Is The Gold Run Over.....Here's How we are Going to Play Gold This Week?

The markets and gold in particular have kept traders on their toes this week. Gold is looking to find support levels while the SP500 continues to push its way higher. Let’s take a look at the charts and our current analysis to get better feel for what is happening with gold and the SP500.

Gold 4 Hour Chart
As you can see from the chart below gold has formed a possible double top. The fact that it made a higher high is actually a bearish sign for the intermediate term 1-3 weeks. When we see a higher high getting sold into with big volume it typically means the big money is unloading large positions into the surge of breakout traders and short covering that occurs when a new high is reached. Following the big money is very important to keep an eye on as it can warn us of possible trend changes before it occurs.

The current selling volume is not exactly a healthy sign if you are looking for higher prices in the near term. If this pattern breaks down I would expect $1340 to be reached very quickly.

Keep in mind gold it in a strong up trend still. Shorting is not the best play in my opinion. I prefer to see pullback which washes the market of weak positions then jump on the long side for another bounce/rally.

SP500 Market Internal Strength – 10min, 3 days chart
I watch these charts to get a feel for the overall market strength on a short term basis. The top chart shows the SPY etf breaking above a resistance trend line on Friday afternoon. This occurred on light volume meaning it is mostly likely a false breakout and Monday we could see a gap lower at the open or a pop & drop. The two other indicators are reaching an extreme level which normally tells us a pullback is due in the next 24-48 hours of trading. The question is, will us just be a bull market pause or will we get a decent pullback.

The red indicator in the top chart and the red indicator levels on the charts below that help us time the market as to when profits should be taken or to tighten our stops if we have any long positions.

The broad market is still in a very strong uptrend so moving stops up and buying on oversold dips is the way to play it.

Weekend Market Analysis Conclusion:
In short, both gold and the stock market are in a bull market (uptrend). Trying to pick a top to short the market is not a good idea. Instead I am looking for an extreme oversold condition to help reduce downside risk before taking a long position.

The overall strength of the market (SP500 and Gold) I think are starting to weaken but in no way am I going to short them. We continue to buy dips until proven wrong because indicators can stay in the extreme overbought levels for a long period of time. Generally the biggest moves happen in the last 10-20% of the trend.

Posted courtesy of Chris Vermeulen at The Gold and Oil Guy.Com

Just Click Here if you would like to get Chris Vermeulen weekly reports and his free trading tips book.




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This Week in Crude Oil and Natural Gas Trading

Crude oil traders end the week on a low note as China continues to attempt to reel in inflation through tightening of bank reserve requirements. These moves are seen to have less of an impact on the equity markets than raising interest rates but still have the same effect with the commodity markets which are dominated by commercial traders.

It appears the streets bias remains neutral on crude oil going into next weeks trading week with more consolidations likely. If the bulls expect to gain any momentum back Monday they will need to defend the first support level at the 10 day moving average crossing of 87.62. And more critical would be second support at the 20 day moving average crossing at 85.28.

These lower prices on the week run in the face of the federal government’s EIA reporting that crude inventories fell by 3,819 thousand barrels for the week ending December 3, 2010, well above analyst expectations. The decrease in oil stocks, the first time in three weeks, can be attributed to ramped up refinery operations.

However, at 355.9 million barrels, crude supplies are 5.9% above the year earlier level and remain above the upper limit of the average for this time of the year. The crude supply cover was down slightly from 25.4 days in the previous week to 24.7 days. In the year ago period, the supply cover was 24.2 days.

Natural gas traders also close out the week lower as we see warmer than predicted weather predictions especially in the mid west and the northeast. Stochastics and the RSI are diverging and turning neutral to bearish for natural gas. Hinting that the rally off November's low might be coming to an end. If January extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.654 is the next upside target. Multiple closes below the 20 day moving average crossing at 4.301 are needed to confirm that a short term top has been posted. First resistance is Thursday's high crossing at 4.479. Second resistance is the 38% retracement level of the June-October decline crossing at 4.654. First support is the 20 day moving average crossing at 4.301. Second support is last Tuesday's low crossing at 4.126.

Nat gas producers seem to see a bright future ahead though as the natural gas rotary rig count, as reported December 3 by Baker Hughes Incorporated, was 961. An increase of 8 rigs from the previous week.


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If This is a Correction in Gold What Are Our Options?

Gold bugs and especially gold bulls can get a bit sensitive when talking about pull backs in our favorite precious metal. And if you predict a pullback you better be prepared. It seems any time that I discuss a possible pullback in gold I place a giant target on my back for people to make nasty public comments or send me hateful emails which in some cases I find particularly amusing. To each his own, but something tells me this article will be as well received as an oral reading of the history of the Illuminati at a Christian Christmas celebration.

Before you all rush to berate me for saying gold may go through a mild correction, read this paragraph before you take my work and my name through the proverbial mud......AGAIN. Before discussing why gold may go through a short term correction, I would point out that in the long term I believe gold is in a secular uptrend that could last much longer than many market pundits or traders might prognosticate.

I do not hold myself out to be an economist, but it appears to me that there are several catalysts looking towards the future that likely will give gold a boost. Unfortunately, the reasons gold could continue rallying are not economically pleasant and certainly not exciting to discuss as by now they have been beaten into our psyches. Instead of pounding the table about all of the various reasons investors should own gold, I am going to focus on a potential opportunity to buy gold at lower prices.

Based on a variety of technical indicators and analysis paired with some fundamental opinions, a trader could make the case that gold is in need of a downward price correction. Gold has been purchased with strong volume for more than a year as a result of several reasons. When looking at a weekly chart of the gold ETF GLD it becomes apparent that the shiny metal is overbought and in need of a pullback, or at a minimum some healthy consolidation.

As can be seen above, gold remains in a strong uptrend and price is well above the 50 period moving average. In fact, the 50 period moving average on the weekly GLD chart has not been tested since April of 2009. The long term trend remains bullish, but as stated above stated above not needed here a pullback is possible.

If we take a look at the GLD daily chart we notice the same long term uptrend that that is needless here we witnessed when looking at the weekly chart. In contrast the daily chart does show potentially bearish formations beginning to work. While the bearish formations patterns, too close previous use of formations may fail or may turn out to be totally false why totally, just use false, it is strong enough on its own based on future price action, at this point a double top formation is possible as is a head and shoulders pattern. This is not to say that GLD cannot grind higher because the weekly chart looks quite strong, but the daily chart is at least posting a warning that lower prices or at least a period of consolidation may be coming to fruition in the not so distant future.

While I am expecting a meaningful pullback or correction at some point, I do not believe that gold is going to crash lower. In fact, I am viewing the possible correction in gold as an excellent potential long entry. Clearly traders could look to purchase GLD around the 50 period moving average on the daily chart ($133.06) and then add to the position if the neckline is tested. I do not believe that price will get to the neckline, but if it does I expect that level to hold and a new rally to take shape. Until gold gets below the 50 period moving average on the weekly chart, it remains in a technically constructive uptrend.

There are a variety of ways to purchase GLD if an equity trader wanted to leg into the trade at a variety of price targets. One strategy would be to simply accumulate partial positions at predetermined price targets. When considering entering a longer term position, investors and traders should formulate a plan and then trade that plan. Through the use of a trading plan, the trader can remove emotion from the subsequent purchase(s) while managing risk.

For those who would like to use options to acquire GLD common stock, the easiest strategy would be to sell cash secured naked puts. Secured naked puts do not require significant option trading experience and most option brokers will allow relatively inexperienced option traders to use this strategy. Each option contract represents 100 shares of GLD, so the trader sets aside a portion of his trading capital to purchase 100 shares of the underlying.

As a basic example, if a trader sold a cash secured January 133 put the trader would be required to have the appropriate cash in the account to purchase 100 shares of GLD at $133/share. So in order to have the put totally secured, the trader in this example would need $13,300 to fulfill the required capital obligation. For a more speculative trader that was looking to collect option premium based solely on time decay (Theta) and had no intention of owning common stock, margin encumbrance would be required. Most option brokers will demand that option traders be able to post 15-20% of the total obligation (Reg T) and will allow more experienced option traders to use margin in order to cover the remaining portion. Traders using portfolio margin can use this strategy to add income to their portfolio without tying up a significant portion of their trading capital.

Based on the weekly chart listed above, the target support areas are around $133/share and $130/share respectively. We will assume the trader wanted to purchase 100 shares at each price point. The trader in this example could sell 1 GLD January 133 Put and 1 GLD January 130 Put. Based on current prices, the trader would receive a credit of $235 for the GLD January 133 Put and a credit of $139 for the GLD January 130 put. Total credit on this trade would be around $374 not including commissions. If GLD does not sell off and continues to rally, the trader has the potential to collect a large portion of option premium from the two cash secured puts that he sold. In this case, the maximum gain would be the total credit received of $374 at expiration if the trader did not get assigned GLD common stock.

It is critically important to understand that there is significant risk in this trade as the theoretical loss would be over $26,000 assuming that GLD were to go to 0 and the trader did not close out the position. Clearly gold is not likely to be worthless, and the odds of losing $26,000 are slim to none however it is theoretically possible. If the trader in the example gets assigned the stock he still gets to keep the option premium for which he sold the puts for which was $374. Since he was purchasing 200 shares of GLD, his total cost would be reduced by $1.87 a share (374 / 200 = 1.87). The average price he would pay for 200 shares of stock would be $131.50/share (133+130 / 2 = 131.50), thus his actual price per share would be $129.63 (131.50 – 1.87 = 129.63).

The profit engine for the naked puts is time decay (Theta). Volatility and price risk exist and would become reality if a massive overnight sell off in gold took place. However, if the trade operated as is custom in traditional market conditions the option trader in this case either will earn a portion or potentially all of the premium he received for selling the puts or he will be assigned 200 shares of GLD with a total basis of $129.63. If the trader wishes to own 200 shares of GLD and has the capital to purchase the common stock, this is an excellent way to develop a trading plan that takes advantage of support levels and remains profitable if GLD continues higher.

From J.W. Jones at Options Trading Signals.Com

If you would like to receive J.W.s Free Options Strategy Guide & Trade Ideas join his free newsletter at Options Trading Signals.Com


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Does This Commodity Rally Rely on QE3.....QE4?

At this point traders and investors alike realize that any near term rally in commodities and equities relies fully on the U.S. governments continued printing of money. QE 2, QE 3.....QE 4? But any real long term support of the world economy will be coming from Chinas recent and future increasing import and export numbers. The strong readings should trigger the Chinese government to continue stepping up tightening measures and a rate hike is imminent. This is just one reason our fund has patiently held a position in the Chinese Yuan using ETF....CYB. We have never favored putting our faith in communist governments with our investment strategies but we believe this is one bubble the Chinese cannot control forever. And the Chinese currency will eventually have to be allowed to inflate.

Here's your trading numbers for Friday morning......

Crude oil was higher overnight as it consolidates some of this week's decline. However, stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 85.33 would confirm that a short term top has been posted. If January extends the rally off November's low, May's high crossing at 93.29 is the next upside target. First resistance is Tuesday's high crossing at 90.76. Second resistance is May's high crossing at 93.29. First support is the 10 day moving average crossing at 87.72. Second support is the 20 day moving average crossing at 85.33. Crude oil pivot point for Friday morning is 88.50.

Natural gas was slightly lower overnight as it consolidates some of the rally off November's low. Stochastics and the RSI are diverging and are turning neutral to bearish signaling that a short term top might be in or is near. Closes below the 20 day moving average crossing at 4.301 would confirm that a short term top has been posted. If January extends the rally off November's low, the 38% retracement level of the June-November decline crossing at 4.654 is the next upside target. First resistance is Thursday's high crossing at 4.637. Second resistance is the 38% retracement level of the June-November decline crossing at 4.654. First support is the 10 day moving average crossing at 4.369. Second support is the 20 day moving average crossing at 4.301. Natural gas pivot point for Friday morning is 4.494.

Gold was lower overnight and remains poised to extend the decline off this week's high. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 1376.70 would confirm that a short term top has been posted. If March renews this year's rally into uncharted territory, upside targets will be hard to project. First resistance is Tuesday's high crossing at 1432.50. First support is the 20 day moving average crossing at 1376.70. Second support is the reaction low crossing at 1352.00. Gold pivot point for Friday morning is 1389.80.


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Is it Time to Follow The Herd into Trading Gold and the SP500?

Are you the type of trader who follows the herd? Do you use herd mentality against the market? Or are you a "contrarian investor"? Over the past 2 weeks we have seen the market sentiment change three times from extreme bullish to bearish and back to bullish as of today. Normally we don’t see the herd (average Joe) switch trading directions this quickly. Over the past 10 years I found that the average time for the herd to reach an extreme bullish or bearish bias takes between 4-6 weeks in length. It is this herd mentality which makes for some excellent trend trading opportunities. But with the quantitative easing, thinner traded market, and lack of trading participants (smaller herd) I find everyone is ready to change directions at the drop of a hat.

The old school traders/investors who don’t use real time data or charts, and who dabbled in stock picks, and options trades here and there have mostly exited the trading arena from frustration or losing to much money. This group accounted for a decent chuck of liquidity in the market and was also the slowest of the herd to change directions.

The new school, today’s smaller herd is much more aggressive and quicker to act on market gyrations. I think this is because the only people left in the market are those who make a living pulling money from the market and those who feel they are really close to mastering the stock market. It is these individuals who are using trading platforms with real time data, charts and scanners to help get a pulse on the market so they can change directions when the big boys do. I feel this is the reason why the market is able to turn on a dime one week to another over the past 8 months....The easy prey (novice and delayed data traders) are few and far between and the fight to take money for other educated traders seems to be getting a little more interesting to say the least.

Anyways, enough about the herd already.....

It’s been an interesting week thus far with stocks and commodities. The week started with a large gap up only for strong selling volume to step in and reverse direction the following day. It is this negative price action that starts to put fear into the market triggering a downward thrust in the market. During an up trend which we are in now, I look for these bearish chart patterns to form as they tend to trigger more selling the following days which cleanses the market of weak positions. Once a certain level of traders have been shaken out of their positions and are entering positions in order to take advantage of a falling market, that’s when we get the next rally, catching the majority of traders off guard as they panic to buy back their short positions. It’s this short covering which sparks a strong multi day rally and kicks off the new leg up in the market.

Currently we getting some mixed signals. The market sentiment is the most bullish it has been since 2007, just a little higher than the Jan & March highs this year. This makes me step back and think twice about taking any sizable long positions. Any day now the market could roll over. Another bearish signal is the fact that we just had a very strong reversal day for stocks and metals to the down side. That typically leads to more selling.

But if we look at the positive side of things, the trend is still up, this is typically a strong time for stocks as we go into Christmas/Holiday season, also the market breadth is really strong with the number of stocks hitting new highs has really taking off.

SP500 – Daily Chart
Below you can see the reversal candles along with short term and intermediate support levels. Although the market sentiment is screaming a correction is near, we must realize that sentiment can remain at this level for an extended period of time while the market continues to trend. This is one of the reasons why we say “The Trend Is Our Friend”.

I am hoping for a pullback and would like to see market sentiment shift enough on an intraday basis to give us a low risk entry point.

Gold – Daily Chart
A reversal candle is seen as a sell signal or a profit taking pattern. Short term aggressive trades use these to lock in quick price movements. With so many traders watching gold, it caused a flood of sell orders to push gold down today.

Mid-Week Conclusion:
In short, each time we see some decent selling in the market its get bought back up. Today was another perfect example as we had an early morning sell off, then a light volume rally for the second half of the session and a end of day short squeeze during the last 30 minutes. Gold has pulled back to the first short term support level. Because of the large following in gold I would like to see if there will be another day of follow through selling before possibly looking to take a trade.

If you would like to get my daily pre-market trading videos, intraday updates, chart analysis and trades just subscribe to my trading service here at The Gold and Oil Guy.com

Chris Vermeulen



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Is This all the Crude Oil Bulls Have Got?

Crude oil traders continue their push in this higher trading range but can't seem to push through critical resistance at the 90+ level. Crude oil bulls are supported by newfound optimism on the street that the economic environment in the U.S. will continue to improve. But worries loom about the Ireland and the Euro as Fitch downgrades Ireland's credit rating despite the recent bail out deal. Precious metals have rebounded slightly but sediment has grown extremely bearish on the street across the whole metals sector. Here your trading numbers for Thursday morning.

Crude oil was higher overnight as it consolidates some of this week's decline. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 85.32 would confirm that a short term top has been posted. If January extends the rally off November's low, May's high crossing at 93.29 is the next upside target.

First resistance is Tuesday's high crossing at 90.76
Second resistance is May's high crossing at 93.29

Crude oil pivot point for Thursday morning is 88.20

First support is the 10 day moving average crossing at 87.25
Second support is the 20 day moving average crossing at 85.32

Natural gas was higher overnight as it extends the rally off November's low. Stochastics and the RSI are diverging but are bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off November's low, the 38% retracement level of the June-November decline crossing at 4.654 is the next upside target. Closes below the 20 day moving average crossing at 4.294 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 4.637
Second resistance is the 38% retracement level of the June-November decline crossing at 4.654

Natural gas pivot point for Thursday morning is 4.523

First support is the 10 day moving average crossing at 4.384
Second support is the 20 day moving average crossing at 4.294

Gold was slightly higher overnight as it consolidates some of the decline off this week's high. However, stochastics and the RSI have turned bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 1377.10 would confirm that a short term top has been posted. If March extends this year's rally into uncharted territory, upside targets will now be hard to project.

First resistance is Tuesday's high crossing at 1432.50
Second resistance is 1455.30

Gold pivot point for Thursday morning is 1392.40

First support is the 20 day moving average crossing at 1377.10
Second support is the reaction low crossing at 1352.00


Watch our latest video "After a Tough 2010, What's Next for Crude Oil Traders?"


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New Video - After a Tough 2010, What's Next for Crude Oil Traders?

I doubt that many traders would argue that the crude oil market in 2010 proved to be a tough commodity sector to get any real feel for the trend and direction. 2010 just did not produce any discernible, lasting trend in the oil market. The trends it has produced have lasted little more than just 3 or 4 weeks at best.

So what's next for crude oil traders in 2010 and into 2011?

In today's short video we examine the fact that crude oil briefly traded over $90 a barrel before falling back. So what made the crude oil market reverse course and fall back? Was it selling, was it profit taking, a technical point, or something else? We are examining crude oil in detail using a tool that we think is very appropriate for this type of market at the moment.

We have not discussed this technical indicator in any of our previous videos and I think when you see how it works and how you can use it your own trading, you will be pretty impressed.

We still look at our "Trade Triangles" of course, but "Trade Triangles" tend to work best with markets that eventually get into big trends and that's really where you make your money.

If you have a few minutes and you'd like to learn about this new/old technical indicator that has generally been overlooked by many traders, you will find this video very interesting. This 30 year old indicator has proven to be very effective in this year's crude oil market so you don't want to miss this video.

As always our videos are free to watch and there are no registration requirements. Please take a moment to leave a comment and tell us what you think of the video and the direction of crude oil.

Watch "After a Tough 2010, What's Next for Crude Oil Traders?"



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Is THIS Oil Rally For Real?

Every time crude oil has shown the ability to rally in 2010 experienced commercial traders have scratched their heads in disbelief as tankers fill with crude oil continue to stack up in ports and harbors around the world. Never have we seen oil rally in this way when there has been such a glut of inventory.

Is it different this time? Will the "Obama Claus" rally push crude oil [and commodities in general] through the critical 90+ levels? It's looking like these markets have played out their run and light volume December trading is about to set in. Swing traders and investors beware, this looks like a day traders market for December. Here's your trading numbers for Wednesday....


Crude oil was lower due to profit taking overnight as it consolidates some of the rally off November's low. Stochastics and the RSI are overbought and are turning neutral to bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 85.30 would confirm that a short term top has been posted. If January extends the rally off November's low, May's high crossing at 93.29 is the next upside target.

First resistance is Tuesday's high crossing at 90.76
Second resistance is May's high crossing at 93.29

Crude oil pivot point for Wednesday morning is 89.16

First support is the 10 day moving average crossing at 86.75
Second support is the 20 day moving average crossing at 85.30

Natural gas was higher overnight as it consolidates some of Tuesday's decline. Stochastics and the RSI are diverging but are bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off November's low, the 38% retracement level of the June-November decline crossing at 4.654 is the next upside target. Closes below the 20 day moving average crossing at 4.267 would confirm that a short term top has been posted.

First resistance is Tuesday's high crossing at 4.545
Second resistance is the 38% retracement level of the June-November decline crossing at 4.654

Natural gas pivot point for Wednesday morning is 4.440

First support is the 10 day moving average crossing at 4.345
Second support is the 20 day moving average crossing at 4.267

Gold was lower due to profit taking overnight as it consolidates some of the rally off the mid-November low. Stochastics and the RSI are becoming overbought, diverging and turning neutral hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 1378.50 would confirm that a short term top has been posted. If March extends this year's rally into uncharted territory, upside targets will now be hard to project.

First resistance is Tuesday's high crossing at 1432.50

Gold pivot point for Wednesday morning is 1412.70

First support is the 10 day moving average crossing at 1389.70
Second support is the 20 day moving average crossing at 1378.50



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Merry Christmas Crude Oil Bulls...From President Obama!

Is the second term of the Clinton presidency back? Even Bill couldn't have timed a better trade as President Obama let's it be known that he is willing to extend the Bush era tax breaks for an extension of unemployment benefits. This as our world currency [crude oil of course] hovers around the most critical level of 90+ a barrel. Is $90 our new support number? Is $100 a barrel in the cards in December? The rest of the week and especially Fridays close will tell us a lot, but for now here is your support, resistance and pivot numbers for Tuesdays trading.

Crude oil was higher overnight as it extends the rally off last week's low. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off last week's low, the 87% retracement level of May's decline crossing at 90.62 is the next upside target. Closes below the 20 day moving average crossing at 84.34 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 90.46
Second resistance is the 87% retracement level of May's decline crossing at 90.62

Crude oil pivot point for Tuesday morning is 89.23

First support is the 10 day moving average crossing at 86.23
Second support is the 20 day moving average crossing at 85.34

Natural gas was higher overnight as it extends the rally off November's low. Stochastics and the RSI are diverging but have turned bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off November's low, the 38% retracement level of the June-November decline crossing at 4.654 is the next upside target. Closes below the 20 day moving average crossing at 4.271 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 4.545
Second resistance is the 38% retracement level of the June-November decline crossing at 4.654

Natural gas pivot point for Tuesday morning is 4.471

First support is the 10 day moving average crossing at 4.357
Second support is the 20 day moving average crossing at 4.271

Gold was higher overnight as it continues to rebound off the mid November low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

If March extends this year's rally into uncharted territory, upside targets will now be hard to project. Closes below the 20 day moving average crossing at 1380.30 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 1429.40.
Second resistance is at 1438.10

Gold pivot point for Tuesday morning is 1418.40

First support is the 10 day moving average crossing at 1390.00.
Second support is the 20 day moving average crossing at 1380.30.



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Is This it.....is the SP 500 and Gold in the Last Stages of the Rally?

When we think of Elliot Wave patterns, we think of one market analyst. David Banister of The Market Trend Forecast.Com. We can't think of anyone who has called the moves better in this market in 2010 then Banister. And as we move to critical resistance levels in this rally it's time to check in with him and see how much room is left in this bull run. Here is his most recent article from Monday evening December 6th.......

The Elliott Wave patterns that I use to forecast movements ahead of time in the SP 500 and Gold for my subscribers have been textbook perfect for quite some time. We can go back to the March 2009 lows and clearly identify 5 waves up to the 13 month initial rally high in April of this year. This was followed by a clear ABC wave 2 pattern to the 1010 lows on July 1st. Right now, the SP 500 is in wave 5 up since July 1st, and that means this is a terminal wave underway before a good sized correction ensues.

Investors should expect the SP 500 to rally up to 1285 as a minimal upside target, with the market likely peaking in the Mid January 2011 period prior to a new correction pattern. That correction will take the markets down to the 1150-1180 ranges more than likely from the January highs and knock the sentiment levels back to bearish before the next big advance. Below is where I see the current wave patterns, and as you can see, this is the 5th and final wave stage of the advance. Ride it up, but lighten up as we approach my figures is my advice. Subscribers to my TMTF service have been riding this stage of the bull long since early July, and we keep them updated every week on the action.

Gold has also completed it’s 4th wave corrective pattern at $1331 per ounce recently, and as I have forecasted recently should continue it’s upward trajectory to about $1480-$1525 before a good sized correction will ensue. Gold bottomed this summer in a classic wave 2 correction at $1155 per ounce, which was a 50% Fibonacci re-tracement of the rally up to $1225 from $1040. My objectives are for this pattern to complete around the same time as the SP 500 peak in Mid January as well. Downside objectives from there are likely to be to the $1310 per ounce range from the $1480-$1525 peaks, but more on that as we approach. I do not like to get too far ahead of myself in my projections, taking it one leg and pivot at a time.

If you’d like to be consistently ahead of the major market and precious metals moves and profit from that positioning, then consider subscribing today. Visit Market Trend Forecast.com for the details and a coupon to subscribe.


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Markets Look to Take a Beating on Bernake Comments

Commodity and equity markets look to take a hit on Monday morning mostly due to comments made by Ben Bernanke over the weekend about his views on the possibility the economy will need additional stimulus.

Here is your trading numbers for Monday trading in crude oil, natural gas and gold.

Crude oil was lower due to profit taking overnight as it consolidates some of the rally off November's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off last week's low, the 87% retracement level of May's decline crossing at 90.62 is the next upside target. Closes below the 20 day moving average crossing at 85.18 would temper the near term friendly outlook.

First resistance is the overnight high crossing at 89.76
Second resistance is the 87% retracement level of May's decline crossing at 90.62

Crude oil pivot point for Monday's trading is 88.61

First support is the 10 day moving average crossing at 85.31
Second support is the 20 day moving average crossing at 85.18


Natural gas was higher overnight as it extends the rebound off last Tuesday's low. Stochastics and the RSI are turning bullish hinting that sideways to higher prices are possible near term.

Closes above the reaction high crossing at 4.515 are needed to renew the rally off November's low. If January renews the decline off the reaction high crossing at 4.515, November's low crossing at 3.853 is the next downside target.

First resistance is the overnight high crossing at 4.428
Second resistance is November's high crossing at 4.515

Natural gas pivot point for Monday's trading is 4.340

First support is last Tuesday's low crossing at 4.126
Second support is November's low crossing at 3.853

Gold was higher overnight as it continues to rebound off the mid-November low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

If March extends the rebound off the mid November low, November's high crossing at 1426.00 is the next upside target. Closes below the 20 day moving average crossing at 1379.20 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 1420.00
Second resistance is November's high crossing at 1426.00

Gold pivot point for Monday's trading is 1,402.80

First support is the 10 day moving average crossing at 1383.20
Second support is the reaction low crossing at 1352.00



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Where Should You Be Playing Crude Oil?

For most retail traders trading crude oil and natural means using tickers like the popular ETF's like USO, OIH, UNG or DIG. But one often over looked company that has been the darling of our hedge fund is NOV, National Oilwell Varco. As the leader in oil rig production for many years through both organic growth as well as Merger and acquisition activity National Oil Varco has stay above support levels for some time giving us safe and consistent profitable swing trades.

One tool we use to watch the trend in NOV is our Smart Scan Chart Analysis technology. And as of this morning [12-6-10] our Smart Scan Analysis still confirms that a strong uptrend is in place for NOV and that the trend remains positive longer term. As always you should trade this strong uptrend with tight money management stops. This kind of rating indicates that NOV is being driven by commercial traders and insiders.

NOV scored +100 on a scale from -100 (strong downtrend) to +100 (strong uptrend). Here is how NOV rated on just a few of our indicators.

+10......Last Hour Close Above 5 Hour Moving Average
+15......New 3 Day High on Friday
+20......Last Price Above 20 Day Moving Average
+25......New 3 Week High, Week Ending Nov. 27th
+30......New 3 Month High in November
+100.....Total Score

Here is a preview of our MarketClub Trade Triangle Chart Analysis and Smart Scan technology system



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Crude Oil Weekly Technical Outlook For Sunday Dec. 5th

Crude oil's rise from 80.06 accelerated to as high as 89.49 last week and the break of 88.63 indicates that whole rally from 64.23 has resumed. Initial bias remains on the upside this week for next near term target of 61.8% projection of 70.76 to 88.63 from 80.06 at 91.10. On the downside, below 87.14 minor support will turn intraday bias neutral and bring some consolidations before staging another rise.

In the bigger picture, the break of 88.63 resistance confirms that whole medium term rise from 33.2 is still in progress and has resumed. Such rally is treated as the second wave of the consolidation pattern that started at 147.27 and should target 50% retracement of 147.27 to 33.2 at 90.24 and possibly further to 61.8% retracement at 103.70. On the downside, break of 80.06 support is needed to be the first sign of medium term reversal and break of 64.23 is needed to confirm. Otherwise, outlook will remain bearish.

In the long term picture, rebound from 33.2 is not finished yet. But overall view remains unchanged. Crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave from there unfolding. Current development suggests that a breach of 61.8% retracement at 103.70 is likely. But we'll then start to focus on reversal signal again above 103.70.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

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Is This a Broad Market Reversal....Better Hold On To Your Hat!

From Chris Vermeulen at The Gold and Oil Guy.com......

This had been an exiting week for traders as the equities market was on a verge of a major sell off. Fortunately, we were watching the market very closely and saw the sentiment and market internals shift shortly after a new low was set last week. That was an early warning for us that a trend reversal to the upside could happen at any hour or day this week.

Wednesday and Thursday’s rallies were on solid volume and the market internal indicators along with market breadth were strong also. There has been a large surge of new highs across the board on the NYSE, NASDAQ and AMEX. These numbers tell me that it’s not just one sector moving the market; instead it’s a broad market advance (institutional buying).

While I don’t typically try to pick major tops or bottoms because of the added risks and lower probability of winning trades, I do tend to spot them forming a few days in advance allowing me to tighten stops and take some profits on positions.

Trend reversals typically have large violent moves near the beginning and end of their life cycle making things not only tougher to trade but potentially more costly. Once I see a trend confirmed with moving averages, volume, and sentiment along with market breadth that’s when I start looking to take positions on pauses or pullbacks to support zones. This greatly increases the odds of winning/making money from the market. There are some really great Options Trading Strategies for taking advantage of these volatility changes in the market which you can get at Options Trading Signals.Com.

SPY Daily Chart:
As you can see the market has clearly broken to the upside above key moving averages after finding support at the 50 day moving average. This rally has some solid volume behind it which I like to see also.

The first 3-4 days of a trend reversal generally post some give moves but after that initial thrust expect a pause or pullback to happen.

SPY 60 Minute Intraday Chart:
We were lucky enough to take profits on our inverse SP500 trade as the market started to give us mixed signals of a possible rally. A couple days later on Nov 26th we saw a major shift within the market sentiment preventing us from shorting the market again.

Two days later the broad market gapped higher triggering protective stops/short covering sparking a fierce two day rally which took the market up to a major resistance level. I do feel as though the market is going higher, but right now, everything is WAY over bought and trading at resistance. Even if the market moves higher for another 2-3 days and breaks this resistance level, it will most likely have a pause, or pullback as it regains energy for another thrust higher.

Mid-Week Trading Conclusion:
In short, it looks as though the trend is now up and the Christmas rally could be gearing up for a good one!

Be sure to get Chris Vermeulen's Free Trading Analysis Book and Analysis or visit The Gold and Oil Guy.Com to get his Pre-Market Trading Videos, intraday updates and trade alerts



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Crude Oil, Natural Gas, Gold and Dollar Commentary For Friday Morning Dec. 3rd

Crude oil was higher overnight as it extends the rally off last week's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends the rally off last week's low, November's high crossing at 89.10 is the next upside target. Closes below the 10 day moving average crossing at 84.54 would temper the near term friendly outlook.

First resistance is the overnight high crossing at 88.33
Second resistance is November's high crossing at 89.10

Crude oil pivot point for Friday morning is 87.47

First support is the 20 day moving average crossing at 85.07
Second support is the 10 day moving average crossing at 84.54

Natural gas was slightly lower overnight as it consolidates some of the short covering gains of the past two days. In the meantime, stochastics and the RSI are turning neutral to bullish hinting that sideways to higher prices are possible near term.

Closes above the reaction high crossing at 4.515 are needed to renew the rally off November's low. If January renews the decline off the reaction high crossing at 4.515, November's low crossing at 3.853 is the next downside target.

First resistance is the overnight high crossing at 4.370
Second resistance is last week's high crossing at 4.515

Natural gas pivot point for Friday morning is 4.306

First support is Tuesday's low crossing at 4.126
Second support is November's low crossing at 3.853

Gold was higher overnight as it continues to rebound off the mid-November low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

If March extends the rebound off the mid-November low, November's high crossing at 1426.00 is the next upside target. Closes below the 10 day moving average crossing at 1375.60 would confirm that a short term top has been posted.

First resistance is Thursday's high crossing at 1399.70
Second resistance is November's high crossing at 1426.00

Gold pivot point for Friday morning is 1,390.90

First support is the 10 day moving average crossing at 1375.60
Second support is the reaction low crossing at 1331.10


Secrets of the 52 Week High Rule

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OPEC Expected to Keep Oil Production Quota Unchanged

OPEC will probably keep its production quota unchanged when it meets on Dec. 11 in Ecuador, ministers from Angola, Venezuela and Libya said. The Organization of Petroleum Exporting Countries considers oil at $80 to $85 a barrel a “comfortable price,” Angola’s Minister of Petroleum Jose Maria Botelho de Vasconcelos said yesterday. Crude traded around $86 a barrel in New York today. Venezuela’s energy minister Rafael Ramirez, who said he prefers a price level of $100 a barrel, told reporters in Doha today that the group will likely maintain its existing output target.

“The current environment is of some stability,” Angola’s Vasconcelos said in an interview. “The sentiment among members is for maintaining the production level.” Libya’s top oil official, Shokri Ghanem, said yesterday in Doha that the organization will seek stricter compliance with the current production target. OPEC, which produces about 40 percent of the world’s oil, hasn’t changed its formal limit since December 2008, when it announced record supply cuts and a quota of 24.845 million barrels a day.

The group’s adherence to that level has faltered as recovering demand and rising prices encourage members to exceed their individual allocations. Compliance among the 11 nations bound by quotas slipped to 51 percent in October, according to data from the group published on Nov. 11. Qatari Energy Minister Abdullah bin Hamad al-Attiyah said today he won’t attend the Dec. 11 gathering in Quito, Ecuador.

Angola’s Vasconcelos said he expects the country’s oil production to increase to 1.9 million barrels a day next year, close to its maximum capacity. Angola pumped an average of 1.73 million barrels a day in November, according to a Bloomberg survey of producers and analysts on Nov. 30. OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system.

Posted courtesy of Bloomberg News

Bloomberg reporter Grant Smith can be reached at gsmith52@bloomberg.net

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Sharon Epperson: Where is Crude Oil and Gold Headed on Friday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil and gold are likely headed tomorrow.



Can you learn to trade crude oil in just 90 seconds?

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Commodity Corner: Crude Oil Rallies to 2 Year High on Economic Optimism

Crude rallied Thursday to a two year high on rising equities and an increase in economic optimism. Oil for January delivery gained $1.25, settling at $88.00 a barrel Thursday. Oil prices peaked at $88.13 during Thursday's trading session and bottomed out at $86.27. According to the U.S. Department of Labor, initial unemployment benefit claims increased by 26,000 to 436,000 from the previous week. However, the four week moving average decreased by 5,750 a two year low.

In addition, reports on an increase in retail and the housing market sales also boosted the U.S. economy. The National Association of Realtors reported a 10 percent increase in pending home sales for the month of October after dropping 1.8% in September. The greenback fell Thursday against the euro on news that the European Central Bank will delay its withdrawal of stimulus measures and keep its interest rate at a record low of 1 percent. A weaker dollar increases oil prices making it cheaper for buyers with foreign currencies.

Likewise, gasoline futures rose to a six month high Thursday, closing the trading session at $2.36 a gallon. The nearly six cent increase came as East Coast supplies declined. Investors fear that imports may decline on tightening supply conditions in the New York harbor. RBOB gasoline fluctuated between $2.29 and $2.36 Thursday.

Front month natural gas futures continued to climb higher Thursday for the eleventh straight day. Natural gas lost earlier rebounds, gained from cooler weather, after inventories fell below market expectation. The Energy Information Administration reported a 23 billion cubic feet drop for the week ended Nov. 23. Natural gas prices settled at $4.34 per thousand cubic feet, up 7.4 cents from the previous day. The intraday range for natural gas was $4.20 to $4.38.

Posted courtesy of Rigzone.Com



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Phil Flynn: Is Europe Too Big To Fail?

Forget about all of that stellar manufacturing data and jobs data. Ok sure, that may have helped rally the oil yet it was the story that the U.S. stands ready to bail out Europe that sent the dollar falling and the oil on a second wind rally. Reuters News reported that an unnamed US official said the U.S. was prepared to support the European Union’s rescue fund through the International Monetary Fund and the largest contributor is the U.S.. The official said the spread of contagion through the euro region would be a problem for the global economy and because of that I guess the U.S. printing presses are ready to roll.

In other words, it looks like the U.S. just said that we are going to make good on all of Europe’s bad debts and make sure that European citizens can retire when they are 50. Ok maybe they did not say that exactly and they defiantly did not say anything about Europeans retiring when they are 50.( Maybe it was 60) And later the story was denied but don’t you tell that to the investment world because once you make a statement like that it is hard to take it back. Based on the weakness in the dollar after the story broke, it seems the market is convinced that come hell or high water the U.S. will back Europe in their time of economic need.

If the market believes it then there is a lot of pressure on the IMF and the US to make it so. If you don’t think so then you have forgotten the lessons of Fannie and Freddie. They were entities that were supposed to be independent but investors like the Chinese were led to belive that the government sponsored entity was backed by the full faith and credit of the good old American taxpayer. The same taxpayers that we have found out have backed a wide......Read the entire article.


Every Once in a While, You Find Something Amazing....Check out Trend TV

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Do You Really Understand How to Use Market Sentiment and Herd Mentality in Your Trading

We don't know of any trader better suited to teach us how to take advantage of market psychology then Chris Vermeulen of The Gold and Oil Guy.Com. In this report Chris is going to teach you how to read market sentiment so you can day trade and swing trade consistently to earn 3-5% per month trading ETFs. I remember always hearing the pro’s say “if you want to make money, you need to trade against the herd (masses)”. This sounds easy but just how do we go about doing that? I am about to show you…

In short, you must start looking at the market completely backwards. I focus on buying into heavy volume sell offs (panic) and selling position into heavy volume breakouts (greed). This was a very tough transition for me to make and its best to paper trade it for while until you are comfortable with buying into fear and selling into greed. It will feel completely wrong at the beginning but the profits speak for themselves!

The Four Charts I Follow Closely
The 4 main tools need to make money from trading against the herd. While this is only one of my trading strategies it is my favorite. I trade the ES futures contract and some sometimes the SDS and SSO exchange traded funds. This may seem basic at first glance but when you combine them you end up with a highly effective trading strategy.

SP500 - 5 Minute Chart
Here is a 5 minute chart of the SP500 showing where I went short. It is important to know that over the past 2 years the SP500 has provided a 1.25% profit on average each time one of these extreme sentiment readings occur on the charts.

The red indicator on the chart is a simple volume based indicator which measures fear and greed in the market and is very powerful for picking market tops and bottoms. It’s calculated by taking the NYSE up volume and dividing it by the down volume. In short, when you see this indicator start to rise it tells us the majority of traders (the herd) are buying and we should start to look at taking a short position.

Let me show you how to find the trade using the market sentiment....

The NYSE advance/ decline line
Is the most easy to understand. How I use this is simple, when there are 1500+ stocks trading up on the day then the market is getting overbought meaning too many stocks have moved up in a short period of time and traders will most likely start taking profits or exit their positions. I also look at the intraday chart for topping patterns or resistance levels then wait for the other two indicators to confirm Selling Volume on the chart above and the put/call ratio before going short the market.

The last indicator I follow is the put/call ratio
This indicator can be a little tougher to use at times because when the market is trending down the ratio tends to fluctuate near the top or bottom of its range during up or down trends. In a down trend is stays near the top which the chart below shows.

When the broad market bounces and we see the put/call ratio drop into the lower band it’s telling me the majority of traders have finally become bullish. This tends to happen once a previous high is broken as it triggers short covering and breakout traders start to buy.

Trading Market Sentiment Conclusion:
All you need to use these indicators, focus on the 15 minute charts, trade only with trend, and take profits at 1%, 2% and keep a small position open for much larger gains.

It is critical that once you take partial profits once you reach a 1% gain then you must start moving your protective stop into the money to lock in a profit for the balance of the position. All three indicators need to reach the extreme levels at the same time for a trade to be triggered. I have seen the market trend in the extreme levels for several weeks continuing to move up day after day and you will get stuck in that situation if you jump the gun entering a trade before each indicator signals an extreme level.

Final thoughts, his strategy works just as well in a bull market but there are some minor changes required on each of the indicators. Also I use inter market analysis following the US Dollar, Gold, Bonds and the Volatility Index for other trading strategies which I incorporate using the market sentiment.

If you would like to get Chris Vermeulen's ETF Trade Alerts for Low Risk Setups checkout his service at The Gold And Oil Guy.com



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