Gold, Silver and Stock Prices at their Tipping Points

Over the past year we have been learning more about the financial situations across the pond in Europe. With international issues on the rise, investors are panicking trying to find a safest haven for their capital. This money has been bouncing from one investment to another trying to avoid the next major crash in stocks, bonds, currencies and commodities. It seems every 6 months there is a new headline news issue at hand forcing the smart money to withdraw from one investment class too another hoping to avoid the next meltdown.

To make a long story short, I feel the market (stocks, bonds, currencies and commodities) are about to see another major shift that will either make you a boat load of money or you lose a lot of money if you are not positioned properly.

So the big question is “Which direction will these investments move?”

Let’s take a look at the charts…...

Gold Weekly Chart – Long Term Outlook

Gold has just finished seeing a strong wave of selling this summer so it’s early to give any real forecast for what is next. That being said this long term chart may be telling us that gold’s rally could be nearing an end or a 12+ month pause could take place. If you have followed the market long enough then you realize that when everyone is in the same trade/position the market has a way of re-distributing the wealth to those who are savvy investors. Over the next 4-6 weeks there should be more price action which will allow me to get a better read for what is going to happen next.

Silver Weekly Chart – Long Term Outlook

Silver has been showing strong signs of distribution selling. Meaning the big money is moving out of this industrial and highly speculative metal. The interesting part here is that silver topped out much sooner than gold. Many times in the past silver has topped and or bottomed before the rest of the market reverses direction. So it is important to keep an eye on silver as we go forward in time because it tends to lead the market 1-2 months in advance some times.

SP500 Weekly Chart – Long Term Outlook

Stocks in general are still looking ripe for another major bull market rally. But if we do not get some follow through in the coming 1-2 months then this almost 3 year bull market could be coming an end.

Mid-Week Trend Trading Conclusion:

In short, the market as a whole is trying to recover from a strong bout of selling over the past few months. In my opinion the market is ripe for another leg higher. The reason I see higher stock prices is because decisions are being made across the pond to deal with their issues. Looking back it is similar to what the United States did in late 2008 – early 2009 just before the market bottomed.

Everyone right now seems to be saying Europe is screwed and that they are going about things in the wrong way, but if you think back that is exactly what took place in America not that long ago. And back then it was all over the news that the resolutions to fix the US would not work…. In the end, life continued, businesses continued to operate. Soon after decisions were made the stock market and commodities rallied and are still holding strong today.

Over the next week or two I am anticipating the market will provide some solid trade setups which I plan on taking advantage of using leveraged ETFS. During the volatile sideways market in August through till now I have navigated my subscribers using both bull and bear funds pocketing over 35% return in two months. If you would like to receive my pre-market morning videos, intraday updates and trade alerts visit my newsletter at: The Gold and Oil Guy.com

Chris Vermeulen

Adam Hewison: Harrisburg, PA. Seeks Bankruptcy..... Is America Next in Line?

It’s not difficult to believe that Harrisburg Pennsylvania is filing for bankruptcy with overwhelming debt of almost half $1 billion. It shows once again that politicians have no clue when it comes to spending money, particularly when it’s someone else’s money.

The question we must all ask ourselves is what’s next? In our home state of Maryland we have $20 billion unfunded liability for entitlements. I’m sure it’s the same across the country. We have had reckless politicians spending too much money and not being held responsible for when things go wrong. It was interesting to see what was happening in the Ukraine, where they’re jailing their former prime minister, Yulia Tymoshenko, to a seven year jail term for abuse of power during term as prime minister.

Just imagine how that would play out in other countries, including the United States. It certainly would make politicians think before committing and spending money that we don’t have. At the moment, no one is held responsible.

It also looks like the politicians in the Euro Zone have kicked the can down the road. This just moves the financial disaster to future generations. No one politician wants to assume responsibility for the incredible amount of future debt they are creating. What does this all have to do with the markets?

We will rely on our Trade Triangle technology to keep us in the loop and in the markets at the right time.

Let's check out the action in the crude oil markets today.....

With both weekly and monthly Trade Triangles in place, we see little enthusiasm to go long this market at the present time. Presently this market is overbought and we expect to see a pullback from current levels. As you know this market has been closely tied in to the movements of the S&P 500. Overall we still view the trend in this market as negative. Intermediate and Long term traders should continue to be short the crude oil market. Please note that we are switching to the December contract for crude oil.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = – 65

November crude oil posted an inside day with a slightly lower close on Wednesday as it consolidated some of the rebound off last week's low. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI remain bullish signaling that sideways to lower prices are possible near term. If November extends the rally off last week's low, September's high crossing at 90.69 is the next upside target. Closes below the 10 day moving average crossing at 81.64 would temper the near term friendly outlook.

First resistance is September's high crossing at 90.69.
Second support is July's high crossing at 101.39.

First support is the 20 day moving average crossing at 82.95.
Second support is the 10 day moving average crossing at 81.65.

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Will The S&P 500 and Gold Make up Theirs Minds Already

A lot of eyes were watching the Slovakian Parliament around the closing bell today as they voted on the European Financial Stability Fund (EFSF). The first vote failed to pass the pending legislation, but members of the opposition party have indicated that they will vote for the bill in a second scheduled vote. The S&P 500 E-Mini futures contract has not sold off sharply on the news, but the trap door risk for equity traders is that the second vote comes up short and the legislation fails unexpectedly.

The marketplace is expecting the second vote to pass without issue and if a different scenario plays out selling pressure could become extreme potentially. With earnings season now upon us, there is plenty of headline risk to go around and this Slovakian situation just adds more complexity to the news flow.
We have seen the S&P 500 Index rally more than 10% in five trading sessions which could potentially mean we have more downside work to accomplish before probing higher.

The flip side of that argument is that prices continue to rally and push towards key resistance levels overhead. At this point in time, I do not have an edge for a directional trade so I am sitting on the sidelines presently. I do have a few time decay based trades in place, but they do not have a directional bias so my book is flat here.

The S&P 500 is a tough buy after a 10% rally in such a short period of time, but the strength and momentum are tough to short. The buyers seem to be higher and the sellers appear to be lower which complicates a potential entry even further. Presently there appears to be two possible scenarios:

Bullish Scenario
The daily chart of the S&P 500 Index is shown below with key overhead resistance levels illustrated on the chart and the potential price action in coming days.......




Bearish Scenario


The daily chart of the S&P 500 Index is shown below with key support levels and the potential price action if price works lower.....





Overall, I do not have a real edge on the S&P 500 at this point. A pullback makes some sense here, but defined risk metrics and a trading plan must be used to reduce risk. Regardless of the price direction traders are considering, this is a situation where proper position sizing and stop orders can allow a trader to take on a defined risk that he/she is comfortable with.

This market has been tough to trade for several weeks. The price action has been choppy and volatility levels have been elevated since the early part of August. This type of market environment chops up a lot of traders and it sucks bulls and bears into the price action late in the game opening the door for potentially devastating losses if risk is not properly defined. 

My Trading partner Chris Vermeulen pocketed over 38% gain during these choppy times using bull and bear ETFs with his subscribers.

As an option trader familiar with a variety of spreads, recently I have been utilizing the elevated volatility levels to sell option premium and use the passage of time as a primary profit engine for my open positions. Currently I have 3 open positions which are all taking advantage of the passage of time as a profit engine.

Back on 9/26 I entered a $DIA Iron Condor Spread to take advantage of heightened volatility and capitalize on time decay leading up to the October monthly option expiration. On 10/06 I was able to close the $DIA position to lock in 15% based on maximum risk. Even though price action was excessively volatile during the past several weeks, my $DIA trade was never a major concern in terms of price action. No adjustments were necessary and members and I pocketed some relatively quick money watching the days pass by.

Gold Analysis
The recent price action in gold has been equally as tough to trade as the S&P 500 Index. After rallying sharply into early September, gold prices plummeted and price action has been consolidating ever since. Similar to the price action in the S&P 500, gold prices have just chopped around for several weeks. Gold is currently trading in a bear flag formation which if triggered could result in additional downside.



In the short-term more downside is always possible, but in the longer term I think higher prices are probable for both gold and silver as this money printing binge will one day end and inflationary pressures may present themselves at that time. The weekly chart of gold futures is shown below......


As can be seen above, gold has traded in a long term rising channel for over a year. Back in August and September gold prices broke out to the upside of the rising channel and went parabolic. In the beginning of September, gold prices sold off sharply back down into the previous rising channel. As it stands right now, gold prices remain near the upper resistance level of that channel and have not tested the lower support line since February.

If gold prices do begin to rollover in the days and weeks ahead, a logical entry point would be a test of the lower channel. The price level I would be watching for would be around $1,500 an ounce. If we get to that area, I would not be shocked to see an overthrow of that support level and a test of the 1,480 price level before reversing to the upside.

The other side of this story is that the U.S. Dollar Index falls out of favor again and its price gets crushed. If the U.S. Dollar gets hammered lower, it would make sense that U.S. domestic equities would rally along with other risk assets such as gold, silver, and oil. Right now I do not have a clear short term bias, but in the intermediate to longer term cycles I remain quite bullish. If the gold price does work back down to that support level, I will be looking to get long. Another possible long entry would present itself on a breakout to the upside back out of the upward sloping channel.

Gold is quite volatile and is impacted by a litany of outside forces such as foreign currency and the U.S. Dollar. For right now the short term bias could be to the downside, but when this period of malaise in the yellow metal ends the next bullish phase of this move higher is going to be quite strong.

As I have said many times, sometimes the best trade is no trade at all. Right now I do not have an edge in either the S&P 500 or gold so I am just going to sit and watch price action patiently while looking for high probability, low risk setups to emerge.

Subscribers of OTS have pocketed more than 150% return in the past two months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at Options Trading Signals.com and take advantage of our free occasional trade ideas and our free options trading strategy book.

Adam Hewison: This Little European Country Holds the Key to Our Economic Future

It would appear that this little country in Europe holds the key to either economic disaster or economic enslavement. The entire country of Slovakia has a population of a little over four million people and a workforce of maybe two million people. These two million people are now being asked to shoulder the debt burden of $5 billion as their share of the European recovery program. That does not seem fair to me.

This tiny country has a better GDP growth rate than the United States. It also has a population that is 99% literate. And I heard this morning, their tax rate is 19% for individuals and 19% for corporations, and the country is thriving in relative terms. Maybe we can all learn something from how this country is run.

GDP (2010 est.): $88.4 billion.
GDP growth rate (2010): 4.0%.
Nominal GDP per capita (2010): $16,288 (ING Bank).
Unemployment (2010): 13.5%.
Consumer price inflation (2010): 1% (Ministry of Finance).
Public deficit (2010): 7.8% GDP.

Now let’s see what our Trade Triangle technology is saying about crude oil......

Please note that we are switching to the December contract for crude oil. Presently this market is overbought and we expect to see a pullback from current levels. We are not totally convinced that this market has made a reversal to the upside and expect it to once again reverse back down and test the $80 level. As you know this market has been closely tied in to the movements of the S&P 500. Overall we still view the trend in this market as negative. Intermediate and Long term traders should continue to be short the crude oil market.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = – 55

November crude oil closed up $0.65 a barrel at $86.05 today. Prices closed nearer the session high again today and hit another fresh three week high. Bulls have gained solid upside technical momentum just recently. Prices have rallied around $10.00 a barrel from last week's low. The bulls have the near term technical advantage.

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John Woods: Crude Oil Prices Not Trading on Fundamentals

John Woods of JJ Woods & Associates explains why oil prices are not taking into account supply and demand fundamentals but are being dominated by traders.



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Phil Flynn: The Good, The Bad And The Bullish And Bearish

It was easy to get caught up in all of the exhilaration as oil rallied strong in the glow of a global bailout frenzy. Promises of re-capitalization of European banks by the French and the Germans and word that a Chinese sovereign wealth fund was buying shares of faltering Chinese banks, eased the markets darkest fears causing a run out of the safe haven dollar and a run in to the euro.

The oil of course dutifully rallied as the risk appetite came back and the VIX fear index fell. Yet despite the fact that it was bailout mania that drove most of the commodity complex, we would be remiss not to point out other bullish factors that were at play in a marvelously bullish day.

For oil there was a lot of bullish news and bullish speculation surrounding Saudi Arabian production. Private forecasters are reporting that Saudi production is falling perhaps by as much as 4% as they seek to take back that extra oil they pumped to replace lost Libyan crude. Also were reports that the Saudis have put on hold their plans to expand production capacity and that was also a potential long term supportive story the crude complex.

What is more OPEC just lowered their global demand forecast by 180,000 barrels per day and at the same time, is warming they are staying alert to market imbalance risk. In other words, if oil prices fall too hard they will take steps to cut production even further. Ah, yes the OPEC boys doing their part to screw up the global recovery.

Even sugar for the ethanol traders had a big news. Floods in Thailand, one major sugar producer and worries about the smaller than expected Brazilian crop shot sugar back above 30. Dow Jones said that strong ethanol demand in Brazil could reignite a rally in sugar futures before the front-month contract expires next March. That is of curse assuming the Europe does not fall on its face again.

Copper soared again on the hope for an improving economic outlook but also as reports of violence at the world's third largest copper mine in Indonesia. Freeport McMoran Copper & Gold Inc says that is continuing to produce and ship copper concentrates at reduced levels from its Indonesian mine while violence broke out and at least one death was reported. In the meantime copper traders are looking for a surge in copper demand from China as they expect that they will be looking to replenish stockpiles. Of course if the economy slows it might not happen.

Jean Claude Trichet in Brussels EU is warning of large scale systemic risk that could impact even the larger countries in the EU! Wow, who knew? Those concerns of course are another reason why the market is wondering whether all of that exuberance was justified. Earnings season begins today and the world is waiting on Slovakia to pass its partipation in the larger EU bailout fund. That's right, Slovakia. The market is worried that a "no" vote could crash the global markets.

In the mean time, mergers and acquisitions in the oil patch could be exploding. Yesterday China raised eyebrows with a major accusation play in the Canadian oil sands. Chinese owned Sinopec signed an agreement to purchase Canadian oil and gas exploration and production company Daylight Energy. Now the question is whether or not the Canadians will approve the deal. Stay tuned!


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Crude Oil, Natural Gas and Gold Market Commentary For Tuesday Morning Oct. 11th

Crude oil started the trading day lower as it consolidates some of the rally off last Monday's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If November extends the aforementioned rally, September's high crossing at 90.60 is the next upside target. Closes below the 10 day moving average crossing at 81.13 are needed to confirm that a short term top has been posted. First resistance is the reaction high crossing at 87.99. Second resistance is September's high crossing at 90.60. First support is the 20 day moving average crossing at 83.08. Second support is the 10 day moving average crossing at 81.12. Crude oil pivot point for Tuesday morning is 84.75.

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Natural gas was slightly lower at the open as it remains entrenched in the decline, which began in June. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If November extends the aforementioned decline, monthly support crossing at 3.225 is the next downside target. Closes above the 20 day moving average crossing at 3.755 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 3.618. Second resistance is the 20 day moving average crossing at 3.755. First support is Monday's low crossing at 3.455. Second support is monthly support crossing at 3.225. Natural gas pivot point for Tuesday morning is 3.521.

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Gold was lower in overnight trading as it extends the trading range of the past ten days. Stochastics and the RSI are bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 1692.20 are needed to confirm that a short term low has been posted. If December renews the decline off September's, the 38% retracement level of the 2008-2011 rally crossing at 1476.20 is the next downside target. First resistance is the overnight high crossing at 1686.70. Second resistance is the 20 day moving average crossing at 1692.20. First support is September's low crossing at 1535.00. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1476.20. Golds pivot point for Tuesday morning is 1663.50.

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Adam Hewison: If Slovakia Votes No, Crude Oil Tanks on Tuesday

This morning I was reading that there are approximately 3.2 million job openings here in the United States. With more than 14 million people out of work in this country, how can we possibly have 3.2 million job openings still not filled?

These are job openings that the private sector needs to fill. I know from our own experience here at our company, finding competent people it extremely difficult. Part of the problem, in my opinion, is that many job applicants have no skills.

The CEO of Cummings, Tim Selso said he can’t find skilled workers for his manufacturing plants. This is a common complaint that many CEOs share.

According to economists, the average worker contributes about $45,000 a year to GDP. If we could just fill 1/3 of those jobs, it would have a huge impact on the economy.

Like many traders today, we were surprised at the velocity of the rally which is based on a potential agreement coming into place in Europe. At the moment no one knows what the deal is, and nobody in a position of authority is indicating what the deal is. The vote from Slovakia has the potential to torpedo any recovery and is a big hurdle approaching tomorrow. If that tiny country votes “no” to this proposed agreement, it could send stocks, and in particular bank stocks, to the cellar!

That leaves us with just one option.....What are the Trade Triangles saying?

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = - 55

The November crude oil market has rallied back to an area that was previous support and should present some fairly serious resistance. We were somewhat surprised at today’s action however, our Trade Triangles remain in a sideways mode indicating a trading range.

We are not totally convinced that this market has turned around and we expected to once again reverse and test the $80 level. As you know, this market has been closely tied in to the movements of the S&P 500. Overall we still view the trend in this market as negative. Intermediate and Long term traders should continue to be short the crude oil market.

November crude oil closed up $2.40 a barrel at $85.38 today. Prices closed nearer the session high again today and hit a fresh three week high. Bulls have gained solid upside technical momentum just recently. Prices have rallied around $10.00 a barrel from last week's low. Higher U.S. stock indexes and a sharply lower U.S. dollar index helped to boost the crude oil market again today. The bulls have the near term technical advantage.


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Crude Oil Rallies on Euro Zone Pledge

Trading was light on the holiday that commemorates Christopher Columbus' arrival in the New World, but news from the other side of the Atlantic helped crude oil start the week with a rally.

Light sweet crude oil for November delivery gained nearly three percent Monday, settling at $85.41 a barrel, after the leaders of France and Germany reported progress in developing a comprehensive plan to stabilize the euro zone's economy. The Brent contract price rose at a similar rate, ending the day at $108.95 a barrel.

Presenting a united front during a Sunday press conference in Berlin, French President Nicolas Sarkozy and German Chancellor Angela Merkel pledged to unveil by month's end a complete plan to recapitalize ailing banks, bolster the euro zone's bailout fund and provide financial aid to Greece. Although the announcement was short on specifics, it prompted rallies in equity markets and helped the euro to strengthen against the U.S. dollar. Because crude oil is priced in dollars, a weaker greenback tends to be bullish for oil and other commodities.

The WTI traded within a range from $82.75 to $86.09 while the Brent fluctuated from $105.78 to $109.20.

November natural gas also finished the day higher, gaining 1.7 percent to settle at $3.54 per thousand cubic feet. Natural gas peaked at $3.56 and bottomed out just under $3.46.

Reformulated gasoline for November delivery rose by nearly two percent, settling at $2.70 a gallon after fluctuating from $2.65 to $2.72.


Posted courtesy of Rigzone.Com


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Crude Oil, Natural Gas and Gold Market Commentary For Monday Oct. 10th

Crude oil moved higher this morning along with equities as it extends the rally off last Monday's low. Stochastics and RSI are bullish hinting that a low might be in or is near. Closes above the 20 day moving average crossing at 83.31 are needed to confirm that a short term low has been posted. If November renews this year's decline, the 75% retracement level of the 2009-2011 rally crossing at 72.20 is the next downside target. First resistance is the 20 day moving average crossing at 83.31. Second resistance is the reaction high crossing at 84.77. First support is last Monday's low crossing at 74.95. Second support is the 75% retracement level of the 2009-2011 rally crossing at 72.20. Crude oil pivot point for Monday morning trading is 82.78.

Just click here for your FREE trend analysis of crude oil ETF USO

Natural gas extends it's decline off June's high. Stochastics and RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If November extends the aforementioned decline, monthly support crossing at 3.225 is the next downside target. Closes above the 20 day moving average crossing at 3.778 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 3.645. Second resistance is the 20 day moving average crossing at 3.778. First support is the overnight low crossing at 3.455. Second support is monthly support crossing at 3.225. Natural gas pivot point for Monday trading is 3.517.

Just click here for your FREE trend analysis of UNG, the Natural Gas ETF

Gold extends the trading range of the past nine days. Stochastics and RSI are bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 1700.20 are needed to confirm that a short term low has been posted. If December renews the decline off September's, the 38% retracement level of the 2008-2011 rally crossing at 1476.20 is the next downside target. First resistance is last Monday's high crossing at 1681.50. Second resistance is the 20 day moving average crossing at 1700.20. First support is September's low crossing at 1535.00. Second support is the 38% retracement level of the 2008-2011 rally crossing at 1476.20. Gold pivot point for Monday morning trading is 1643.80.

Just click here for your FREE trend analysis of gold ETF GLD