Commodities: "Pictures Have Meaning"

A simple price chart pattern signaled a major top in 2011... and today, Jeffrey Kennedy shows us a smaller version of it

by Nico Isaac
Updated: September 08, 2017

What do you see when you look at a market's price chart?

• Random squiggly lines
• Bursts of volatility
• You have no stinking idea

Well, when our senior commodities analyst Jeffrey Kennedy looks at a price chart, he doesn't go a step further unless a clear picture emerges, one that's unmistakable in its message. That picture can be any number of Elliott wave patterns and technical signatures.

In his September 5 Trader's Classroom video "Pictures Have Meaning," Jeffrey walks his subscribers through the process of identifying specific Elliott wave "portraits" on a market's price chart. One of which is the five-wave pattern known as an "impulse," -- as seen, for example, on the daily price chart of Expedia, Inc. (NASDAQ: EXPE).

Play the following clip from the Traders Classroom video to hear Jeffrey's analysis first-hand:

Again, in Jeffrey's own word:

"What's the meaning behind the picture of a five-wave move?

"Well, if it's complete, the meaning is that you're going to see a correction, you're going to see a retracement that should push prices back into the span of travel of the prior fourth wave, most often ending near its terminus."

Jeffrey's video provides an invaluable opportunity for traders and investors to navigate a five-wave move in an actual market as it unfolds in real time.

As for seeing what happens after a five-wave move ends -- well, back in 2011, this simple pattern signaled one of the most dramatic trend changes in the history of commodities. And, Jeffrey Kennedy was there from the very beginning.

At the time, commodities were enjoying a powerful rebound with the bellwether CRB Index orbiting a three-year high. Thanks to soaring energy costs, growing economic uncertainty, mounting inflation fears and so forth, mainstream financial experts saw no end in sight to the commodities comeback. Here, these 2010-2011 news items capture the raw optimism for raw materials:

• "I'm a big believer that the commodity bull market is here to stay. The world has changed and if you don't acknowledge that you've been asleep. The crash of 2008 in commodities was a mere blip... The rally in prices shows no signs of slowing." (Financial Post)
• "Over the next few months certainly -- even up to a year -- it's hard to see how prices will come down meaningfully." (CNN Money)
• "All of the elements that contributed to the long bull run in commodities from October 2001 to August 2008 are in place." (The Telegraph)

It goes without saying, commodity bears at the time were a lonely bunch. Our own Jeffrey Kennedy would know, as he was one. He had a really great reason to be; namely, a decade-long, five-wave bullish move coming to an end on the price chart of the Continuous Commodity Index (CCI).

(Editor's note: The CCI is a broad group of commodity futures used as a benchmark for measuring the performance of commodities as an investment. The CCI is equally weighted among 17 commodities, with each representing 5.88% of the index.)

In his March 2011 Monthly Commodity Junctures, Jeffrey prepped the stage for one more move up and wrote;

"The CCI shows the need for additional advance for the pattern to complete itself."

Then, once price action confirmed Jeffrey's bearish wave count, he revisited the CCI in the September 2011 Monthly Commodity Junctures. There, he presented a special, expanded "Featured Market" segment on the CCI that argued in favor of a major, price halving turn down: 

"A BEAR MARKET IN COMMODITIES: THE TRAIN IS COMING

"Soul singer and writer Curtis Mayfield wrote a song in 1965 that just might apply here:

'People get ready, there's a train a-comin'

You don't need no baggage, you just get on board...'

"The monthly price chart of the CCI clearly displays another five-wave advance (chart 2). This impulse wave, which began in 1999, ended this year. If we again apply the same Elliott wave guideline, we can look for selling in the CCI to travel into the range of 615.04--322.53, the span of travel of the previous fourth wave of one lesser degree. But remember that the likely retracement is commonly near the terminus of the previous fourth wave. This argues that a decline in the CCI should actually target the December 2008 low of 322.53, the terminus of the previous fourth wave."

The next chart captures the dramatic 60%-plus deep,  bear market sell-off that followed, pushing prices directly into the into "the range of 615.04--322.53, the span of travel of the previous fourth wave of one lesser degree" -- as Jeffrey identified six years earlier!

When it comes to seeing the "picture" of a clear, Elliott wave pattern on the price charts of financial markets, few experts have a more observant and objective eye than our chief commodities analyst Jeffrey Kennedy. The best part is, you can see everything Jeffrey sees in his very own Commodity Junctures Service, which includes instant access to the September 5 Traders Classroom video lesson "Pictures Have Meaning."

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