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The Future Potential In Grains As Per The U.S. Dollar
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By Nico Isaac
Thu, 18 Mar 2010 13:45:00 ET |
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While Elliott wave analysis does not embrace the view that outside factors trigger lasting trend changes in financial markets -- it does acknowledge the fact that markets do not exist in a vacuum. At times, correlations, however temporary, do exist between disparate markets -- for example, the recent inverse correlation between the U.S. dollar and commodities. Dollar up, commodities down, and vice versa.
Make no mistake, though: You will never find EWI's analysts acting on this inverse relationship alone, because we know from decades of experience that the best approach is to analyze wave structure of each market separately. So, the dollar/commodities connection will always be in support of the Elliott wave structure, not in lead of it. When the two pictures align, the message can be more compelling -- a fact made clear by EWI's chief commodity analyst and long-time Futures Junctures Service editor Jeffrey Kennedy.
To wit: In the June 2009 Monthly Futures Junctures, Jeffrey used the dollar's wave structure to reinforce his long-term outlook for grains. In a four-page "Feature" segment, Jeffrey revealed that the "Party" was over for the sector via these timely insights:
- Soybeans: "Odds are that the high of the year is in place and that it will introduce a selloff."
- Corn: "The corrective advance that began in December 2008 is complete. This means that the stage is set for renewed selling."
- Wheat: "We can now look for prices to more than completely retrace the December 2008 advance."
- The US Dollar: "Although wave patterns alone in grains offers a compelling case for further decline into the end of 2009, the outlook for the US dollar Index supplies another piece of evidence that they are turning down. It is important to note that the inverse relationship between the dollar and commodities holds mainly for medium-to-long-term trends. This being the case, it is possible that for weeks at a time, the dollar and commodity prices can rise and fall in unison."
And -- from their respective June 2009 peaks, ALL three grain markets plunged in a synchronized selloff to multi-month and multi-year lows. The dollar itself fell in unison with commodities until finding a lasting bottom in December 2009. From there, the currency has risen while corn, soybeans, and wheat have tumbled down.
Flash ahead to today: In the March 18, 2010 Daily Futures Junctures, Jeffrey Kennedy returns to the dollar/grains picture. There, he presents three labeled price charts of the US currency and reveals how the dollar's dominant wave pattern fortifies the overall case for grains' next big move.