Followers of Tech Charts blog will remember my earlier analysis on Soy Meal which was posted in March. Soy Meal had one of the best technical chart patterns; symmetrical triangle. It was a long-term chart pattern which made it even more significant.

http://techcharts.wordpress.com/2012/03/05/soy-meal-3/

Soy Meal broke out of its long-term consolidation at 370 levels in March and has been moving higher since then. It has been a powerful breakout followed by a pullback in June. Recent rally is being supported by the weather news in grains market. Whatever the reason is it has been a perfect technical action.

This is how a long-term symmetrical triangle resolves and this is the type of technical action we should expect after such a breakout.

Now let’s look at another long-term symmetrical triangle on GBP/USD. Please not that for ease of display I  have inverted the price scale. So a breakout on the upside will result in weak GBP and strong USD. GBP/USD not only formed a large-scale symmetrical triangle it also formed a minor horizontal consolidation range between 1.52 and 1.62. GBP/USD should be on our watch list. I expect a strong move in the following months which should be no less than the magnitude we have seen on Soy Meal breakout and rally. A breakout above (below) 1.52 levels can easily target 1.35 levels. This would be a massive devaluation for the pound and strength for the dollar.

Another update is on the long and medium term Coffee charts. One month from the last update Coffee has found support at the lower boundary of the long-term trend channel and rebounded sharply.

http://techcharts.wordpress.com/2012/06/01/coffee-3/

Before we identify the direction of the next medium/long-term trend, Coffee is likely to consolidate between 200 levels (200 day moving average) and 160 levels in the next few weeks. Though, it is important to note that price found support at 150 levels and this confirmed the validity of the upward trend line (which should act as support going forward).

Since my last update on Natural Gas price moved higher and reached the important resistance area between 2.75 and 2.80. Earlier analysis discussed the possibility of a head & shoulder bottom reversal.

http://techcharts.wordpress.com/2012/06/18/natural-gas-3/

Natural gas is now closer to a decisive price action. A breakout above 2.75-2.80 will confirm the head and shoulder bottom and target 4.0 levels. It is important to note that 3 different technical resistances are overlapping at this resistance area. Year-long downward trend line, 200 day moving average and the neckline of the inverted head & shoulder pattern. A breakout should be significant. Failure to break above 2.75-2.80 area will pull the price back to 2.5 levels and result in more sideways consolidation below 2.75.

 

Housing starts in U.S. fell 4.8% in May. Total starts dropped 4.8 percent to a 708,000 annual pace in May from a revised 744,000 rate in the prior month that was the highest since October 2008, today’s report showed. Building permits increased 7.9 percent to a 780,000 annual rate, reflecting gains in single-family and multifamily homes.

How strong are these numbers and what has it been like historically? I’m posting two historical charts on both housing starts and building permits.

Since 1960s housing starts have been cyclical between 2,270,000 and 850,000 units. Until the latest collapse (2006-2009) there has been 4 consecutive troughs and peaks. 1966,1975, 1982 and 1991 were depressed housing market years with housing starts reaching 850K level and 1972,1978, 1984 and 2006 were strong housing market years reaching 2,270,000 level. What is different in the latest housing collapse (2006-now)? First, the market overshoot the 850K number, second it has taken longer to rebound when compared with the previous V-shaped reversals/recoveries.

It is true that building permits are rising and this is definitely positive. However, we should see the housing starts back above 850K threshold to be more optimistic about the U.S. housing market.

 

Spain meets Croatia tonight for Euro 2012 tournament. Greece had a great victory against Russia. Both teams are probably qualifying for quarter finals. While the news for Spain and Greece is exciting on the Euro cup side, it is not as rosy on the economics side. Yesterday Greece had elections. Results: positive. Market reaction: short-lived optimism. Markets are now focusing on Spanish 10 year govt. yields which is now exceeding 7%. 7 percent was the threshold that forced Greece, Ireland and Portugal to call for sovereign rescues for the first time since the euro’s creation. Likewise this level is extremely critical for Spain.

Uptrend that started in the beginning of 2006 is now accelerating on the upside. Spanish yields bottomed at 3% in the beginning of 2006 and reached 7% over the past 6 years, levels that was not seen since 1997. Charts are telling us that the uptrend is gaining strength. Intermediate term support area is between 5 and 6. Expect yields to move higher and challenge Spain and euro zone further.