentary]
Listed under “This Month,” the charts in this section are usually kept
up to date, while the commentary may be up to several weeks old as long
as it is still deemed appropriate. It should be noted that daily chart
wave counts do not necessarily have to be the same as long-term
continuation chart wave counts. Many daily contracts begin their
trading lives as deferred contracts at huge carrying charge premiums to
the nearby and have a natural downward tendency as they approach
expiration. Some come on at a huge discount to an existing shortage
situation. When they do become the active contract, the daily chart
wave count does have to make sense within the context of the “Big
Picture,” and because of that, during their relevant trading life they
may be labeled accordingly.
[Intraday
Commentary] In
WCO, intraday updates are the exception, rather than the norm.
They will be presented whenever a covered market’s price action
deviates markedly from the possible paths discussed in the daily
update, or a high-confidence potential turning point presents itself.
All covered markets are monitored virtually throughout their trading
day. Taking the time to daily comment that “this is what we
were looking for” would detract from time that can be used more
profitably in thoroughly analyzing the technical situation for the
daily update.
Note:
At Elliott Wave International, we pride ourselves on independent
and objective analysis. These values extend throughout our analytical
department, so there is not "house wave count" that each
analyst must be in line with. Our analysts are free to interpret
and forecast markets based upon their personal experience and skill,
using the Wave Principle and supporting technical analysis.
That means on
occasion, two EWI analysts may arrive at different conclusions for
the same market. Usually an apparent conflict turns out to be simply
a matter of analysts addressing a different time frame. Yet
there are times when two analysts do differ sharply in their interpretation
of a pattern. Such differences are usually resolved in the short
run as continuing market action makes clear which of the interpretations
is actually unfolding; some resolve more slowly.
We treasure
the complete independence and objectivity of our analysis. Thought-provoking
research is what EWI is all about. Every day, we strive to meet
the exceptional high standards of analysis set forth by Bob Prechter
when he started our firm in 1979.
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