Current Gold & Crude Oil Trading Patterns Unfolding

The past two months we have seen all the focus from traders and investors be on the equities market. And rightly so and stocks run higher and higher. But there are two commodities that look ready to explode being gold and oil (actually three if you count silver).

Below are the charts of gold futures and crude oil 4 hour charts. Each candle stick is 4 hours allows us to look back 1-2 months while still being able to see all the intraday price action (pivot highs, pivot lows, strong volume spikes and if they were buyers or sellers…).

The 4 hour chart is one time frame most traders overlook but from my experience I find it to be the best one for spotting day trades, momentum trades and swing trades which pack a powerful yes quick punch.

As you can see below with the annotated charts both gold and silver are setting up for higher prices in the next 1-2 weeks from a technical point of view. That being said we may see a couple days of weakness first before they start moving up again.

4 Hour Momentum Charts of Gold & Oil:

By: Chris Vermeulen catch all of Chris videos and post at the Gold & Oil Guy.com

SPX's Running Correction, Gold's Setup, Crude Oil Explodes!

The financial markets continue to climb the wall of worry on the back of more Fed Quantitative Easing. Those trying to pick a top in this choppy bull market may prove to be correct for a couple hours but over time the shorts continue to get clobbered.

Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.

The past few weeks the number of emails I receive on a daily basis about what individuals should do about short positions they took on their own has growing quickly. Usually when my inbox starts to fill up with traders holding heavy losses trying to pick a top I know something big is about to happen and its not going to be in the favor of the herd (everyone shorting). In the past couple week there have been some great entry points for the broad market whether its to buy the SP500, Dow, NASDAQ or Russell 2K. I focus on trading with the trend and entering on extreme sentiment readings as shown in the chart below.

Extreme Trend Trading Analysis
Below are my main market sentiment indicators for helping to time short term tops and bottoms. That being said I don’t pick short term tops in hopes to profit on the down side. Rather I wait for a extreme sentiment bottom to be put in place, then enter long with the up trend (Buy Low).

Once there is a 1-2% surge in price and sentiment indicators are showing a short term top I like to pull a little money off the table to lock in some profits while still holding a core position (Sell High). This is exactly what I/subscribers have done over the last couple weeks. This is a simple yet highly effective strategy and works just as well in a down trend except I focus on shorting extreme sentiment bounces. Subscribers know what these indicators are as I cover them each week in my daily pre-market trading videos as we prepare for the day ahead.

SPX Running Correction
Since early September the equities market has been on fire. In late September the market was extremely toppy looking and trading at key resistance levels from prior highs convincing a lot of traders to take a short position. But instead of a correction the market surged and has since continued to grind its way up week after week.

This rising choppy price action can be seen two ways:
1. As a rising wedge with a blow off top (Bearish)
2. Or as a Running Consolidation (Bullish)

The running consolidation happens when buyers are abundant picking up more shares on every little dip. Overall looking at the intraday price action you will see market shakeouts as it tries to buck traders out before it continues higher. This choppy looking market action if not read correctly looks extremely bearish to the novice trader and the fact the market is so overbought it easily convinces them to take short positions. This choppy action is just enough to wash the market of weak positions before starting another run up.

All that said, both a blow off rising wedge and a running correction are very bullish patterns for a period of time. Again I cannot state it enough, trade with the trend and the key moving averages.

Gold Shines On The Daily Chart
The gold story is straight forward really… Trend is up, quantitative easing is back in action and that is helping to list gold and silver prices. Key moving averages have turned back up and gold closed at a new high which shows strength.

Golden Rocket
With another round of quantitative easing just starting and gold making another new high last week there is a very good chance gold stocks will rocket higher in the coming 8 months. I have been following Millrock Resources Inc. because of the team involved with this company. A breakout to the upside here could post some exciting gains if you take a look at the chart and see where the majority of volume has traded over the years along with the bullish chart patterns (Cup & Handle/Rising Wedge) with strong confirming volume. From 84 cents to the $3.50 area there should not be many sellers other than traders slowing taking profits on the way up.

Crude Oil Breaks Out Of Cup
Crude oil has been dormant the past few weeks even though the US Dollar has plummeted. But last week’s news on more QE was enough to send oil higher. The surge took oil prices straight to the 2010 highs as expected and blew past my first target of $86.00 per barrel. I figure it will consolidate here for a while until we see if the dollar bottomed last week or is just testing the breakdown level.

Weekend Trading Conclusion:
In short, the market has played out exactly as we planned and all four of our positions are deep in the money. As we all know the market goes in waves in both price and for trade setups. The past couple weeks were great for getting into trades and now the market is running in our direction. It will take a few days for the market to stabilize (pullback or pause) before we could get anther round of trade setups. Keep position sizes small as the market remains overbought and a sharp correction could happen at any time. Until then, keep trading with the trend.

Get Chris Vermeulen's Daily Pre-Market Trading Videos, Daily Updates & Trade Alerts Here at The Gold And Oil Guy.com


Disclaimer: Chris owns shares of SPY and MRO.V
Share

Gold, Crude Oil, SPX....Trading Around the Election

This week we have a major wild card (Election) happening on Tuesday. Most of you know I don’t get involved with political discussion for several reasons… one of them being that I am Canadian “an outsider” looking in.

That being said, it looks and feels as though the market has been propped up and oil has been held down from an invisible force. Lots of theories going around saying higher stock and lower/stable oil prices will give voters the warm fuzzies to keep the current leaders elected… I prefer trading the charts and not getting caught in the Wall St. hype.

Let’s take a quick look at some charts

SPY – SP500 ETF Trading Vehicle
The broad market has been finding buyers as the beginning of each month and it looks as though it’s ready for another bounce. I do want to note that Tuesday or Wednesday we could see a very sharp move in the market as investors around the world digest the outcome. It is very important to keep positions small and or use protective stops incase of a flash crash or flash rally for those of you trying to pick a top.

Gold Price – Futures Contract
The price of gold looks to be setting up for another wave down in my opinion. More often than not we see a sharp pullback, sideways chop then a pop above recent highs. It’s that pop above recent highs which tends to suck in long positions only to roll over and make new lows quickly after. As noted in previous reports, gold has support around $1300 area and that’s what I am looking for. Again this week’s election will trump recent price action so we really just need to sit tight until the smoke settles.

Crude Oil Futures:
Crude oil has been trading sideways for a solid month while the US dollar has been dropping at tremendous rate. Many oil traders believe the price is being manipulated to stay down until the election is finished because of the strong negative affect rising oil prices have on the economy/end user/voters.

In short, this is a going to be a wild week in the market. Keeping position sizes small and using protective stops is crucial during times like these. We have taken profits on both of our positions from last week and have moved our stops to breakeven for the balance just incase of a crash.

Overall, I am neutral on the market for a couple days until we see what type of blip we get on the charts.

If you would like to receive my Daily Trading Commentary, Charts and Trades be sure to join my newsletter at The Gold And Oil Guy.com

Chris Vermeulen



Share

SP 500 Fakeout & Market Trend

From Chris Vermeulen, The Gold and Oil Guy....

I think it’s safe to say that everyone knows the markets are manipulated… but during options expiry week we tend to see prices move beyond key resistance and support levels during times of light volume which triggers/shakes traders out of their positions.

Trading during low volume sessions Pre/Post holidays for swing traders or between 11:30am – 3:00pm ET for day traders tends have increased volatility and false breakouts. This happens because the market markets for individual stocks can slowly walk the prices up and down beyond short term support and resistance levels simply because there is a lack of participation in the market.

SP500 4 Hour Candlestick Chart
That being said, the chart below of the SPY (SP500 ETF) shows that last Thursday, (the day before Friday options expiry) the put call ratio was showing extreme bullishness. I also mentioned that we should expect a pop of 0.5 -2% in the next 24 hours as big guys will try to shake everyone out of their short positions (put options).

The put/call ratio indicator at the bottom of this chart is a contrarian indicator. When it shows that everyone has jumped to the bullish side, the big money knows its about time to change the direction so they can cash in at premium price levels.

SP500 60 Minute OptionsX Chart of the Week
If you look at the volume at the bottom of the chart you will see there are times where this virtually zero volume trades. The yellow high lighted section shows the overnight price surge which is very easy for the big guys to push higher as everyone sleeps.

Here is what they are doing. The light volume makes it easy to manipulate so they push it higher until key resistance is broken, then everyone who was short and had a protective stop in place will have their order executed. As the price rises, more and more stops get triggered. Also, with the rising number of traders becoming bullish from the previous session have buy orders to go long if key resistance is broken. This causes a virtually automated rally to unfold, but once the orders/buying dries up, the big guys start selling their positions at premium prices, pushing the price all the way back down to where the market closed the previous day.

In short, the big guys shook the majority of traders out of their positions Thursday night and pocketed a ridiculous amount of money. Crazy part is 99% of the public don’t even know this type of thing is happening while they sleep.

SP500 OptionsX Intraday Price Action
I thought I would show this chart as it shows the selling pressure in the market. What I find interesting about this chart is the fact there was more selling volume during options expiry week, but the prices continued to move higher.

From watching the market internals I saw the majority of traders go from bearish to bullish by the end of the week, and this really gave the big guys a huge advantage in my opinion. Each session selling volume took control with the big guys unloading bu the low volume afternoons naturally brought prices up again as more and more traders became bullish each session. This happened all week and Thursday night it looks as though they let the price rise allowing the key resistance level to be broken which caused a surge of buying which they could selling into. So what’s next…

SP500 / Broad Market Trading Conclusion:
In short, the market looks toppy and if all goes well, last weeks overnight shakeout just may have been a top. This week will start off slow and most likely with light volume until Wednesday. During light volume times, keep trading positions smaller than normal and remember there is a neutral/upward bias associated with light volume.

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 2-4 investments at a time, I’ll only be covering only one. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis per customer’s request, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of newsletter traders and they will receive direct personal responses regarding trade ideas and analysis going forward. Let the volatility and volume return!

Chris Vermeulen

Get More Free Reports and Trade Ideas Here for Free: FREE SIGN UP



Share

How to Find Market Tops for Gold & the Dow

Last week the general market continued to grind its way higher for yet another week. Overall I feel the market is very much over bought. We all know the market can stay in extreme overbought levels for extended periods of time making it very difficult to pick tops.

This is the reason I do not try to pick tops, but rather wait for a top to form before putting my money to work. While a bottom can be made in 1 day, tops tend to take days and some times months to complete.

A few things really stood out to me when looking back on last week’s price action.

1. Gold (GLD Fund) was only up 0.29% for the week while the gold mining stocks (GDX Fund) was down over 3.5%. This strong divergence really has me concerned about the price of gold in the near term. Gold stocks generally lead gold and if they are down 10x more than gold last week, we better watch out....

2. The US Dollar broke out and started to rally posting a gain of 1% for the week. It is definitely weird to see gold move higher when the US dollar is rising…

Gold GLD Daily Chart

Gold has been trading sideways/down since December. I see this large 5 month pullback as a bull flag and expect to see much higher prices for gold long term. But I don’t count my eggs before they hatch, so I continue to focus on the daily and intraday chart patterns for low risk trading opportunities.

Friday we saw gold close very strong for the day. It looks very much like a reversal candle but with the price trading under the mini head & shoulders neck line and with the US Dollar in rally mode again, I don’t think the stars are aligned enough for me to put money to work just yet.

Gold is currently trading in a major congestion zone. Until there is a breakout of this zone, I think setups will not be very accurate.



Dow Jones Industrial Average vs. NYSE New Highs Divergence – JANUARY

This chart shows the January 2010 peak in the stock market. As you can see prices became choppy with strong up and down movements before we saw the sharp drop.

Also note the NYSE new highs line. As the market became choppy new highs began to drop quickly. This indicated the market internals were weakening and led to an 8% drop over the next couple weeks.



Dow Jones Industrial Average vs. NYSE New Highs Divergence – MARCH

This chart in my opinion looks much the same as January. You can see the Reversal candle from the February lows and the strong rally to the current price, as of Friday.

Notice how the market is getting choppy. Also last Thursday the Dow gave us a reversal candle. But this time the reversal candle is to the down side.

Also note the NYSE New Highs line. It has dropped sharply indicating the market internals are weakening once again.

This is what trading is all about… finding things that are out of whack and waiting for a low risk setup in order to make a profit.



Weekend Trading Conclusion:

In short, the stock market is over bought and about to roll over. I do understand that this grind higher could last another week or so, which is why I am focusing on short/quick intraday movements like Friday’s SP500 Intraday Low Risk Setup, and not buying etf funds to hold for a few weeks. Most of you know I do not chase prices higher simply because down side risk increased when buying into an over extended rally.

I feel gold, silver and oil will move together and at this time, I don’t like their charts for trading. With any luck we could get some setups this week, but not counting anything just yet.

Just click here if you would like to receive Chris Vermeulen's Real Time Low Risk ETF Trading Signals.


Share

Stocks and Commodities Are Trading Predictably

It’s been a great week so far. Stocks and commodities are moving as expected from my weekend trading report. I like to see the market unfold in a calm collected manner.

The US dollar has made a nice move in the past couple weeks. Although it has broken out of its down channel I think there is a lot of short covering going on making this bounce more powerful than others. Also it is important to note that it is near resistance which could dampen things around the $77-77.5 level. If the dollar heads back down I expect gold to start making a move back up which it started to do Wednesday.

Below are my thoughts and charts about what I think is unfolding for both stocks and commodities.

DIA – Dow Jones Index Fund
The DIA fund has performed just the way I thought it would. Push to a new high then sell down. Generally I would expect this move down to test my support level or trade near that level, but because we are heading into the holiday season and volume is light the market has a natural tendency to drift higher. I’m sure this is why it’s still trading near the high.

This new yearly high was enough to suck in breakout traders and only time will tell if they get follow through or get shaken out of this trade also. Oh, the joys of buying a breakout in an over bought market condition.



GLD – Gold Exchange Traded Fund
Gold broke down sharply from its trend channel and has settled into a support zone. Wednesday we saw a nice bounce but the question is, is this a rally or a sucker’s bounce?
I’ve found the best setups and moves occur after an ABC retrace. The black lines on the chart show exactly that type of price action. These retraces shake out most short term traders before starting a new rally. There is a thin dotted blue line showing a possible resistance trend line which would need to be broken after the ABC retrace pattern has formed if we want a low risk setup with a sizable win/loss ratio.



SLV – Silver ETF Trading Fund
Silver is in the same boat as its big sister (Yellow Gold). We just need to wait for a high probability setup to present its self before putting any of our hard earned money to work.



USO – Crude Oil Fund
USO has provided some great short term gains for anyone who used my analysis from my Sunday night report. The quote and chart below covers my thoughts for USO.

Sunday night report:
“Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.”



UNG – Natural Gas Trading Fund
Natural gas is still very much a speculative play as everyone thinks they will make huge money from this commodity.

This means two things in my opinion:
1. It’s still headed lower
2. After rallies the sellers jump back in.

UNG is trading near resistance and it could provide a great shorting opportunity in the coming days.



ETF Trading Conclusion:
Although it’s been a quite week in the market, I have really enjoyed it. Not sure if it is related to everything unfolding in a controlled manner or the holiday season nearing, or maybe both?

November and December have been quiet for our ETFs but I know we are on the verge of either a large move up or down in the coming weeks. Let’s watch the market and funds unfold and see if we can get another trade or two in before year end.

Just click here to receive Free ETF Trading Newsletter from Chris Vermeulen The Gold And Oil Guy.









Share