By Christopher Diodato – TradersBase.com
This is from my weekly newsletter, coming out later today. Here’s a sneak peak of part of it I wrote last night!
Pardon me, before I being, for starting this week’s e-mail with something so esoteric. For those unaware, 61.8% is one of the most important proportions in physics, biology, archetecture, and astronomy. I use it in the stock market to predict postential support and resistance levels.
Since the July bottom, the market has been led mainly inflation sensitive sectors, such as energy and materials. Here’s the comparison chart of the S & P 500 (white) and the energy sector ETF, XLE (blue).
In my September 17 newsletter, available here I conducted an Elliott Wave and Gann analysis of oil. Here, I predicted the bottom of oil, via USO near $33.00. Price reversed at an exact low of 32.98, right on the maximum Elliott Wave boundary. The reversal was accompanied by a bullish divergence so clear that even a non-technician would see the bullish implications.
Now, XLE is exhibiting a similar behavior on its own chart, creating short term divergences right at the 61.8% retracement of its previous upswing.
So, energy looks like it might have another run to the upside before this bull market collapses. What could cause this? Well, for those interested in speculating, it might have to do something with Iran. Click here for a link to ZeroHedge explaining about some recent curious military movement and deployment in the Middle East region.