FSO Weekly Charts from Stephan Bogner Mar. 16, 2004

Stephan Bogner

"WEEKLY CHART THOUGHTS"
March 16, 2004

The following chart of the Commodity Index by Morgan Stanley shows how prices move along dominant trendlines. Major price rises and declines are constantly being accomplished at the end of triangular price formations. Explosive thrusts to the up and downside are acting at the same time as a first move within a next triangle. Without having to draw single triangular annotations, one can see clearly that the CRX-Index is all about triangles since the end of 1996.

Welcome to the Thrust

For more than one year copper is being thrusting out of a massive triangular price formation that began at the end of 1996. At $120, copper has made it above a resistance point that was first marked in 1997 and was acting as the first high point of this 8-year long triangle. This price level has now being converted into a strong support zone with the help of the big (green) triangle. Whether copper will be able to close above next resistance at $140 might be decided by another triangle which probably will use $110-$120 as lowest support leg. Since breaking to the upside, copper broke out of its triangular price pattern relative to gold. This indicates, that copper has been rising faster than gold.

About six months later, aluminum managed to break out of its year long triangle and has been thrusting ever since. Analogous to copper, aluminum was being stopped by a similar resistance zone at $85 and is now trying to overcome this with another triangle. Support lies at $77.

Asnoted before, the U.S. Dollar Index was caught in atriangle, which lasted 9 months. At the end of January2003, the USD began breaking the upside leg and rose to 87.5index points before pulling back to the triangles` apex at85 points in the middle of February. Since the pullbackwas completed, the USD is now in the process of trying tothrust to the upside. In my humble opinion this thrustwill one day being classified as an exemplaryfake-breakout. Even though the USD is breaking to theupside out of a year-long triangle, I would not take adime betting that this thrust is "real," thusmaking me believe this being a classical "fake".

The30-year U.S. Treasury Bonds are priced above 110� a resistance zone that was being trespassed with thehelp of a massive triangle, which was building up for morethan 13 years. The implications of this massive trianglethrusting in a certain direction will have profound andlong-term effects for all other markets.

The30-year Treasury Bonds have been yielding within anarrowing, downside pointing triangle for about 10 years.After having touched the very end of the triangle, theyield from these Bonds is breaking fast to the downsidenow. It will be interesting to watch whether the (red)support zones will be breached fast or rather slowly.However this will be done, if the last marked support linewill be breached to the downside, there will be only onedirection for these papers: down south.

About to Thrust

TheHUI Index has been engulfed in a dominanttriangular chart pattern since October 2003. In totalthere have been 4 amplitudes within the triangle so far.If one bets that gold and consequently the HUI will startmoving to the upside soon, then recent prices of the HUIstocks can be classified as "Strong Buy" at themoment. At the bottom of above chart one can see therelative performance of HUI stocks when compared to theones from the XAU Index. Clearly, the HUI Index hasbeen outperforming the XAU Index consecutively, but takinga closer look at the very manner that the HUI has beenracing against the XAU, one might see a triangularpattern. Right now, we are standing at the very end ofthis formation, at the apex of this (blue) triangle. Ifgold, the HUI and the XAU will be rising soon, then this(blue) triangle will explode to the upside, indicatingthat the HUI Index is not only outperforming physicalgold, but aslo his (hedged) peers from the XAU camp.

Similartriangular situation for the XAU Index. When the XAU isbeing compared with gold price movements, one can see atthe very bottom of above chart that the XAU isoutperforming gold rather weakly.

LightCrude Oil has been moving within a triangle since theend of 1996. The apex is being positioned at the end of2005. Although this seems to be quite far away until thistriangle will be ready to thrust, let me state again, thatnot every triangle is using pullbacks to touch its apex.Yet this triangle can break out any time above the upperleg, cut across $40, and start moving fast for about oneyear thinking we are in a thrust. After that oil might becorrecting sharply back to $40, exactly to its apex,showing that this pullback is necessary before thrusting"for good." A question that I ask myself is notwhether oil might break to the downside or when it willbreak to the upside, but more interestingly, in case of athrusting oil and gold price, which will be rising faster?At the bottom of the chart you can find the oil pricecompared to gold. Astonishingly, they are caught inanother triangle to each other. If this (yellow) trianglebreaks to the upside, this indicates (among otherpossibilities) that oil is rising faster than gold. Ifthis triangle breaks to the downside, gold is risingfaster than oil (note that I am extremely bullish on bothmarkets).

TheOil Index (XOI) has been moving within a trianglesince the end of 1996. However, since the middle of 2002,the XOI was breaking beneath the lower leg and neededabout one and a half years to pullback exactly to itsapex. This looks like a dramatic fake breakout that madeit back to the end of the triangle and is now rising fastto the upside. When comparing the XOI to gold, one cannotice that the XOI is quite cheap and ready to risefaster again.

Similarprice pattern applies for the OIX Oil Index.

Feelfree to send me your comments and how you feel about allthe triangles.

HAPPYTRADING, GO GOLD & GATA!

Chart courtesy: www.stockcharts.com