Don Hodges, portfolio manager for the Hodges Fund, says energy plays like Halliburton, Devon and SandRidge are still moneymakers despite the drop in oil prices.
Tuesday, August 30, 2011
Monday, August 29, 2011
Positive Consumer Spending Report Lifts Oil and Equities
Closes above the reaction high crossing at 89.19 are needed to confirm that a low has been posted. If crude oil renews this summer's decline, the 75% retracement level of the 2009-2011 rally crossing at 71.72 is the next downside target.
First resistance is the reaction high crossing at 89.19. Second resistance is the May-July downtrend line crossing near 95.01. First support is the reaction low crossing at 79.38. Second support is August's low crossing at 76.15.
Sharon Epperson: Where is Gold and Crude Oil Headed on Tuesday
CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks at where oil and precious metals are likely headed tomorrow.
What is Next For Gold and the SP 500
Two of our partners, J.W. Jones and Chris Vermeulen, have partnered to give us special insight on how they are trading this market and how price action in coming weeks will offer clues about what lies ahead for U.S. equity markets......
Now that Mr. Bernanke’s speech is old news, what was the financial media thinking exactly? A significant number of financial writers have been anticipating discussion of QE III or QE III Lite which clearly were never even on the Fed Chief’s radar this week. The focus of the Jackson Hole Summit was how to achieve long run growth, not conduct discussion of monetary policy.
QE III will not be discussed openly until the next FOMC meeting in September, which noticeably was extended to two days. Besides the extension and the Fed Chairman’s prediction of growth in the back half of the year, the remainder of Mr. Bernanke’s speech was nothing more than a brief synopsis of what he has already said in the recent past.
While Chairman Bernanke focuses on the U.S. economy, I have been more inclined to monitor the action across the pond. Price action in Europe is having a major impact on financial markets here in the United States. Traders are monitoring credit default swap (CDS) spreads on European sovereign debt as well as on domestic and European banks.
Recently U.S. banks have seen the CDS swaps on their debt rising indicating that the marketplace believes their debt is a greater risk to investors. While the price action is nowhere near the 2008 & 2009 levels, current prices are relatively consistent with what was seen during the correction in the late spring of 2010. While there is no reason to panic at this point, this is a trend that I will be monitoring closely going forward.
For now, I continue to believe that equity markets will rally in coming weeks as conditions are extremely oversold. The price action so far today makes sense as the wild price swings helped flush out weak hands that were long. Consequently, the snap back rally pushed shorts into stop levels as well.
A significant move lower does not seem likely at this point, but a retest of the recent lows is possible, if not probable. I would remind readers that stock market crashes generally happen within the context of an oversold market. While the likelihood of a crash is remote, it is still possible and tight risk definition in this environment is warranted regardless of which side of the tape a trader is playing.
One price chart that I have been watching closely is the German DAX. The German DAX is presently a thermometer for traders to monitor the situation in Europe. The reason the German stock market index is so important is due to the financial strength of Germany within the Eurozone. Without Germany, the Eurozone would crumble in on itself and the Euro currency would be in trouble. Recently Germany’s equity markets have been crushed and the daily chart below illustrates the recent carnage:
Another metric I monitor regularly is market momentum. The chart below illustrates the number of domestic stocks trading above their 200 period moving averages. As can be seen below, the U.S. equity market has not been this “oversold” since back in 2009. Chart courtesy of Barchart.com.
In my previous article posted back on August 18th, I discussed the likelihood for stocks to pullback and put in some form of a basing pattern. I wrote the following statement in that article:
“It is entirely plausible that Mr. Market thrusts lower from here to shake out longs. If that scenario plays out it could potentially carve out a double bottom or another basing pattern which would give active traders another entry point to get long.”
Since August 18th, we have seen the S&P 500 push lower and there is a double bottom on the daily chart which is capturing quite a bit of attention in the trading community. I would also draw your attention to the wedge pattern that is also present. A breakout higher or lower out of this wedge pattern will be the clue that will indicate Mr. Market’s short term price direction. I continue to believe we will see a breakout higher, but a retest of the lows is always a possibility. The daily chart of the S&P 500 Index is shown below:
In the short to intermediate term, I believe we will see higher prices and a test of the key S&P 1,220 area or possibly a re-test of the key S&P 1,250 price level which corresponds with the March 2011 pivot lows. Additional resistance would come in around the 1,260 – 1.270 area which marks the neckline of the recent head and shoulders pattern which triggered the selloff in the S&P 500. The daily chart of the SPX below illustrates the key resistance areas:
Gold Analysis
My most recent article argued that gold prices were going parabolic and that a pullback was likely. We have seen a major pullback in gold prices. Admittedly, I was about $200 an ounce early on my call, but members of my service were able to capitalize on an option trade that captured 32% based on maximum risk through the use of a double calendar spread. While my timing was not precise, the juiced volatility in the GLD options allowed me to roll contracts forward and make additional adjustments to produce a strong gain for the service.
My most recent article argued that gold prices were going parabolic and that a pullback was likely. We have seen a major pullback in gold prices. Admittedly, I was about $200 an ounce early on my call, but members of my service were able to capitalize on an option trade that captured 32% based on maximum risk through the use of a double calendar spread. While my timing was not precise, the juiced volatility in the GLD options allowed me to roll contracts forward and make additional adjustments to produce a strong gain for the service.
Some traders argue that gold prices are going to rally back sharply in short order, which I find hard to believe. Instead, I am of the opinion that we could see additional downside in the weeks/months ahead in gold prices. There is an ominous pattern starting to form on the gold daily chart which if it is carved out and triggered, it could produce the next leg of this selloff. The daily chart of gold is shown below:
While it is far too early to determine if a head and shoulders pattern will be carved out or if lower prices take place, I am of the opinion that this selloff will offer an attractive entry point for longer term investors. At this point it is a bit too early to get involved, but if my analysis is accurate the next leg of the gold bull market will be potentially extreme.
While I believe stocks will rally in the short to intermediate term, I am of the opinion that we have officially entered the next phase of the bear market. The next wave lower in stocks is going to be just as severe as the likely rally in gold.
The reason I believe gold will rally is primarily due to future weakness in Europe. If European banks have a credit crisis, a sovereign nation unexpectedly defaults, Germany leaves the Eurozone, or a currency crisis transpires gold prices should soar while U.S. equity prices tank.
While it is far too early to make that determination, if the S&P 500 puts in a lower high on this next advance higher and consequently takes out the recent lows on a selloff, the bear will be in full swing and gold prices should take off. The chart below illustrates my expectations for the S&P 500 in the future:
The next few weeks are going to be very telling about the future in domestic markets. Is this just a correction that pushes stocks higher by the end of the year, or is this the beginning of something far worse?
For now I am going with the latter, but price action in coming weeks will offer clues about what lies ahead for U.S. equity markets. Right now this is nothing more than speculation, but the next few months should be very interesting. Risk remains exceedingly high.
Check out J.W. Jones site at Options Trading Signals.Com for a 24 hour 66% off coupon. And sign up for Chris Vermeulens unique services at The Gold and Oil Guy.Com
Crude Oil Bulls Take Charge in Mondays Early Trading
Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.
First resistance is the 20 day moving average crossing at 85.80.
Second resistance is the reaction high crossing at 89.19.
Crude oil's pivot point for Monday trading is 84.65.
First support is the reaction low crossing at 79.38.
Second support is this month's low crossing at 76.15.
Friday, August 26, 2011
Crude Oil Markets Welcome Ben and Irene over for Friday Trading
We are giving the oil bulls a slight near term advantage as the Stochastics and RSI remain bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.
First resistance is the 20 day moving average crossing at 86.27. Second resistance is the reaction high crossing at 89.19. First support is last Friday's low crossing at 79.38. Second support is this month's low crossing at 76.15. Crude oil pivot point for Friday morning trading is 84.96.
Thursday, August 25, 2011
Crude Oil Bulls Struggle to Gain Momentum in Thursdays Session
But the bulls have a lot of work ahead of them as closes above the reaction high crossing at 89.19 are needed to confirm that a low has been posted. If October renews this summer's decline, the 75% retracement level of the 2009-2011 rally crossing at 71.72 is the next downside target.
First resistance is the 20 day moving average crossing at 86.82. Second resistance is the reaction high crossing at 89.19. First support is this month's low crossing at 76.15. Second support is the 75% retracement level of the 2009-2011 rally crossing at 71.73.
Chris Vermeulen: Risk Trade is Back, Is a Big Upside Move Starting to Unfold?
The past month investors have been hit hard from the falling stock market. Those who owned gold and bonds have been rewarded. During times of economic fear which leads to selling of stock shares investors and traders find safety in gold and bonds. It was this surge of money coming out of stocks that propelled the price of gold and bonds sharply higher through out this sell off.
On Sunday I warned subscribers that any day now gold should start to correct and there is potential for it to drop all the way back down to the $1640 – $1670 area depending how much of the recent buying volume was investment versus speculative money which will quickly sell out if prices began to fall.
Take a look at the intraday charts below to get a visual of how money is moving around the market and how economic fear plays a roll on investment decisions:
Seven Day 10 Minute Chart Pre-Market Selloff This Past July
Here you can see investors became fearful of the stock market/economic environment. Money started to get pulled out of the high risk (Risk On Trade) equities market and put to work in the Low risk (Risk Off Trade) to earn small but steady income and to help fight inflation (Gold & Bonds).
Here you can see investors became fearful of the stock market/economic environment. Money started to get pulled out of the high risk (Risk On Trade) equities market and put to work in the Low risk (Risk Off Trade) to earn small but steady income and to help fight inflation (Gold & Bonds).
After this shift the stock market sold off very strong for a couple weeks before finding a bottom.
Three Day 10 Minute Chart Post-Market Selloff – Todays Prices
If you compare these two charts you will notice they are both opposites to each other…
Meaning money is now getting pulled out of the risk off (gold & bonds) and put to work in the potentially high yielding stocks (risk on).This could be the start of a big upside move starting to unfold and I will be keeping my eye on some charts for possible entry points like SPY and TBT.
Mid-Week Trading Conclusion:
In short, the overall market seems to be entering another pivot point. It is likely that another big move is brewing… After this type of technical damage on the charts and heightened fear/emotions out there, it may cause prices to trade sideways in a large trading rage for a few weeks still so I’m not getting overly excited just yet.
In short, the overall market seems to be entering another pivot point. It is likely that another big move is brewing… After this type of technical damage on the charts and heightened fear/emotions out there, it may cause prices to trade sideways in a large trading rage for a few weeks still so I’m not getting overly excited just yet.
Consider joining us at The Gold and Oil Guy for ETF trade ideas on the SP500, Oil, Gold, and Silver with great accuracy. Check us out at The Gold and Oil Guy.com
Warren Buffett and Lower Inventories Boost The Markets
Crude oil was slightly higher in overnight trading as it extends this week's short covering bounce. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.
First resistance is the 20 day moving average crossing at 86.85. Second resistance is the reaction high crossing at 89.19. First support is last Friday's low crossing at 79.38. Second support is this month's low crossing at 76.15. Crude oil pivot point for Thursdays trading is 85.43.
Wednesday, August 24, 2011
Has the Gold and Silver Market Topped Out?
Today, Gold and Silver confirmed that they have topped out for the time being. The Equity markets are another story, and I’m not quite sure that we have seen a bottom put in place for those markets.
The crude oil market [October contract] is now back in an area that should provide resistance. This is based on the 61.8% Fibonacci retracement level of 85.30. Currently the market is trading a little above that level, which is not totally unusual in volatile markets. Long Term and intermediate term traders should hang on for the ride and protect profits with money management stops. Short term traders should be on the sidelines in this market. The longer term trend for crude oil is down based on our Trade Triangle technology.
Crude oil trend analysis.....
Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 85
Crude oil closed down $0.38 a barrel at $85.06 today. Prices closed nearer the session low. The bulls have regaining some upside technical momentum this week. The next near term upside price breakout objective for the bulls is producing a close above solid technical resistance at last week's high of $89.19 a barrel.
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