The Dutch tulip bubble still serves as a prototype of extreme collective irrational market behaviors and readers might recognize my interest in it from “Eight Fat Swine” - the title of my Tumblr.
HG (Copper) Multiple Timeframe Analysis
**Hint** Buy the dip
Taking a look at a copper chart, we see a weekly in a protracted downtrend (could be sideways depending on how you look). For the purposes of this post, we will say downtrend as the ichimoku cloud is and has been trending bearish. However, many signs of a potential change in trend:
1. Tenkan line has crossed over the kijun line.
2. Kumo (cloud) is beginning to shrink.
3. Price has regained the 30 wk MA.
Our daily chart is where we look quite bullish. An obvious Head and Shoulder pattern is developing. Textbook in the sense of a clear, flat neckline. You can also see that the left shoulder developed on the heaviest volume. The head, although creating a lower price, did so on lower volume. Finally an increase in buying volume to finish forming the head. Almost all of our ichimoku indicators are bullish with the exception of the senkou which still remains below prior price. The 50dma has been acting as support.
Our 4H chart shows a triangle that others are seeing. Take a look at the RSI. Rarely has dropped below the 20 level on this consolidation. I would consider it a sign of strength. We’ve pulled back to the bottom of our triangle.
Guessing the direction of the break is exactly that, a guess. With the evidence I see, it’s probably a better day to buy the dip then hope for a downside break of the shorter term pattern.
SPX Comp (85/86 vs. today)
Was concerned about the current divergences in the RSI and MACD and looked through some charts. Almost all of the time, a weekly RSI divergence precedes an extremely sharp and deep correction.
However, found a case where the current market appears to look quite similar. The time period is from the end of 1985 through 1986. We appear to be tracking about a month behind but things look eerily similar. In 1986, we did experience the sharp correction, though not deep. And as you all know, the market recovered quickly and went near parabolic into 1987 before the crash.
I’m not an analogue guy just found this interesting and pretty damn close.