So if you are attorney for the prosecution the case is starting to build. The question here is whether this commodity drop has legs to it. The answer is simple. Does the downturn in China still have legs? Market psychology says it does. In my line of thinking, as long as China keeps going, commodities will sell. If they sell, the Dollar will be bought. If the Dollar is bought, we have no evidence the inverse relationship with equities will change. The next question is whether the Dollar has bottomed for good. I wish I could come here and tell you the Dollar is being bought for the right reasons, but it isn’t. It’s exactly the same psychology for every rally in the past few years. Unless that changes, this is just another phase in a long bear market. But I did hear an interesting piece of information on the Fast Money show this week. Mark Fisher, the legendary trader who was on the cover of the February issue of this magazine, the same issue that contains my Gann article, was quoted as saying the energy sell off has created a ‘fear premium.’ I’m in 100% agreement with that. However, a fear premium doesn’t mean oil has bottomed, it only means that at some point it will go back up.
The weight of the evidence is starting to build in favor of a bigger correction. Mind you, it doesn’t have to return to a bear market. At Lucas Wave International, we take this one step at a time. But for right now, when you look at the banks, you’ll see we are right at the inflection point of something bigger.
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Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.