Wolfe Wave Pattern with Higher Oil, Higher U.S. Interest Rates
Much of the first half gains in U.S. markets were contributed to historical low interest rates. Now that the Federal Reserve is stating they are trimming back QE 3, yields have reversed quickly. A matter of fact there has only been a few times over the past 20 years we have seen a faster percent increase in U.S. Treasuries. With higher yields we squash what we have gained in housing sector and with the homebuilders sector. Two sectors that were obviously hit the hardest in 2008-09. We also have higher oil prices with the current turmoil in the Middle East. Although higher oil prices could quickly turnover with U.S. markets heading lower. Higher oil prices also temper positive consumer sentiment and retail sales.
Technically we are looking at a Wolfe Wave Pattern. Identified correctly, Wolfe waves can be used to accurately predict the scope (equilibrium price) of the underlying security. To identify Wolfe waves, they must have the following characteristics:
Waves 3-4 must stay within the channel created by 1-2
Wave 1-2 equals waves 3-4 (shows symmetry)
Wave 4 is within the channel created by waves 1-2
There is regular time between all waves
Wave 5 exceeds trendline created by waves 1 and 3 and is the entry point
The estimated price is a price along the trendline created by waves 1 and 4 (point 6).
Fibonacci measurements also help you plot forecasted hits on discovered ascending/descending trendlines. A 2-3 Fibonacci extension to 1.618/1.414 is usually the spot for the 5th wave. Also a measure from 2-1 with a 2.414 fib can also measure a 5th wave target.
Federal Reserve FOMC Calendar
September 17-18*
* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
federalreserve.gov/monetarypolicy/fomccalendars.htm
Federal Reserve Chairman Ben Bernanke will miss the annual Jackson Hole meeting this August.
Technically we are looking at a Wolfe Wave Pattern. Identified correctly, Wolfe waves can be used to accurately predict the scope (equilibrium price) of the underlying security. To identify Wolfe waves, they must have the following characteristics:
Waves 3-4 must stay within the channel created by 1-2
Wave 1-2 equals waves 3-4 (shows symmetry)
Wave 4 is within the channel created by waves 1-2
There is regular time between all waves
Wave 5 exceeds trendline created by waves 1 and 3 and is the entry point
The estimated price is a price along the trendline created by waves 1 and 4 (point 6).
Fibonacci measurements also help you plot forecasted hits on discovered ascending/descending trendlines. A 2-3 Fibonacci extension to 1.618/1.414 is usually the spot for the 5th wave. Also a measure from 2-1 with a 2.414 fib can also measure a 5th wave target.
Federal Reserve FOMC Calendar
September 17-18*
* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.
federalreserve.gov/monetarypolicy/fomccalendars.htm
Federal Reserve Chairman Ben Bernanke will miss the annual Jackson Hole meeting this August.
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