6.4  Commodities
 Figure 6-9 displays five and a half years of price history for soybeans. The explosive rise in 1972-73 emerged from a long base, as did the explosion in coffee prices. The target area is met here as well, in that the length of the rise to the peak of wave 3, multiplied by 1.618, gives almost exactly the distance from the end of wave 3 to the peak of wave 5. In the ensuing A-B-C bear market, a perfect Elliott zigzag unfolds, bottoming in January 1976. Wave B of this correction is just shy of .618 times the length of wave A. A new bull market takes place in 1976-77, although of subnormal extent since the peak of wave 5 falls just short of the expected minimum target of \$10.90. In this case, the gain to the peak of wave 3 (\$3.20) times 1.618 gives \$5.20, which when added to the low within wave 4 at \$5.70 gives the \$10.90 target. In each of these bull markets, the initial measuring unit is the same, the length of the advance from its beginning to the peak of wave three. That distance is then .618 times the length of wave 5, measured from the peak of wave 3, the low of wave 4, or in between. In other words, in each case, some point within wave 4 divides the entire rise into the Golden Section, as described in Lesson 21. Figure 6-9 Figure 6-10 is a weekly high-low chart of Chicago wheat futures. During the four years after the peak at \$6.45, prices trace out an Elliott A-B-C bear market with excellent internal interrelationships. Wave B is a contracting triangle. The five touch points conform perfectly to the boundaries of the trendlines. Though in an unusual manner, the triangle's subwaves develop as a reflection of the Golden Spiral, with each leg related to another by the Fibonacci ratio (c = .618b; d = .618a; e = .618d). A typical "false breakout" occurs near the end of the progression, although this time it is accomplished not by wave e, but by wave 2 of C. In addition, the wave A decline is approximately 1.618 times the length of wave a of B, and of wave C. Figure 6-10 Thus, we can demonstrate that commodities have properties that reflect the universal order that Elliott discovered. It seems reasonable to expect, though, that the more individual the personality of a commodity, which is to say, the less it is a necessary part of human existence, the less it will reliably reflect an Elliott pattern. One commodity that is unalterably tied to the psyche of mass humanity is gold.

Lesson 6   Back   Next