Crude Oil and the Precious Metals Complex

"The HUI, gold, and silver will experience one more decline lasting approximately 3 to 6 weeks before the correction that started in May 2006 will be over. The types of corrections that are taking place do not require new lows in order to be complete. We are fast approaching the start of the most dynamic part of this precious metals bull market since it started 6 years ago. When this decline appears to be ending I will be issuing a buy signal for the balance of funds in the trading account. The investment account is 100% committed and the trading account is 50% committed. Approximately 6 months have elapsed since we last saw new highs in the precious metals complex. The previous rise in the HUI went from 165 to 401. That was a 243% rise in approximately 12 months. The HUI will be starting a third of a third wave and it should be substantially greater than the previous rise."

It is a little known fact that every Elliott wave of any size terminates at a Delta turning point. For those interested and using the wave theory, this knowledge is invaluable. Because of this fact, an explanation of how the Delta turning points were discovered is called for. The current weekly charts for crude oil, gold, the HUI, and silver are posted below.

What is Delta? The discovery of The Delta Phenomenon as it relates to markets can be best captured by way of a story. This story is about one man, working alone, who was driven to find an answer to a long debated question; "Is there an underlying order to all markets?" Working in Chicago in the fall of 1983 in the commodities industry, Jim Sloman decided it was time to focus on other pursuits. Still, he felt intuitively that there must be some principle, some basis that transcended the innate functioning of all markets. Despite the fact that the traders Jim worked beside unequivocally held to markets being "random" and the "random walk theory", he was unable to embrace the precept that markets were in fact completely random. Jim decided to follow a path of reasoning not unlike the great 20th century scientist Albert Einstein. Einstein once explained that he was able to unleash his amazing creativity by following a relatively simple mental process. First, identify the right question to ask. Second, assume nothing. Third, learn how to harness the hidden power of your subconscious mind to find the answer. It would be through following this same mental prescription that Jim Sloman would soon uncover the Delta time frames. Jim began by asking himself the central question; "Is there order in the markets?" He then practiced a mental process of "unlearning". Jim described this to Mr. Wilder as "opening his mind to all possibilities…making no assumptions, having no preconceived ideas…" When Jim felt that his mind was clear and receptive to new ideas he waited on the answers to come, as a farmer waits patiently on the sun and the rains to grow the crop he had planted. Slowly at first, the puzzle pieces began to connect. The first piece surfaced quite unexpectedly.

Jim awoke early one morning and upon walking into his living room noticed a tidal chart sitting on the glass table. His girlfriend at the time, a runner, referred to this tidal calendar daily to plan the time she would run on the beach at low tide. Jim looked closely at the tidal chart. It abruptly dawned on him that the line graph representing the high and low tides were rising and falling relative to the phases of the moon. Jim was thunderstruck. He was witnessing a natural repeating phenomenon. His mind began to center on a better question…"When did these tidal highs and lows repeat? Upon a little more investigation Jim began to see that the tidal charts did repeat at regular intervals. Jim further learned that each full moon occurred every 29.32 days. The lunar relationship to planet Earth was a basic astronomical relationship that was well documented and understood. Jim now felt he was beginning to understand a part of the answer. Undoubtedly, something this overarching and this fundamental had to exert its force over markets. A short time later Jim intuitively zeroed in on the other large puzzle piece, the sun. Our sun, a yellow dwarf star fixed at the center of our solar system stands as the very basis of time. Earth and the other 8 planets have fixed orbits based upon their relative proximity to the sun. Thus, the sun and moon acted as the primary external influences that governed life on Earth. The dividing of all 4 seasons was dictated by the earth's 365 day elliptical journey around the sun. Also, the moon and its various phases exerted a direct influence over our lives as well. Jim intuitively knew these external forces had to transcend markets and their day to day functioning. After all, the sun and moon transcend all of life, and acted as the very basis of how we measure human time. Still, another large mental bridge had to first be crossed, "How could this symbiotic relationship between the sun, moon, and earth be represented in terms of markets? The answer to this last question, the final puzzle piece was illuminated to Jim a short time later. While studying a daily bar chart of gold, Jim happened upon an idea. What if by using clear transparency paper he could create a scaled color grid, representing full moon dates that could be superimposed over the daily price chart? Thus, the transparency would provide a template or grid representing a repeating natural cycle of time. When Jim placed the newly created transparency "template" over the price chart for gold, it took only a few moments before a new picture began to take shape. For the first time, just as he had seen on the tidal charts, a pattern of repeating price highs and price lows suddenly emerged. Visually, Jim began to see distinct price patterns, repeating patterns of price highs and lows in relative proximity to the repeating colored lines on the transparency grid. Jim labeled these price inflections as numbered "turning points". Further, each market Jim began to "solve for" had its own unique solution, or fixed number of repeating turning points. A market's turning point was like its own fingerprint relative to the colored template, fixed and certain. In a subsequent conversation with Mr.Welles Wilder, Jim described the template as being like a hologram. "Welles, a hologram is made by projecting laser light through a holographic negative, much like a photographic negative. However, if one looks through the holographic negative is normal lighting, it looks like mass confusion. Yet, if the right laser were to shine through the negative, if there was order there, it would be immediately obvious…Delta is not a market follower, it is the reason for market cycle phenomenon…The Delta time frames are like the right laser, and the time frames illuminate the order within the chaos of price".

Then…1983, now…2006 "Markets repeat directly or inversely relative to the total interaction of the sun, the moon and the earth." After Jim's initial discovery of Delta in 1983, he and Welles Wilder collaborated on Delta directly for over a year. Upon purchasing the rights to Delta, Mr. Wilder spent his full time that year reviewing literally hundreds of years of available data to solve for all major commodity markets. Also, paralleling the commodity solutions, data was obtained from Data General representing 60 Stock Groups. Each "group" solution was solved across the newly formulated delta time frames. This meant that any individual stock, falling under the group solution, might be followed using the delta time frames. During this intensive first year it was determined that there were 5 legitimate time frames upon which solutions to markets were to be based. The time frames were labeled as Short-Term, Intermediate-Term, Medium-Term, Long-Term, and Super-Long Term. The basis for each time frame was premised upon time intervals comprising the total interaction between the sun, moon, and earth. Upon the completion of research, Mr. Wilder formed the Delta Society. The Society had two levels of association, Membership and Directorship. These levels allowed individuals the opportunity to learn about the Delta time frames directly and apply them as a basis for timing in their trading efforts. In the early years an Annual Directors Meeting was held. This meeting acted as a mastermind group that continued to develop and flesh out practical application of the time frames to different trading strategies and tactics. In the late 1980's a seminar workshop was established replacing the annual meetings. At these workshops concepts were taught and best practices formulated whereby Members and Directors might become more effective traders utilizing the delta time frames. These workshops have been held around the world and continue to this day. Also in the late 1980's Delta Graphics & One Day at a Time Software was created. For the first time this allowed Delta Members and Directors the ability to download price data for any commodity or stock and to superimpose the Delta time frames on the price graphs. Due to a breach of confidence in the Directorship and the growing potential for piracy and copyright infringement, the Delta Phenomenon book was published in 1991. Now, officially in print, the Delta time frames replete with stock and commodity charts with their accompanying visual solutions were displayed. Interestingly, while the book created a broader audience through wider dissemination of the delta information, the proprietary nature and application of Delta was largely protected to the benefit of the Members and Directors. Also, the effectiveness of Delta as a tool for market timing was not diminished with this decisive event. Throughout the 1990's and early 2000's Mr. Wilder returned to developing technical trading systems. These systems were added to the software to facilitate trading strategies while using the delta time frames as a backdrop and time filter. These systems provided a type of exoskeleton to the Delta time frames with their alternating high and low turning point windows. Today, the mission of the Delta Society remains the same. Mr. Wilder and his management team at the Delta Society are continuing to find new applications of the Delta time frames. The delta time frames are used as a timing tool while technical and fundamental analysis is applied with strict risk management. Specifically, one major goal is to continue to increase "accuracy" in determining and confirming turning points as they are being made.

In essence, whether one trades stocks or commodities, currencies or options, intra-day, daily, weekly or monthly charts…Delta can enhance any trading system. It acts in many capacities…a timing filter, a price gauge of intrinsic strength and weakness, and when understood and synergized correctly, the delta time frames allow traders of all types to become more effective in their trading campaigns. As Jim Sloman and Mr. Wilder first recognized in 1983… "Delta is not a market follower, it is the reason for market cycle phenomenon…The Delta time frames are like the right laser, and the time frames illuminate the order within the chaos of price…Delta is like a roadmap into the future…what an incredible advantage to those who have it."

D. W.

Projections and charts showing the daily, weekly and monthly turning points for gold, silver, and the HUI are available with a subscription to:

THE RON ROSEN PRECIOUS METALS TIMING LETTER

Reports are posted twice weekly and updates will be posted when market action warrants.

CRUDE OIL WEEKLY

Disclaimer: The contents of this letter represent the opinions of Ronald L. Rosen. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Ronald L. Rosen is not a registered investment advisor Information and analysis above are derived from sources and using methods believed to be reliable, but Ronald L. Rosen cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.