This Week's Commodity & Index ETF Trading Strategy

As we all know, last weeks stock market blip/mini crash was very emotional for those of you watching or trading it live. A lot of money changed hands last week and you either lost a bundle or made a bundle…

I did send out some charts and a video on Thursday night about the market crash/recovery if you have not seen it. It’s called “Stock Market Micro Intraday Crash Shows Us Where The Safe Havens Are”.

Below are my ETF charts for the commodities and index I actively follow and trade.

GLD – Gold Bullion ETF – Daily Chart
GLD is a great ETF to trade as it generates 10-20 quality low risk setups each year for subscribers. The chart clearly shows the large rally in late 2009 and the correction as it formed patterns moving from a down trend – base – and back to an uptrend.



$USD – US Dollar Index – Monthly Chart
This weekly chart I think shows some serious potential for gold and silver prices. The US Dollar is now trading at a key resistance level which I think it will have a tough time moving higher. The dollar has been moving up for several months and looks ready for a pullback or at least a pause. If the dollar starts to roll over in the next few months then we should see gold and silver move substantially higher.



SLV – Silver Bullion ETF – Daily Chart
Silver like gold bounced off a key support level last week as investors started to buy silver as a safe haven. Gold moved up sharply on the day of the intraday market crash while silver traded sideways for a day before joining the party. The following day investors starting buying up silver because it was lagging its big sister “yellow Gold”.



USO – Oil Fund – Daily Chart
Several weeks back I posted this chart showing how volume was drying up as oil tested resistance on declining volume. This indicated to us that once/if the price started to roll over it would trigger a sharp sell off as short term traders who bought in anticipation of a breakout to the up side sold out of their positions once support was broken. This is what caused the heavy volume and sharp price drop.



SPY – SP500 INDEX Trading ETF – Daily Chart
It’s tougher now to read the index charts as last weeks heavy volume market crash could be seen in two very different ways…

One – We are starting a correction and had a jump start with the human error of selling billions of dollars worth of investments instead of millions prematurely pushing pulling the market down to a level where I think it should/will test again before moving up.

OR
Two – This extremely heavy sell off is just the start of what is to come....

Since the government owns the largest banks and the banks are unloading/selling massive amounts of shares calling it an error how do we know it’s not a scam for them to completely short the market in anticipation for a collapse which would make them unheard of amounts of money as the market drops… It is tough to trust anyone sitting up there in those power positions after everything they have been caught for already…

I personally think we could see lower prices in the coming month then the market will bottom and we will see new highs for 2010.



Weekend Commodity & Index ETF Trading Strategy Conclusion:
Stepping back and looking at the above charts it looks as thought we could see stocks and commodities digest the recent moves. In short, gold and silver have rallied strong and now trading near resistance. Oil dropped last week and is now trading near a key support level. I feel it the market will trade sideways and stabilize before for a while as the SP500 had that crazy drop last week and now the market is in shock. I figured it would see 3-4 weeks to reach those prices yet it happened in 1 day so now the market could do very little for 3-4 weeks…

The US dollar is something we will be watching more closely because it’s trading at key resistance level. In the past it has taken a month or two for a rally to roll over and head back down. This could play out very nicely if the dollar tops and the rest of the market trends sideways to digest the recent moves. Once the dollar starts to fall it will provide fuel for the next rally in both stocks and commodities.

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ETF Trading: Gold, Silver, Oil and the Dow Index

Etf trading has made it so easy for traders and investors to get maximum exposure to the entire market without the high fees of mutual funds and manager. There are now etfs covering almost every investment type whether it’s stocks, indexes, sectors, commodities, bonds, real estate, currencies etc…

In this short report I will quickly show a few charts on what is happening for precious metals and energy.

HUI – Gold Stock
This monthly chart of the gold stocks index you can see how easy it is to trade the market and avoid large sell offs when using technical analysis. Currently gold stocks are in a bull market, testing the 2008 highs. Until we are proven wrong buying stocks after a pullback is a winning strategy.



Trading the GLD ETF
We have been in the GLD etf for a few months as we ride this bull to new highs. This chart clearly shows how buying dips in a bull market can really pay off. I do have certain criteria which must be met before buying dips so I know the odds are in my favor.



ETF Trade Silver
Silver along with gold and oil are looking ready for an oversold bounce. I don’t think prices will jump and rally higher right out of the gate but eventually I feel the will head higher.



Crude Oil Fund - USO
Crude oil looks prime for the picking. It is currently oversold and testing 2 support levels. The downside momentum is still strong so this selling could last another 1-2 days but I’m expecting it to soon.

This is not a low risk setup. This is more of a short term aggressive contrarian play. For those of you who like heart pounding plays.



Natural Gas Fund - UNG
Natural gas has been taking its time to bottom. Virtually every bottom picker has been burned this year. I am starting to hear everyone get more bearish on it again which is great! It should bottom any day then! LOL….

Seriously it cannot get much more bearish for gas. We don’t have enough space to store it and companies are finding more natural gas in the ground every day. Because it sounds like a terrible investment it must be getting close to a bottom. If this is the start of a flat basing pattern, then I expect it could drag out for a few months before actually making a nice move up.



Dow Jones ETF - DIA
The Dow looks similar to gold and silver. I feel we are ready for a 1-2 day bounce then we go a little lower to shake traders out of the market before heading higher.



ETF Trading Conclusion
Gold stocks and the broad market are in a bull market. The recent pullback has many traders worried. I think this an opportunity to bet into some positions before the next rally. Buying the dips in a bull market is a low risk trade until proven wrong. I think we still have more of a pullback yet but then we could have a very profitable year end Xmas rally.

Natural Gas is just bumping along bottom I think. Not expecting any trade for a few weeks anyways.

Crude Oil looks like its ready for a move whether it is a 1-2 day bounce or the start of a new leg higher. If you loot at late Sept you can see USO broke down on heavy volume shaking most traders out of their positions just before the next leg higher, and this is what I feel it is doing now. Only time will tell.

Let’s see how the second half of this week unfolds.

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USO and UNG Mid Week Trading Tips

Crude oil has a nice bull flag and we are waiting for a breakout and setup while natural gas continues to see selling pressure.

USO Fund Trading – Daily Fund Chart
The USO oil fund broke out a few weeks ago from the large pennant pattern. The price has been flagging for about 3 weeks now. It looks like we are getting close to a low risk setup so I am keeping a close eye on this fund.


UNG Fund Trading – Daily Fund Chart
Natural gas continues to under perform the rest of our commodities. This fund is starting to look like another good by point but we need a few things to fall into place before that happens. Let’s not jump the gun because this fund is still in a bear market. Waiting for a setup.


Waiting for these exchange traded funds to generate low risk setups and watching our current positions mature is the boring part of trading. It’s these slow times when traders get bored and start taking more risk by entering positions that do not have clear entry and exit points. Not having clear entry and exit points will lead to traders holding on to losing trades and not taking profits on winning trades. Be sure you enter positions which you know where you should get out if the trade goes against you and where to take some money off the table if it rallies higher.

ETF Trading Conclusion:
We continue to wait for trading opportunities to unfold. We focus on taking advantage of low risk setups and avoiding times the market when things are choppy and unclear.

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