Are Gold, Oil and the S&P500 Having a Seasonal Pivot Trading Low?

The last week of October was something else. Heavy fiscal year end selling for mutual funds seemed to put a damper on good news and push stocks and commodities lower. October is historically a tough month on the US market with mutual funds locking in profits on their books.

Below are some charts showing my analysis on gold, silver, oil, natural gas and the S&P 500 index along with a seasonality chart proving that October has more selling pressure than other months.

Gold GLD ETF – Gold Pivot Trading Low – Daily Chart
As you can see from the chart below we appear to be in the middle of a pivot low correction which can make for some great entry points. The trend is up, gold is oversold and it looks like we had a reversal low last week.


Silver SLV ETF – Silver Pivot Trading Low – Weekly Chart
This is a chart I posted a couple months ago and so far silver has traded within the trend lines and support & resistance levels I pointed out in early August. Silver still looks bullish as it is trading at a pivot low.


Gold Miners GDX ETF – Gold Miners Pivot Trading Low – Weekly Chart
Gold mining stocks appear to be trading near the bottom of the trend channel. The odds are still pointing to higher prices.


Crude Oil USO Fund – Oil Pivot Trading Low – Daily Chart
This chart of USO is also from a recent post in early October. USO broke out and is now trading at our support trend lines. There was a nice reversal candle last week but the heavy selling across the entire market pulled oil back down.


Natural Gas UNG Fund – Natural Gas Pivot Trading Low – Daily Chart
Pivot trading low could be close for UNG. The daily chart is telling me we saw the bottom in natural gas back in September as prices collapsed washing out most long (bullish) traders. I figure we will see prices trade between $9-12 for several months as the commodity forms a base.


S&P 500 Index – S&P 500 Pivot Trading Low – Daily Chart
The broad market looks and feels oversold. This chart uses Andrews Pitchfork analysis to show where short term pullbacks to the middle trend line (middle of trading range) have been a buying opportunity. Deeper corrections drop to the bottom support trend channel. These corrections sometimes form a lower low and lower high that scares traders and inestors out of the market before heading higher.


S&P 500 Seasonality Chart – S&P 500 Pivot Trading Low
This chart shows the performance for each month over the past 37 years. Simple analysis shows selling pressure in Sept and Oct as mutual funds sell positions to lock in gains for their books each year. This move is generally compounded because seasoned traders know about this seasonal movement and also sell positions and even short the market to take advantage of this at times.

I think we are inline for a perfect storm going into year end. The market is trading at a pivot low from many different analysis theories. This forms a high probability trading opportunity in the next 2 months if we see prices reverse and start heading higher this month.


Pivot Trading Low Conclusion:
A lot of stocks have taken a real beating this past month as sell orders flooded the trading desks last week. Technology, financials and small cap stocks took is the worst. The sharp drop is not really what we wanted to see but it makes good sense. With those groups posting the largest gains since March it is only normal that money will be coming out of those stocks to lock in gains.

Many traders are starting to panic about another possible market melt down. This negative sentiment is a bullish indicator for higher prices. If everyone is scared and exiting their positions then we must be close to trading a pivot low.

I am still bullish on the market and will be looking for new opportunities if we see prices start to head higher this month.

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Oil Falls the Most in a Month as U.S. Consumer Spending Drops

Crude oil fell the most in a month after U.S. consumer spending dropped for the first time since April, increasing skepticism that the economy will strengthen. Oil decreased as much as 3.8 percent and equities declined after the Commerce Department said purchases slipped 0.5 percent in September in the world’s biggest energy consuming country. Futures climbed the most in two weeks yesterday after a government report that the U.S. grew in the third quarter.

“People are still antsy that this will be a tepid recovery,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Given where the economy is, $80 oil doesn’t make a hell of a lot of sense.” Crude oil for December delivery fell $2.83, or 3.5 percent, to $77.04 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices are down 4.3 percent this week, the first decline this month. Futures are set to gain 9.1 percent in October, the biggest monthly increase since a 30 percent rally in May.....Read the entire article.

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Crude Oil Climbs the Most in a Month After U.S. Economy Expands

Crude oil rose the most in a month after the U.S. economy grew in the third quarter for the first time in more than a year, spurring optimism that fuel demand will increase. Oil climbed as much as 3.9 percent after the Commerce Department said that the world’s largest energy consuming country expanded at a 3.5 percent annual pace from July through September. The economy was forecast to strengthen at a 3.2 percent annual pace, according to a Bloomberg News survey.

“This confirms that the recession has ended and now the only question is what the pace of the recovery will be,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “It would appear that this would lead to increased demand.” Crude oil for December delivery rose $2.71, or 3.5 percent, to $80.17 a barrel at 1:21 p.m. on the New York Mercantile Exchange. Futures are up 80 percent this year after climbing to a one year high of $82 a barrel on Oct. 21. Prices are heading for the biggest gain since Sept. 30.....Read the entire article.

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Commodities & Stocks Ready to Bounce or Rally?

Commodities and stocks almost look ready for a rally or at least a relief bounce. The market is down over 5% and the normal pullback this year has been 4%. Using technical analysis and inter-market analysis we can see that the market is reaching extreme lows and this usually means we are only a couple days away from a rally.

I work with several market technicians as we all analyze the market a different way and share our work with each other to gain maximum insight on the broad market moves. We analyze momentum cycles, magnetic cycles, volatility levels, support & resistance levels, volume analysis and inter-market analysis.

Each of us has found a formula which works for our individual style of trading. And by combining our work we have found that we can collectively produce some very exciting trading signals for the broad market. We focus on leveraged index funds in order to take advantage of our insights. While nothing in trading is ever perfect, the analysis for timing the broad market is very exciting.

Here are some quick charts on where the market is trading.

US Dollar – Daily Dollar Price Chart
This chart is a no brainer. The trend is down and trading at resistance. If the US dollar reverses back down we will see stocks and commodities move higher.


VIX – Daily Volatility Index
Again, overall the trend is down and trading at resistance. As the saying goes “When the VIX is high its time to buy”. Just to be clear, the VIX is low compared to the previous highs set back in 2008 which was around the 80 level. But, if we want to keep things simple for the current trend then the VIX is high for our current market condition. The VIX moves in the opposite direction of the equities market.


DIA – Dow Jones Industrial Average ETF Fund
Here is the Dow Jones index fund and it clearly shows that when investors are selling out of their positions and getting scared of a market collapse, volume rockets higher. When we see the price pullback to possible support levels and volume increases that is a time when we should be looking to scale into a long position for a bounce, such as now.


XLE – Energy Sector ETF
You can see that the energy sector is very close to a support level and volume is high. With the US dollar about to reverse back down it will help boost this sector as it is tied in with commodity prices which rise with a falling dollar. I expect we will see a price gap lower and fill this area before moving higher.


GLD – Gold ETF Fund & Silver
This chart has not changed much from last weeks report. We are getting the drop as expected this week. We could see the gap fill from early October before gold stabilizes.

Silver is in the same situation. Gold and silver move in tandem so we are waiting for a bottom before looking for a low risk entry point.


Commodity & Stocks Trading Conclusion:
To keep things short and to the point, I am seeing momentum cycle lows as of today, magnetic wave lows today, and most commodities and indexes trading at support. These observations, coupled with the US dollar at a possible resistance level and market volatility spiking to an extreme high, lead me think a bounce is in the cards.

The market has had an amazing rally so far this year and I feel that we will have a solid year end rally going into Christmas. That being said, the recent sharp correction could form an ABC retrace pattern which means we get a bounce in the next week or so, then one more multi day sell off which will scare even more bulls out of the market. I am going to be scaling out of this oversold play quickly to lock in some gains while allowing a smaller position to ride for larger gains.

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Crude Oil Tumbles After Unexpected Increase in Gasoline Supply

Crude oil fell more than $2 a barrel after a government report showed an unexpected increase in U.S. gasoline stockpiles and crude supplies rose to a two month high. Gasoline inventories climbed 1.62 million barrels last week, the Energy Department said. A 1 million barrel decline was forecast, according to a Bloomberg News survey. Crude oil inventories rose as imports advanced the first time in five weeks. Oil also dropped as the dollar gained against the euro.

“The gasoline number was a big surprise and makes people less optimistic about the economy and demand,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “You are also seeing strength in the dollar, further weakening the oil market.” Crude oil for December delivery fell $2.14, or 2.7 percent, to $77.41 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $77.23, the lowest since Oct. 16. Prices have gained 74 percent from the end of 2008 and reached a one-year.....Read the entire article.

Has the Gold Market Topped Out?

That is the big question on many traders’ minds as gold fell from a high around $1,070 to the lows seen on Tuesday.

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New Video: Has the S&P Index Topped Out for the Year?

From Adam Hewison at The MarketClub......

There is compelling evidence that we may have seen a top in the S&P index. In my new short video, I show you the evidence that I have found which may point to the fact that we are going to see a correction in this index.

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Bottoming U.S. Dollar Threatens Crude Oil Rally

Crude oil was slightly higher due to short covering overnight as it consolidates some of Monday's decline. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 75.48 would confirm that a short term top has been posted. If December extends this month's rally, weekly resistance crossing at 84.83 is the next upside target.

Tuesday's pivot point, our line in the sand is 79.39

First resistance is last Wednesday's high crossing at 82.00
Second resistance is weekly resistance crossing at 84.83

First support is Monday's low crossing at 77.97
Second support is the 20 day moving average crossing at 75.48

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Natural gas was slightly higher due to short covering overnight as it consolidates some of Monday's decline. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. Monday's close below the reaction low crossing at 5.280 confirms that a short term top has been posted.

If December extends the decline off last week's high, the 62% retracement level of the September-October rally crossing at 4.970 is the next downside target. Closes above the 20 day moving average crossing at 5.581 would confirm that a short term low has been posted.

First resistance is Monday's gap crossing at 5.473
Second resistance is the 20 day moving average crossing at 5.581

First support is the overnight low crossing at 5.173
Second support is the 62% retracement level at 4.970

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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of Monday's rally. Stochastics and the RSI are turning bullish hinting that a short term low might be in or is near.

Closes above the 20 day moving average crossing at 76.16 are needed to confirm that a short term low has been posted. If December renews this year's decline, monthly support crossing at 73.39 is the next downside target.

First resistance is the 20 day moving average crossing at 76.16
Second resistance is the reaction high crossing at 76.85

First support is the 10 day moving average crossing at 75.65
Second support is last Wednesday's low crossing at 75.08