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Showing posts with label DX. Show all posts
Showing posts with label DX. Show all posts
Wednesday, April 4, 2012
Did a “bearish divergence” yesterday signal a top for the equity markets?
Crude Oil pulls back....is this a buying opportunity? We analyze where this energy market is headed.
Gold crashes....no surprise for MarketClub members. We show you where we think this precious metal is headed in today’s video.
Gold crashes....no surprise for MarketClub members. We show you where we think this precious metal is headed in today’s video.
Saturday, February 26, 2011
J.W. Jones: Mr. Market Sends Oil Investors Mix Signals
While this week was shortened due to the President’s Day holiday, it has been quite a ride for traders and investors. The 24 hour news cycle certainly intensifies current market conditions as any news focusing on oil or the Middle East protests moves markets. Thursday the International Energy Agency came out and indicated that the expected drawdown in crude oil supplies coming from Libya was being exaggerated. Immediately upon the release of this information light sweet crude oil got hammered and stocks rallied from day lows.
By now most market prognosticators and the punditry will be out declaring that oil prices are going to continue lower and equities are on sale and primed for a snapback rally. I’m not sure that it is that easy. Mr. Market makes a habit of confusing investors with mixed signals. One thing is certainly clear from the recent price action, rising oil prices are not positive for equities here in the United States. What is also clear when looking at the Massachusetts Institute of Technology’s (MIT) version of inflation data (http://bpp.mit.edu) for the United States, it becomes rather obvious that inflation continues to ramp higher in the short term and also on monthly and annual time frames.
If inflation continues to work higher, it would be expected that light sweet crude oil futures prices would work higher as well. The dollar index futures have been selling off while oil and precious metals have rallied until the IEA news came out on Thursday. What should be noted from the recent uncertainty in the marketplace is that the U.S. Dollar Index futures did not rally. This is the “dog that didn’t bark.” During recent periods of market uncertainty such as the European sovereign debt crisis, the U.S. Dollar was considered a safe haven. This most recent market uncertainty caused by political instability in the Middle East has seen the U.S. Dollar Index futures sell off while gold and silver rallied as investors looked to the shiny metals for safety.
So what do all of the mixed signals relating to financial markets really mean? It’s simple, the U.S. economy is not on solid ground, rising oil prices will damage the economy, the world does not necessarily view the U.S. Dollar as a safe haven, and inflation is rising. With all of that being said, what if this is just the beginning of a major rally in energy and the metals? What if prices are going to pull back to key breakout levels, test them successfully, and probe to new highs? As can be seen from the chart above, the U.S. Dollar Index is poised to test recent lows. Should price test the lows and breakdown, oil and the metals could rally in lockstep in a parabolic move.
The daily chart of light sweet crude oil futures illustrates the breakout level that oil prices surged from.
I am expecting a test of that level at some point in the near future. If that level holds, oil prices could be poised to take off to the upside. If prices were to move considerably higher it could place downward pressure on equities and would correspond with the U.S. Dollar cycle lows which are expected by most sophisticated analysts sometime this spring. The intermediate to longer term fundamentals in the oil space are strong and technical analysis could also affirm higher prices very soon. If we see the key breakout level hold and a new rally takes shape on the heels of a lower dollar, the equity market could be vulnerable.
The next few days/weeks are going to prove critical as a lower dollar could change everything. A quick look at the silver futures daily chart illustrates the key breakout level which will likely offer a solid risk / reward type of setup.
As can be seen, silver has had a huge run higher and has broken out to new all-time highs. Gold has moved higher but has yet to breakout and could play catch up while silver consolidates. Longer term I remain bullish on precious metals and oil, but volatility is likely to increase in both asset classes going forward, particularly if inflation continues to increase. Patience and discipline will be critical in order to enter positions where the risk / reward validates an entry.
As for the equity market, it remains to be seen what we will see next week. I am not convinced that the issues in the Middle East are over and that oil is going to come crashing back down to previous price levels. Oil has broken out and if the breakout levels hold I would expect a continuation move higher. If we see price action in oil transpire in that fashion, equities will be for sale and prices could plummet tremendously.
I will be watching to see how much of the recent move lower is retraced. If we see a 50% retracement and prices rollover the S&P 500 will likely be magnetized to the 1275-1285 price range. If that price level is tested and fails, we are likely going to see a 10% correction and potentially more. The daily charts of SPX listed below illustrate the key Fibonacci retracement levels as well as the key longer term price levels that could be tested if prices rollover.
While lower prices are possible, if we see a retracement of the recent move which exceeds the 50% retracement level in short order prices will likely test recent highs and begin working higher yet again. The price action on Friday and next week is going to be critical to evaluate as many traders and market participants are going to be watching the price action closely looking for any clues that might help indicate directionality.
For right now, I am going to be patient and sit in cash and wait for high probability low risk setups to emerge. As I have said many times, sitting on the sidelines can be the best trade of all!
Get More Trade Ideas J.W. Jones visit Options Trading Signals.Com
Share
By now most market prognosticators and the punditry will be out declaring that oil prices are going to continue lower and equities are on sale and primed for a snapback rally. I’m not sure that it is that easy. Mr. Market makes a habit of confusing investors with mixed signals. One thing is certainly clear from the recent price action, rising oil prices are not positive for equities here in the United States. What is also clear when looking at the Massachusetts Institute of Technology’s (MIT) version of inflation data (http://bpp.mit.edu) for the United States, it becomes rather obvious that inflation continues to ramp higher in the short term and also on monthly and annual time frames.
If inflation continues to work higher, it would be expected that light sweet crude oil futures prices would work higher as well. The dollar index futures have been selling off while oil and precious metals have rallied until the IEA news came out on Thursday. What should be noted from the recent uncertainty in the marketplace is that the U.S. Dollar Index futures did not rally. This is the “dog that didn’t bark.” During recent periods of market uncertainty such as the European sovereign debt crisis, the U.S. Dollar was considered a safe haven. This most recent market uncertainty caused by political instability in the Middle East has seen the U.S. Dollar Index futures sell off while gold and silver rallied as investors looked to the shiny metals for safety.
So what do all of the mixed signals relating to financial markets really mean? It’s simple, the U.S. economy is not on solid ground, rising oil prices will damage the economy, the world does not necessarily view the U.S. Dollar as a safe haven, and inflation is rising. With all of that being said, what if this is just the beginning of a major rally in energy and the metals? What if prices are going to pull back to key breakout levels, test them successfully, and probe to new highs? As can be seen from the chart above, the U.S. Dollar Index is poised to test recent lows. Should price test the lows and breakdown, oil and the metals could rally in lockstep in a parabolic move.
The daily chart of light sweet crude oil futures illustrates the breakout level that oil prices surged from.
I am expecting a test of that level at some point in the near future. If that level holds, oil prices could be poised to take off to the upside. If prices were to move considerably higher it could place downward pressure on equities and would correspond with the U.S. Dollar cycle lows which are expected by most sophisticated analysts sometime this spring. The intermediate to longer term fundamentals in the oil space are strong and technical analysis could also affirm higher prices very soon. If we see the key breakout level hold and a new rally takes shape on the heels of a lower dollar, the equity market could be vulnerable.
The next few days/weeks are going to prove critical as a lower dollar could change everything. A quick look at the silver futures daily chart illustrates the key breakout level which will likely offer a solid risk / reward type of setup.
As can be seen, silver has had a huge run higher and has broken out to new all-time highs. Gold has moved higher but has yet to breakout and could play catch up while silver consolidates. Longer term I remain bullish on precious metals and oil, but volatility is likely to increase in both asset classes going forward, particularly if inflation continues to increase. Patience and discipline will be critical in order to enter positions where the risk / reward validates an entry.
As for the equity market, it remains to be seen what we will see next week. I am not convinced that the issues in the Middle East are over and that oil is going to come crashing back down to previous price levels. Oil has broken out and if the breakout levels hold I would expect a continuation move higher. If we see price action in oil transpire in that fashion, equities will be for sale and prices could plummet tremendously.
I will be watching to see how much of the recent move lower is retraced. If we see a 50% retracement and prices rollover the S&P 500 will likely be magnetized to the 1275-1285 price range. If that price level is tested and fails, we are likely going to see a 10% correction and potentially more. The daily charts of SPX listed below illustrate the key Fibonacci retracement levels as well as the key longer term price levels that could be tested if prices rollover.
While lower prices are possible, if we see a retracement of the recent move which exceeds the 50% retracement level in short order prices will likely test recent highs and begin working higher yet again. The price action on Friday and next week is going to be critical to evaluate as many traders and market participants are going to be watching the price action closely looking for any clues that might help indicate directionality.
For right now, I am going to be patient and sit in cash and wait for high probability low risk setups to emerge. As I have said many times, sitting on the sidelines can be the best trade of all!
Get More Trade Ideas J.W. Jones visit Options Trading Signals.Com
Share
Monday, December 20, 2010
What is the Holiday Grind, and How Can You Trade It?
We go through this every year and it's amazing how many traders forget how to approach this market every year. It’s that time of year when volume dries up and prices rise into the new year. A lot of individuals are scrambling to prepare for the holidays, even though we had a year to prepare. The big money has already done most of their year end shuffling and will be taking it easy until January.
The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets. While I am keeping a close eye for a top, there is not much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The U.S. federal government is the only wild card going into year end that should be on traders’ radars. They have been doing a great job boosting prices in the equities and commodities market, but can they continue to hold things up when the big money and the proverbial herd start unloading positions in 2011?
SP500 Holiday Grind – Daily Chart
This chart shows the slow and steady grind higher that we have seen in the S&P 500. I expect this to continue into 2011 The market in my opinion is on the verge of some serious selling so long positions should be small going forward.
US Dollar On Pause For A Couple of Weeks
This 4 hour candle stick chart of the dollar shows price testing resistance (a previous high). I am expecting to see the U.S. Dollar trade sideways or possibly move closer to the previous high as we enter the new year. A sideways dollar will allow the equity and commodity markets to rise.
Conclusion:
In short, I think we could see an intraday pullback early this week and then a grind higher. The pullback would shake out some weak positions before the holiday march higher takes place. I typically don’t trade much going into the holiday season and new year. I may put on a small long position if I like what I see forming on the charts, but that would likely be about it. Light volume can be very dangerous to trade because sharp price spikes up or down can occur in a blink of an eye catching traders off guard.
If you would like to learn more about trading while getting trade alerts for ETFs just click here to join Chris Vermeulen newsletter at The Gold and Oil Guy.com
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The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets. While I am keeping a close eye for a top, there is not much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The U.S. federal government is the only wild card going into year end that should be on traders’ radars. They have been doing a great job boosting prices in the equities and commodities market, but can they continue to hold things up when the big money and the proverbial herd start unloading positions in 2011?
SP500 Holiday Grind – Daily Chart
This chart shows the slow and steady grind higher that we have seen in the S&P 500. I expect this to continue into 2011 The market in my opinion is on the verge of some serious selling so long positions should be small going forward.
US Dollar On Pause For A Couple of Weeks
This 4 hour candle stick chart of the dollar shows price testing resistance (a previous high). I am expecting to see the U.S. Dollar trade sideways or possibly move closer to the previous high as we enter the new year. A sideways dollar will allow the equity and commodity markets to rise.
Conclusion:
In short, I think we could see an intraday pullback early this week and then a grind higher. The pullback would shake out some weak positions before the holiday march higher takes place. I typically don’t trade much going into the holiday season and new year. I may put on a small long position if I like what I see forming on the charts, but that would likely be about it. Light volume can be very dangerous to trade because sharp price spikes up or down can occur in a blink of an eye catching traders off guard.
If you would like to learn more about trading while getting trade alerts for ETFs just click here to join Chris Vermeulen newsletter at The Gold and Oil Guy.com
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Wednesday, December 15, 2010
Trading The Inverse Relationship Between The SP 500 and the U.S. Dollar
Between the FOMC meeting, low volume holiday trading and Chinese government banking action this week, no surprise that the street is starting show a lack of confidence in the equities market. This Wednesday we started to see fear (green indicator) reach a level which tells us to start looking for the market to bottoming. I do follow a few other charts and indicators which warn me of a possible trend reversal (high probability setup) before it takes place but the US Dollar and selling volume are key.
As we all know, when the market is trying to top and roll over it tends to be more of a process than a couple day event. It’s this lengthy topping process which has a lot of choppy price action sucking traders into a position much to early or shakes you out of the position before the market does what you anticipated. Knowing that tops tend to drag out for an extended period of time is critical for an options trader simple because of Theta (time decay)
On the flip side, bottoming is more of an event because it tends to happen after a strong wave of panic selling. Fear is the most powerful force in the market (other than the Fed/Manipulators.. but that’s another topic). That being said, when you know what to look for in bottoms you can generally see the market starting to bottom and prepare for it.
The charts below of the US Dollar Index and the SPY clearly show the inverse relationship they have. Right now it seems everything is directly connected with the dollar… it has been like that for most if the year… I will note that its not normally this clear. Anyways, the dollar is currently trading at resistance which means there is a good chance it will turn back down. So if the dollar drops, then it should boost the SPY (equities market) and put in a bottom for stocks.
Looking at the lower chart of the SPY etf you can see that recent prices have dropped down to a support zone. The important thing to note here is how selling volume is ramping up. This to me means more traders are getting worried and are cutting their losses or locking in gains before it gets worse. We typically see panic selling enter the market near the end of pullbacks. Just like in a bull market where the retail trader (John Doe) is the last to buy into a stock before it falls, it’s the same but flipped in a down trend. The retail trader is the last to panic and sell out of their position before the market bounces/rallies.
Currently the equities market looks to be showing signs that a bottom is nearing. Over the next session or two the rest of this equation should come to light as a tradable bottom or to start playing the down side of the market, only time will tell.....
Posted courtesy of Chris Vermeulan at The Gold and Oil Guy.Com
If you would like to learn more and get Chris' trading alerts along with his pre-market morning videos so you know what to look for in the coming session I recommend taking a minute to subscribe to his ETF trading newsletter. Just visit The Gold and Oil Guy.Com
Share
As we all know, when the market is trying to top and roll over it tends to be more of a process than a couple day event. It’s this lengthy topping process which has a lot of choppy price action sucking traders into a position much to early or shakes you out of the position before the market does what you anticipated. Knowing that tops tend to drag out for an extended period of time is critical for an options trader simple because of Theta (time decay)
On the flip side, bottoming is more of an event because it tends to happen after a strong wave of panic selling. Fear is the most powerful force in the market (other than the Fed/Manipulators.. but that’s another topic). That being said, when you know what to look for in bottoms you can generally see the market starting to bottom and prepare for it.
The charts below of the US Dollar Index and the SPY clearly show the inverse relationship they have. Right now it seems everything is directly connected with the dollar… it has been like that for most if the year… I will note that its not normally this clear. Anyways, the dollar is currently trading at resistance which means there is a good chance it will turn back down. So if the dollar drops, then it should boost the SPY (equities market) and put in a bottom for stocks.
Looking at the lower chart of the SPY etf you can see that recent prices have dropped down to a support zone. The important thing to note here is how selling volume is ramping up. This to me means more traders are getting worried and are cutting their losses or locking in gains before it gets worse. We typically see panic selling enter the market near the end of pullbacks. Just like in a bull market where the retail trader (John Doe) is the last to buy into a stock before it falls, it’s the same but flipped in a down trend. The retail trader is the last to panic and sell out of their position before the market bounces/rallies.
Currently the equities market looks to be showing signs that a bottom is nearing. Over the next session or two the rest of this equation should come to light as a tradable bottom or to start playing the down side of the market, only time will tell.....
Posted courtesy of Chris Vermeulan at The Gold and Oil Guy.Com
If you would like to learn more and get Chris' trading alerts along with his pre-market morning videos so you know what to look for in the coming session I recommend taking a minute to subscribe to his ETF trading newsletter. Just visit The Gold and Oil Guy.Com
Share
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