You don't have to squint to see them. Watch commodity market charts long enough and they'll appear soon enough: those patterns on a chart when prices first swing wide up and down, then less so, then the swings narrow even more…
Then, for a time, it seems the market is stuck going sideways, until – boom! – Prices launch into a wild spike that takes it far, far, and away.
Triangles. That's what Elliotticians call those contracting swings in the charts. In fact, one of the triangle patterns in Elliott wave analysis is called just that: a "contracting triangle." It's usually a sideways move comprised of five overlapping waves, labeled A-B-C-D-E.
A "regular" contracting triangle unfolds entirely within the area of the preceding price action. While a "running" variety will see wave B make a new extreme beyond the origin of wave A.
Here's the important thing to remember: traders who remain patient with the contracting triangle during its frustrating and drawn-out crawl are often generously rewarded. That's because contracting triangles always unfold in a position prior to the final actionary wave in the pattern of one larger degree -- namely as wave four in an impulse, or as wave B in an A-B-C correction. And when one ends, the resolution is usually sharp and swift.
First, take a look at the idealized diagram of a contracting triangle below:
Now, let's take a look at a contracting triangle in an actual commodity market: namely, Lean Hogs. The following close-up comes directly from the September 9 Daily Futures Junctures. There, EWI's chief commodity analyst and long-term Futures Junctures Service Editor Jeffrey Kennedy used this chart to illustrate the completion of a multi-month contracting triangle underway in hogs.
So, if Jeffery's labeling is correct, lean hogs are likely headed for a sharp and dramatic move in one direction.