Gary Savage or Tim Knight, I sense deep skepticism over the viability of the commodity bull market. This attitude prevails despite the fact that"> Gary Savage or Tim Knight, I sense deep skepticism over the viability of the commodity bull market. This attitude prevails despite the fact that" />

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April 14, 2008

Commodity Correction: Nothing but a Blip

As I read through the comment sections of popular blogs such those publlished by Gary Savage or Tim Knight, I sense deep skepticism over the viability of the commodity bull market. This attitude prevails despite the fact that most of these readers consider themselves to be technicians. Take a look at this 8-year chart of the Reuters CRB Index and tell me if any respectable technician could deny the existence of a bull market.

stock chart

I took the liberty of marking the chart with primary Elliott waves counts. As you can see, we are in the early innings of primary wave 3, and it is wave 3 where bull markets see their largest and most consistent gains. The recent 10% correction is barely a blip on the chart. Compare it to the first 10% correction of wave 1 and tell me if any astute trader should give it the smallest concern. I suspect that after a quick back test of the 380 area, commodities will be off to the races once again, yet those vacuous talking heads on TV will continue in their attempts to label the run a "bubble" or "overblown speculation" or what not.

Indeed, wave 3 is the time when bull markets climb the proverbial wall of worry. Now is the time, ladies and gentelemen, to grab your positions and ride them out. I assure you that as wave 3 progresses, the public will become more and more interested, and it is this gradual change in psychology that will set up... way down the road... the wave 5 blow-off move.

As for positions, I'm waiting for this mini-correction to play out before beefing up on silver, oil, and probably some sugar. However, I do believe the low for the correction has been set, so in order to make a litle extra income while I wait, I've sold near-term OTM puts on silver.

 

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