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It’s been an exciting week for traders as volatility levels are through the roof and the broad market is moving up and down like a yoyo. You cannot take your eyes off the screen if you have a large amount of money invested as you can quickly find yourself with a large profit or loss in the matter of minutes....
Although we have seen stocks jump around the past few days precious metals have held strong with very little volatility. This is because of the economic fears looming for the US and other countries of possible financial collapse. This fear is helping to boost gold and silver prices because they are seen as the safe haven. Also we are seeing money move in the US dollar because the country is still seen as a leader in many ways helping to boost the US dollar.
Below are a couple charts on Gold and Silver ETF’s showing the end of last years rally and the correction in prices which are now looking to setting up for another leg higher.
Gold Futures Price – 60 Minute Day Trading Chart
Gold has been showing some very bullish price action the past week forming several mini bull flags with confirming volume levels. I think we should see gold pop another $5-10 bucks in the very near future if not continue higher for several days.
SLV – Silver ETF Trading Vehicle – Daily Chart
Silver formed much of the same patterns as gold but with much more volatility. Also silver has yet to break the 2009 high which is surprising but with a large part of silver being use for industrial purposes it does make sense as the economy is not as strong as it was thought to be in 2009. Silver carries much more risk when trading because it has more random moves and increased volatility.
Mid-Week Precious Metals Trading Conclusion:
In short, gold and silver are in an uptrend and looking strong. Both are currently trading at short term resistance levels on the daily chart which has caused them to stop moving up today (Wednesday May 26th) but on an intraday basis they look solid and could break though these resistance levels.
That being said buying way up here adds a lot more risk because a good chunk of the move has already been made and if prices do roll over and start heading back down the next support level is several percentage points away for placing a protective stop with the proper amount of wiggle room.
If Trading Gold, Silver and Index Futures and ETFs interest you, check out Chris Vermeulen's trading services at The Gold and Oil Guy.com
Gold and the stock market continue to trade within a tight range this week. While the long term trend for both stocks and metals are up, and the charts look bullish I am not buying at this level because the market is over bought.
Chasing prices higher especially after a run this large is not the right move in my opinion. I did mention last week that we could see stocks continue to grind higher going into earning season which is about 2 weeks away still. I think that could happen, and if the same thing happens which we saw last January with great earnings (which I think we will see again) then watch out for another drop.
In short, if earning are good which they have been and everyone is expecting the same this April, then the typical Buy on Rumor (pre-earnings rally) which is what we have now, and Sell on the Good News in April then all the suckers thinking the market should rally will provide some liquidity for the smart money to sell at a premium.
That being said, if the earning are not good, then people will sell on that news also because the market is just waiting for news to sell… It’s the exact same situation as last time, that’s how I am feeling about it.
Trading Bottoms in the Broad Market
The past few months I have been really focusing on buying dips in the broad market after I see a mini 3 wave correction. I use a mix between price patterns, volume, market sentiment, and market internals and of course years of watching how the market moves and evolves during times of economic expansion and contractions. This is represented on the chart below as the purple line.
This chart below shows one of my custom indicators which have successfully timed intermediate market bottoms 1-2 days before everything started to rally higher. This is one of the reasons we bought into the selling on Feb 5th and again on Feb 25th using ETF’s.
Because this is a new etf trading strategy and type of trading signal to be used in a bull market I still have to fin tune it a little more because I want to be sure we don’t get shaken out of positions to early which is what happened to a couple ETF’s we got into Feb 5th.
What happened was were buying when EVERYONE was bearish and panicking out of positions making it an extremely emotional time for traders and myself to buy into the market. This is not an easy task… I still have trouble pulling the trigger on these days and some times I just sit back in my chair and with one quick poke from my finger I hit the enter button to buy. My heart pounding just from that… but add few thousand followers on the pile relying on quality analysis and you start to understand what im going though. Not to mention the hundreds of emails with people telling me the market is about to crash, we should be shorting etc....Crazy times for sure.
Anyways, I will be provided these new signals for subscribers which is very exciting. Because my focus is on managing risk and keeping it as low as possible this will be a learning curve as I apply it to the service and set protective stops which is very difficult to do during a time of high volatility in the market. We can see the market move 2-4% in one day during these times so if we are trading the TNA 3x leveraged Russell2000 fund we could see our position drop 12% in one day. Bigger risk, bigger rewards as they say.
GLD Gold ETF – Daily Chart
Gold and silver are currently trading in limbo at the moment. It’s tough to say what’s going to happen here which is why I continue to wait for something with a high probability of winning before putting any money to work.
The daily chart clearly shows a multi month bull flag, ABC retrace, Reverse Head & Shoulders, and wedge. All of which are very bullish. It’s just a waiting game as I do not jump the gun on any move because the market has the tendency to catch everyone off guard and I don’t want to be one of them. Been there, done that to many times....
Mid-Week ETF Trading Signals Conclusion:
Keeping things short and simple, I think the stock market is in a major bull market. I am not buying anything until we get a pullback of some type. If the market unfolds properly we could have a great shorting opportunity (profit from a falling market) happening any day now, so that is my main focus at this time.
