How To Be Positioned for SP500, Gold & Crude Oil This Week

The second half of last week we saw some strong price action in the equities market. The SP500 broke through the 5 and 50 day moving averages closing the week just under key resistance levels. The SP500 futures will find resistance at the June high $1099.25, $1100 which is whole number then at $1103 which is the 200 day moving average. Each of these are clumped together making it really just one solid area which sellers will be waiting to short the market.

The market momentum and internals are looking strong for the equities market overall. With last weeks strong close we have seeing the percentage of stocks closing above their 50 and 200 day moving averages surge from 40% to 68% from the previous week. Stocks closing above their 20 day moving average jumped from 40% to 82% from the previous week. Seeing this type of shift in the market Momentum is generally a bullish indicator.

From a quick glance at the internals it looks as though Monday will trade flat/negative for the session. Reason being is that the NYSE Advance/Decline line is telling us the market is overbought when looking at a short term time frame. I would expect some selling Monday or possibly we get a gap up, then a sell off early in the session while the market digests last weeks strong closing.

Gold
Bullion has been giving mixed signals for while now. It looks like there has been a possible ABC retace, but on the other hand it looks to be forming a stair step pattern lower (series of bear flags). Until we get something more concrete from the charts lets just keep our eye on it for now.

Crude Oil
The past month we have seen oil form a bear flag which generally leads to lower prices. That said oil continues to grind its way higher closing at a key resistance level. This could be a possible double top before heading lower or we could get a breakout and rally this week. I know that does not sound helpful but remember oil is very sensitive to weather (hurricanes), US Dollar and geopolitical events making it much more unpredictable than one may think. That said I am not trading it right now.

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I feel the equities market has some strength behind it. But we must see the SP500 futures contract close strongly above the $1103 area. With the market overbought and trading at resistance I am favoring some early weakness Monday

As for the gold and oil, I am just going to keep an eye on them. I’m just not feeling/seeing the patterns which I find tradable at the moment for a low risk setup.

Quick Trading Tip: I try to always analyze and trade the market the way which has always worked for me. Keeping my emotions in control and filtering out as much news, events and opinions as possible so I can think clearly while I focus on my low risk setups. The past couple months have had big news and events unfolding making it harder for traders to stay focused. It is crucial for traders to step back and clear their heads from all the news, hype and opinions shared across all the mediums and just look at a simple chart analyzing the price, volume and trend.

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Crude Oil Rises to Near 12 Week High as Equities Gain on Economic Optimism

Crude Oil traded near $79 a barrel in New York for a third day as advancing equities in Asia bolstered speculation the global recovery in fuel demand will be sustained. Crude earlier rose as much as 0.4 percent as the MSCI Asia Pacific Index reached a one month high after most European banks passed stress tests aimed at assuring investors. Consumer spending, which accounts for about 70 percent of the U.S. economy, the world’s largest, probably increased last quarter, according to a Bloomberg News survey of economists before a report this week.

“The market is on the way to test $80 and the stock market is one of the factors,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge Group in Tokyo. “After the result of the stress tests, we have to continue to monitor the financial markets. Even on Friday, the markets sustained gains.”

Oil for September delivery was at $78.99 a barrel in electronic trading on the New York Mercantile Exchange, up 1 cent, at 1:05 p.m. Singapore time. On July 23, the contract fell 32 cents, or 0.4 percent, to $78.98 after settling at $79.30 on July 22, the highest since May 5. Futures have gained 16 percent in the past year.

The MSCI Asia Pacific Index climbed 0.3 percent to 117.72 as of 1:25 p.m. in Tokyo amid optimism over the health of the global economy. Finance companies were the biggest boost to the index, set for the highest close since June 22.....Read the entire article.

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Crude Oil Weekly Technical Outlook

Crude oil's break of 79.38 resistance indicates that whole rebound from 64.23 is still in progress and has resumed. Further rise will be expected as long as 76.16 support holds towards 80.53 resistance (61.8% projection of 64.23 to 79.37 from 71.09 at 80.48). On the downside, below 76.16 will flip intraday bias back to the downside for 71.09 support. Break there will indicate that rebound from 64.23 is completed.

In the bigger picture, while rise from 64.23 is still in progress, there is no change in the view that it's a correction to fall from 87.15 only. Hence, even in case of further rally, we'd expect strong resistance below 87.15 high and bring reversal. On the downside, break of 71.09 will be the first signal that whole fall from 87.15 is resuming for another low below 64.23 towards 50% retracement of 33.2 to 87.15 at 60.18

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.....Nymex Crude Oil Continuous Contract 4 Hours Chart

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New Video: A Battle Royal in the S&P 500

The battle between the bulls and the bears continues in the S&P 500 with neither side able to gain the upper hand. This choppy trading action will eventually lead to a large move one way or the other. The bulls are betting that we are headed higher and the bears are betting that the economy is going to tank.

In our latest video, we share with you some of the key technical points that are still in play and where the market needs to go in order to break out of the current logjam that it's in.

As always our videos are free to watch and there is no need for registration. Please let us know your thoughts by leaving a comment.


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Crude Oil and Natural Gas Commentary For Friday Morning

Crude oil was lower due to light profit taking overnight as it consolidates some of Thursday's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If September extends this month's rally, the reaction high crossing at 79.97 is the next upside target. Closes below last Tuesday's low crossing at 74.70 would temper the near term friendly outlook.

First resistance is the overnight high crossing at 79.60
Second resistance is the reaction high crossing at 79.97

Crude oil pivot point for Friday is 78.29

First support is the 20 day moving average crossing at 76.50
Second support is last Tuesday's low crossing at 74.70

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Natural gas was slightly lower overnight as it consolidates some of Thursday's rally but remains above broken resistance marked by the 20 day moving average crossing at 4.571. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

Closes above Wednesday's high crossing at 4.662 would confirm that a short term low has been posted while opening the door for a larger degree rally into the end of July. Closes below Monday's low crossing at 4.454 would temper the near term friendly outlook.

First resistance is Thursday's high crossing at 4.719
Second resistance is the reaction high crossing at 4.923

Natural gas pivot point for Friday is 4.624

First support is Monday's low crossing at 4.454
Second support is last Tuesday's low crossing at 4.334

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Smart Scan Chart Analysis For Crude Oil ETF - USO

Our Smart Scan Chart Analysis is showing some near term weakness in crude oil ETF, USO. However, this market remains in the confines of a longer term Uptrend. Trade with tight money management stops.
Based on a pre-defined weighted trend formula for chart analysis, USO scored +70 on a scale from -100 (strong downtrend) to +100 (strong uptrend):




+10.....Last Hour Close Above 5 Hour Moving Average
+15.....New 3 Day High on Thursday
+20.....Last Price Above 20 Day Moving Average
+25.....New 3 Week High, Week Ending July 24th
-30.....New 3 Month Low in May
+70.....Total Score

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Pending Gulf Storm and Stronger Equities Sends Crude Oil Higher

Crude oil closed sharply higher on Thursday over concerns of the pending Gulf storm and spillover strength from the equity markets. Today's rally allowed September to breakout of its sideways trading pattern of the past week and the high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term. If September extends the rally off this month's low, the reaction high crossing at 79.97 is the next upside target. Closes below last Tuesday's low crossing at 74.70 would temper the near term friendly outlook. First resistance is today's high crossing at 79.42. Second resistance is the reaction high crossing at 79.97. First support is last Tuesday's low crossing at 74.40. Second support is the reaction low crossing at 71.47.

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Natural gas closed higher on Thursday and above the 20 day moving average crossing at 4.579. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term. Closes above Wednesday's high crossing at 4.662 are needed to confirm that a short term low has been posted. If August resumes the decline off June's high, the reaction low crossing at 4.108 is the next downside target. First resistance is today's high crossing at 4.719. Second resistance is the reaction high crossing at 4.923. First support is the 10 day moving average crossing at 4.479. Second support is last Thursday's low crossing at 4.288.

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The U.S. Dollar closed lower on Thursday and closed below the 10 day moving average crossing at 83.34 as Investors unloaded the Dollar over worries about a sluggish U.S. economic recovery persist and confidence in the euro zone and nations abroad increase. The low range close sets the stage for a steady to lower opening on Friday. Despite today's decline, stochastics and the RSI are turning bullish signaling that a short term low might be in or is near. Closes above the 20 day moving average crossing at 84.22 are needed to confirm that a short term low has been posted. If September resumes the decline off June's high, the 50% retracement level of the November-June rally crossing at 82.15 is the next downside target. First resistance is Wednesday's high crossing at 83.64. Second resistance is the 20 day moving average crossing at 84.22. First support is last Friday's low crossing at 82.25. Second support is the 50% retracement level of the November-June rally crossing at 82.15.

The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010

Gold closed higher amidst increased interest in many commodities after some bullish corporate earnings reports boosted confidence in the economic recovery. August gold continues to consolidate above the 38% retracement level of this year's rally crossing at 1183.90. At the same time, stochastics and the RSI are oversold and turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 1210.90 are needed to confirm that a short term low has been posted. If August renews the decline off June's high, the 50% retracement level of the aforementioned decline crossing at 1158.30 is the next downside target. First resistance is today's high crossing at 1201.20. Second resistance is the 20 day moving average crossing at 1210.90. First support is Tuesday's low crossing at 1175.10. Second support is the 50% retracement level of the aforementioned decline crossing at 1158.30.

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Phil Flynn: Ben What A Bummer!

Ben what a bummer! Way to bring us all down Ben. Dude, we were feeling happy in this little bubble world of earnings driven economic expectations and you go and have to ruin our little economic recovery fantasy world bliss. Why did you have to tell us the truth man and ruin the buzz? That you and most of your friends at the Fed saw the risks to growth as weighted to the downside.

Why tell us that the economic expansion is only proceeding at a moderate pace and only because it is being supported by stimulative monetary and fiscal policies. We may be high but to some it felt like we were doing it on our own. Why tell us that the housing market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction? And on top of that, you remind us that this is an important drag on household spending. Then you have to bring up that darn slow recovery in the labor market and the attendant uncertainty about job prospects.

Did you have to go and say that after two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, a pace insufficient to reduce the unemployment rate materially? Or that in all likelihood it is going to take a significant amount of time to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.....Read the entire article.


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Back 2 Back Reversals for the Stock Market

The market continues to become quicker and fiercer as it move up and down 2+% on a regular basis This week we have seen some wild price swings due to earnings, events and the Fed’s which just makes trading that much more intense.

I have pointed out yesterday that this market only gives you a brief moment to take profits before it starts going wild shaking traders out of positions. This increased volatility is caused from a couple of things:

1. Traders/Investors know the financial system is still riddled with unethical practices/manipulation. This causes everyone to be extra jumpy/emotional and causes volume surges in the market as the herd starts to get greedy or fearful.
2. Volume overall on the buying side of things just isn’t there… I see some nice waves of buying but it doesn’t move the market up much… then it only takes a small wave of sellers for the market to drop....Investors are just scared to buy stocks and that is not a good thing…

I keep a close eye on the buying and selling volume for the NYSE as it tends to help pin tops and bottom within a 2-3 day period. In short when we get panic buying meaning 75%+ of volume is from buyers then I know the general public is jumping into the market buying everything up and that’s when the smart money starts to scale out of their position selling to these retail investors. These retail investors are buying on news and excitement much like what we are seeing now with earnings season. Stocks have run up for 5-10 days, as the smart money buys in on anticipation of good news, then the earnings are released which are better than expected and the stocks pop and drop. Well the pop higher on BIG volume are all the retail investors buying and are generally the last ones in. The smart money is quickly selling into this buying surge so they end up getting out at high prices.

My point here is that in general I see 4-6 of these panic buying or selling days a year which I find are tradable. The crazy part is that we have seen 11 of these panic days (both buying and selling) in just 8 weeks… We are seeing more selling than we did at the bottom in 2009! Something big is about to happen and I want to make sure we get a price of it once the moves starts.

Anyways, below is a chart of the SP500 showing how its trading under some key resistance levels. Today the market gapped up testing the 50 day moving average and above the 5 day moving average then sold down very strongly during Ben Bernanke’s speech. This is not a good sign for the overall health of the market.

On the commodities side of things we are not seeing much happening with gold or oil at the moment. Gold is still in a short term down. And gold took an $8 drop today when Ben Bernanke said inflation would remain low for an extended period of time.

As for crude oil, yesterday afternoon I pointed out to members that oil had a big run up on virtually no volume Tuesday and it would most likely give back those gains today. We saw this today with oil dropping from $78 down to 76.50 per barrel. Overall Oil looks like it wants to go higher but has some work to do before that can happen.

Mid-Week Trading Conclusion:
In short, the market remains choppy and we are getting more than normal news/events which are moving the market and this is causing extra noise and volatility for traders. Cash is king during volatile times and if you are doing some trades be sure to keep the positions small for another month or so.

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We Follow Up on Last Week's Euro Video

Earlier this week we produced a video on the Euro, Is the Euro on Shaky Ground?, making a case that the currency was very close, if not at its highs. Since then, we have had two significant events fall into place which made the dollar skyrocket against the euro.

This new video shows you exactly what transpired and where we are so far this week. We think you'll find it interesting and informative.

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