Commodities, stocks at key time windows

The last week of a year that turned out better than most people could have expected. To the 90% of Americans who are working, its time to count your blessings. For the 10% who aren’t hopefully it’s the darkest before the dawn. Truth be told, 2010 could’ve been a whole lot worse for all of us. We are two years into a bull market. That’s right, what else would you call it? The perma bears would have you believe disaster always lurks just around the corner.

Heading into September with the banks breaking down, things did look scary at that point. But it ended up being the turning point of the year. We are not exceptionally bullish here but we just haven’t had a reason to be bearish. Since October, we’ve had turn windows with very little readings and for those of you who don’t know what that means here’s a quick lesson. In my first book we introduced a lot of people to the fact markets can be timed. In fact they must be timed. We were a little ahead of the curve because about a year and a half after that book came out, CNBC reported that if you bought an SPX fund in 1998 you had nothing to show for 10 years of buy and hold. We talked about timing windows and had you read my book you would’ve learned how to recognize the top of the bull market in 2007. Considering the financial destruction that followed, it makes that book timeless.

However, what we’ve done since that time is develop a methodology to judge the strength of a pivot to determine if a specific time window is going to validate. We just came out of a sequence in the last two months where one time window after another failed to give us the ‘under the hood’ readings that could give us the kind of turn we had back in 2007.

But now the time windows have expired but the readings are finally showing up. Last week, we had an interesting event. There was a rare total lunar eclipse right on the Winter Solstice and an event such as this hasn’t happened in the modern stock market era. Yet the perma bears were out telling you of the financial destruction to follow. All you have to do is look at your Gann calendar to realize the Winter Solstice is one of those times in the year where markets can change direction. At the same time, it’s very difficult to get that change during the holiday season because the holidays are seasonally the most bullish time of year and trading desks around the world keep skeleton crews. There’s just not a lot that goes on the last two weeks of the year.

But there are areas to be concerned about. Last week we talked about Copper. Its sitting at all time highs but because of the trajectory of the parallel warning line has a little room to go higher. I think tests of this nature can play out over the whole first quarter of the year. If you noticed we also have charts like Corn and Cotton battling very serious resistance levels. We are starting to get readings there as well. Corn is interesting because it has great underlying strength but the near term readings suggest we can turbulence right here. It’s the same for Cotton. Heading into the New Year, think about how many products will be affected by the 3 C’s. That’s Copper, Cotton and Corn which gives us a wide range of products affecting building materials, clothing, breakfast cereal to pet food. Oh yeah, I forgot to mention oil sitting at 90 or whatever it is today. But we at least partially cracked the code on Heating Oil in our weekend Futures Update which is one of the most difficult charts to comprehend. Heating Oil is also sitting on the potential of a change in direction.

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