Without a doubt, cotton futures have one of the most violent and choppy patterns I have ever dealt with, and it’s been doing that as far back as I have found charts for.
What I see is that cotton prices loved the upswing of the solar cycle, but cotton prices sure didn’t like the downswing of solar cycle 24. The 2011 peak in cotton prices matches the first peak of solar cycle 24 after which its price crashed and still hasn’t recovered, except for small bear market rallies.
The impending end of solar cycle 24 is drawing cotton prices down and we could end up getting another Primary degree zigzag. Our present bearish cotton wave count still needs lots of work, but a new record low should happen.
I have not had to change wave 3 in Cycle degree for any reason, which is a good thing. Since the 2001 bottom cotton produced a great looking inverted zigzag. That’s what diagonal wave structures are all about and cotton shows us one zigzag about 10 years long.
I’m sure that this bear is going to continue for the next 1-2 years, but we want to wake up to cotton before solar cycle 25 starts.
BAL which is an ETF/ETN could be used to track cotton prices and it’s just as violent as the futures charts are, so be warned.
Gold has made some wild moves since its peak on February, 20 at the $1346 price level. I also dropped the degree level down by one degree which might not last too long as I do have the potential for a triangle to play out as well.
Commercials are still net short by a large amount and last week they added to their bearish outlook when they removed longs and added short positions at the same time.
What I’m looking for is a zigzag type of a move which should take us to new bearish lows. If that happens then my mythical triangle may also become more visible, which suggests a new record high can happen.
You can ignore that huge spike to the upside, as it only shows up in a bar style setting but it doesn’t show up when I switch to line type settings. False spikes do happen and since the April peak, several other false spikes were also created, which I didn’t count.
The worst that happens with a spike is that your account provider scopes in a huge amount of stop-loss orders from the bears.
It used to happen to me when I was trading the mini gold contract as the liquidity was extremely low and spikes were pretty normal.
I know that the gold bulls are looking for investors to charge into gold as a safe-haven but those are emotional decisions which never last that long.
Gold has been in a bearish mood since the 2011 peak and unless you know how bullish they were at that peak we can make the wrong decisions thinking a standard 5 wave bull market has happened.
That 2011 peak was a 30-year ± 1 year mania peak as wave 3 in Cycle degree. Not only that but gold also finished a huge Primary degree zigzag at the same time.
All commodities run under an idealized diagonal world that has been active since the Little Ice Age. That all changed during the Roaring 20s as stocks and commodities separated and went their separate paths.
Markets can turn at the beginning, middle, or end of a month most of the time. The USD had a bearish relapse this month but it looks like a corrective zigzag may have completed.
It also means that the USD can soar much higher. The US dollar is in a bull market which started in 2008, but this bull market is also producing a large number of overlapping waves. which work best as diagonal waves.
The USD may not breakout and even give us another leg down but in the bigger picture, this US Dollar is in a bull market even though commercials are heavy net short.
Last week commercial net short positions had a ratio of 40:1, which I consider extreme. Having a bullish wave count with those conditions in place is like two cars playing “Chicken” on the freeway! Last week the commercials added contracts to their long positions and took away 424 contracts from their short positions. This gives a clue that commercials had a bullish outlook last week!
It may be hard to realize but the USD has been in a major bull market since the 2008 bottom which I documented very well. The thing is the younger generation today has no clue how emotional that time period was.
Emotions of a herd only last for so long after which they disappear. It is the numbers and letters of the EWP that capture these emotions. You heard about the “Message in a Bottle”, well the EWP is all about “Emotions in a Bottle”.
Even with the trade war being in full swing, the USD keeps making bullish progress.
On the monthly charts, the golden cross has already happened, while on the weekly charts the moving averages are on the verge of creating another golden cross as well. The moving averages are giving bullish signals so we have to see who wins by the end of this month.
The full moon is coming up this weekend, so that can produce a turning next week as well.