A Trend Analyzing Tool Reveals If Commodity Strength Will Continue

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A Trend Analyzing Tool Reveals If Commodity Strength Will Continue
Soybeans, Silver, Copper, Corn, Crude Oil, and more

By Nico Isaac
Tue, 22 Dec 2009 13:45:00 ET

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A really smart person once said: True genius is not in the knowing; but rather, in the incessant desire to know more. Case in point: EWI's chief commodity analyst and Futures Junctures Service editor Jeffrey Kennedy. Never content to just sit on his mastery of the Elliott Wave Principle, Jeffrey is constantly working to develop new correlative techniques for achieving his ultimate goal: Identifying turning points in a market before they occur.

After years of separating the duds from the diamonds, Jeffrey lists his final frontrunners in the Traders Toolbox section of Futures Junctures Service. There, among several other links to exclusive education resource material, Jeffrey presents his hugely popular Technical Toolbox Video Series -- the riveting tell-all in which Jeffrey walks and talks viewers through the construction and interpretation of his top FIVE favorite technical indicators.

Today, we are discussing indicator number five, aptly named "Jeffrey Kennedy's Trend Analyzer Tool" (JK TA, for short).

Here's how it works: At the bottom of a commodity market's price chart, Jeffrey places three panels; from top to bottom:

JK Fast: Subtract (20-period exponential moving average) from (5-period exponential moving average) to get a pink line. Then take the 5-period %R (inverse of stochastics) of the pink line, 10-period %R of pink line, and 15-period %R of the pink line and put in a single window.

This measures the most immediate, near-term progression of a market's trend, and smallest degree of the Elliott wave structure.

JK Base Line: Start with 5-period exponential moving average. This is a blue line. Then take 5-period %R, 10-period %R, and 15-period %R of the blue line and place in a single window.

This measures the intermediate progression of a market's trend.

JK Slow: Start with 20-period exponential moving average. This is a green line. Then take 5-period %R, 10-period %R, and 15-period %R of the green line and put in a single window.

This measures the long-term progression of a market's trend. A reading of 100 indicates an uptrend. A reading of 0 indicates a downtrend.

Now, here's how you use the JK TA as a proxy for clarifying the underlying Elliott wave structure: When all three lines in any version are flatlining (blended into one), it signals an impulsive, or motive, structure.

On the other hand, anytime you see the three lines separate, it's a strong signal that the market is yielding a countertrend, or corrective pattern.

Now, let's take a look at the Jeffrey's Trend Analyzer Tool in the real world price action of a key commodity market:

This chart comes directly from the December 21 Daily Futures Junctures "Special Update," where Jeffrey identifies not one, but SEVEN key markets for which the JK TA is flashing a red alert.

Using what you've learned about the Trend Analyzer Tool today's brief lesson, one thing is clear from the close-up above: The lines in all three TA's are separated at the market's recent strength, a classic corrective signature. And, in the Jeffrey's own words:

This "indicates that the recent advance is a countertrend move that is destined to be more than fully retraced in the days and weeks ahead."

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Tags: soybean futures, silver futures, copper futures, crude oil, corn futures

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