Intra-Day Update: Correlations

UPDATE 1:45pm EST: Well, so far zero has spot on, although we haven’t really dropped that much. ‘Tis difficult tape to say the least. I now see some blue in the PZ and MZ – might be good to take profits here. Again, it’s your trade and you need to learn how to link it with those indicators. They can only tell you what the market is doing (and sometimes what it’s about to do).

Anyway, while we are being bored to death let’s talk about my favorite precious metal for a change:

Remember how I was talking about correlations the other day – it seems that Gold is now moving with the market, which is quite a change from about six months ago when we enjoyed an inverse correlation.

We have seen the same flip happen in crude, and all of those commodities are of course linked to the value of the Dollar, which has been rallying.

Or has it? The USD/JPY has been bleeding in the last few weeks. Also, we are getting close to completing the current rally in the Dollar index and I expect it to drop like a rock starting early spring 2009.

So, what do you think will happen to Gold and Crude prices once the Dollar starts tanking? I’m more confident about Gold enjoying a rally – not sure yet about Crude. Equities – well, it depends on whether the market thinks that we are in a deflation or a recession. The former would mean equities will tank as well, and the latter would give equities a rise.

Although all this is interesting I never base my trades on that. Take Gold for instance – everyone was looking at Gold from a fundamental prospective six months ago – and got wiped out in the process. I kept saying that Gold would drop when it reached 960 and got a lot of heat for it. Well, look where we are now. That’s why I stick with my long term wave count. The rules might not help you on a daily basis, but when it comes to long term trends EWT is unbeatable and has saved my butt more than once.

UPDATE 1:57pm EST: I wanted to share this chart with you guys as it should affect your trading decisions right now.

That’s 20 days worth of 1-hour zero signals. It’s pretty obvious what’s going on here – the market basically chops hamburger meat for the last three days. What we all should be waiting for is some real confidence in direction. Remember – you cannot force the market – let it tell you what it’ll do. Best thing a trader can do is to realize when he/she is in a non-win situation and just wait things out. The trend will continue – one way or the other. Get the point?