Weekly Report: Geometry Of Global Financial Markets
- Crude Oil is primed to resume its daily uptrend and longer-term eyes the $75-$87 range. For that it needs to close and stay above geometric resistance (now turned support) of $54.90.
- Russell 2000 Index is potentially finished consolidating, but requires a weekly close above 1,499.06.
- TASI (Saudi Stock Exchange) displays bullish potential during the current consolidation, but must continue to stay above the recent low of 6,772.12 to have a chance of an eventual bullish trigger.
- Walmart reaches parabolic topping area and time, with harmonic support at both $95.90 and $90.20.
- General Electric (update) has broken below aligned support angles and now heads toward the $10 support area, unless it is stopped first by $14.40 support.
- Bitcoin (update) reached price target only two trading days off initial target, after bottoming right on harmonic circular support. Both higher and lower price targets are presented geometrically.
CRUDE OIL (CL SPOT)
- Important November geometric resistance of $54.90 was broken to the upside on November 3 and then tested as support and held on November 14-16. This is bullish behavior.
- If crude finishes the month above $54.90, the bull trend should continue.
- On the other hand, if price breaks below $54.90 a deeper retracement is much more likely.
- Upper resistance levels are from $69 to $85, as given by wave interference patterns shown in the charts below.
On November 3, crude oil broke above resistance of $55.24 from the high of the first week of this year. Perhaps even more important is the simultaneous breakout of resistance at the confluence of two wave interference patterns:
Wave interference patterns are generated from the intersection of two (or more) sets of concentric circles interacting (emanating, usually from an important reversals), akin to dropping two stones into a pond.
The line patterns shown here (solid lines) are made by connecting such intersections using specific relationships: 1x1 (black) and 4x1 (brown). Although line patterns can start anywhere, the examples shown are selected due to their alignment with price.
While crude is still recovering from the major low of Jan./Feb. 2016, formed at the 4x1 pattern (brown), this month it managed to cross above resistance at $54.90, from the critical mid-line (black dashed angle). Note previous resistance from this mid-line at point B, causing the final leg of the downtrend to support. However, the month is only half-finished. Time will tell if the month closes above $54.90.
Note the double-top at the black resistance pattern of 1x1, whose continuation downward shows potential resistance around $75-$87, at the time the current market may reach it. But, the $75 price level of the 1/2 point (dashed black horizontal) stands in the way of a full recovery back up to the resistance curve. Notice its prior effectiveness as support at point A.
The next chart offers wave interference patterns using the preceding major low of December 1998, with all important reversals covered. The next resistance barrier in this geometric environment is $69, derived from an internal fractional curve which identifies the same low of $75 at point A in the previous chart.
In isolation, the black 1x1 patterns perfectly outline the major market action since the all-time high was formed in 2008. The potential for a full recovery back to major resistance (blue arrow) is clarified in simplistic beauty from large reversals at points A through D, with assists from reversals at A1, B1 & B2):
RUSSELL 2000 INDEX
- Starting to give bullish signals that may lead to a continuation higher.
- Next sign of strength provided on rally above 1,495.04.
- Subsequently, strength confirmed on a weekly close above 1,499.06.
A dual vector concentric circle analysis of the Russell 2000 shows that it has been declining and contained between two concentric circles for the past couple of months (black solid circle and dotted brown 7/8 circle).
Last Friday the index broke out above the higher main circle (black), closed above it on a weekly basis, and thereby provided a new bullish signal. That move followed a bounce off the lower circle (test of support) and geometric support two days prior, on November 15. It was immediately followed by a very strong up day right up to circular resistance, the strongest one-day advance since the short-term decline began from H.
The current market seems rather defiant of circular resistance:
Each of the preceding four times that IUX broke above and closed above circular resistance, a decline followed the following trading day, leading to a continuation of the overall downtrend (pullback). This activity suggests that Monday’s daily close will tell all, as the index will either again turn back down and continue the downtrend, or sustain the bullish break out, which points to higher prices ahead.
Note that the correction dropped and came to a sudden halt at the black 45o angle (2nd blue arrow). This perfect 1x1 relationship of price and time is a strong source of support, and is encouraging for the fledgling bullish recovery.
To better assess the strength of this breakout, and look for confirmation of the correction ending, it is measured against the average closing prices since the high (cumulative average- red dotted line):
These values were determined by using a moving average corresponding to the periods from the high (red) and the low (blue). Moving averages were then removed for visual clarity.
According to this analysis, the market must first break above Monday’s resistance of 1,495.04, and even more importantly, subsequently close up and over the weekly average value of 1,499.06 on a weekly closing basis, thereby signaling the end of the correction.
TADAWUL ALL SHARE INDEX
- TASI remains within a critical support zone.
- Geometry of price/time chart suggests eventual upside resolution, however risk of downside remains.
The TASI has been consolidating in a narrow range since October 11, between 7,031.10 and 6,770.37. Does this low volatility period display a bullish or bearish inclination? According to the cumulative average on the next daily chart, the bulls have a slight advantage:
The Saudi market is mostly closing above this cumulative average from the major low. However, there is still some disconcerting price activity below this average which casts some doubt on whether a decisive sign of strengthening may happen soon. Sunday’s close (Nov. 19) was the lowest daily closing price since before mid-June and therefore the lowest daily close of the current six-week consolidation phase.
Luckily, the recent low of 6,772.12 on November 7 tells another story, having reversed on a cumulative average of a preceding high that helps define the larger trading range:
The recent low is aligning with the average closing prices since the high of April 25, 2016. This phenomenon is simply profound, as the market bounced 79 weeks later at the average of all closing prices that have occurred since that high, which is 6,792.25 (This value can be derived quickly, from the value of a 79-simple moving average on that week, offset by +1).
In addition, the consolidation once above the high’s closing price of 6,805.84, refused to close below this important level.
A wider viewpoint, as seen on this next weekly geometric chart shows that the current consolidation zone is at a perfect fractional intersection of 2/7 (of 90o right angle of both price and time) giving it some additional potential power. The entire long-term downtrend from the major high of 11,159.50 on the week of September 7, 2014 is set to 45o, and the two angles are then drawn from the vector points (H-L):
Although this might seem coincidental, the fact is that the two preceding lows at points A & B also displayed this kind of matching harmonic relationship, albeit in 9ths and 8ths. A strong move upward from support would make it 3 for 3.
Given this geometric analysis, a breakout of the current consolidation range, either up or down, will likely lead to a sustained continuation in that direction. The geometry suggests an eventual upside breakout, while a move down would be a failure of a significant support zone.
Wal-Mart
- Barely misses key price resistance, but does hit resistance in time
- Increased chance of deeper pullback now and eventual filling of recent gap
Walmart took a giant leap higher towards its next major resistance level of $101.34 on Thursday last week following a positive earnings report. Then on Friday the stock topped at $100.13, just missing parabolic resistance of $101.34 and right on the third time point of November 17 (point E). However, there is more to GE’s extended uptrend than meets the eye:
According to this parabolic structure from the major low of $56.30 (L), WMT is responding as expected by reversing at the resistance curve 2, and right on the third timing point of Friday, November 17 (506.7 trading days from the low, or 32 x 56.30 (low price). Therefore, a drop to a lower curve is now expected.
WMT is already halfway down to initial support at the nearby 3/4 curve, which is from $95.75 to $95.80. If that price area does not hold, then the ½ level is the next target for support, at the $90.00 to $90.20 price range. That lower range is more in keeping with the general price movement that has occurred throughout the entire structure.
General Electric
- Broke through support and falling towards long-term $10.00 price support.
- Interim support zone could see tradable bounce from around $14.50 - $15.00.
Here is a quick update on the GE analysis published in the Weekly Report, Vol. 1, from November 5:
Support of the aligned angles discussed did not hold and the stock is now in freefall heading down towards the supplied target support zone of $9.50 - $10.00. Naturally, since this drop is still intra-month, a November monthly close back above support, around $19.57 (December’s value is $19.66), would indicate higher prices are in store in the short-term.
A half line has been added to the original chart analysis (blue dashed) showing the next interim support zone of note in the $14.50 - $15.00 price range.
BITCOIN (XBT/USD) - UPDATE
- Both higher and lower price targets are presented geometrically.
This next chart on Bitcoin is an update on the November 21 target of $8,020 published in our Weekly Report, Vol. 1, from November 5:
On Thursday, November 16, Bitcoin topped at $8,029.80, breaking the $8,020 target level by only $9.80 (specific price may vary slightly between data providers), several trading days earlier than the timing point of this Tuesday, November 21 (another blow-off back up to the target is still possible):
Note that the market bottomed at the harmonic 2/3 concentric circle (point B). Compare this to its predecessor at point A, which was at the preceding 2/3 circle (point A).
If the market heeds current resistance of $8,020, then a drop back down to the nearest circle (3) is expected. A typical quick drop/pullback would bring the market for Bitcoin to the $6,850 area.
If the market breaks above resistance, then the next resistance area is at $8,898.29 (top of circle 3) then $9,050 (next circle). Both circle and level intersect at $8,898.29 on December 1, perfect for a potential top or bottom.
I/we have no positions in any securities mentioned, and no plans to initiate any positions within the next 72 hours.