Rising wedge is a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range narrows. Rising wedges slope upwards and have a bearish bias. The loss of upside momentum on each successive high gives the pattern its bearish bias. Dow Jones Industrial Average has been forming a rising wedge (bearish) over the past two years. 2009-2012 uptrend is likely to end with a bearish wedge pattern that is forming very close to historical high level at 14,000 levels. As of this week, 200 day moving average stands at 12,945 levels. Index has already breached the lower boundary of the rising wedge and it is now challenging the long-term average. Failure to hold above 12,945 levels will be followed by a sharp correction towards 11,000 levels. Corrections that follow wedge patterns usually retrace all the way back to the beginning of the wedge, in this case 10,500 levels. Conclusion is: this is a clear negative technical outlook for U.S. equities and suggests larger scale corrections.

Lumber price hits strong resistance at 327 levels and is likely to pull back. Horizontal support/resistance levels provide valuable information on the supply and demand relationship. Lumber is an important commodity for the housing market. Over the past three years prices have been consolidating in a wide range between 150 and 330 levels. Higher lows on the price chart shows increasing demand over the past three years but also failure to record a new high since 2010 signals there is enough supply around 327 levels. It is now the 3rd time Lumber is testing the strong resistance are. Pull back is likely and this could have implications on the housing market. Breakout above 327 levels will be extremely bullish for Lumber. This is an important long-term chart.

Soybeans are close to a strong directional move. Since the dry summer conditions ended prices have reversed sharply and pulled back to their 200 day moving average. Soybeans found resistance between 1,664-1,800 area in August and formed a double top chart pattern which was broken down at 1,600 level in September. Prices are now consolidating above the long-term support at 1,517 levels. Failure to hold above this level could result in a larger scale correction towards 1,300 levels.

Daily chart focuses on the last one year’s uptrend and shows the last two month’s consolidation between 1,574 and 1,517. Low volatility suggests a breakout is imminent and should be followed by a strong directional movement. Breakout above the short-term resistance at 1,574 will push prices towards 1,650 levels. We should watch Soybeans closely in the following weeks.

Fool me once, shame on you. Fool me twice, shame on me… Jobless claims increased by 46,000 to 388,000 in the week ended Oct. 13 from a revised 342,000 the prior period that was the lowest since February 2008. This was recorded as a sharp reversal on our charts and with 388K, initial jobless claims is now above the 52-week average, an important threshold for the 3 year-long downtrend. In the following weeks 52 week moving average will become support at 376K.