market folly

Making the round through some of my favorite blogs and I found some interesting posts that I would like to flag to everyone's attention. Firstly, concerning Aluminum prices and Alcoa (AA). Steve Puri's blog located here has some great charts showing an excellent bull flag forming in Aluminum. And, obviously through higher prices, companies like Alcoa (AA) benefit. The first chart shows producer Alcoa, while the second one shows aluminum. I don't usually rely too much on elliott waves and fibonacci's in terms of technical analysis/chartology. But, if you're into that, Steve's got it outlined on each of those charts. I'm more concerned with the general trend. Aluminum has run up a lot, now it's consolidating in a bull flag and I expect it to break out to new highs here soon, thus benefitting Alcoa (AA). You can check out the chart on AA to figure out the best risk/reward play for your investing/trading style. With the market trading lower again, we could see a rush to "safety" again (in commodities).

Next, I found this great chart over on Kevin's Market blog located here. He points out that the Euro has become increasingly bullish and with the ECB hinting that they may actually raise rates to combat inflation, it gives the currency all the more reason to bounce. The main thing worth highlighting is the bottom part of the chart which depicts net long positions of small, large, and commercial traders. Kevin's noticed that commercial traders (red line) have taken their largest net long position in the Euro in some time. I find this interesting because the exact same thing happened in natural gas long before its initial breakout. The commercial traders amassed a large net long position and natural gas exploded to new highs. The same formation is developing in the Euro, so I wanted to flag it to everyone. Kevin's been right on by tracking the commercial traders in this aspect.