Is Gold on the Verge of a Bottom - See for Yourself

The recent downward price swing in Gold has kept Goldbugs frothing at what they believe is a very unusual and unexplained price function in the face of so much uncertainty throughout the globe. With Turkey, Russia, China and many others experiencing massive economic and currency crisis events, Gold has actually been creeping lower as the U.S. Dollar strengthens. It is almost like a “Twilight Zone” episode for Gold Bulls.

The setup for a gold rally has been in place for over a decade. Much like in 2006 through 2008, the current price and volatility of Gold is simply mundane. For the past two years, Gold has rotated between $1190 and $1360 – within a $180 range. Certainly, Gold traders were able to find some profits within this range, but no breakout trends have been established since early 2016 when the price of Gold changed from Bearish to Bullish and a 31% rally took place driving prices $328.80 higher from the lows.

Our team of researchers, at The Technical Traders, believe something very interesting may be taking place in Gold right now – almost like a “Deja Vu” of the past. A double setup appears to have taken place recently and we believe the bottom may have already formed in Gold for now.

In early 2016 through November 2016 where price rallied 31% then retraced nearly 75% to form the second leg higher. This deep retracement of price was indicative of a wide price rotation before another leg higher pushed back up to near the all time highs.

From 2017 until now the Gold chart shows another 75% price retracement from recent highs once again. This second 75% retracement could be a massive bottom formation setting up in Gold and could be a huge “wash out” low price. We believe this unique retracement is indicative of a massive price breakout over the next year or so as the price of gold is forming what Stan Weinstein calls a Stage 1 Accumulation.

Now, let’s zoom in and take a look at the weekly chart and our Adaptive Dynamic Learning model, the predictive analysis suggests that Gold prices should begin to bottom within the next week or two and begin to climb much higher over the next 3 to 10+ weeks.

This pattern consists of 12 unique instances of data and suggests that the future upswing will start rather mild for the first 2 weeks, then begin to accelerate as time progresses. It appears we have a strong potential to see prices above $1400 within the next 5 - 8 weeks or so and you look at the previous chart above, what is the $1400 level? You got it! Resistance, and if price breaks out above $1400 a new bull market would be triggered!

As many of you are aware, Gold is often a move to safety when the global economy begins to show signs of chaos or weakness. We believe the move in the U.S. Dollar will stall and possibly correct as this move takes place. If Gold were to rally while the U.S. Dollar continued to strengthen, you can clearly assume that a flight to safety is taking place and it includes a massive capital migration toward U.S. equities and GOLD. If the rally in gold is seen while the U.S. Dollar weakens or stalls, then we are seeing a move to safety while the currency markets address regional and global currency market issues.

Either way, we expect Gold to begin a new rally higher off of this 75% retracement level to complete the Pennant formation that is currently set up for a Wave 5 upside price expansion. Some of this technical analysis may be over your head as it can be confusing, but you should get the gist of things which is that precious metals should find a bottom and there is the potential that a massive bull market could be on the horizon if price rallies quickly. Be prepared for this move because the Gold shorts will likely be forced to cover their positions within the next few weeks as this move begins to accelerate higher.

Visit The Technical Traders to learn how we can help you find these types of swings in the major markets. We alert our clients well in advance of these swings and deliver daily video content to all of our members before the market opens each day. Our objective is to make you a better trader and to help you find successful setups to create greater success. Visit our website to learn how we can help you become a better trader today.

Chris Vermeulen
Technical Traders Ltd.

When Will They Bottom? Crude Oil, SP500, then ExxonMobil

A full blown bear market in energy resources and energy stocks has been underway since mid-2014. History shows that the price of crude oil typically bottoms before the broad stock market. And oil related stocks bottom at the same time or later than the broad market. The monthly chart below shows how oil bottoms several months before the stock market does. This provides us with some insight on when we should start to expect a bear market to end in the US stock market.

Many traders follow and trade shares of Exxon Mobil. And while the are big money maker I do feel their share price is going to underperform oil for some time. Based on my research XOM has acquired many new oil operations, which many require $70+ per barrel to be profitable. This has cost XOM a considerable amount of capital and is now left holding and operating business that are losing money with the current price of oil sub $40 per barrel.

Base on my analysis, economic data and forecast I feel as though oil will remain low for another 3-9 months below $60 per barrel. It will do this for several reasons but what matter to us is that it forced the majority of oil producers to cap and close off well and go out of business. While this is taking place stocks and the economy will rebalance through a strong economic recession and a bear market in equities that will last most if not longer than 2016. Take a look at the US stock market average (SP500 index) in the chart below. While this chart is a very basic and simple looking forecast understand that the stock market internals and market breadth have completely collapsed just s we saw in 2000 and again in 2008 months before the index collapsed and started bear markets.

Oil, XOM, and Stock Trading Conclusion:

In short, I expect oil to find a bottom during the next 1-3 months. Oil services stocks on average are likely to trade sideways and build a basing pattern. These oil services stocks will not breakout and rally until the broad stock market has bottomed which I expect to happen late in 2016 or early 2017. Unfortunately, oil and oil stocks collapsed so fast without any retest or pause for us to get short and enjoy the ride down for profits. I feel trading oil and oil stocks will be choppy and tough in the near year. Last week subscribers and I played the energy (XLE) for a quick two-day pop of 2-4% return depending on entry and exit. These types of plays will continue, but the big trend trade in oil and energy are a long way away yet.

The easier money will be likely be shorting the stock market (buying inverse ETFs) to profit as stocks collapse which is what I provide subscribers to my ETF trade alert newsletter.

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Chris Vermeulen – www.The Gold & Oil Guy.com

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Gold, Copper, and Crude Oil Forecasted the Recent Selloff in the S&P 500

Nobody better in the industry at understanding herd mentality then the staff at The Technical Traders. And of course they have been telling us it would be like this.....you just have to know which herd to watch and when.....

For the past several weeks, everywhere I looked all I could find was bullish articles. After the fiscal cliff was patched at the last second, prices surged into the 2013 and have since climbed higher all the way into late February.

I warned members of my service that this runaway move to the upside which was characterized by a slow grinding move higher on excessively low volume and low volatility would eventually end violently. I do not have a crystal ball, this is just based on my experience as a trader over the years.

Unfortunately when markets run higher for a long period of time and just keep grinding shorts what typically follows is a violent selloff. I warned members that when the selloff showed up, it was likely that weeks of positive returns would be destroyed in a matter of days.

The price action in the S&P 500 Index since February 20th has erased most of the gains that were created in the entire month of February already and lower prices are possible, if not likely. However, there are opportunities to learn from this recent price action.

There were several warning signs over the past few weeks that were indicating that a risk-off type of environment was around the corner. As a trader, I am constantly monitoring the price action in a variety of futures contracts in equities, currencies, metals, energy, and agriculture to name a few.

Besides looking for trading opportunities, it is important to monitor the price action in commodities even if you only trade equities. In many cases, commodity volatility will occur immediately prior to equity volatility. Ultimately the recent rally was no different.

As an example, metals were showing major weakness overall with both gold and silver selling off violently. However, what caught my eye even further was the dramatic selloff in copper futures which is shown below.

Copper Futures Daily Chart



As can be seen above, copper futures had rallied along with equities since the lows back in November. However, prices peaked in copper at the beginning of February and a move lower from 3.7845 on 02/04 down to recent lows around 3.5195 on 02/25 resulted in roughly a 7% decline in copper prices over a 3 week period.

As stated above, commodity volatility often precedes equity volatility. As can be seen above, copper futures appear to be reversing during the action today and many times commodities will bottom ahead of equities.

I want to be clear in stating that equities will not necessarily mirror the action in commodities or copper specifically, but some major volatility was seen in several commodity contracts besides just metals. Oil futures were also coming under selling pressure as well.

Crude Oil Futures Daily Chart



As can be seen above, oil futures topped right at the end of January and then sold off briefly only to selloff sharply lower a few weeks later. Oil futures gave back roughly 6% – 7% as well which is quite similar to copper’s recent correction. I have simply highlighted some key support / resistance levels on the oil futures chart for future reference and for possible price targets.

In equity terms, since February 20th the S&P 500 futures have sold off from a high of around 1,529 to Monday’s low of 1481.75. Thus far we are seeing a move lower of about 3.10% since 02/20 in the S&P 500 E-Mini futures contract. While I am not calling for perfect correlation with commodities, I do believe that a 5% correction here not only makes sense, but actually would be healthy for equities.

S&P 500 E-Mini Futures Daily Chart



If we assume the S&P 500 E-Mini contracts were to lose 5% from their recent highs, the price that would correspond with that type of move would be around 1,453.

As shown above, while 1,453 does represent a consolidation zone in the S&P 500 which occurred in the beginning of January of 2013, there is a major support level that corresponds with the 1,460 – 1,470 price range.

I am expecting to see the S&P 500 test the 1,460 – 1,470 price range in the futures contract, however the outcome at that support level will be important for future price action. If that level holds, I think we likely reverse and move higher and we could even take out recent highs potentially. In contrast, if we see a major breakdown below 1,460 I believe things could get interesting quickly for the bears.

I am watching the price action today closely as I am interested in what kind of retracement we will get based on yesterday’s large bullish engulfing candlestick on the daily chart of the S&P 500 futures.

Ultimately if the retracement remains below the .500 Fibonacci Retracement area into the bell we could see some stronger selling pressure setting in later this week. The Fibonacci retracement of the 02/25 candlestick can be seen below.

S&P 500 E-Mini Futures Hourly Chart



So far today we have not been able to crack the 0.382 Fibonacci retracement area. This is generally considered a relatively weak retracement and can precede a strong reversal which in this case would be to the downside in coming days.

It is always possible to see strength on Wednesday and a move up to the .500 retracement level. As long as price stays under the .500 Fibonacci retracement level, I think the bears will remain in control in the short-term. However, should we see the highs from 02/25 taken out in the near term the bulls will be in complete control again.

Right now I think it is early to be getting long unless a trader is looking to scale in on the way down. I think the more logical price level to watch carefully is down around 1,460 – 1,470 on the S&P 500. If that level is tested, the resulting price action will be critical in shaping the intermediate and long-term price action in the broad equity indexes.

If you have to trade, keep position sizes small and define your risk. Risk is elevated at this time.

If you would like to get our detailed trading videos each week and know what is just around the corner test out here:

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Chris Vermeulen & JW Jones
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Gold Mining Stocks Continue to Disappoint ......But Not For Long

 From Chris Vermeulen....The Gold & Oil Guy

It is an endless debate for investors interested in gold. Should they buy a direct play on the gold price, either gold bullion itself or even so called paper gold with an ETF such as the SPDR Gold Shares (NYSE: GLD)? Or should they invest into gold equities, particularly the larger, higher quality gold mining companies?

Recent history suggests the answer is gold itself. According to Citigroup, physical gold has outperformed global gold equities 120% percent of the time over the past 5 years. Stocks of the bigger gold mining firms seem to react adversely to bad news (which is normal), but the problem is they react with no more than a yawn to good news. These type of stocks are contained in the Market Vectors Gold Miners ETF (NYSE: GDX).

Evidence of this trend can been seen in the latest news to hit the industry…the slowdown in expansion as recently signaled by the world’s largest gold producer, Barrick Gold (NYSE: ABX). The company’s stock has fallen by more than 30 percent over the last year due to cost overruns at major projects. The latest blowup in costs of up to $3 billion occurred in its estimate for development of its flagship Pascua-Lama project on the border of Chile and Argentina. The project may now cost up to $8 billion.

In addition, Barrick decided to shelve the $6 billion Cerro Casale in Chile and the $6.7 billion Donlin Gold project in Alaska. Barrick is not alone in its thinking among the major gold producers. The CEO of Agnico-Eagle Mines (NYSE: AEM), Sean Boyd, recently said “The era of gold mega projects may be fading. The industry is moving into an era of cash flow generation, yields and capital discipline.”

Fair enough. But are gold mining companies’ management walking the walk about yields or just talking the talk? Last year, many of the larger miners made major announcements that they would be focusing on boosting their dividends to shareholders in attempt to attract new stockholders away from exchange traded vehicles such as GLD, which have siphoned demand away from gold equities. Barrick, for example, did boost its dividend payout by a quarter from the previous level. Newmont Mining (NYSE: NEM), which has also cut back on expansion plans, has pledged to link its dividend payout to the price of gold bullion.

So in effect, the managements at the bigger gold mining companies (which are having difficulties growing) are trying to move away from attracting growth-only investors to enticing investors that may be interested in high dividend yields. This is a logical move.

But rising costs at mining projects may put a crimp into the plans of gold mining companies’ as they may not have the cash to raise dividends much. And they have done a poor job of raising dividends for their shareholders to date. In 2011 the dividend yields for gold producers globally was less than half the average for the mining sector as a whole at a mere 1.3 percent. Their yields are below that of the base metal mining sector and the energy sector.

It seems like management for these precious metal companies have the similar emotional response shareholders have when they are in a winning position. When the investor’s brain has experienced a winning streak and is happy it automatically goes into preservation/protection mode. What does this mean? It means management is going to tight up their spending to stay cash rich as they do not want to give back the gains during a time of increased uncertainty. Smaller bets/investments are what the investor’s brain is hard wired to do which is not always the right thing to do…

Looks like there is still a lot work to be done by gold mining companies’ to improve returns to their shareholders. But with all that set aside it is important to realize that when physical gold truly starts another major rally. These gold stocks will outperform the price of gold bullion drastically for first few months.

Gold Miner Trading Conclusion:

In short, it seems gold has been forming a major launch pad for higher prices over the past year. Gold bullion has held up well while gold miner stocks have given up over 30% of their gains. If/when gold starts another rally I do feel gold miner stocks will be the main play for quick big gains during the first month or two of a breakout. The increased price in gold could and value of the mining companies reserves could be enough to get management to start paying their investors a decent dividend which in turn would fuel gold miner shares higher.

Both gold and silver bullion prices remain in a down trend on the daily chart but are trying to form a base to rally from which may start any day now. Keep your eye on precious metals going into year end.

If you would like to get my weekly analysis on precious metals and the board market be sure to join my free newsletter at The Gold & Oil Guy.com

Chris Vermeulen

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The Dollar and Manipulation Control the Market

Over the weekend I had an interesting conversation with a local trader. We typically meet a few times a year to share our market outlooks, new trading tools and techniques, and usually finish our session off in a debate about the US market manipulation and how to trade around it.

Talking about market manipulation always opens up a can of worms and sparks some interesting theories… And while everyone has their own views and opinion on this subject I thought I would briefly share the main points I pulled from our conversation.

I did talk about the dollar index last week, but the recent price action unfolding today is important so I’m going to recap on it again.

My Weekend Conversation Key Thoughts:

Point form thoughts supporting Lower Equity prices and a Higher Dollar:

-          Dollar index looks ready for a major rally (high dollar means lower stocks)

-          SP500 may have just formed a double top

-          SP500 closed strongly below the 20 day moving average

-          First week of May for the past two years have been intermediate market tops

Points supporting Higher Equity prices and a Lower Dollar:

   Countries around the globe are trying to keep their currency value low including the United States.

   Presidential cycle strongly favors higher stocks prices which means the dollar should not rally until Nov.

   What do all these points mean? Let’s take a look at the dollar charts below…

4 Hour Dollar Index Chart:

This chart time frame allows us to see all intraday price action while being able to zoom out several months for patterns along with key support and resistance levels.

As you can see over the past few months the dollar has been consolidating sideways. Within this consolidation it has formed two bullish falling wedges with the most recent one breakout last week right on queue.

Using this 24 hour futures dollar index chart we can see where things are trading through the weekend. On Friday the dollar index closed around the 79.50 level. As you can see the dollar has surged Sunday night by more than half a penny breaking through its down trend line.

The next few weeks will continue to be exciting ones as strong moves in the dollar will create wild movements in stocks and commodities.

Long Term Weekly Dollar Index Chart:

If you zoom WAY OUT using the weekly chart this shows you the two major areas where the dollar index is likely to reach come November. Also with these levels are my SP500 price points which are simply numbers I pulled from the charts using basic analysis. I say this because I’m not into long term forecasting but rather shorter term price movements. A lot can change between now and then.

So, if the dollar index rallies to the 86 – 88 level then I would expect the SP500 to be trading back down at the 1000 level. If this takes place, the Fed will likely issue QE3 to jam the dollar back down and boost equities.

The flip side of the coin is that the dollar rolls over here and gets pulled down. This will boost stock prices in favor for the president’s election. After that the dollar would likely rally which in turn would put a major top in the stock market, kick starting a bear market.

The big question…

Do you short the market in anticipation of rising dollar and falling stock prices? OR do you buck the trend and stick with the theory of a lower dollar value and presidential cycle?

The charts above clearly show how we are entering a major tipping point for the market and the next couple months are likely going to provide some big price swings for stocks, commodities and currencies.

If you want to get my thoughts and market ideas each morning before the opening bell be sure to join my video newsletter The Gold & Oil Guy.com

Chris Vermeulen

The Long Term Fundamental Case for Gold

A quick glance at most of the headlines over the weekend and the primary focus seemed to be either calling a near term top in domestic equity indices or a focus on the Greek debt situation. Why is anyone even paying attention to what is going on over there? Until the ISDA declares a default where the underlying Credit Default Swaps (CDS) are triggered, it is all just noise.

The ECB has broken the rule of law by placing itself as the senior creditor ahead of private creditors, the Greek government is trying to pass retroactive legislation to trap private sector creditors holding out of the PSI, and the leader of Greece was not even elected by the people of Greece – how much more manipulation and insanity do we need to monitor?

Similar to the price action since 2008, central banks around the world control everything from financial markets to the ascent of political leaders. These same political leaders help central bankers and planners control policy and decision making at the highest government levels in Europe and around the world. It would seem that the United States should change the motto from “We the People” to “We the Bankers.”

However, there is one particular asset class that even the central bankers have a hard time controlling. While they can impact short term price action through direct currency manipulation initiatives, in the longer-term gold is likely to move in only one direction, higher.

The price action on Tuesday reminded market participants that actions such as the Greek bailout come at a cost. Quantitative easing and/or printing money (depending on what one wishes to call the practice of producing fiat currency out of thin air) has a direct impact on the price of gold.

Many financial pundits argue that gold has no utility, but what they fail to recognize is that gold is the senior currency to all other fiat currencies. Silver is also a form of currency and is senior to all other fiat currencies as well. While one can draw the utility of gold into question, the idea that gold is the senior most currency to all other fiat currencies is not new.

The Constitution of the United States of America, which is over 200 years old, refers to gold and silver as forms of payment. Looking back thousands of years the Romans used gold coins as a form of currency. The idea that gold and silver are currencies is certainly not a grandiose thought or a stretch of historical concept. Trying to depict gold as a worthless asset depends on your view and consideration of fiat currency.

There are those that would argue that the Federal Reserve of the United States is not actively manipulating economic conditions domestically or abroad. For those that view gold as a poor investment or hedge against currency devaluation need to consider the charts illustrated below. The chart below was produced by Thomas Gresham of Gresham’s Law.

Total Asset Growth of the Federal Reserve System – 1915 – 2012

It is rather obvious by looking at this chart that the Federal Reserve has actively sought to enter domestic and foreign financial markets. The surge in balance sheet assets serves to prove how far the Federal Reserve Bank is willing to go to maintain markets which seemingly are only allowed to move higher over time.

This chart is bearish for nearly any form of paper backed assets. The above referenced chart is long term bearish for the Dollar and Treasuries and long term bullish for physical gold and silver. As the Federal Reserve continues to debase the U.S. Dollar in concert with other central banks’ monetary easing programs, gold and silver prices over time are destined to move higher in virtually every form of fiat currency.

During the same time frame that the Federal Reserve has seen its balance sheet grow exponentially, the rapid rise of M2 money supply is staggering. The long term chart of M2 is compared to gold futures in the charts presented below.

M2 Money Stock

Gold Futures Monthly Chart

It is rather obvious what has happened to the price of gold as the M2 money supply has grown. The idea that the Federal Reserve has not already destroyed a significant amount of the purchasing power of the Dollar can easily be refuted by the two charts shown above.

In the short term, gold and silver could suffer from a pullback, but in the intermediate to longer term it is unlikely that we have seen the highs of this bull market for either metal. As long as central banks around the world continue to print money and expand their balance sheets gold and silver will remain in a long term bull market. The daily chart of gold futures is presented below.

Gold Futures Daily Chart

As can be seen above, it is not out of the question that we could see gold pullback to test one of the key moving averages in coming days/weeks. However, I expect the key support area to hold in the event of a sharp selloff. Ultimately, I expect to see a breakout over the resistance zone in the days/weeks ahead. However, I would not be surprised to see gold consolidate or work marginally lower from current prices before breaking out to the upside. Right now the primary threat in this fledgling gold rally is a short term spike higher in the U.S. Dollar. The primary catalyst which could drive a flight to the Dollar involves the sovereign debt situation in Greece and the Eurozone as a whole.

While the short term price action may be bearish, the intermediate to longer term time frames are quite bullish for metals as central banks will continue to race to debase their currencies. Quantitative easing in the U.S. and around the world will become pervasive and gold prices could potentially soar in value. The data from the Federal Reserve Bank itself suggests that they are indeed increasing the money supply. As time has passed, the money supply and gold have seemingly grown in lockstep with one another. Surely inquiring minds do not consider this mutual relationship between gold and the money supply to be purely coincidental.

As further evidence that the Federal Reserve continues to use quantitative easing to manipulate asset prices through direct entry into financial markets, a chart of the velocity of M2 clearly depicts that the velocity of money is declining. I am not an expert regarding macroeconomic data, but if the velocity of money is declining to 1960’s levels would it be a stretch to say that we may be going through a period of stagflation? The chart below illustrates the Velocity of M2 Money Stock courtesy of the St. Louis Federal Reserve Bank.

Velocity of M2 Money Stock

For those unfamiliar with the term velocity of money, it is simply the rate of turnover in the overall money supply. The velocity of M2 is expressed as the number of times that a Dollar is used to purchase final goods or services which are included in the total gross domestic product.

Conclusion

The short term technical picture in gold is a bit suspect due to overhead resistance and recent U.S. Dollar strength. However, the longer term macro factors that impact the value of the U.S. Dollar and precious metals are all telling us the same thing.

As time wears on and central banks do even more to prop up the broader economy and failing financial institutions, it is without question in my mind that gold and silver will both benefit handsomely from these decisions being made by central bankers from around the world.

Ultimately, I am very bullish of gold and silver in the intermediate to longer-term, but in the immediate short term frame gold could consolidate or pullback before breaking out to the upside.

By: Chris Vermeulen – Get Chris' Free Weekly ETF Reports & Analysis 
Co-Author: JW Jones – Get J.W.s Free Weekly Options Reports & Analysis

The Currency War Big Picture Analysis for Gold, Silver & Stocks

I think you will admit that we are in the middle of one major crazy financial mess. The part that makes things really crazy is that it’s not just in the United States anymore but rather serious global problem which if not handled properly could change the way we live our lives going forward or possibly even spark some type of war, hopefully things don’t get that crazy...... But I do know one thing. Fear is the most powerful force on the planet and people do some crazy things when they are backed into a corner.

Anyways, on a more positive tone…... today China decided to help provide more liquidity for the financial system along with the central banks. This news triggered a monster rally in overnight trading making the market gap up sharply at the opening bell. This news did hit the US dollar index hard sending it sharply lower but the question remains “Will today’s news be a one week hiccup in the market?” If Euroland starts printing money it will likely send the dollar higher and stocks lower for 6 -12 months.

Just today I was joking with Kerry Lutz of the Financial Survivor Network about how each country should just give each other country a second chance. Wipe the dept clean and start over knowing this time around exactly how each country truly operates at a financial level allowing everyone to avoid a repeat of this BS. Some countries will get off way better than others because they would get so much dept wiped clean. But isn’t it better than years of problems and possibly wars over food, gold, guns, oil and Canadian water? 

All joking aside, let’s take a look at the weekly long term charts.....…

Dollar Index Showing Possible Massive Rally If Euro Starts Printing Money:

I’m sure my off the cuff options/thoughts will cause a stir but I am fine with that. Everyone I talk to is thinking the dollar is about to fall off a cliff while I think it’s very possible that it does just the opposite. Either way I will be looking to benefit from which ever move unfolds.

Weekly Gold Chart:

Weekly Silver Chart:

Weekly SP500 Chart:

Long Term Thoughts:

I would first like to say that tonight’s report is out of my norm. Generally I do not focus on the big picture negative stuff and I like to avoid it for a few reasons...... One, it’s just downright depressing to talk and think about. And Second I don’t want to be labelled as one of those “The Sky Is Falling” kinds of guys.

So, that being said I think these charts above show a situation what is very possible to happen in the coming 6-12 months. Keep in mind that my focus is on short term time frames as it allows me to avoid and actually profit from major market moves while providing enough information for my followers to learn technical analysis and trade management. And the obvious idea of not looking too far into the future with a negative outlook.......

With headline risk changing the market direction on a weekly basis, this negative outlook could easily change in a couple months. I will recap on the big picture as things unfold in January/February.

Chris Vermeulen
The Gold and Oil Guy.com

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How to Trade Using Market Sentiment & the Holiday Season


How to Trade Oil ETFs When $100 Per Barrel is Reached

How to Trade Using Market Sentiment & the Holiday Season

The months of November and December are the second strongest back to back months for the financial markets. Many traders and investors use this time of the year to reap big gains as they close the year out. The fact that most traders and investors are sitting in cash and underweight stocks in their portfolio’s leaves me to believe a Santa Clause rally is just around the corner. Reason being is everyone has cash on hand to buy stocks because they are selling their positions in this pullback we are in right now. I know traders well enough, they will buy back into the market trying to catch the holiday rally in the coming weeks.

Subscribers and myself have been short the SP500 for a couple weeks after watching the broad market become overbought and sentiment levels became overly bullish with greedy pigs thinking they could buy stocks after a massive month long rally that had not pullback. Once the selling started you would either get you head handed to you or you were going to make a killing buying leveraged inverse ETFs.

Those who arrived late to the rally are the ones selling out of their positions this week. The interesting thing about this week’s market condition is that I have not seeing any real panic selling in stocks, and I’m not seeing the volatility index spike in value yet.

What does this mean? Well it means we could actually see another big dip in the market which should last 1-2 days and then we get a sharp reversal to the upside.

Take a look at the SP500 & Volatility index below:

This chart allows us to get a feel for fear in the market. Me being a contrarian trader, I focus on market sentiment extremes. When the masses are losing money hand over fist I’m generally on the other side of that trade with open arms. Trading off fear is one of the easiest ways to trade the market. That is because fear is much more powerful than greed and it shows up better on the charts. Spotting panic selloff bottoms is something that can be traded successfully if you know what to look for and how to trade them.

On the chart you can see the pullbacks in the SP500 which triggered a panic selling spike in my green indicator. What I look for is a pullback in the SP500 and for my panic selling indicator to spike over 20. When that happens I start watching the volatility index for a spike also. The good news is that the volatility index typically rises the following day making my panic indicator more of a leading one…

Market Sentiment Trading

I could write a 20 page report going into depth this with topic, but that’s not the point of this report. Just realize that the stock market is likely going to put in a bottom very soon and likely end with a STRONG panic selling washout this week or next. 

Prepare for a sharp drop in the market which should kick start a holiday rally in the next few trading sessions.

Chris Vermeulen
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How Gold & Stocks are About to Repeat the 2010 Bottom

In May of 2010, immediately following the flash crash many investors started to become bearish (nervous) regarding their position in gold and equities. Once the general public became aware that the stock market could fall 10% in a matter of minutes, investors became very cautious. Suddenly protecting their capital and current positions was at the forefront of their investment process.

A couple days later the market recovered most of its value, but it became clear that investors were going to sell their long positions if the market showed signs of weakness. It was this fear which pulled the market back down to the May lows and beyond over the next couple months which caused investors to panic and sell the majority of their positions. It is this strong wave of panic selling that triggers gold and stock prices to form intermediate bottoms. Emotional retail traders always seem to buy near the top and sell at the bottom which leads to further pain.

Now, fast forward to today........

This past August we saw another selloff similar to the “Flash Crash” in May of 2010. I warned followers that gold was on the edge of topping and that stocks would take some time for form a base and bottom. Over the past couple months gold, silver, and stocks have been trying to bottom but have yet to do so.

Just a couple weeks ago we saw gold, silver, and equities make new multi month lows. This has created a very negative outlook among investors which I highlighted in red on the chart below. Since the panic selling low was formed just recently we have seen money pile back into gold and stocks (more so stocks).

This strong bounce or rally which ever you would like to call it may be the beginning stages of a major bull leg higher which could last several months. Before that could happen, I am anticipating a market pullback which is highlighted with red arrows on the chart below.

Chart of SP500, Gold and Dollar Index Looking Back 18 Months

Reasons for gold and stocks to pullback:

• Stocks are overbought and generally retracements of 50% or 61% are common following large rallies.
• The dollar index looks ready to bounce which typically means lower gold and stock prices.
• Gold continues to hold a bearish chart pattern pointing to lower prices still.

Weekly Trend Trading Ideas

A few weeks ago I warned my followers that stocks and gold are forming a bottom and that we should be on the lookout for further confirmation signs. I also mentioned that I was not trying to pick a bottom, rather that I was looking to go long once the odds were more in my favor.

This is a potentially very large opportunity unfolding and there will be several different ways to play this. However, right now I continue to wait for more confirming indicators and for more time to pass before getting subscribers and my own money involved.

From August until now (October 17) the SP500 is down -6.3% and gold is down -8.1%. Subscribers of my newsletter have pocketed over 35% in total gains using my simple low risk ETF trading alerts.

I can email you my bi-weekly reports and videos by joining my free newsletter here at The Gold and Oil Guy.com

Chris Vermeulen

Chris Vermeulen: Gold, DAX and Dollar Still Pointing to Sharply Lower Prices

The past month has been a wild ride for both equity and commodity traders around the globe. Novice traders have had their heads handed to them and their investment accounts drained. When fear, uncertainty and volatility are running high, some of the best opportunities become available to those who know what to look for. These market conditions force you to focus and strive for perfection in finding low risk entry setups and to also actively managing positions with laser focus because within hours a winning trade can turn into a losing trade.

Looking back on the daily charts of the dollar, SP500, gold, and also the overseas markets it looks as though we are nearing a market bottom. I say NEARING because I think investments need more time for the current selling pressure and bearish sentiment to run its course, which could take another few weeks and possibly a few month before truly bottoming.

Let’s take a quick look at some charts…...

SPY 30 Minute Chart Looking Back 2 Months

As you can see below price action has been wild. But for subscribers to my newsletter it has been a fun and exciting time having pocketed over 40% return from August 1^st – up until today.

The point of this chart is to show you the basic market phases (Impulse, Uncertainty, and Corrective). Understanding how to identify each phase using momentum, price action, volume analysis and market sentiment is crucial for success in today’s volatile market. Once mastered you can trade virtually any investment with a high level of confidence, though I recommend mastering 3-4 investments at most and just trading those full time with pinpoint accuracy. Through my newsletter members learn exactly how to read the market and manage positions from my daily video market analysis, intraday updates, trade alerts and trading tips.

As you can see below I am anticipating weakness in the market over the next few days. Once those levels are reached or if the charts start hinting that a reversal back down is imminent I will be ready to take action using an inverse leveraged ETF.

Gold 30 Minutes Chart Looking Back 2 Months

This chart will piss some people off for sure… but the chart to me is still pointing to lower prices at this time. Until we get a breakout above the upper resistance level I am not bullish on gold. Keep in mind that during strong selloffs in the stock market almost all investment drop together (gold, silver, oil, stocks).

German DAX Daily Chart Looking Back 3 years

This chart shows the long term chart of the DAX which I think is giving us some insight to a global market bottom in the coming months. You will notice I painted the phases over the chart and where I feel the market is trading and where it is headed looking forward.

Dollar Index Daily Chart Looking Back 3 Years

The dollar also shows us three years for price action. If this strong rally continues in the dollar we will see lower stock and commodity prices for a few more months.

Trend Trading Idea Conclusion:

In short, I feel we have some very exciting times ahead along with huge potential trades starting to unfold. While I don’t want the market to collapse I will admit I prefer trading the short side of the market because fear is easier to trade than greed, not to mention prices drop much quicker than they rise… I’m sure you like making money fast also........

I can email you my bi weekly reports and videos by joining my free newsletter here at the Gold and Oil Guy.com

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