Trade ideas, analysis and low risk set ups for commodities, Bitcoin, gold, silver, coffee, the indexes, options and your retirement. We'll help you keep your emotions out of your trading.
The gold market has had a lot of publicity and been under intense scrutiny lately as investors, both conservative (Glenn Beck) and liberal (George Soros), are weighing in and recommending a position in gold.
Certainly the trend in gold remains positive, however there are some possible early chinks in the gold armor that I want to bring to your attention in this short video.
We invite you to watch this video with no strings attached and to leave us a comment on this popular market.
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.
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!
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
