The Power of the Pattern has reflected that the Commodities complex created a pattern that suggests lower prices, as far back as a year ago (see post here) Gold and Silver hits highs in the summer of 2011 and have since created a series of lower highs, inside of a falling channels highlighted below.
CLICK ON CHART TO ENLARGE
During falling channels, breaks of support can bring about rather quick declines/slipper downward slopes. Commodities are being put under selling pressure and the Gold and Silver market are not exempt from selling pressure during these environments!
Joe Friday suggested that Cattle were at 20-year resistance line (see post here) and Cattle have since fallen 15%.
Last year Gold became a “VERY CROWDED TRADE” and hit the top of its rising channel and its 261% Fibonacci extension level. The Power of the Pattern suggested that an “Eiffel Tower Pattern” could be in the making(see post here) Has Gold fallen like a rock since last August? NOPE!!! Would it have paid to harvest long Gold positions or hedge them last August when it was hitting channel resistance and its Fib extension level? For Sure!!!
Last week “Commodity Deflation” was discussed (see post here) ….It can pay to be “Picky” when it comes to the signals sent by Basic Materials(see post here) Jim Cramer mentioned yesterday that a decline in Crude prices would be good for the economy. I suspect that he is correct. Does a decline in Crude prices mean good things for the stock market? The past few years, this has not been true (see “be careful what you wish for)
Copper is yet to break down, as it is nearing support…A break of support in ole Dr Copper would put more pressure on Commodities…Keep a Copper chart close at hand!