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.
Crude oil declined, falling below $70 a barrel in New York, after the seizure of a Spanish bank fueled concern Europe’s debt crisis may spread. Oil dropped for the first day in three as the euro weakened against the dollar, reducing the investment appeal of commodities. U.S. supplies of crude oil probably rose for the 16th time in 17 weeks amid ample imports, according to analysts surveyed by Bloomberg News before a government report tomorrow.
“Speculators are shifting money from risky to non-risky assets,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. “From a fundamental point of view, inventories are high so that could push prices further down but crude oil is really going to be driven by the euro issue.” Crude oil fell as much as $1.08, or 1.5 percent, to $69.13 a barrel in electronic trading on the New York Mercantile Exchange. It was at $69.16 at 12:08 p.m. Singapore time. Yesterday, the contract rose 17 cents, or 0.2 percent, to settle at $70.21 a barrel.
Futures rose yesterday on speculation that China may delay economic tightening measures and on signs that U.S. economic growth will accelerate. Europe’s debt crisis has undermined that optimism, pushing the region’s common currency lower. The dollar rose to $1.2299 per euro from $1.2372 yesterday. The euro fell against all of its most traded counterparts after the Bank of Spain said on May 22 it appointed a provisional administrator to run CajaSur, a savings bank crippled by property loan defaults.....Read the entire article.
The stock market topped in April which was expected from analyzing stocks and the indexes. Back in April I posted a few reports explaining how to read the charts to spot market tops. Today’s report is about identifying market bottoms. It does not get much more exciting than what we have seen in the past 2 months with the market topping in April and the May 6th mini market crash. This Thursday we saw panic selling which pushed the market below the May 6th low washing the market of weak positions.
For those of you who have been following me closely this year I am sure you have noticed trading has been a little slower than normal. This is due to the fact that the market corrected at the beginning of the year and we went long Feb 5th and again on Feb 25th. Since then the market rallied for 2 months and never provided another low risk entry point. In April the market became choppy and toppy and we eventually took a short position to ride the market down. Now were we are looking at another possible reversal to the upside.
Only a few trades this year which I know frustrates some individuals but if you step back and look at my trading strategy you will learn that we only need to trade a few trades a year to make some solid returns. I don’t know about you but I would rather trade a few times a month and live life between trades… not trade all day every day getting bug eyed in front of the computer.
Ok enough of the boring stuff let’s get into the charts....
SP500 – Stock Market Index Trading ETFs & Futures
The pullback in the broad market was expected but the mini crash on May 6th really through a wrench into things for us technical analysts. We don’t really know the truth about what happened that day… was it just a simple error or was it a planned error for the US government to take a massive short position to move something in their favor quickly to generate MASSIVE gains? It leaves us technicians hanging wondering if that was a shift in trend from up (accumulation) to down (distribution)?
My thoughts are if the crash was truly an error then we will see months if not another year of higher prices… But if it was a planned sell off with banks moving to the sidelines then we are most likely headed into another bear market. Personally it does not matter what happens as big money will be made in either direction. Problem is if we do go into another bear market then the majority of individuals will lose capital as investor’s portfolios get smaller and smaller. That will lead to a lot of depressed people…
In short, I am neutral on the stock market for the intermediate and long term. Once we have a few more months of price action only then will I have a plan for longer term investments. But on the short term time frame the market is screaming at me with extreme sentiment levels lining up on the stock market and gold.
The daily chart of the SPY – SP500 Index shows several important points which help me time market bottoms. We have prices trading at a support zone. Buyers step back into the game here and should provide a decent bounce which started Friday Morning.
Next we have the panic selling spikes from an indicator I created. Generally the day after we see panic in the market like we did on Thursday we will see a big bounce and many times a large rally.
Down at the bottom you can see my custom market cycles which are both starting to bottom. During times like this the market has a natural tendency to move higher.
VIX – Market Volatility Daily Chart
The VIX has an old saying “When the VIX is high its time to buy, When the VIX is low, its time to go”. Simple analysis clearly shows the VIX trading high and at a resistance zone.
Put/Call Ratio – Daily Trading Chart
This chart measures the amount of put and call options traded each day. When it is trading over 1.00 then we know for every 1 call option traded (wanting the market to go up) there is 1 put option traded (wanting the market to go down). Over 1.00 is extreme and when that many people are bearish and using leverage to profit from a drop in price then in my opinion it means everyone has already sold and the selling pressure is about to end.
Actually if you go back in time and review SP500 and this ratio you will notice 2-3 days after this ratio reaches 1.00 or higher the market bounces/bottoms.
NYSE Advance/Decline Line for Equities – Daily Chart
This chart shows us how many stocks are advancing or declining on any given day. When extremes are reached look for a short term bounce or bottom 1-3 days following.
How to Identify Stock Market Bottoms with Simple Analysis:
In short, I feel the market is forming a bottom here. How big of a rally will we get? I don’t know because of the mixed signals from the May 6th EXTREME heavy volume selling session. As usual I focus on trading with the trend, trading the low risk setups and I manage my money/positions scaling in and out of those positions as I see fit.
Crude oil closed slightly higher on Monday as it consolidated some of this month's decline. The mid range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If July extends this month's decline, last July's low crossing at 66.11 is the next downside target. Closes above the 20 day moving average crossing at 79.38 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 74.43. Second resistance is the 20 day moving average crossing at 79.38. First support is last Thursday's low crossing at 68.85. Second support is last July's low crossing at 66.11.
Natural gas closed lower on Monday as it extends last week's decline. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If June extends today's decline, this month's low crossing at 3.855 is the next downside target. Closes above the 10 day moving average crossing at 4.212 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 4.140. Second resistance is the 10 day moving average crossing at 4.212. First support is today's low crossing at 3.986. Second support is this month's low crossing at 3.855.
The U.S. Dollar closed higher on Monday ending a three-day correction off last week's high. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 84.60 are needed to confirm that a short term top has been posted. If June renews this year's rally, the 87% retracement level of 2009's decline on the weekly continuation chart crossing at 87.79 is the next upside target. First resistance is last Wednesday's high crossing at 87.63. Second resistance is weekly resistance crossing at 87.79. First support is last Friday's low crossing at 85.33. Second support is the 20 day moving average crossing at 84.60.
Gold closed higher due to short covering on Monday as it consolidated some of last week's decline but remains below the 20 day moving average. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If June extends last week's decline, the reaction low crossing at 1156.20 is the next downside target. Closes above the 10 day moving average crossing at 1211.60 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1196.70. Second resistance is the 10 day moving average crossing at 1211.60. First support is last Friday's low crossing at 1166.00. Second support is the reaction low crossing at 1156.20.
Intraday bias in crude oil remains neutral and some more consolidations might be seen and rise to 38.2% retracement of 87.15 to 64.24 at 72.99 cannot be ruled out. However, upside should be limited by 61.8% retracement at 78.39 and bring fall resumption. Below 64.24 will target 60 psychological level next, which is close to 50% retracement of 33.2 to 87.15 at 60.18
In the bigger picture, the break of 68.59/69.50 support zone affirms our view that whole medium term rebound from 33.2 has completed at 87.15 already, just ahead of 50% retracement of 147.27 to 33.2 at 90.24. Further decline should be seen to 50% retracement of 33.2 to 87.15 at 60.18 at least. Also, as rebound from 33.2 is viewed as as a correction to the whole correction that started at 2008 at 147.27, we'd anticipate a break of 33.2 low in the longer term. On the upside, break of resistance at 78 level is needed to be indicate that fall from 87.15 is completed. Otherwise, we'll stay bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart
Don’t you hate it when the fundamentals get in the way of a great bullish trade? Yes, you do unless you are bearish. Oil traders and the world continue to get a reality check as global markets are crumbling and teetering on the edge of oblivion. There is great loss of confidence in Europe as the true nature of the ills that still plague the global economy are unmasked. We live in a world of printed money, piles of debt and countries that hide the true nature of their debt.
The fundamentals of supply and diminishing demand has taken over crude oil as opposed to the fundamentals of economic illusions along with global markets that are crashing down.Oil got crushed into expiration, dropping to a low into the $64 a barrel handle before coming back on rumors of euro currency intervention. Yet the Wall Street Journal says that, “the sharp rally in the euro against the Swiss franc in Asian trading Friday was most likely due to large scale covering of short positions and profit taking rather than intervention from the Swiss or other central banks.” Yet many floor traders in Chicago disagreed.....Read the entire article.
Crude oil fell as European governments struggled to contain the region’s debt crisis, raising concern that it will slow the global economic recovery. Futures dropped as much as 2.5 percent as European Union finance ministers plan to meet today in Brussels to discuss sovereign debt. U.S. petroleum inventories climbed to the highest level in at least 20 years for the middle of May.
“The worry is that the European economy is going to drag the global economy into another recession,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said in an interview. “Because 2008 is so fresh in everybody’s mind, everyone I talk to is just petrified.” Crude oil for July delivery dropped 78 cents, or 1.1 percent, to $70.02 a barrel at 10:35 a.m. on the New York Mercantile Exchange. The July contract has dropped for nine consecutive days, losing 13 percent since May 10. Prices are down 7.2 percent this week.
Oil prices plummeted almost $115 a barrel between July and December 2008. Supplies of oil and all petroleum based fuels jumped to 1.81 billion barrels in the week ended May 14, the highest stockpiles on a seasonal basis in Energy Department data through 1990. High inventories have driven down the profit margin from refining crude into gasoline and heating oil from a 15 month high. The crack spread for July has dropped 14 percent this week, based on Nymex futures prices.....Read the entire article.
Short term outlook in crude oil remains bearish as long as 71.43 and another fall is still in favor. Sustained trading below 38.2% retracement of 33.2 to 87.15 at 66.54 will target 60 psychological level, which is close to 50% retracement at 60.18. On the upside, though, note that break of 71.43 resistance will indicate that a short term bottom is formed, possibly with convergence condition in 4 hours MACD, and bring stronger rebound.
In the bigger picture, the break of 68.59/69.50 support zone affirms our view that whole medium term rebound from 33.2 has completed at 87.15 already, just ahead of 50% retracement of 147.27 to 33.2 at 90.24. Further decline should be seen to 50% retracement of 33.2 to 87.15 at 60.18 at least. Also, as rebound from 33.2 is viewed as as a correction to the whole correction that started at 2008 at 147.27, we'd anticipate a break of 33.2 low in the longer term. On the upside, break of resistance at 78 level is needed to be indicate that fall fro 87.15 is completed. Otherwise, we'll stay bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.
Crude oil closed lower on Thursday as it extended this month's decline. The mid range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If June extends this month's decline, last May's low crossing at 59.43 is the next downside target. Closes above the 20 day moving average crossing at 77.98 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 72.73. Second resistance is the 20 day moving average crossing at 77.98. First support is today's low crossing at 64.24. Second support is last May's low crossing at 59.43.
Natural gas closed lower on Thursday as it extends yesterday's breakout below the 20 day moving average crossing at 4.173. The mid range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near term. If June extends this week's decline, this month's low crossing at 3.855 is the next downside target. If June renews this month's rally, the 38% retracement level of the October-April decline crossing at 4.678 is the next upside target. First resistance is Tuesday's high crossing at 4.494. Second resistance is the 38% retracement level of the October-April decline crossing at 4.678. First support is today's low crossing at 4.040. Second support is this month's low crossing at 3.855.
The U.S. Dollar closed lower due to profit taking on Thursday as it consolidated some of this year's rally. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that a short term top might be in or is near. Closes below the 20 day moving average crossing at 84.16 are needed to confirm that a short term top has been posted. If June extends this year's rally, the 87% retracement level of 2009's decline on the weekly continuation chart crossing at 87.79 is the next upside target. First resistance is Wednesday's high crossing at 87.63. Second resistance is weekly resistance crossing at 87.79. First support is the 10 day moving average crossing at 85.60. Second support is the 20 day moving average crossing at 84.16.
Gold closed lower on Thursday and below the 20 day moving average crossing at 1193.20 confirming that a short term top has been posted. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If June extends this week's decline, the reaction low crossing at 1156.20 is the next downside target. Closes above the 10 day moving average crossing at 1214.90 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 1214.90. Second resistance is last Friday's high crossing at 1249.70. First support is today's low crossing at 1175.00. Second support is the reaction low crossing at 1156.20.
Oil prices bucked the deflationary commodity trend with a late session turnaround as traders moved to cover positions the day before the June futures contract expiration. Some traders credited the turnaround in the market to what seemed to be an increasingly optimistic Federal Reserve that raised their economic growth expectations in the release of its Fed Minutes. The Fed said in the Minutes from the FOMC meeting last April that GDP growth would range to 3.2% to 3.7% which was up from a previous forecast range of 2.8% -3.5%. The Fed also lowered its forecast for unemployment from a range of 9.5%-9.7% to a range of 9.1%-9.5%.
Of course one has to remember that these forecasts were made before the depth and gravity of the European financial crisis was clear to the market. Oh sure, the Fed did mention that the Greece crisis could impair US Markets but I do not think that they realized how bad the situation was at that time.If the turnaround in oil was all about growth expectations then why did we not see more confidence in buying some of the other commodities? Unless of course you assume that oil is going to be a leading indicator of economic growth. And the other reason we saw a snap back was due to the fact that oil is over sold.....Read the entire article.
