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.

If you would like to receive these Free Bi-Weekly Trading Reports please visit Chris Vermeulen's The Gold And Oil Guy.

Share

Choppy SP500, Gold Stock Meltdown and Dollar Strengthens

From guest blogger Chris Vermeulen....

For the past few weeks I have been expecting the market to correct. By looking at the price action on the weekly and daily charts we can see that there has not been any real pullback since November and that is important to note. Without regular market corrections stocks start to become over bought meaning everyone has/is buying them and no real sellers have jumped off the trend. So when the price in an over bought market starts to slide lower we generally see everyone rush to hit their sell buttons. This is what causes the high volume breakdowns similar to the GLD (Gold) breakdown last December.

Another way of getting a feel for the market to know if it is over bought is to look at market sentiment for bulls vs. bears (buyers vs. sellers). Currently almost everyone is bullish and with this high of a reading we must start protecting our positions by tightening stops and/or get ready to play the coming correction with a short term trading strategy.

We can add another level of analysis to assist our understanding of the market if we look at the 60 minute charts of the SPY & IBM.

The chart below of the SPY (SP500) clearly shows we are in choppy times. With the majority of investors buying up stocks left, right and center because they are bullish on both the economy and individual companies, we have continued to see the index crawl higher. This has been going on for almost 3 months now but the more recent price action in the SPY chart clearly shows there are some BIG sellers unloading positions into this buying pressure. When the big sellers slow their selling we see the price drift back up until selling kicks back in. This is a warning signal for lower prices in the coming days.

The IBM chart shows a perfect example of the ‘Buy on the Rumor – Sell on the News’ saying we all know. The share price of IBM ran up into their earning news as traders know IBM is great for beating estimates. Once the great news came out which actually beat the estimates, the price sold off. This is happening everywhere with stocks.

In short, the market looks top heavy and has also rallied into earning season. These two points really have me on edge for taking a long trade at the moment.



Gold Stocks and the Dollar

The HUI (Gold Stock Index) has been on fire the past 10 months. Both gold and gold stocks have been leading the market higher. But the past month we have seen gold stocks under perform the SP500 and as of today are testing a key support level. Only time will tell if it bounces or breaks, so keep a close eye on your positions.

I use the UUP etf of the US Dollar to show the price action of today’s price move. The US Dollar is now above a key resistance level and has started to move higher. If the Dollar continues higher commodities across the board will have downward pressure. This could trigger a large sell off in the gold and gold stocks which I think are still over bought using a short term time frame.



Gold & Oil Futures Trends

The trend of gold and oil has been down the past few days. Gold broke down in the past 24 hours in overnight trading which triggered a wave of selling when the US market opened.

Gold and oil are currently trading between key support and resistance levels. I am looking for gold to drift back up to the $1130 level where I will look for a short setup as the current price action is not bearish on the intraday charts.

Oil is still bullish so I am not really looking to short it at this time. I will wait for another low risk buy signal.



Commodity Trading Conclusion

I feel the broad market could be ready for a large correction ranging from 5-10%. I am calling it a correction as I want to stay positive thinking. But it could be the start of a major market top. Market tops tend to be a process and take several months to roll over. So let’s focus on protecting our money and wait for a pullback that will allow us to load up with some great positions in the coming weeks.

Patience is how money is made in the market. Waiting for the market to come to you is vital for success. Also having the patience to let winners run by scaling out (selling a portion) of a position when the price reaches a support or resistance level makes it easier to let them run. Each time you sell some of a position you are locking in a profit and lowering your risk for the balance of that trade.

Just Click Here to receive Chris Vermeulen Free Weekly Gold Reports and make sure to visit The Gold and Oil Guy.



Share

Market Meltdowns, Inflation, Protecting Capital & Trading Commodities

The purpose in owning commodities like gold, silver and oil is to protect oneself from the effect of inflation that I believe will begin to assert itself in the coming months.

Unfortunately, the United States has taken a monetary policy of printing massive amounts of money to attempt an escape of deflation. In just the past 16 months, the monetary base has ballooned from $908 billion to $2.0 trillion. Bailout funds in the past 2 years total $8.1 trillion….. That is 78 times more than what they spent to bail out WorldCom…… and 123 times more than they spent on Enron. U.S. debt has risen sharply, from $6.2 trillion in 2002 to $12.1 trillion today. These are scary numbers!

The illusion of economic recovery in the U.S. is simply the function of the FED making billions and trillions of newly printed money available at literally ZERO percent interest to the largest financial institutions. The idea that you really can get something for nothing is fantasy. But that’s what’s happening – Money created out of thin air, instead of created by PRODUCTION.

A painful reality check will appear when these quantitative easing policies create inflation without employment or productivity gains. Commodities – hard assets – will outperform everything in this type of environment. To some people commodity investments may sound like a no brainer investment, however without a sound money and risk management system in place there really is no such investment.

This is why I focus on technical analysis as it provides price points for investments when we should be putting our money to work on a weekly or monthly basis. When volatility is rising I put less money to work to protect my portfolio from sharp price movements (risk). And during low volatility I push more money into the market catching trends with lowered risks.

What really blows my mind is how almost everyone I know who employed a broker or financial advisor lost between 30-70% of their portfolios during the market crash. What the heck was everyone paying for?

What I am trying to say is everyone can make money in a bull market. The question is, do either you or your financial advisor know when to take some profits to lower overall risk? How much money will you give back when the market corrects, starts another bear market or is affected by a terrorist attack? Do you have protective stops in place?


Ok, that’s enough of that, Just click here and we'll get to the chart!






Share

Year End Commodity & ETF Trend Trading Signals

Well, here we are with only hours left before the year is over. Virtually every investment is up other than the US dollar. Not much has changed since my last gold market trends report. But I have provided some interesting charts that show us what is possible in the coming weeks for the dollar, gold and natural gas.

US Dollar Trend Analysis – Resistance Levels
The dollar has shown some strength in the past month. It was a no brainer trade for 2009. You were either long gold or short the dollar. The chart below shows the key resistance levels for the $USD. I have a feeling we are going to see the dollar test the 80 -81 levels before rolling over and heading south again.

If this happens then gold and silver will continue to pull back. I am actually hoping the dollar moves higher and gold drops back to test the $1000-1060 level. This would clear the way for gold and the dollar to continue with their longer term trends with increased momentum (dollar collapses, gold goes parabolic).



GLD Gold ETF – Daily Chart
The daily gold swing trading chart is really starting to look attractive for a buy signal. Depending on what the US dollar does in the coming days will set the tone for gold.

We could see gold start to rally starting tomorrow or it will become volatile and start to sell off sharply in the coming days. Right now we have very light volume so any moves/breakouts cannot be taken seriously or with a large position.

If the dollar starts to rally we could see the GLD ETF drop to the $97.50 – $103 level.



Spot Gold Trend Analysis – 18 Day, 1hr Bar Chart
Starting in 2010 I will be providing futures trading analysis and signals so I thought I would provide a chart of the spot gold trend I have been day trading over the holidays.

This may seem like I am going against my #1 trading Rule – Never Trade Against the Trend, but the trend changes depending on time frame and trading style you are using. In short, gold reversed very strong 18 days ago just as we anticipated it would. The selling momentum was so strong it made for excellent gold futures day trading setups which I took advantage of over the past 10 trading days.

The chart below is of the 100 ounce gold GC Feb 10 futures contract which I traded. The chart is shrunk down and does not show my setups, nor does the chart look very sexy, but it clearly shows the direction of the trend and the BIG SELLING VOLUME.

The table shows my recent trades and if you take a close look all of the trades I did were Short Trades. Because the momentum and trend is down on this time frame I only traded perfect short setups (profiting from gold as it loses value).



UNG Natural Gas Trading Fund
UNG appears to be trading at resistance and starting to look like its rolling over. It did move above last weeks high which voids the reversal candle we had Tuesday and Thursday, or else it would have been a short setup for us. I don’t chase a trade, that’s my #2 rule, so I am waiting for a possible bounce here, test of resistance then another reversal back down.



Commodity & ETF Year End Trends
In short, we continue the waiting game for more setups in the coming weeks as volatility and volume creep back into the market. The dollar and gold are currently trading at pivot points and no one knows which way to play them.

Trading futures run virtually 24 hours a day and have provided some excellent trading opportunities that I will be providing in the coming weeks for traders.

Natural Gas is trading at pivot point and looking ready for another move down.

Crude oil and the board market I feel will top out in the next 2-5 days but nothing worth putting any money on at this time.

I would like to thank everyone for their kind words and support over the past 12 months. I wish you all a happy and safe New Years!

Just Click Here to sign up for FREE Weekly Newsletter and so much more from The Gold and Oil Guy.



Share

10 Days of Indexes and Commodities

It’s been a great year as we head into the final few trading sessions. The past several weeks the indexes have not done much of anything which is why we are now in cash.

I feel as though the market is about to change direction abruptly in the coming days or weeks. I feel this way for several reasons:

1. NYSE, Dow Jones, S&P500 are all drifting higher into resistance levels on the 10 day, 60 minute charts. Light volume tends to favor higher price hence the reason for the holiday rally.
2. Broad market momentum waves are topping
3. These same indexes are trading at resistance levels from early 2008
4. Money flow is indicating large institutions have been big sellers over the past 3 weeks.
5. US economy I think is worse than most want to think

So take a look at these 10 day charts which clearly show resistance and support trend lines. Each, if broken will lead to a sharp decline. I used ETF’s as substitutes for the indexes.

Dow Jones – DIA – Top Chart
SPY – S&P500 – Middle Chart
NYSE – Bottom Chart


Stocks have started to decouple for the US dollar in recent days so I am not focusing much on what affect the dollar will have on the above indexes.

That being said, the US dollar (UUP etf fund) is at a pivotal point. It’s either going to bounce off the trend line support level (blue line) and send gold back down to test the previous low, or breakdown through the support trend line. A falling dollar will give gold some power to muscle its way back up to the next short term support level.


Yesterday (Tuesday Dec 22nd) we said gold stocks and silver prices would move higher. I consider gold stocks and silver my leading indicators for the price of gold. Today (Wednesday Dec 23rd) gold stocks and silver shot higher – out performing gold by 7:1 which is very bullish for gold.

Crude oil had a large rally today sending the USO oil fund surging 3.5%, confirming a bounce off our support level 2 weeks ago. It could be warming up for another rally.

Natural gas opened lower but put in a strong session as it trended up all day. This also looks very strong and if prices breakout and follow through next week natural gas could be making a real rally for once.

This is a short trading week with Thursday only a half trading session and Friday being closed for Christmas/Holidays. We will not have any low risk setups this week and because we are sitting in cash, let’s take this time to enjoy our family, friends and pets 

Just click here to get all of the Gold and Oil Guy Trading Charts, Reports and Signals.



Share

ETF Commodity Trading Analysis & Charts - USO & UNG

Commodities continue to perform well as the US dollar tests the October lows. If we step back and take a look at the weekly charts of the gold, silver, oil and natural gas ETFs we can get a better feel for what to expect in the coming week.

Trading commodity ETFs can be a very fun and profitable experience when done correctly. The first things I always analyze are the longer time frame charts. This allows me to see past support and resistance levels and determine whether the investment is trending up, down or sideways.

Let’s take a look at crude oil and natural gas.

USO Fund – Weekly Chart
The USO fund continues to look bullish as it consolidates the breakout with volume getting lighter. We could see a bounce this week and if we do I will be watching for a low risk entry setup.


UNG Fund – Weekly Chart
UNG continues to trend down and under perform the market. The last time UNG dropped to this level we had a nice bounce generating a 30% move in 3 weeks. But I don’t think that will happen this time. The price has been sliding lower slowly on light volume. This type of price action is not as predictable when compared to others. I will wait for a proper setup before buying an oversold bounce or shorting after a bounce.


Commodity ETF Trading Conclusion:
The weekly charts don’t lie. Trade with the underlying weekly trend and you will put the odds in your favor. I use the daily chart and 30 minute intraday charts for timing my trades as those time frames have proven to be very accurate with commodity ETF investments.

WE continue to be hold our golden rocket stocks and GLD fund. If the market co operates this week we could get some trading signals for both Canadian and US ETF funds.

Just Click Here to receive the weekly Gold and Oil Guy.Com Trading Newsletter