The U.S. Dollar’s Impact on Price Action in the S&P 500, Gold, & Crude Oil

I was starting to put on my bullish hat on Friday morning when out of the blue an ugly close has forced me to rethink my position. After viewing a few hundred charts, I have determined that while I am still leaning into higher prices at this point in time, I will not totally rule out a rollover on the S&P 500. In coming days the news flow will be extreme and headline risk will be everywhere we look. The S&P 500 has been able to deflect worry for quite some time now and in every case the resiliency is unquestionable.

However, we are nearing the beginning of another earnings season which will start in just a few weeks’ time. First quarter earnings for 2011 are going to be quite interesting and most analysts’ estimates are relatively challenging. Will the rubber hit the road into earnings? Are we about to see a double top play out into earnings, or is there going to be a breakout which will take us to the SPX 1,400 – 1,415 price level?

I know, I ask a lot of questions but quite frankly that is what is running through my head. The SPX is not out of the woods yet, and the price action on Friday indicated that there is some serious supply overhead and two key resistance levels to break through before the SPX gets back to clear blue skies overhead. That being said Chris Vermeulen has caught a nice part of the recent bounce with his subscribers. He does feel the market is about to get choppy but his analysis is pointing to overall higher prices in the coming weeks.

SPX illustrates the two key price levels:

In addition to the uncertainty that earnings season can bring, the primary reason why I am still leaning into a bullish move in the S&P 500 is the recent price action in the U.S. Dollar Index futures. The U.S. Dollar is scheduled to make its 3 year cycle low sometime this spring and the recent price action is indicative that the recent lows may not be the cycle lows. If the U.S. Dollar Index breaks down below recent lows, I would expect to see a nasty sell off.

The U.S. Dollar Index futures daily chart is shown below:

Whether readers believe that we are going to be in an inflationary environment or a deflationary environment is a topic for a different time, but the chart above is undeniable that recently the U.S. Dollar has declined in value and is exhibiting weak price action. Friday morning it looked as though the U.S. Dollar was going to rip higher, but by the end of the day sellers had stepped in and forced the U.S. Dollar into the red for the session. The price action on Friday highlighted the weakness in the U.S. Dollar and the high levels of overhead supply.

If the U.S. Dollar continues to weaken, in the short run I would view this as a positive for the S&P 500, crude oil, and precious metals. If the dollar breaks down to new lows, it should help bouy the S&P 500 and gold prices. Gold has been consolidating for nearly 6 months and a breakout higher from current price levels would make a trip to $1,500 an ounce very likely. I would not be surprised to see gold work even higher than $1,500 an ounce depending on how violent the selloff in the U.S. Dollar might be.

The weekly chart of gold futures is listed below:

I would think that most investors are aware that crude oil futures have been trading higher recently. On Friday oil prices climbed above recent resistance around the $107/barrel price level and reached new recent highs. Members that belong to my paid service enjoyed a relatively low risk options trade that we put on several weeks ago which involved selling cash secured naked puts on $USO. The trade was closed on Friday for a total gain of 85% of the premium that was sold. For long time readers, my stance on energy has been pretty obvious. In the longer term, energy prices almost have to go up as the world’s demand for energy increases while supplies remain flat.

I will likely get involved in another oil trade at some point in the future, but for right now I’m going to wait for a more prudent entry. Based on current price action, it would not surprise me to see crude oil futures test the $110 – $112 per barrel price range in the near future. If the $112/barrel price level is breached to the upside, a test of the $120/barrel price level will be likely.

The weekly chart of oil futures is listed below:

Weekend Trend Conclusion:
The S&P 500 is in an interesting place as far as the price action is concerned. With earnings season rapidly approaching and a possible break down in the U.S. Dollar Index likely, future price action is uncertain. I am leaning into the bullish camp at this point, but that could change rather quickly based on the price action later this week in both the S&P 500 and the U.S. Dollar Index. One thing worth mentioning is that if the U.S. Dollar Index were to bottom around these levels and a bounce higher transpired, it would put negative price pressure on most asset classes. The fact that price action in the U.S. Dollar Index has been weak lately makes me believe a break down is likely, but as most readers know Mr. Market offers few guarantees.

Assuming the U.S. Dollar breaks down, we should see the S&P 500, precious metals, and oil continue to work higher. My eyes are going to be watching the U.S. Dollar Index closely in coming days/weeks. If a breakdown transpires, the potential upside in precious metals and oil could be intense. Ultimately, I remain slightly bullish on stocks and extremely bullish on oil and precious metals. However, my entire thesis could change if the U.S. Dollar Index starts to firm up and begins to work higher. There are simply too many question marks surrounding price action to take on significant amounts of risk at this point in time.

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Mid-Week U.S. Dollar, Gold & SP500 Trend Trading

It has been a roller coaster week thus far as stocks and precious metals plunged on heavy selling volume on the back of a rising dollar, only to make a strong rebound Wednesday. While there has been significant intraday price movement, it was no surprise to us as we have been anticipating this pullback since discussing it in my Sunday Gold Newsletter. Let’s take a quick look at the charts....

US Dollar Daily Trading Chart
The past couple weeks the dollar has traded in a choppy fashion, and last week I mentioned to subscribers to keep any new positions small. The dollar looked ready to make a bounce and if it reverses we will see stocks and commodities correct rather sharply.

Last week we trimmed some profits on our gold and SP500 trading positions in anticipation of a rising dollar/lower equity and metals prices. The dollar is currently in a down trend so we are still trading with the trend, but the next couple sessions could potentially change that.

As you can see on the chart a similar pattern to what we saw during the May/June top earlier this year has now formed in reverse this month. It’s a simple pattern I call a drop-n-wash. It is like dropping a knife – you panic, then take action (move foot, then wash the kife). That is typically how the market reacts to this type of price pattern after an extended trend has taking place for a long period of time.

The dollar made an obvious breakdown which the entire world witnessed, causing traders who recently went long to panic and sell their positions. Those who like to short the dollar would have taken a short position, only to see the market reverse and head straight back up again. This pattern has yet to confirm, but through the use of the shorter time frame charts (5 Min, 10 Min, 30 Min), I have a feeling the dollar may continue to rise. However, until the dollar shows considerable strength I am still playing the long equities / long gold side of the equation.

SPY – SP500 ETF Trading Fund
The SP500 made a nice move up last week and we trimmed our position back to lock in more gains as I anticipated this pullback and possible gap fill. As you can see on the chart the moving averages are all heading up and that’s the direction we are still focusing on playing (buying dips).

The morning dip on Wednesday the market sentiment started to shift to become extremely bearish on the short term time frame (10 minute charts). If the market drops down to fill the rest of that gap, I have a feeling the majority of traders will panic out of their position giving us an extreme sentiment buy signal. Also a gap fill will bring the price down to the key moving averages which will act as a support level. I will notify members to add more to my SP500 long position if that happens.

GLD – Gold ETF Trading Fund
Gold has much of the same story as the SP500 but with a couple twists. Gold has huge global demand from banks, investors and traders adding more buying power to this investment than stocks right now. We could see gold hold up above its gap that formed last week. That being said, a pullback to the key moving averages would not only act as a major support level but also fill the gap. We currently have our long positions, but trimmed some profits near the highs and are sitting tight letting the market work it’s self out.

Mid-Week ETF Trading Conclusion:
In short, the focus should be kept on trading with the underlying trends until a trend change has been confirmed. So that means short the dollar, long equities, metals and oil.

That being said, because things are starting to look unstable it is crucial to trade smaller position sizes during times of uncertainty like this. Anticipating major market tops is very difficult and generally costly play, just ask everyone who has been trying to pick a top for the past 2 months… Anticipate trend changes, but don’t trade them until the price/volume action confirms the new trend.

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SPX, U.S. Dollar, Crude Oil and Gold Analysis

Last week was volatile thanks to China raising their interest rates a quarter basis point. This rate hike caused the Dollar to spike in value which in turn forced equities and metals to sell off sharply. This one day event caused equities to break below a short term support level causing a large number of protective stops to be triggered. This added more selling pressure causing the market to be down nearly 2.5% at one point but a late day bounce recouped a good chunk of the drop.

Wednesday & Thursday the market had a nice rally making back all of losses and then some. But Thursday afternoon we saw the market slip below a key short term support level and triggered another wave of stops. The market continues to resilience because it recovered into the close saving the day.

After Thursday’s end of day rally, we had expected a typical light volume session which typically chops around in a sideways or slow grind higher.

SPY – SP500 ETF 10 Minute Intraday Chart

Chris Vermeulen
The Gold And Oil Guy.Com – ETF Swing Trading Signals



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Stock Market Leaders Are Now Lagging?

Wednesday’s session closed mixed on the day. The DOW posted a third of a percent gain while the tech sector closed down almost nine tenths of a percent. While technology stocks have been leading the market higher in the recent months, today they took the back seat while the DOW took control. Take a look at the intraday chart of the SPY price action compared to the tech sector. It’s clear the tech stocks where not in favor today. Some tech stocks that really took a beating today were FFIV, NTAP, APKT and AKAM. On another note, we are entering earning season and I am wondering if we are going to see a “Sell the New” type of thing again.

The broad market is experiencing a 36 day down cycle which has played a very dominant roll in the market this year. It topped out 9 days ago so we should expect sideways chop or some selling over the next 9 trading session. Because the market is trending up, pullbacks should be shallow.

The market continues to grind its way higher on relatively light volume. I have been waiting several weeks now for the volume to come back into the market but its just not happening. The majority of shares being traded are from banks, funds and day traders as the average investor’s not taking part because of the uncertainty looming. The lack of volume (commitment) to the market from the masses is making the market internals swing from one extreme to another on virtually weekly basis making it more difficult to take advantage of short term extreme sentiment levels.

The current market environment has traders shifting gears to more of a momentum trading strategy to take advantage of trends and this is what I am going to start implementing again as the market expands.

Market Conclusion:
In short, the equities market is in an up trend but looks to be overbought. Also with the downward cycle I don’t think the market will expand here and take off. Rather it will most likely chop around and burn off time until some earnings are released and the cycle bottoms. Unless we get a really sharp reversal down which we have yet to see on the SP500 or DOW, nibbling on small long positions or staying in cash is what I am doing right now.

As for gold, silver, the dollar and oil… Well the dollar continues to lose value on a daily basis which in turn is boosting metals along with crude oil. All four of those investments are over extended but they are trending and not really looking like they want to reverse just yet.

Chris Vermeulen
The Gold And Oil Guy.com

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SP500 Pierces, Bonds Rally, Dollars Fall Out the Window

From Chris Vermeulen at The Gold And Oil Guy.Com.......

It’s been a wild ride the past few days OptionsX, Obama and FOMC comments. Seems like everyone is waiting to see what the market is going to do going forward at this pivotal point…

Since the market topped in April and has since been trading sideways in this rather large range, everyone has small positions at work but waiting for a decisive move before fully committing to one side. There could be a few opportunities in the coming days using bonds, the dollar and the SP500 if all goes well which I explain below.

Lets take a look at the charts.....

SP500 – SPY ETF, Daily Chart
There has been a lot of talk about a sharp rally if the SP500 could break the 1130 level or the neckline everyone is talking about. Well this week Obama was on TV and the market rallied into that, then again after. I don’t really thing investors or traders were buying things up as he said the same boring stuff he always says without anything new. I feel there could have been another force at work, which we can discus another time .

Anyways, the market pierced those resistance levels and I’m sure a ton of traders have switch their view on the market from bearish to bullish. While I prefer to trade with the trend I can’t help but feel this market is still range bound, which is why I am still bearish at these shakeout levels. The SP500 did break resistance BUT the following candle did not close above the breakout candles high to confirm the move.

That said, the market is now trading back down at support and the next couple of days I’m sure will shed some like on the direction.

20 Year Bonds – TLT Fund, Daily Chart
We have seen the bond price pullback in a bull flag formation. It touched support before bouncing to break short term resistance as it looks to have started another rally. The chart below overlays both the candlesticks of the bond price and the SP500 which is the white line. You will notice they have an inverse relationship. If bond prices continue to rally then lower SP500 could start to rollover.

US Dollar – UUP Fund, Daily Chart
The dollar has fallen sharply the past 10 trading session and it looks to be oversold for a couple reasons. The past couple days the price has dropped straight down and gapped lower. This recent drop has reached a gap window which will act as support and could provide a tradable bounce in the coming days depending how things unfold.

In short, the SP500 is flirting with resistance and has yet to confirm the breakout. Bond prices look to be headed higher which will makes me think equities could start to sell off any day now… It’s also important to note that the big banks GS and JPM shares have been under pressure and they tend to lead the broad market. Another point to add is the fact the oil has not rallied even though the dollar dropped like a rock? What happens if the dollar bounces? Could oil finally start its next leg down?

Gold and silver continue their steady grind up. The price action reminds me of the 2009 Nov –Dec move. Once that train de-rails its going to have a sharp correction…

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 3-5 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis as it allows me toe get more into across to you quicker and is more educational, 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 traders and they will receive direct personal responses regarding trade ideas and analysis going forward.

Let the volatility and volume return!

Chris Vermeulen....The Gold And Oil Guy.Com

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SP500 and Gold At Crucial Pivot Points

WOW that was some big short covering and buying today! And we hope you got a piece of it! Wednesday was a big session with better than expected manufacturing surging the market 3%. In this article I will do a quick technical take on the current situation for the SP500 and gold as they are both trading at a key resistance level. also its important to know what type of price action we will get in the next 1-2 days so you can have your profit targets or protective stops in place depending on which side of the market you are currently playing.

SPY – SP500 Exchange Traded Fund – 60 Minute Chart
The market is currently in a down trend which means bounces get sold. But if you take a look at the buying volume ratio at the bottom of the chart you will notice that in an uptrend buying surges are the beginning of a rally, and during a downtrend buying surges are the end of a rally. I also want to mention that a lot of volume traded at this current level which you can see on the volume by price bars on the chart. This means there will be a lot of sellers to overcome before breaking to the upside.

The situation the market is at now makes things difficult to tell if this bounce will get sold, or if its just the starting of a rally. There are several arguments for each side but the one which I think has the most influence is the buying volume. It was very strong on this current bounce. It feels more like a rally but we will not know for sure for a couple days…

That being said, if the SP500 moves up Thursday then I would consider the market to be in an uptrend and exiting any short positions is a smart play. But if this bounce is sold and the market drops, then the 3% rally on Wednesday could all be given back and then some.

GLD Gold Exchange Traded Fund – 60 Minute Chart
Gold has continued to grind its way up to the previous top. Problem is the volume has been very light and that tells me there is not much demand for gold at these elevated prices. While we are still long gold it is crucial to have your protective stop in place so we lock in as much profit as possible for when the sharp selling spike happens.

Mid-Week Technical Take:
In short, the market feels like its trying to reverse back up but at this time its still in a down trend and trading under a key resistance level. This means trading with the trend and selling the bounces is still the play.

That being said today’s strong volume makes this bounce suspect. Keeping positions small and setting a protective stop should be done as a safety precaution. The next couple days will shed some light for sure…

As for gold, I am still bullish but expecting our protective stops to be triggered any day now, which means we get paid and can mark another successful trade down on the scoreboard.

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High Volume Resistance Plagues Precious Metals, Crude Oil & SP500

Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.

Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.

SLV – Silver Bullion ETF Trading
Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.

Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.

GLD – Gold Bullion ETF Trading
Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.

USO – Oil ETF Trading
The oil ETF broke down from its large multi-month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.

SPY – SP500 ETF Trading
The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.

Weekend Equities and Commodities ETF Trading Report:
In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.

That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.

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Are Gold & SP500 Topping Out Here?

Prices continue to churn as traders and investors try to figure if they want their hard earned dollar in cash or investments. The market is very jittery simply because no one wants to get caught on the wrong side of the market if it makes another 30-40% move, which is why we are seeing money rotate in and out each with very little commitment and follow through. Until a major trend looks to be in place most investors will not me holding many positions over night or through the weekend.

Here are a couple charts on what I think is most likely to happen in gold and the sp500.

GLD – Gold ETF Daily Chart
Last week we saw gold move higher by 1% but I cannot help but think a sharp sell off is only days away from being triggered. Either we get a another pop into resistance which would eventually trigger a wave of sellers and cause a sharp drop or the price of gold will drift lower to eventually break a key support level and trigger stop orders. Once the stops start to get triggered I would expect follow through selling for a couple days which will pull the price of GLD back down to the $113-116 area.

Also there is a possible head and shoulders pattern forming on this chart which is not picture perfect one but, it’s important to be aware as a neckline break could trigger massive selling and pull GLD down to the $100 area. But that would not unfold for several weeks if not months.

SPY – SP500 ETF
SP500 broke down from the support trendline two week ago and has since been trying to bounce. Last week we did see a two day pop but was given back Thursday. As you can see there is a possible mini head & shoulders pattern forming and the current price is testing the neckline. A breakdown below this should trigger a move to the $102 level.

Weekend Trading Conclusion:
In short, the market is trading at a key support level and this week should be exciting. Looking at several large cap stocks I am seeing bear flags on a large percentage of charts. Seeing these forming makes me think lower prices are just around the corner.

It looks like low risk trading setups are about to start popping up across the board and if we get a powerful trend going into the year end there will be some good money made for those on the proper side.

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Gold, Silver, Crude Oil & SP 500 ETF Trends & Reversal Levels

Trading commodities and indexes through the use of exchange traded funds sure keeps things simple for an average trader. These funds allow individual investors to buy and sell things like gold, silver, oil, the sp500 and other investments which where not available only few months ago like “wheat” for example.

One of the nice things with ETFs is that they allow everyone to follow the price of a commodity or index using any charting website and can even apply indicators to help spot key support and resistance levels using volume by price analysis. There is no need for a expensive data feeds, charting programs and you don’t have to worry about contract expiration.

Below are a few charts of the trend and my short term forecast.....

GLD – Gold Bullion ETF
As you can see gold broke out of its support zone this week and popped into the next resistance level. This is very typical price action in the stock market. It is important to look at the price charts like an apartment building. It’s nothing but a bunch of floors and ceilings.

How it works; if a ball breaks though a floor it will naturally fall to the next floor and bounce. The same for if a ball breaks through a ceiling, it will hit the next ceiling then bounce back down. This is essentially how the market moves.

SLV – Silver ETF
Silver is forming a large pennant and nearing its apex. With the amount of volume traded within this large volume channel I would expect a sharp breakout once a direction is made.

USO – Oil Traded Fund
Crude oil had a funky day. Early Wednesday morning in pre-market trading we saw virtually every investment drop at the same time which was strange. Anyways the US dollar dropped sharply and oil when down also. Normally as the dollar drops oil rockets higher but that was not the case today.

Currently oil is trading between two trendlines and is trying to hold up. If we get a breakdown then we could see a sharp drop in oil over the next 1-2 weeks.

SPY- SP500 ETF Trading Fund
The SP500 is trading within a high volume channel, similar to silver. Once a breakout in either direction is made I would expect a sizable move lasting a few weeks.

Mid-Week Commodity and Index ETF Report
In short, the market looks bearish for the short term of 5-10 trading sessions. This is because everything looks to be trading near resistance levels. That naturally brings sellers out of the woodwork putting pressure on prices.

Silver and gold stocks tend to lead the metals sector on breakouts so it will be important to keep an eye on them as we near a possible breakout or breakdown in the metals. If you see SLV or GDX ETFs out performing the GLD gold fund by 2-3x then I would expect to see gold move higher later that session or the following day.

The US dollar trend usually helps to identify if oil will have downward pressure or not. Also energy stocks tend to lead the price of oil by a few hours and some times a day. I keep an eye on XLE energy etf for a feel of how the energy stocks are doing and also UUP US dollar fund.

As for equities tech, financials and the Russell 2K (small cap stock) tend to lead the way for the broad market. Watching XLK, XLF and IWM help to confirm breakouts.

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Financials, Crude Oil & Gold on the Move

Most traders I have been talking with are feeling the same thing. Something big is brewing for the equities market but most do not want to get heavily involved until there is a clear direction. The broad market has been consolidating for almost 3 months and it’s important to remember that the larger the consolidation the bigger the move.

Also the biggest and best moves come from failed patterns. So is the big head & shoulders pattern on the SP500 which everyone is yelling about (the sky is falling) really going to happen or is this the BIG fake out? Only time will tell, either way no matter which way it goes I will be sure to catch some of it.

Below area few charts pointing out patterns and trends which could provide some opportunity in the coming days or weeks.

XLF – Financial Sector ETF
Financials play a large roll in moving the major indexes so if this reverse head and shoulders patter breaks out to the upside then the indexes should rally and XLF etf could reach its measured move of $16.50.

USO – Crude Oil Fund
Crude oil almost looked like it was going to breakout and mover higher this week but sellers jumped in sending it lower once again. The daily chart shows a large bearish pennant which is known as a continuation pattern. So it looks as though we should see lower prices for oil.

GLD – Gold Bullion ETF
Gold has been sliding lower for several weeks now and it looks to be showing selling exhaustion. The 5th wave down with the volume spike indicates panic selling as investors cannot hold onto those positions any longer and exit. This is a bullish sign for gold. Also we are seeing gold fall deep into a support level along with the 200 day moving average.

Mid-Week Financial, Oil and Gold Trading Conclusion:
In short, the equities market is in limbo until a clear trend is established. If the financial sector breaks out to the upside then we should see a sizable rally. As for oil it looks to be trading in near the middle of its range but is still in a down trend overall. Gold is almost looking ready for a bounce but I am waiting for more confirmation before jumping on the wagon.

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Mid-Week Gold & Oil Trading Report

From guest analyst Chris Vermeulen....

In my last report I showed some cycles for the price of gold and how they were starting to roll over which would in turn put some selling pressure on both gold and silver this week.

Last Monday we saw gold and silver open higher but both were met with selling for the entire trading session. Since then gold and silver have been drifting higher on light volume with some occasional waves of selling on higher volume. It looks as though gold and silver have started a 5-14 day pause or pullback.

GLD – Gold Exchange Traded Fund

You can see from the chart below that the price of GLD looks to have bottomed after completing several typical price patterns from the breakdown we saw in December. The recent 4 months have provided a solid looking chart which should help gold take another run at the $1500 mark in the coming months.



USO Oil Fund



Crude Oil Futures – 120 minute chart of April 14, 2010

As the saying goes, buy on rumor (expectations) sell on the news. Well the price of oil moved up in the early morning anticipating the news (inventory numbers) at 10:30am ET would be in line with estimates. Then we saw profit taking started 2 hours before the number came out which is normal to see. But traders forecasted 1.4 million barrels as the number but the number came out at -2.2 million which was a big surprise for everyone. This sent oil sharply higher providing traders who caught the breaking news with an easy money trade. This type of action does not happen often so it’s a great little bonus for day traders.



Mid-Week Trading Conclusion:

In short, metals have had a nice run recently and the charts are pointing to a short breather before the next upward thrust.

Oil is holding up strong on the daily chart and with today’s extra boost in price, its looking like it may want to start a new leg higher if the momentum carries over for a few more days.

We saw the major indexes surge higher on rising volume indicating buyers are in a panic to buy in fear of missing more gains. There really is no reason to be buying at these prices other than trading off emotions in fear of missing more upside. The problem for these traders is that money is made by those who buy dips in the bull markets. Buying over extended rallies is a dangerous game, especially with the market as overbought as this one. The trend is our friend and if we do get a 1-2 day pullback in stocks we could take small position to buy on a dip.

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Gold, Silver & Stock Indices on the Verge of Rolling Over?

From guest analyst Chris Vermeulen....

This week has been playing out as we expected. Last week we saw the market rally on light volume into a resistance zone on the daily chart. Light volume rallies are always a warning sign, much like the “Calm before a Storm”.

The way I look at bearish price action....

The First Heavy Selling Volume Day – I see this as large institution selling massive amounts of investments (stocks & commodities) because prices have risen enough for them to book profits OR they know something we don’t and they are getting out before the majority of traders find out.

Light Volume Rally/Drift Higher – After a heavy volume sell off we tend to see prices drift higher on light volume. This is when the institutions stop dumping investments and allow the retail investors (Un-educated Traders) to buy the market back up.

Bear Market Trend – In a down trend we see these two phases enter and exit the market. These patterns happen on every time frame from tick charts to yearly charts. Trends vary in length from 1-2 cycles and sometimes 10-20 cycles and more…

Current Market Conditions

So far this week we have seen the market sell down on increasing volume which is bearish and is pointing to lower prices. On Wednesday we saw prices move up on light volume with volatility rising into the close with a short wave of selling. This was indicating to me that sellers were starting to enter the market again.

The daily chart below clearly shows the heavy selling and drift higher on declining volume. The market is now trading deep into a resistance zone and looking ready to drop.



SP500 Intraday 2 Hour Candle Charts

You can see the same selling patterns repeat themselves. Since the Feb 5th bottom we have been forming a much larger bear flag which makes me think a BIG drop is only days away.



SP500 Trend Trading Conclusion:

Both stocks and precious metals are trading with the same chart patterns and volume levels. So if you are wondering about gold, silver and oil, I am seeing a similar scenario playing out for them also.

The reason I keep bringing these bearish patterns up in my reports is because once you master trading in a down market then you can make money during some of the fasted moving times in the market. I have always preferred shorting the market because prices drop much quicker then they rise. So profits are made quickly.

Also, if the broad market does eventually roll over later this year, and I am not saying it is, but “IF” it does, then you will feel somewhat comfortable with the positions we will be taking.

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Mid-Week Charts: Gold, Silver, Oil, Nat Gas and SP500

The stock indexes have been trading very choppy making it difficult for swing/trend traders. It’s during times like this when seasoned traders rise above the herd of average traders.

If you only trade one strategy like swing trading or trend trading then you are likely finding it difficult to make money right now. On the other hand, day traders are having a blast right now as they take advantage of the powerful intraday rallies and sell offs.

I personally like swing trading but during times like this, when I know it will not work, I have to switch my strategy to day trading and focus on the 60 minute and 5 minute charts.

SP500 Index Fund – Intraday Setup
I posted this chart earlier this week and I want to be sure everyone takes something away from this chart as I believe it shows a perfect low risk setup for shorting the market, or you could buy a reverse fund which goes up as the market moves down.

At first glance this chart is noisy, but if you simply focus on the all the different color analysis separately you will notice how simple trading can be and what you should be looking for.

Red Analysis:
1. Overall market trend is down so we are looking for a short trade, signs of weakness.
2. First we see a light volume test of the previous high set earlier in the day. The low volume indicates there are not many participants in the move up and that is a weak sign.
3. Between 14:30- 15:30 we notice the price start to drift higher on very light volume. Also, the price moved up into a resistance level. This to me is a perfect setup.
4. You would sell short or buy a reverse index fund at this point hoping for the market to start selling. You could also wait until it started to drop before taking a position but when a chart looks this good I try to get in at the highest price possible.

Blue Analysis:
1. The price starts to drop forming several small bear flags going into 14:30 before bouncing. Also note the volume began to rise as more selling was happening. This tells us that trading activity is predominately selling and that we should also focus on shorting when the time is right.
2. Again, the price starts to drop forming several small bear flags going from 15:00 – 15:45 before bouncing. Also note the volume began to rise as more sellers took part in this short term trend.

Black Analysis:
1. This shows more or less the resistance level, area to short the index and the nice trend down.



Gold GLD ETF Trading
Gold has been under selling pressure since early December. That powerful drop and the chart pattern it has formed will generally resolves itself after an ABC retrace pattern. I have drawn this on the chart which is what I think will happen in the near term. This daily chart of GLD ETF has a small 4 day bear flag and bearish reversal candle which is pointing to lower prices in the near term.



Silver SLV ETF Trading
Silver has a funky looking chart. It has formed a large megaphone pattern and possible head & shoulders pattern. Both are bearish and if we use the Head & Shoulders to calculate where silver could end up trading if it continues to break down, then $14.00 would be a level to look for a bounce.



Natural Gas UNG Fund
The natural gas fund UNG has been in a down trend for over a year and the recent drop looks to be the start of another sell off. This could possibly form a reverse head & shoulders pattern with this drop moving UNG down to the $8.75 – $9.00 area. We will have to wait and watch things unfold for now.



Crude Oil USO Fund
USO looks to be trading at support. I am inclined to patiently wait another session before possibly taking a position.



Mid-Week Trading Conclusion:
In short, I feel the overall market could bounce including stocks and possibly commodities, but the selling is not over yet in my opinion. The drop we have seen in the past week is the half way mark. So this bounce would be the starting of an ABC retrace for stock indexes. During choppy times I like to be sitting in cash and or day trading for short term profits.

Precious metals do look oversold and ready for a small bounce or sideways move; I do think they will head lower. Too many traders are still holding on to their gold positions and until a large number of them get scared out of their positions, we will not see gold rocket higher.

Natural gas looks like it’s about to head much lower this week while oil looks ready for a solid bounce off support.

We continue to wait for new low risk setups as different investment scenarios unfold.

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How to Trade Crude Oil and other Commodity ETF’s

Whether you are trading stocks, ETFs or futures, technical analysis is the preferred choice for short term traders. Technical analysis in short is the study of price and volume movements on charts. It can be used for studying charts in any time frame whether you are a 1 minute chartist or a long term investor using monthly charts.

Using technical analysis in my opinion really opens the door for a trader to lower his/her overall risk when investing money. I always like to know if the investments I am watching are trading near a critical price level (support or resistance). During these times you can take positions that have very clear entry and exit points for trading. Also it puts the odds in your favor when a position is entered in the same direction of the underlying trend.

Price action is how we make money in the market, so I strictly follow price and volume when trading as they are the least lagging indicator on what the market it doing.

I have put together a few charts using commodity ETFs to show you what I am seeing in the market and what we should expect to see in the coming days.

USO Crude Oil Fund – Daily Trend Chart
Oil has slid lower the past 5 sessions and is now nearing a support level. This has me looking for an oversold bounce with the potential to rally much higher. I am keeping an eye on this for any possible low risk setup.



UNG Natural Gas Fund – Daily Trading Chart
While UNG is not a great intermediate and long term fund to invest in, I do find it trades very nicely for intraday and short swing trades. I am neutral on natural gas for the time being. It could go either way from here and I’m not willing to take on a 50/50 probability trade. Let’s wait for something exciting to form.



Commodity Trading Conclusion
In short, gold and silver have been underperforming the market recently which is not what we want to see. They have led the market higher all year but are now taking a breather.

The way I see gold, silver, oil and natural gas is that they are trading below their recent highs and still have more room to fall before landing on a solid support level.

The stock market is now over extended and looks ready for a sharp correction. If this happens we will see commodities drop and test lower prices also.

There is not much we can do right now other than protect our current long positions by tightening our stops. Depending on the strength of the breakdown, there could be a great opportunity for short term traders (60 minute chart traders) to make some quick money. I expect a sell off which will last 3-5 days at the least.

Just Click Here if you would like to receive this Free Technical Trading Newsletter.

Chris Vermeulen "The Gold and Oil Guy"



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Energy ETF Trading Report - USO and UNG

So far this week has been generous with our commodity ETFs moving higher, other than natural gas which is clearly in a bear market. Each of the commodity ETF trading charts below is at a different stage and it will be interesting to see how things unfold in the coming weeks.

Trading ETFs is very rewarding when done properly and using multiple time frames for timing your entry and exit points is crucial. My main focus is on the weekly and daily charts but I use a 30 minute intraday chart when the time comes to actually pick an exact buy or sell point. Below I have provided both the weekly and daily chart so you can see how the same ETF looks completely different on the two time frames.

USO Fund Trading – Weekly & Daily Trading Charts
While gold and silver have been moving higher oil has been flagging sideways taking a breather. Both the weekly and the daily charts are aligned for a nice move higher if the trend and charts follow through on their patterns. We could get some tradable action in the next couple days.


UNG Fund Trading – Weekly & Daily Trading Charts
Natural gas is really starting to slide. Wednesday UNG dipped below the Sept low of $8.94 by a couple cents then moved up into the close. Overall it’s not bullish. This could be the start of a waterfall sell off which is a sharp heavy volume sell off that lasts 3-5 days.


Commodity ETF Trading Conclusion:
To sum everything up the gold and silver ETFs are on fire as they continue to surge higher. Being ready for a sharp reversal is important if you want to lock in gains on a portion of your position.

Crude oil is taking its time but looking ripe for a breakout higher. We continue to watch for some action.

Natural gas continues to get pushed down and it’s not looking good for higher prices anytime soon. We are waiting for a shorting opportunity or an oversold condition to play a 1-5 day bounce.

Quick Trading Tip: If you have a position which has done well and has moved up for an extended period of time be sure to draw some trend lines and tighten your stop, or set a stop, under a tight trend line. Sell some of your position (25-50%) to lock in gains and let the core position continue to mature. If you get a pullback to a support level (previous breakout level) you can buy back your other part of your position at a lower price.

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