The Fed Taper Explained by SPX Options

From our trading partner options guru J.W. Jones......

With the last major news item for 2013 less than 48 hours away, I thought I would share some insights as to what the S&P 500 Cash Index (SPX) options were pricing into the Federal Reserve’s monetary policy announcement due out Wednesday.

After the news is released and the week ends, it will be time for Santa Claus to come to Wall Street. While most people believe in the Santa Claus rally, what few understand is the bullish undertones that traditionally accompany a triple witching event.

This coming Friday, is a triple expiration. Equity options, index options, and futures contracts will be expiring this Friday. This event is traditionally known as “triple witching” and historically the quarterly expiration event ushers in serious bullishness.

According to Bank of America Merrill Lynch, “In the 31 years since the creation of equity index futures, the S&P500 has risen 74% of the time during this week. More recently, it has risen in ten of the past 12 years.” The chart shown below was posted on zerohedge.com and was provided by Bank of America Merrill Lynch......Read "The Fed Taper Explained by SPX Options"



Get our "Gold and Crude Oil Trade Ideas"

Precious Metals & Miners Flash Short-Sell Signal

It has been a bumpy ride for precious metal investors over the past couple of years and unfortunately we do not think its over just yet. But we feel fortunate to have our trading partner Chris Vermeulen on our team walking us through this.

Today Chris is telling us that the good news is that the bottom has likely been put in for gold, silver and gold miners BUT the recent rally in these metals and miner looks to be coming to an end. While we could see another pop in price over the next week or so the price, volume and momentum seem to be stalling out.

What does this mean? It means we should expect short term weakness and lower prices over the next month or two.

Here are three charts Chris posted several months. Their forecast were based off simple technical analysis using cycles, Fibonacci and price patterns. As you can see we are not trading at our key pivot level which we expect selling pressure to start to increase and eventually overpower the buyers sending the prices lower.....Click here to see Chris' complete chart work and article.

The SP500 Enters Major Correction Period

Our trading partner David A. Banister of Market Trends Forecast releases his call that the SP 500 is close to confirming new correction. Says 1685 support is the key. Here's the details based on his Elliot Wave research.

The SP 500 has been on a tear since late 2012 with the SP 500 bottoming at 1266. The rally though we have been charting out as part of a “Primary wave 3″ uptrend for this Bull market cycle from March 2009, and we are likely entering a Major correction or what we would label “Major wave 4″. Since the 1266 lows, we have had Major Wave 1, 2, and now 3 completed at 1710. We are entering Major wave 4 which should correct 23-38% of the entirety of Major wave 3, which was 444 points.

This correction will be confirmed with any close below 1674 and nails in the coffin begin with any close below 1685 on the SP 500 index. Primary wave 1 of this super bull cycle ended at 1370, a 704 point rally. Primary wave 3 will likely be larger than Primary wave 1 and I am projecting a top between 1900-2000 on the SP 500 before it’s completed. The current correction is Major wave 4 of Primary wave 3, which has 5 Major waves required. With that said, our projections are for 1605 on the shallow side and 1540 on the deeper side for Major wave 4 of Primary wave 3.

Now it is possible that we may extend a bit higher yet in Major wave 3 to 1736-1772, but only if we hold the 1685 support lines which the market is basing around currently. In any event, at our Trading service we have been aggressively taking profits in the past two weeks on multiple positions while still holding a few open at this time.

Below is a chart showing our projected correction pivots of 1605 and 1540, subscribers will be updated on a regular basis. Just click here to join Banister with a 33% discount on his trading service and also receive Precious Metals (GOLD) forecasts on a regular basis every week.




John Carter releases DVD version of "Spread Trading Strategies for any size Account"....Click Here to get your copy!

Mid Week Commodities Report

May crude oil closed higher on Wednesday as it extended the rally off last week's low. The high range close sets the stage for a steady to higher opening when Thursday's night session begins. Stochastics and the RSI are turning neutral to bullish signaling that a low might be in or is near. Closes above the 10 day moving average crossing at 95.04 are needed to confirm that a short term low has been posted. If May renews this month's decline, the reaction low crossing at 91.84 is the next downside target.

May Henry natural gas closed higher on Wednesday. The mid range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are diverging and are neutral to bullish signaling that sideways to higher prices are possible near term. If May extends the rally off February's low, the reaction high crossing at 4.290 is the next upside target. Closes below last Thursday's low crossing at 3.861 would confirm that a short term top has been posted.

April gold closed sharply lower on Wednesday. The low range close sets the stage for a steady to lower opening when Thursday's night session begins trading. Stochastics and the RSI are neutral to bullish hinting that a low might be in or is near. Closes above the 20 day moving average crossing at 1589.30 would confirm that a short term low has been posted. If April renews last week's decline, the June 2011 low crossing at 1504.00 is the next downside target.

Are you afraid of the high pressure and heavy risk in scalping?

The Long and Winding Gold....Bull Cycle about to Begin

The dramatic 2-3 day take down in Gold Spot pricing action smells and looks like capitulation to us at The Market Trend Forecast. We have been calling this entire 19-20 month consolidation period as a Primary wave 4 correction pattern, though complicated for sure. It has had multiple false rallies and buy and sell signals the entire time. With that said, the pattern is set up for final 5th wave decline which we are seeing now at the beginning of April.

Traditionally, Gold tends to meander or be weak in April anyways on a seasonal basis. This sets Gold up to rally in May into July with another soft patch, followed by a fall rally. However, our technical analysis is predicated on our Elliott Wave analysis, which says this entire 20 month correction is a “Double Three” correction pattern. Essentially its two ABC patterns with an “X” Wave rally in the middle to really confuse everyone.

The X wave took Gold to 1800 last fall before dumping all the Bulls off and eventually working its way down to the 1540’s levels we see today. This last leg down is a 5 wave decline and you know you’re at the bottom of wave 5 when everyone throws in the towel, the Gold stocks trade at multi year lows and relative valuation extremes. We also have insiders buying 7 to 1 over sellers according to Ink Research in the Gold stock sector. Stocks are valued at $923 per ounce equivalent even though Gold is trading north of $1,500 per ounce still.

We say bring it on and are actively accumulating selected Gold stocks with production profiles and growth metrics that are attractive.

See the Gold Elliott Wave analysis chart we sent to our paying subscribers a few days ago to forewarn of one more leg down. The next rally should be a doozy and have very few people on board. We would simply caution that a drop below $1523 spot pricing could lead to a blast down to the 1440-1460 areas, but its unlikely in our current views.

Join us for regular updates at The Market Trends Forecast.com

The 2 Energy Sectors You Should Invest in This Year

Do You Agree.... The SP 500 Nearing a Cyclical High

One of our favorite traders to follow is David Banister [make sure to sign up for his calls] and he just sent over this great post on his thoughts on the SP 500 nearing a cyclical high in the coming two weeks of trade. And here's what he is thinking.......

The SP 500 has rallied to a post June 4th high of 1409 this week, about 13 points shy of the Bull Market cycle highs of 1422 earlier this year.

The rally has overlapped along the way, forming a series of “3′s” which are sometimes found in impulsive bullish moves, but usually found at the end of bull cycles whether they be short term or long term cycles.

To wit, the first 11 trading days off the 1267 SP 500 lows saw a 97 point rally, again in only 11 trading days.

The last 34 trading days we have only been able to move up about 44 further points, indicating the rally is getting long in the tooth and a bit tired at that.

So 11 days, 97 points… 34 more days, only 44 further points.

Another 10 trading days would mark a 55 fibonacci trading day cycle, so we should be alert to potential rally highs between August 13th and August 22nd as a window for a top.

A few days ago I discussed we may see a continual sloppy drift up to 1425-1445 ranges, with 1434 a key pivot line to watch.

Although the count doesnt really fit for me, if this rally from the June lows is a 5th and final wave up… then a 5th wave rally to complete a larger cycle often is characterized by a series of 3′s.

To summarize:

The first leg of the rally was a 3 wave rally to 1363, about 97 points in 11 days. We have continued with overlapping 3′s. This final stage of the rally is likely going to be 5 waves or ABCDE in nature to complete the entire cycle up from 1267

That cycle high should come within the Aug 13th-22nd window and in the 1425-1445 ranges.

Make sure to visit Davids website to register for all of his articles

Test drive our video analysis and trade idea service for only $1.00

Crude Oil Prices Will Be Driven by the Externals This Week

From CME Group contributor Dominick Chirihella......

Last week was all about jawboning out of Europe. First from ECB President Draghi followed up by comments from Germany's Merkel reinforcing Draghi's main comment that the ECB will do everything to support the euro. Support for this type of comment from Merkel is very important as Germany is where the money is. For now the jawboning was enough to send many risk asset markets into a modest end of the week short covering rally. However, we can't lose sight that these type of comments have been coming out of Europe for the last three years and so far the sovereign debt issues are still not solved.

The big question is will the bold comments finally be converted to actions. Especially this coming week as the ECB holds its monthly meeting on Thursday August 2. Will the ECB initiate a bold solution that puts the EU problems on the back burner once and for all which has not been the case for the last several years. Will they simply lower short term interest rates and issue the usual support of the euro comments or will their actions include stimulus and some form of bond backing or buying of bonds from the troubles EU member states?

Whatever the ECB decides to do this week the market is now expecting actions that will support the debt problems and drive down the bond yields of the problem countries as well as send the euro into a much longer lasting rally that goes well beyond a simple modest short covering rally like we saw the last two trading days of last week. With the market now trading over the last few session with a strong ray of hope that the ECB and the EU will finally get a handle on the problems any disappointment next week will result in a huge push to the downside in the euro as well as in global equity markets.

Who said August is a quiet and sleepy time for global risk asset markets? Yes many participants are at the peak of the summer vacation season coupled with the London Summer Olympics at its peak but that is not going to prevent the markets from potentially active and volatile trading over the upcoming week and possibly for the rest of the summer. In addition to what is setting up to be a major ECB meeting on Thursday the US Federal Reserve FOMC will meet on Tuesday and Wednesday with many expecting the Fed to embark on a new round of quantitative easing of some form. The US economy has slowed to just a 1.5% growth rate a decline of 0.5% from the first quarter. The employment situation is not getting any better and the plethora of economic data that has hit the media airwaves over the last month or so has been supportive of further slowing of the US economy.

Is there enough negative data to support the Fed taking action now (as a recent WSJ article suggested) or will the Fed take a wait and see of what comes out for the ECB on Thursday while it awaits more data points like Friday's latest nonfarm payroll data? A new round of easing out of the US Fed is not a slam dunk at this meeting in my opinion. I think there are many reasons why it will be prudent for the Fed to wait another month or two before initiating a new round of easing that many believe will have limited success in bolstering the US economy and spurting the private sector hiring process. I do not think the Fed will act at this meeting and save their next so called silver bullet until the end of August at the Jackson Hole symposium (possibly mentioned in Bernanke's speech) or until the mid September FOMC meeting.

Just click here to read Dominick Chirihellas entire article

Get our Free Trading Videos, Lessons and eBook today!

Crude Oil Bulls Struggle to Hold 20 Day Moving Average

Enter code number "JULY499" to get $150 off our quarterly membership!

Crude oil fell on Monday as the Institute for Supply Management’s U.S. factory index dropped 1.4 percent and collective Euro unemployment hit historic highs never seen in history.

Crude oil posted an inside day with a lower close on Monday as it consolidated some of last Friday's rally but remains above the 20 day moving average crossing at 82.49. The mid range close sets the stage for a steady opening when Tuesday's night session begins. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If August extends last Friday's rally, the 38% retracement level of this year's decline crossing at 90.43 is the next upside target. If August renews this year's decline, the 75% retracement level of the 2011-2012 rally crossing at 73.28 is the next downside target. First resistance is the reaction high crossing at 87.32. Second resistance is the 38% retracement level of this year's decline crossing at 90.43. First support is last Thursday's low crossing at 77.28. Second support is the 75% retracement level of the 2011-2012 rally crossing at 73.28.

John Kilduff, trader with Again Capital, said a weak jobs report this Friday could spur additional selling. But he doesn't see much chance of oil slipping into the $60s, as some had been discussing prior to Friday. "It's only a draft," said Tony Rosado, an oil options analyst and broker at GA Global Markets. But if Iran takes more concrete action in the strait, an important waterway for oil, "then I think people will have to take it more seriously," Mr. Rosado added.

Natural gas closed higher on Monday and is poised to extend the rally off June's low. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI have turned bearish hinting that a short term top might be in or is near. Multiple closes below the 20 day moving average crossing at 2.564 are needed to confirm that a short term top
has been posted. If July extends the rally off June's low, February's high crossing at 3.137 is the next upside target. First resistance is last Wednesday's high crossing at 2.975. Second resistance is February's high crossing at 3.137. First support is the 10 day moving average crossing at 2.714. Second support is the 20 day moving average crossing at 2.564.

Gold posted an inside day with a lower close on Monday. The high range close sets the stage for a steady to higher opening when Tuesday's night session begins trading. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. Multiple closes above the 20 day moving average crossing at 1600.10 are needed to temper the bearish outlook. If August renews the decline off June's high, May's low crossing at 1529.30 is the next downside target. First resistance is the 20 day moving average crossing at 1600.10. Second resistance is reaction high crossing at 1642.40. First support is the reaction low crossing at 1556.40. Second support is May's low crossing at 1529.30.

Get our Free Trading Videos, Lessons and eBook today!

Crude Oil Traders Whisper....U.S. Inventories on the Rise

CME: August crude oil prices trended lower throughout the overnight and initial morning hours. Traders noted that some of the late day advance yesterday was tempered by private industry data that suggesting that U.S. crude stocks might have unexpectedly increased last week. The market also appears to be under a degree of pressure in front of this week's EU summit, which is largely expected to show little progress in resolving the European debt crisis. The crude oil market garnered support in yesterday's session from mounting concerns over a tightening North Sea supply situation.

COT: August crude oil was slightly lower overnight as it consolidates below the 62% retracement level of the 2009-2012 rally crossing at 80.33. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term. If August extends this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 73.28 is the next downside target. Closes above the 20 day moving average crossing at 82.86 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 82.86. Second resistance is the reaction high crossing at 87.32. First support is last Friday's low crossing at 77.56. Second support is the 75% retracement level of the 2009-2011 rally crossing at 73.28.

Get our Free Trading Videos, Lessons and eBook today!

Equities Fight to Hold Up While EU & US Data Give Mixed Signals

It’s Easy, get started trading options today. Let’s us show you how!

Investors and traders just can’t seem to catch a break when it comes to economic news. For example Tuesday in the United States we saw strong ISM manufacturing numbers which surprised the market. The numbers were way above expectations and it triggered a feeding frenzy in US based investments like stocks and the green back.

The following session Italy reported terrible PMI and unemployment rate numbers which took most of the wind out the European and US stocks. One day the data is great, next day it’s bad…

The strong numbers in the US have everyone including myself thinking that this week’s jobless claims (unemployment rate) will be down. If this is the case then we will see stocks jump along with the dollar, much like what we saw trader do last Tuesday which is what Jim Cramer says best – BUY BUY BUY.

Normally we do not see the dollar index rally along with stocks but if EU continues to show signs of weakness then it is very likely the dollar and equities inverse relationship could decouple. Reason being investors around the globe will focus their money on the more stable US investments like the dollar and US stocks.

The Dollar is Trading at a Major Tipping Point....Read the entire article.


Get Instant Access to our FREE E-mini Trading Video, LIVE Personal Training and more TODAY!

Crude Oil Weekly Technical Outlook For Sunday March 18th

From the staff at Oil N Gold.......

Crude oil dripped to 103.78 last week as consolidation from 110.55 extended but quickly recovered. Such consolidation might have completed already. Initial bias is mildly on the upside this week for retest of 110.55. Break will confirm resumption of recent rally and should target 114.83 key resistance next. On the downside, though, below 103.78 will extend the correction to 61.8% retracement of 95.44 to 110.55 at 101.21.

In the bigger picture, the medium term up trend from 33.2 shouldn't be completed yet. Rise from 74.95 is indeed tentatively treated as resumption of such rally. Sustained break of 114.83 will target 61.8% projection of 33.2 to 114.83 from 74.95 at 125.40. On the downside, though, break of 95.44 support will indicate that correction pattern from 114.83 is going to extend further with another falling leg to 74.95 and below before completion.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Check out our latest Video, Market Analysis and Forecast for the Dollar, Crude Oil, Gold, Silver, and the SP500

ONG: Crude Oil Weekly Technical Outlook For Saturday February 4th

Here is the weekly call from the great staff at Oil N Gold.......

Crude oil dipped to as low as 95.44 last week but formed a temporary there and recovered. Initial bias is neutral this week first. On the downside, below 95.44 will bring another decline but after all, we'd we'd expect strong support from 92.52 cluster support (38.2% retracement of 74.95 to 103.74 at 92.74). to contain downside and bring rebound. Meanwhile above 101.29 will be the first signal that recent consolidative trading has finished and flip bias back to the upside for a test on 103.74 resistance.

In the bigger picture, pull back from 114.83 was completed at 74.95 already and medium term rally from 33.2 is not finished yet. We'd tentatively treat rise from 74.95 as resumption of such rally. Sustained break of 114.83 will target 61.8% projection of 33.2 to 114.83 from 74.95 at 125.40. On the downside, though, break of 92.52 support will indicate that correction pattern from 114.83 is going to extend further with another falling leg to 74.95 and below before completion.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it's second wave of the consolidation pattern. While it could make another high above 114.83, we'd anticipate strong resistance ahead of 147.24 to bring reversal for the third leg of the consolidation pattern.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

ONG: Crude Oil Daily Technical Outlook For Tuesday Dec. 13th

Crude oil continues to stay in tight range above 97.36 temporary low and intraday bias remains neutral for the moment. As noted before, more consolidative trading would likely be seen below 103.37 high. Below 97.36 minor support will flip bias to the downside for 94.99 and possibly below. But in such case, downside is expected to be contained by 89.16/17 cluster support (50% retracement of 74.95 to 103.37) and bring rebound. On the upside, break of 103.37 will confirm resumption of recent rally and should target 114.83 resistance next.

In the bigger picture, fall from 114.83 has finished at 74.95 already. The structure suggests it's merely a correction or part of a consolidation pattern. Hence, rise from 33.2 is not finished yet. As long as 89.16/17 support holds, we'd favor a break of 114.83 resistance to resume the rally from 33.2. However, break of 89.16/17 will indicate that rebound from 74.95 has completed and whole fall from 114.83 is possibly resuming for another below 74.95.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts


Gold’s 4th Wave Consolidation Nears Completion and Breakout

Has The SP 500 Index Been Naughty or Nice?

At the beginning of this week I warned readers that the market was extremely overbought and that a top could be forming. While it is still unclear whether a major top has formed, it is without question that we saw a major correction on Wednesday as yields on Italian debt caused margin requirement adjustments at the London Clearing House.

I generally will not make bold predictions as today’s financial markets are so dynamic that a lot can change in a short period of time. However, Tuesday night I sent out a video to members of my service which I entitled my “European Rant.” My soapbox rant discussed where we were in the market and what my thoughts were regarding the structural issues in Europe.

Little did I know that the very next day Italian 10 year bond yields would surge calling the fiscal stability of the Eurozone back into question. My intent for the video was to give my members a better understanding of what was going on in Europe. As it turned out, the video was spot on in its timing so I could not help but share it with readers.

My current view on the S&P 500 is neutral. I am watching several key price levels on the S&P 500 Index for clarity, but so far Mr. Market has not tipped his hand. I am watching for a breakout over recent highs around the 1,290 area before I consider layering back into long positions. Consequently, I am watching the 1,230 and 1,190 areas as potential short entry points. The daily chart of the S&P 500 Index is shown below:

SPX Option Support Levels

Clearly the 1,190 – 1,200 level should offer strong support as the 50 period moving average is resting right at the 1,200 price level currently. If the 1,190 price level breaks down I think we could see a dramatic selloff transpire. On the flip side, if the recent highs around 1,290 are taken out to the upside we could see a rally that takes us back to the 2011 highs around 1,370. Right now I am going to wait patiently and let others do the heavy lifting.

The 1,257 price level on the S&P 500 Index is a major pivot that I am going to be watching closely. If the bulls can push prices above that area for two or more consecutive closes I think the bulls may have the bears on the ropes. As of the writing of this article, the SPX is currently trading around the 1,263 level. If the bulls can hold up prices into the closing bell, we could see an extension higher on Monday. The chart of SPX below illustrates the key 1,257 price level:

SPY Option Trading Setup

At the close on Tuesday I was involved in a SPY 122 Put Calendar Spread for members which capitalized on time decay (Theta) as well as lower prices in the SPY ETF. Thursday morning I took profits on the position locking in a gain of around 13% on maximum risk. Recently I have had several winning trades for members of my service, but I admittedly have been taking profits aggressively and trading in smaller size due to the wild volatility swings that are commonplace in this market.

Trading is a marathon, not a sprint and my focus is to live to play another day. Since the inception of my service, I am running at about a 70% success rate based on all trades that have been taken. I am not telling you this to boast, I am telling you this to point out that I am wrong 30% of the time. In the trading world the overall numbers look good, but if my position sizing is not appropriate the 30% could potentially blow up my account.

With that in the back of my crowded mind, I try to use smaller position sizes and lock in profits aggressively during times of widespread volatility. I take fewer trades and focus my attention on risk and money management during times of heightened volatility which has been prevalent the past few weeks.

In addition to monitoring my risk profile, I am watching the price action in two underlying assets which I believe will throw off clues about where this market may be headed. The EUR/USD currency pair has been on my screens quite a bit the past few weeks. Most of the time I monitor the U.S. Dollar Index futures as well, but recently my focus has been on the currency pair. The chart below illustrates the correlation between the Euro currency and the S&P 500 since September:

Euro Index Trading

Since the beginning of September, the moves in the S&P 500 have been very similarly correlated to the Euro currency as can be seen above. Additionally the Dow Jones Industrial Average also has very similar congruence in terms of price action when compared to the Euro.

The strength of the Euro has a profound impact on the price action of the U.S. Dollar Index. The U.S. Dollar Index soared on Wednesday and took out recent resistance. Since Wednesday, the Dollar has been retracing a large portion of the move higher. The daily chart of the Dollar Index is shown below:

USD Dollar Index Trading

It is a bit too early to tell for sure, but the Dollar could be rolling over based on austerity plans coming out of Italy and the expectation that the Eurozone is going to try to get ahead of the crisis unfolding based on the yields of Italian government debt instruments.

Last and certainly not least is the banking sector of the economy. The KBW Banking Index (BKX) is a proxy for financial institutions domestically. The KBW Banking Index is a great indicator for the future price action in the S&P 500. Stocks cannot rally if the banks do not participate with higher prices.

If stocks are selling off and the financials are holding up well many times equity indices will reverse higher. The key price level that a lot of traders are monitoring currently is the 40 area. The daily chart of the KBW Banking Index is shown below:

Banking Index XLF, FAS Trading

Similar to the key 1,257 pivot level on the S&P 500 Index, the key 40 price level on the KBW Banking Index has a similar impact on the underlying price action. If the bulls can push the BKX above the 40 price level and hold it up then a rally in stocks becomes more likely. As I write this, the BKX is trading at $39.78 / share so we are getting close to crunch time. The S&P 500 has broken above its pivot during intraday trade and now a lot of eyes are watching to see if the banks can follow through.

Ultimately investors could be looking at a Santa Claus rally or an absolutely ugly selloff in the near future. I will be monitoring the key price levels mentioned above on the S&P 500 and will wait patiently for Mr. Market to tip his hand. This is a tough market to trade and volatility is running relatively high. Headline risk coming out of Europe is seemingly constant. I would keep position sizes light and monitor risk aggressively. This is not the time to be a hero!

Subscribers of OTS have pocketed some serious return in the past few months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at Options Trading Signals.com and take advantage of my professional trading alerts and position management experience each week.

JW Jones

Commodities Gain Strength on the Back of a Weaker U.S. Dollar

Crude oil closed higher on Tuesday extending the rally off October's low. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off this month's low, the 62% retracement level of the May-October decline crossing at 100.08 is the next upside target. Closes below the 20 day moving average crossing at 90.63 are needed to confirm that a short term top has been posted. First resistance is the 62% retracement level of the May-October decline crossing at 100.08. Second resistance is the 75% retracement level of the May-October decline crossing at 105.41. First support is the 20 day moving average crossing at 90.63. Second support is the reaction low crossing at 89.17.

Natural gas was higher due to short covering on Tuesday as it consolidated some of Monday's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If December extends this year's decline, monthly support crossing at 3.225 is the next downside target. Closes above the reaction high crossing at 3.978 are needed to confirm that a short term low has been posted. First resistance is the reaction high crossing at 3.978. Second resistance is the reaction high crossing at 4.039. First support is Monday's low crossing at 3.652. Second support is monthly support crossing at 3.225.

Gold closed higher on Tuesday as it extends the rally off September's low. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that additional strength is possible near term. If December extends the rally off September's low, the 75% retracement level of the 2008-2011 rally crossing at 1826.50 is the next upside target. Closes below the 20 day moving average crossing at 1704.70 would confirm that a short term top has been posted. First resistance is the 75% retracement level of the 2008-2011 rally crossing at 1826.50. Second resistance is the 87% retracement level of the 2008-2011 rally crossing at 1875.10. First support is the 10 day moving average crossing at 1748.30. Second support is the 20 day moving average crossing at 1704.70.


Do You Understand How Divergences Work in the Market?

Crude Oil Settles at a New 3 Month High, Natural Gas and Gold Extend Rally

Crude oil closed higher on Thursday as it extending this month's rally. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off this month's low, the 50% retracement level of the May-October decline crossing at 95.32 is the next upside target. Closes below the 20 day moving average crossing at 85.56 are needed to confirm that a short term top has been posted. First resistance is the 50% retracement level of the May-October decline crossing at 95.32. Second resistance is the 62% retracement level of the May-October decline crossing at 100.08. First support is the 20 day moving average crossing at 89.06. Second support is the reaction low crossing at 83.40.

Natural gas was lower Thursday while extending this month's trading range. Stochastics and the RSI are diverging but neutral signaling that sideways trading is possible near term. Closes above last Monday's high crossing at 4.039 are needed to confirm that a short term low has been posted. If December renews this year's decline, monthly support crossing at 3.225 is the next downside target. First resistance is the 25% retracement level of the June-October decline crossing at 4.133. Second resistance is the 38% retracement level of the June-October decline crossing at 4.336. First support is today's low crossing at 3.724. Second support is monthly support crossing at 3.225.

Gold also closed higher on Thursday as it extends the rally off September's low. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are bullish signaling that additional strength is possible near term. If December extends the rally off September's low, the 62% retracement level of the 2008-2011 rally crossing at 1775.20 is the next upside target. Closes below last Thursday's low crossing at 1604.70 would confirm that a short term top has been posted. First resistance is the 62% retracement level of the 2008-2011 rally crossing at 1775.20. Second resistance is the 75% retracement level of the 2008-2011 rally crossing at 1826.50. First support is last Thursday's low crossing at 1604.70. Second support is September's low crossing at 1535.00.


Get Our Big Picture Index & Commodity Forecasts Here

Adam Hewison: If Slovakia Votes No, Crude Oil Tanks on Tuesday

This morning I was reading that there are approximately 3.2 million job openings here in the United States. With more than 14 million people out of work in this country, how can we possibly have 3.2 million job openings still not filled?

These are job openings that the private sector needs to fill. I know from our own experience here at our company, finding competent people it extremely difficult. Part of the problem, in my opinion, is that many job applicants have no skills.

The CEO of Cummings, Tim Selso said he can’t find skilled workers for his manufacturing plants. This is a common complaint that many CEOs share.

According to economists, the average worker contributes about $45,000 a year to GDP. If we could just fill 1/3 of those jobs, it would have a huge impact on the economy.

Like many traders today, we were surprised at the velocity of the rally which is based on a potential agreement coming into place in Europe. At the moment no one knows what the deal is, and nobody in a position of authority is indicating what the deal is. The vote from Slovakia has the potential to torpedo any recovery and is a big hurdle approaching tomorrow. If that tiny country votes “no” to this proposed agreement, it could send stocks, and in particular bank stocks, to the cellar!

That leaves us with just one option.....What are the Trade Triangles saying?

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = - 55

The November crude oil market has rallied back to an area that was previous support and should present some fairly serious resistance. We were somewhat surprised at today’s action however, our Trade Triangles remain in a sideways mode indicating a trading range.

We are not totally convinced that this market has turned around and we expected to once again reverse and test the $80 level. As you know, this market has been closely tied in to the movements of the S&P 500. Overall we still view the trend in this market as negative. Intermediate and Long term traders should continue to be short the crude oil market.

November crude oil closed up $2.40 a barrel at $85.38 today. Prices closed nearer the session high again today and hit a fresh three week high. Bulls have gained solid upside technical momentum just recently. Prices have rallied around $10.00 a barrel from last week's low. Higher U.S. stock indexes and a sharply lower U.S. dollar index helped to boost the crude oil market again today. The bulls have the near term technical advantage.


How To Find Winning Trades In Any Market

David Banister: Bears Yelling Fire in Empty Theater

The lows at 1101 were a convergence of Fibonacci weeks, months, sentiment bottoms and VIX extremes along with major insider buying all at the same time.

We rallied up in 5 waves from 666 to 1370 Bin Laden highs.  At that level we had re-traced 78.6% of the entire 2007 highs to 2009 lows, a common turning point.  Since then, we have had a 3 wave decline, also common for correcting a 5 wave move to the upside.  The decline halted at 1101, an exact 38% fibonacci retracement of the 666 lows to 1370 highs.  This is what I call a “fibonacci intersection”. The same thing happened in July 2010 at 1010 on the SP 500, where a huge bottom formed.

The rally since 1101 was a 5 wave rally, this is an early BULL SIGN.

A correction of this 103 point 5 wave rally would be normal, but the lighter the correction the more Bullish.  So far the correction is only 23% of the 104 point rally with a gap fill at 1180.

 
Let’s review: 13 Fibonacci month’s from the July 2010 bottom to August 2011 bottoms 7 Times in history we had the SP 500 double in a short period of time, and in every case it retraced 27-40% of the price movement from lows to highs. We just retraced 40% of our SP 500 double, historically very high retracement.

At 1101 we had 38% fibonacci ABC correction of the Bull leg from 666 to 1370.

In 1974-77 we had the SAME pattern, which I outlined for everyone last week.

13 Fibonacci weeks correction from the Bin Laden 1370 highs to 1101 lows. 1370 was a 78% fib of the 07 highs and 09 lows. 1101 is a 38% fib of the 666 lows and 1370 highs. Thats what I call a Fibonacci intersection. The same thing happened in July 2010 at 1010 lows.

Insiders with massive buying, corporate buybacks announced.

VIX at extreme levels.

Fear gauges at extreme levels.

5 wave impulsive rally from 1101 to 1204 ensued… now a pullback is due. Same thing happened last summer 1010 to 1130, pullback to1040 in 3 waves, then another 5 waves up.

What am I telling everyone?

Stop yelling fire in an empty theater….

This is options expiration week, trading this week is notoriously difficult…

The Bear case is crowded, the Bull case is not.

I’m leaning bullish as long as I keep seeing this type of confirming price action.

I’m watching 1165 on SP 500 as a pivot low worst case, but as long as we see price action above that I like the set up for a while yet on the long side.

So you say "But Dave, the textbook for Elliott Waves doesn’t agree with you".… good, that’s why I use other indicators!

Consider subscribing to David Banisters 24/7 email access so that you will be consistently informed and also get Gold and Silver forecasts on a regular basis. Subscribe now with a 33% discount coupon ahead of our rate increase Market Trend Forecast.Com for details.

Is it Time to Follow The Herd into Trading Gold and the SP500?

Are you the type of trader who follows the herd? Do you use herd mentality against the market? Or are you a "contrarian investor"? Over the past 2 weeks we have seen the market sentiment change three times from extreme bullish to bearish and back to bullish as of today. Normally we don’t see the herd (average Joe) switch trading directions this quickly. Over the past 10 years I found that the average time for the herd to reach an extreme bullish or bearish bias takes between 4-6 weeks in length. It is this herd mentality which makes for some excellent trend trading opportunities. But with the quantitative easing, thinner traded market, and lack of trading participants (smaller herd) I find everyone is ready to change directions at the drop of a hat.

The old school traders/investors who don’t use real time data or charts, and who dabbled in stock picks, and options trades here and there have mostly exited the trading arena from frustration or losing to much money. This group accounted for a decent chuck of liquidity in the market and was also the slowest of the herd to change directions.

The new school, today’s smaller herd is much more aggressive and quicker to act on market gyrations. I think this is because the only people left in the market are those who make a living pulling money from the market and those who feel they are really close to mastering the stock market. It is these individuals who are using trading platforms with real time data, charts and scanners to help get a pulse on the market so they can change directions when the big boys do. I feel this is the reason why the market is able to turn on a dime one week to another over the past 8 months....The easy prey (novice and delayed data traders) are few and far between and the fight to take money for other educated traders seems to be getting a little more interesting to say the least.

Anyways, enough about the herd already.....

It’s been an interesting week thus far with stocks and commodities. The week started with a large gap up only for strong selling volume to step in and reverse direction the following day. It is this negative price action that starts to put fear into the market triggering a downward thrust in the market. During an up trend which we are in now, I look for these bearish chart patterns to form as they tend to trigger more selling the following days which cleanses the market of weak positions. Once a certain level of traders have been shaken out of their positions and are entering positions in order to take advantage of a falling market, that’s when we get the next rally, catching the majority of traders off guard as they panic to buy back their short positions. It’s this short covering which sparks a strong multi day rally and kicks off the new leg up in the market.

Currently we getting some mixed signals. The market sentiment is the most bullish it has been since 2007, just a little higher than the Jan & March highs this year. This makes me step back and think twice about taking any sizable long positions. Any day now the market could roll over. Another bearish signal is the fact that we just had a very strong reversal day for stocks and metals to the down side. That typically leads to more selling.

But if we look at the positive side of things, the trend is still up, this is typically a strong time for stocks as we go into Christmas/Holiday season, also the market breadth is really strong with the number of stocks hitting new highs has really taking off.

SP500 – Daily Chart
Below you can see the reversal candles along with short term and intermediate support levels. Although the market sentiment is screaming a correction is near, we must realize that sentiment can remain at this level for an extended period of time while the market continues to trend. This is one of the reasons why we say “The Trend Is Our Friend”.

I am hoping for a pullback and would like to see market sentiment shift enough on an intraday basis to give us a low risk entry point.

Gold – Daily Chart
A reversal candle is seen as a sell signal or a profit taking pattern. Short term aggressive trades use these to lock in quick price movements. With so many traders watching gold, it caused a flood of sell orders to push gold down today.

Mid-Week Conclusion:
In short, each time we see some decent selling in the market its get bought back up. Today was another perfect example as we had an early morning sell off, then a light volume rally for the second half of the session and a end of day short squeeze during the last 30 minutes. Gold has pulled back to the first short term support level. Because of the large following in gold I would like to see if there will be another day of follow through selling before possibly looking to take a trade.

If you would like to get my daily pre-market trading videos, intraday updates, chart analysis and trades just subscribe to my trading service here at The Gold and Oil Guy.com

Chris Vermeulen



Share

ONG Focus: Crude Oil and Gold Daily Technical Outlook For Friday Nov. 26th

Crude Oil Daily Technical Outlook

Crude oil jumped to as high as 84.53 but was limited by mentioned 85.42 resistance and weakens again. With 4 hours MACD crossed below signal line, intraday bias is turned neutral. As noted before, decline from 88.63 is still in favor to continue with 84.52 resistance intact. Break of 80.06 will target 61.8% retracement of 70.76 to 88.63 at 77.59 and below. Though, above 84.53 will now flip intraday bias back to the upside for retesting 88.63 high.

In the bigger picture, the steeper than expected fall from 88.63 is mixing up the outlook and argue that rise from 64.23 is possibly finished with three waves up to 88.63. In other words, it could be the second wave of consolidation from 87.17 and the third wave might have just started. We'll now slightly favor more decline as long as 88.63 resistance holds. Nevertheless, medium term rise from 33.2 is treated as the second wave of the consolidation pattern that started at 147.27. As long as 64.23 support holds, medium term rise from 33.2 is still in favor to extend to 50% retracement of 147.27 to 33.2 at 90.24 and possibly higher before completion.

Nymex Crude Oil Continuous Contract 4 Hour and Daily Charts

Gold Daily Technical Outlook

With 4 hours MACD crossed below signal line, Gold's recovery from 1329 should have completed at 1382.9 already. Intraday bias is now cautiously on the downside for 1315.8/1329 support zone. Decisive break there will complete a head and shoulder top reversal pattern and should turn outlook bearish for deeper fall. On the other hand, strong rebound from 1315.8/1329 will indicate that gold is merely in sideway consolidation and another would still be seen before topping.

In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). Such rally might still continue towards 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before completion. Though, we're aware of long term projection target of 100% projection of 253 to 1033.9 from 681 at 1462 and we'd anticipate strong resistance from there to bring medium term correction finally. On the downside, however, break of 1315.8 support will be an early alert of medium term reversal and will turn focus back to 1155.6 support for confirmation.

Comex Gold Continuous Contract 4 Hour and Daily Charts


Just click here for your FREE trend analysis of gold ETF GLD

Share