Gold, Silver and Miners Remain Junk Grade Investments

Since silver and gold topped in 2011 investors have been struggling with these positions hoping this cyclical bull market for metals continues. The simple truth is no one knows for sure if prices will continue and make new highs and those who say its a for sure thing we all know deep down is full of bull crap.

All investments move in cycles, waves or trends which ever you want to call it. The market has 4 simple yet distinct stages each require a completely different skill set and trading tactics to navigate.

Stage 1 – After a period of decline a stock consolidates at a contracted price range as buyers step into the market and fight for control over the exhausted sellers. Price action is neutral as sellers exit their positions and buyers begin to accumulate the stock.

Stage 2 – Upon gaining control of price movement, buyers overwhelm sellers and a stock enters a period of higher highs and higher lows. A bull market begins and the path of least resistance is higher. Traders should aggressively trade the long side, taking advantage of any pullback or dips in the stock’s price.

Stage 3 – After a prolonged increase in share price the buyers now become exhausted and the sellers again move in. This period of consolidation and distribution produces neutral price action and precedes a decline in the stock’s price.

Stage 4 – When the lows of Stage 3 are breached a stock enters a decline as sellers overwhelm buyers. A pattern of lower highs and lower lows emerges as a stock enters a bear market. A well positioned trader would be aggressively trading the short side and taking advantage of the often quick declines in the stock’s price. More times than not all of stage 2 gains are given back in a short period of time.



Now that you know the stages and what it looks like its time to review the gold, silver and miners charts.

Gold Chart – Weekly

Gold has been in a bull market for several years but is starting to show its age in terms of the size of the price patterns, volume levels and extreme bullish sentiment. Back in 2011 a week before price topped we exited precious metals because the short term charts and volume levels were warning of a sharp drop. Since then I have not done many trades in either gold or silver because I do not like shorting in bull markets. Waiting for a bullish setup/price pattern before getting involved is my focus.

Gold has pulled back with a bullish 5 wave correction the last 5 months and at key support. While the long term charts are pointing to higher gold prices you must be aware that if gold and silver start to breakdown things will likely get ugly quickly. To be honest I do not care which way it goes, I just want it to either rally from support here and make new highs or breakdown and crash. Both will be very profitable if traded properly.



Silver Chart – Weekly

Silver has a very similar chart to that of its big sister (yellow gold). This shiny metal has the energy of a 3 year old making it a very volatile investment. I have touched on the topic of gold and silver being so called safe havens and if you have been reading my work for a while you know that any investment that can move 18-45% in value within 1 month is NOT a safe haven.

While it has done well in the past decade and boosted a lot of retirement accounts the day will come with these things collapse and most people holding them will give back most if not all the gains they had simply because people get attached to large positions and most do not know when to just exit a position.



Gold Miners Chart – Monthly

This chart gives me cold sweats because I know how many people own gold mining stocks and I know how fast these things can move. If the price closed below the green support line the bottom could fall out and be very painful for those who get paralyzed by denial and do nothing but watch their accounts lose value week after week.



Precious Metals Investing Conclusion:

In short, this report is to show you the very basics of how investments move in stages. It is also to show a warning that precious metals are technically very close to a major breakdown which the big money players are watching closely. This thinly traded sector can move extremely fast when everyone rushes for the door.

Do not get me wrong, I am not saying a crash is about to happen, actually it’s the opposite. All I am doing is planning the idea in your subconscious so that if prices continue to move lower you will remember that these price levels and take action with your investments. Remember, you can always buy the investment back at any time again if the outlook changes in a week, month or year.

Just click here to get My FREE Weekly Gold, Silver and Mining Reports and Trade with the Stages

Chris Vermeulen

Playing the ABC Gap fill for swing trading entry at ATP

From guest analyst David Banister....

One of my favorite “Crowd Behavioral” patterns is the ABC Gap fill pattern. This is a normal correction pattern in the stock market that works off overbought sentiment. You can apply this to liquid individual stocks in most cases, and look ahead to spot potential entries on your watch list for trading.

A sample we will use today is KORS, a fast growth stock of the leading luxury retailer Michael Kors. We notified our subscribers several days in advance to watch for a gap fill at $57 on this stock before entering a long trade. We also spotted what looked like a classic C wave pattern coming down from a B wave interim top.

Sure enough it took several days but the stock worked its way down to $57 and hit the gap on the nose on February 26th. It immediately reversed to end the day $2.25 higher or about 4-5% swing gains on this pattern. The chart below shows a 1, 2, 3, and 4 pattern with ABC making up the 4 pattern on KORS stock.

At ATP, we look for ABC and other patterns in growth plays and swing trade them long for reversals, just as the crowd of traders has stopped out and gone sour on the stock. Consider joining us by learning more at The Active Trading Partners.com



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Gold, Copper, and Crude Oil Forecasted the Recent Selloff in the S&P 500

Nobody better in the industry at understanding herd mentality then the staff at The Technical Traders. And of course they have been telling us it would be like this.....you just have to know which herd to watch and when.....

For the past several weeks, everywhere I looked all I could find was bullish articles. After the fiscal cliff was patched at the last second, prices surged into the 2013 and have since climbed higher all the way into late February.

I warned members of my service that this runaway move to the upside which was characterized by a slow grinding move higher on excessively low volume and low volatility would eventually end violently. I do not have a crystal ball, this is just based on my experience as a trader over the years.

Unfortunately when markets run higher for a long period of time and just keep grinding shorts what typically follows is a violent selloff. I warned members that when the selloff showed up, it was likely that weeks of positive returns would be destroyed in a matter of days.

The price action in the S&P 500 Index since February 20th has erased most of the gains that were created in the entire month of February already and lower prices are possible, if not likely. However, there are opportunities to learn from this recent price action.

There were several warning signs over the past few weeks that were indicating that a risk-off type of environment was around the corner. As a trader, I am constantly monitoring the price action in a variety of futures contracts in equities, currencies, metals, energy, and agriculture to name a few.

Besides looking for trading opportunities, it is important to monitor the price action in commodities even if you only trade equities. In many cases, commodity volatility will occur immediately prior to equity volatility. Ultimately the recent rally was no different.

As an example, metals were showing major weakness overall with both gold and silver selling off violently. However, what caught my eye even further was the dramatic selloff in copper futures which is shown below.

Copper Futures Daily Chart



As can be seen above, copper futures had rallied along with equities since the lows back in November. However, prices peaked in copper at the beginning of February and a move lower from 3.7845 on 02/04 down to recent lows around 3.5195 on 02/25 resulted in roughly a 7% decline in copper prices over a 3 week period.

As stated above, commodity volatility often precedes equity volatility. As can be seen above, copper futures appear to be reversing during the action today and many times commodities will bottom ahead of equities.

I want to be clear in stating that equities will not necessarily mirror the action in commodities or copper specifically, but some major volatility was seen in several commodity contracts besides just metals. Oil futures were also coming under selling pressure as well.

Crude Oil Futures Daily Chart



As can be seen above, oil futures topped right at the end of January and then sold off briefly only to selloff sharply lower a few weeks later. Oil futures gave back roughly 6% – 7% as well which is quite similar to copper’s recent correction. I have simply highlighted some key support / resistance levels on the oil futures chart for future reference and for possible price targets.

In equity terms, since February 20th the S&P 500 futures have sold off from a high of around 1,529 to Monday’s low of 1481.75. Thus far we are seeing a move lower of about 3.10% since 02/20 in the S&P 500 E-Mini futures contract. While I am not calling for perfect correlation with commodities, I do believe that a 5% correction here not only makes sense, but actually would be healthy for equities.

S&P 500 E-Mini Futures Daily Chart



If we assume the S&P 500 E-Mini contracts were to lose 5% from their recent highs, the price that would correspond with that type of move would be around 1,453.

As shown above, while 1,453 does represent a consolidation zone in the S&P 500 which occurred in the beginning of January of 2013, there is a major support level that corresponds with the 1,460 – 1,470 price range.

I am expecting to see the S&P 500 test the 1,460 – 1,470 price range in the futures contract, however the outcome at that support level will be important for future price action. If that level holds, I think we likely reverse and move higher and we could even take out recent highs potentially. In contrast, if we see a major breakdown below 1,460 I believe things could get interesting quickly for the bears.

I am watching the price action today closely as I am interested in what kind of retracement we will get based on yesterday’s large bullish engulfing candlestick on the daily chart of the S&P 500 futures.

Ultimately if the retracement remains below the .500 Fibonacci Retracement area into the bell we could see some stronger selling pressure setting in later this week. The Fibonacci retracement of the 02/25 candlestick can be seen below.

S&P 500 E-Mini Futures Hourly Chart



So far today we have not been able to crack the 0.382 Fibonacci retracement area. This is generally considered a relatively weak retracement and can precede a strong reversal which in this case would be to the downside in coming days.

It is always possible to see strength on Wednesday and a move up to the .500 retracement level. As long as price stays under the .500 Fibonacci retracement level, I think the bears will remain in control in the short-term. However, should we see the highs from 02/25 taken out in the near term the bulls will be in complete control again.

Right now I think it is early to be getting long unless a trader is looking to scale in on the way down. I think the more logical price level to watch carefully is down around 1,460 – 1,470 on the S&P 500. If that level is tested, the resulting price action will be critical in shaping the intermediate and long-term price action in the broad equity indexes.

If you have to trade, keep position sizes small and define your risk. Risk is elevated at this time.

If you would like to get our detailed trading videos each week and know what is just around the corner test out here:

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Chris Vermeulen & JW Jones
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Question & Answer Per Your Request

I just received an email from trading legend, Todd Mitchell, that his PowerStock Mentoring Program is filling up.

That's pretty remarkable considering he just started accepting new students last week. But questions remain and he fired up his computer camera with his partners Doc and Dave, and answered all your questions.

I'm not sure if it's Todd's 100%, one year Performance Guarantee, the fact you get ALL of his highly coveted stock trading strategies, or that he's making himself personally available to you. Including giving them his cell phone number. I think that's what has so many traders excited.

Either way, I'm sure it's only a matter of a couple of days before the entire course is sold out. But before you enroll in PowerStock Trading, click here to check out this 5 minute video he just created.

It's answers the 3 most popular questions about the course and how you can personally get in contact with Todd for additional questions.

Watch the 5 Minute Question & Answer Video Here

GOLD Should be Completing a Cyclical Low in February

David A. Banister of Market Trend Forecast has been our go to trader when it comes to gold. Here's what he says about the bottoming process in gold.....

Over the past 5 calendar years we have seen GOLD either complete an intermediate cyclical top or bottom in each February. My forecast was for February of 2013 to be no different and for Gold and Silver to make trough lows this month. With that said, I did not expect the drop in GOLD to go much below $1,620 per ounce at worst, but in fact it has. Where does that leave us now on the technical patterns and crowd behavioral views?

First let’s examine the last 5 years and you can see how I noted tops and bottoms in the chart below




That brings us forward to todays $1,573 spot pricing and trying to determine where the next move will go. To help with that end, some of our work centers on Elliott Wave Theory, along with fundamentals and traditional technical patterns of course.

In this case, the recent action around Gold has been very difficult to ascertain, and I will be the first to admit as much. With that said, one pattern we can surmise is a rare pattern Elliott termed the “Double Three” pattern. Essentially you have two ABC type moves, and in the middle what is dubbed an “X” wave, which breaks up the ABC’s on each end of the pattern.

That brings us forward to todays $1,573 spot pricing and trying to determine where the next move will go. To help with that end, some of our work centers on Elliott Wave Theory, along with fundamentals and traditional technical patterns of course. In this case, the recent action around Gold has been very difficult to ascertain, and I will be the first to admit as much. With that said, one pattern we can surmise is a rare pattern Elliott termed the “Double Three” pattern.

Essentially you have two ABC type moves, and in the middle what is dubbed an “X” wave, which breaks up the ABC’s on each end of the pattern. For sure, if we add in traditional technical indicators along with sentiment, we can see very oversold levels coupled with the potential Double Three pattern and probably start getting long here for a trade back to the 1650’s as possible....




Obviously this chart shows oversold readings in the lower right corner using the CCI indicator. That said we would like to see 1550 hold on a weekly closing basis to remain optimistic for a strong rebound.

Consider our free weekly reports or a 33% discount, just click here and go to Market Trend Forecast

Gold and Silver Nearing MAJOR Long Term Support

Gold and silver along with their related miners have been under a lot of selling pressure the last few months. Prices have fallen far enough to make most traders and investors start to panic and close out their long term positions which is a bullish signal in my opinion.

My trading tactic for both swing trading and day trading thrive on entering and exiting positions when panic trading hits an investment. General rule of thumb is to buy when others are extremely fearful and cannot hold on to a losing position any longer. When they are selling I am usually slowly accumulating a long position.

Looking at the charts below of gold and silver you can see the strong selling over the past two weeks. When you get drops this sharp investors tend to focus on their account statements watching the value drop at an accelerated rate to the point where they ignore the charts and just liquidate everything they have to preserve their capital.

Gold Bullion Weekly Chart: 

The price and outlook of gold has not really changed much in the past year. It remains in a major bull market and has been taking a breather, nothing more. Stepping back and reviewing the weekly chart it’s clear that gold is nearing long term support. With panic selling hitting the gold market and long term support only $20 - $30 dollars away this investment starts to look really tasty.

But if price breaks below the $1540 level and closed down there on a weekly basis then all bets are off as this would trigger a wave of selling that would make the recent selling look insignificant. And the uptrend in gold would now be over.

Silver Bullion Weekly Chart:

Silver price is in the same boat as its big sister (Yellow Gold). Only difference is that silver has larger price swings of 2-3x more than gold. This is what attracts more traders and investors but unfortunately the masses do not know how to manage leveraged investments like this and end up losing their shirts. A breakdown below the $26.11 price would likely trigger a sharp drop back down to the $17.50 level so be careful.

Gold Mining Stocks – Monthly Chart:

If you wanna see a scary chart then look at what could happen or is happening to gold miner stocks. This very could be happening as we speak and why I have been pounding the table for months no to get long gold, silver or miners until we see complete panic selling or a bullish basing pattern form on the charts. We have not seen either of these things take place although panic selling is slowly ramping up this week.

There will be some very frustrated gold bugs if they take another 33% hair cut in value.

Precious Metals Trend and Trading Conclusion:

In short, the precious metal sector remains in a cyclical bull market. That being said and looking at the daily charts the prices have been consolidating and are in a down trend currently. Until we see some type of bottoming pattern or price action form it is best to sit on the side lines and watch the emotional traders get caught up and do the wrong thing.

The next two weeks will be crucial for gold, silver and miner stocks. If metals cannot find support and close below the key support levels things could get really ugly fast. If you would like to receive my daily analysis and know what I am trading then check out my newsletter at The Gold& Oil Guy.com

Chris Vermeulen


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Enrollment is open....the PowerStock 2.0 Mentoring Program

Legendary trading mentor, Todd Mitchell, just opened his PowerStock 2.0 Mentoring Program for the very first time this year. He’s doing things with stock trading that most people have never even heard of.

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WTI holds range support....Brent bears take the advantage

With Brent breaking below it's upward trend line it's time to check in with Dominick Chirichella at the CME Group......

The spot WTI contract held range support and has now moved back to the middle of its trading range on the last day of trading for the March Nymex WTI contract. The soon to be spot April contract has been in a trading range (since the middle of January) of about $99/bbl on the upside and $95.40/bbl on the lower end. At the moment the contract is trading in the middle of its trading range. Both range support and resistance have been successfully defended several times since January. For now I would expect more of the same unless a strong directional catalyst emerges.

On the other hand the spot Brent contract has broken below its upward trending channel that was in play since mid-January. It is trading below the key technical level of $118/bbl with the possibility of the contract moving to test the next support level of about $115/bbl. It has now been trading below the $118/bbl level for five trading sessions and barring a surprise upside price direction catalyst emerging Brent should remain biased to the bearish side.

As I discussed in yesterday's newsletter the April Brent/WTI spread failed to breach the upside range resistance level and has traded down toward the $19.70/bbl support level. For those who entered the spread from the short side the market is close to the original objective and if the $19.70/bbl support level holds we could get another move back to the upside. If support is breached the next support level for the spread will be around the $18.25/bbl level.

The Seaway Pipeline operator indicated in a FERC filing that they expect to be able to average about 295,000 bpd flow through the line for the period February through May. They also went on to say that they hope to raise the throughput to 335,000 bpd but it is not expected to increase above that level due to the anticipated mix of light and heavy crude oil. This is slightly bearish for the Brent/WTI spread as it is an increase of movement of oil out of Cushing over January's levels.....Read Dominicks entire article.


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Devon Energy DVN Reports Fourth Quarter and Full Year 2012 Results

Devon Energy Corporation (NYSE:DVN) today reported a net loss of $357 million for the quarter ended December 31, 2012, or $0.89 per common share ($0.89 per diluted share). The company’s fourth quarter financial results were impacted by a non-cash asset impairment charge of $896 million. Excluding the asset impairment charge and other items securities analysts typically exclude from estimates, Devon earned $316 million or $0.78 per diluted share in the fourth quarter of 2012.

Asset impairments also led to a loss of $206 million for the year ended December 31, 2012, or $0.52 per common share ($0.52 per diluted share). Excluding adjusting items, the company earned $1.3 billion or $3.26 per diluted share in 2012.

“In spite of a challenging commodity price environment that impacted our financial results, Devon delivered solid operating results in 2012. During the year, we continued to make significant progress toward the conversion of our asset portfolio to a higher oil weighting,” commented John Richels, Devon’s president and chief executive officer. “This is evident through the strong oil production growth we delivered during the year and the impressive growth in oil reserves.”........Read the entire Devon Energy earnings report.


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National Oilwell Varco and Robbins & Myers Receive Clearance

National Oilwell Varco (NYSE: NOV) and Robbins & Myers (NYSE: RBN) jointly announced today that the Antitrust Division of the United States Department of Justice has closed its investigation of the parties’ previously announced merger.

NOV and RBN also received today a no action letter from the Canadian Competition Bureau. Having received clearance from the United States and Canada, NOV and RBN expect to complete the merger tomorrow, February 20, 2013. The transaction has been cleared without modification.


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