The Weak End Trading Report

It’s been a crazy week for stock and futures traders as the market moved up and down like a yo-yo, finally closing down sharply on the week.

Earlier this week I posted a report showing the Volatility Index (VIX) and how it was then trading at an extreme low level which triggered the sharp market corrections. Since that post the VIX has now risen over 30% as traders start selling positions to lock in gains.

Take a quick looks at the Volatility Index chart:



Chart of S&P500 Daily Price Action
Since the low in the volatility index a few days ago we have seen the S&P500 drop over 3.4%. This sharp sell off in equities and ES futures has happened in a very short period of time making the overall market oversold when looking at short time frame of the daily chart. With the market oversold and also trading near a support level I expect we could get a weak bounce lasting 1-5 days before rolling over for another wave of selling.

There are several reasons I feel this will happen:
1. Experience from seeing setups/patterns like this across many different indexes and investment vehicles leads me to believe distribution of shares are now starting to flood the market.
2. The market sentiment surveys are still extremely bullish. What does this mean? Well if almost everyone is bullish, then who is left to buy?
3. As the good old saying goes “Buy the Rumor, Sell the News”. With earning season starting I cannot help but think everyone (smart money) will be selling into the good earnings news as dumb money buys into stocks as they meet or beat earnings. This inflow of dumb money is exactly what the big guys need to unload massive amounts of shares at a premium. Also I would like to point out that earning estimates have been very low that past year which I think has been on purpose for the institutions. This makes it very easy for companies to beat estimates each quarter giving the warm cozy feeling to retail investors (us, the small guys)
4. Also Chares Biderman on Bloomberg pointed out the other day that the market looks to be manipulated by the feds as virtually all the gains have been produced after hours in the futures market.



Chares Biderman Video
The United States in my opinion is much more corrupt than most people think and I don’t really want to get into this rather large and interesting debate at the moment. But Charles Biderman has some very interesting points which fall in line with my thinking about how much of what is happening is really natural and what is completely manipulated in the past 10 months of rising market prices.

Must Watch 5 Minute Video



Quick Technical Chart Update on Gold
I thought this chart may be of interest to some of you as it shows two perfect textbook plays on the 4hr gold futures trading chart.

As you can see the first pattern is a reverse head & shoulders pattern. This is bullish and a breakout above the neckline would signal a buy point. Now if we use basic technical analysis with this pattern we can measure the potential move up by looking reverse head and shoulders pattern. You take the low of the upside down head $1075, and go straight up to the neckline at $1117. That is a total of $42. So if we add that $42 to the breakout point above the neckline then we can have a price target of $1117 + $42 = $1159.

As we can see the price of gold over the next couple days rallied to the $1160 level. Trading is not that easy but that is how it works in general. The hard part is knowing how to manage your trade and I scale out of positions as the price matures reaching short term resistance levels and by adjusting my stops accordingly to lock in maximum gains while minimizing downside risk.

A couple days later the same chart formed a regular Head & Shoulders and has since moved its potential measured move. I m not expecting a weak bounce in gold as with the overall stock market, but I am still not sure that the selling is over.



The “Weak’end Trading Conclusion:
In short, the market was turned upside down this week. Those who follow me should be in cash or mostly in cash as this drop was anticipated a few days ago.

Trading during fast moving markets is much tougher for swing traders as pivot points for indexes and commodities tend to happen during the intraday or during futures trading at night. High volatility like this is fantastic for active traders who focus on shorter time frames like the 4hr and 60minute charts, as opposed to trading just the daily chart and entering and exiting positions at the open and close each day.

I continue to watch the market and plan on providing some of these short term setups on the 4 hour chart using both the GLD etf gold fund and the YG Gold futures mini contract.

If you are interested in Trading Gold Futures and other contracts please just click here to receive my Free Futures Trading Newsletter.

Chris Vermeulen "The Gold and Oil Guy"



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Phil Flynn: They Are So Tired

They're so tired, they haven't slept a wink. They're so to tired, their mind is on the blink. They wonder if they should get up and fix themselves a drink but what they really are wondering where all the bullish momentum has gone. I mean come on it seemed like the oil bulls were on top of the world as the year started on such a bullish note. The bulls had their arguments like cold weather and China but with every passing day those arguments become more tired.

On the other hand the bearish case is wide awake. We have weak demand, ample inventories, rising OPEC and non OPEC production and questions about the continued growth in China oil demand. Now throw in some proposed new banking regulations that could zap demand and it's the bull's worst nightmare. No wonder they can't get any sleep. The bull market and the bulls are just downright tired.

The Energy Information Agency weekly report did not help out the bullish case. The EIA did report that oil supplies fell modestly (400,000 barrels) and that we had a big drop in distillates (3.3 million barrels) but are we not to expect that when the weather is cold? And we are still above the average range in both categories. At the same time we had a huge build in gasoline supply 3.3 million barrels and a historical low refining run rate of 78.4 % which just seems too scream out weak non-weather related demand.

Of course the oil bulls would tell you that it is not about US oil demand but demand from China. Yet is it possible that the oil demand story is not all it seems or at the very least the oil market got far ahead of the China demand story. I have been raising this issue for some time. Yesterday I warned that despite the fact of an explosive Chinese growth rate of 10.7%, the impact of China raising reserve rates and desperately reigning in credit could cause problems for the oil bulls.

I warned that even though it raised market fears, the Chinese government will take even more steps to reign in credit. I said that the market's reaction to the banking news could really be saying something more profound about how the market feels about the Chinese economy and even more, the health of the Chinese banking system as a whole.....Read the entire article.

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Crude Oil Falls to Lowest in a Month on Concerns Over U.S. Demand, China

Crude oil fell to a one month low in New York after equities dropped on President Barack Obama’s proposed restrictions on risk taking at financial institutions and on speculation China will raise interest rates. Oil fell as much as 2 percent as stocks tumbled on the U.S. plan to bar banks from trading for their own accounts. U.S. refineries ran at 78.4 percent of capacity last week, the lowest rate outside the Atlantic hurricane season since at least 1989, an Energy Department report yesterday showed.

“We’re watching the stock market and what’s going on in China,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The market is still digesting the massive drop of the last couple days, so we probably won’t see any big move in the next couple days.” Crude oil for March delivery declined $1.17, or 1.5 percent, to $74.91 a barrel at 10:15 a.m. on the New York Mercantile Exchange. Futures touched $74.58, the lowest level since Dec. 23. March oil has dropped 4.4 percent this week as declines in equity markets dented investor confidence and a stronger dollar reduced the appeal of commodities as an alternate investment.....Read the entire article.

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Crude Oil Daily Technical Outlook For Friday

Crude oil's correction from 83.95 resumed and dropped to as low as 75.82 so far. While another fall could still be seen, downside is expected to be contained by 61.8% retracement of 68.59 to 83.95 at 74.46 and bring strong rebound. Above 78.25 minor resistance will flip intraday bias back to the upside for 83.95 resistance first. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Lower, Oversold, But Signals Remain Bearish

Crude oil was steady to slightly lower overnight as it extends this week's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near term.

If March extends this week's decline, the 75% retracement level of the aforementioned rally crossing at 75.46 is the next downside target. Closes above the 20 day moving average crossing at 80.05 are needed to confirm that a short term low has been posted.

Friday's pivot point, our line in the sand is 76.70

First resistance is the 10 day moving average crossing at 79.46
Second resistance is the 20 day moving average crossing at 80.05

First support is the overnight low crossing at 75.62
Second support is the 75% retracement level at 75.46

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Could There Be....More Upside in Chevron?

Stephanie Link, director of research for Action Alerts Plus Portfolio, reveals why they still love Chevron and are buying the stock despite its recent 40% move.



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Stronger Dollar, Demand Concerns Keep The Advantage to the Crude Oil Bears

Crude oil closed lower on Thursday as it extends last week's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI remain bearish signal that sideways to lower prices are possible near term.

If March extends last week's decline, the 75% retracement level of the December-January rally crossing at 75.46 is the next downside target. Closes above the 10 day moving average crossing at 80.21 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 80.02
Second resistance is the 10 day moving average crossing at 80.21

First support is today's low crossing at 75.66
Second support is the 75% retracement level of the December-January rally crossing at 75.46

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Natural gas closed higher due to short covering on Thursday but the mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are bearish hinting that additional weakness is possible near term.

If February renews last week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. Closes above last Thursday's high crossing at 5.804 would temper the near term bearish outlook in the market.

First resistance is last Thursday's high crossing at 5.804
Second resistance is the reaction high crossing at 6.108

First support is last Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar closed higher on Thursday but well off session highs due to profit taking, which erased most of its early gains. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If March extends this week's rally, the 38% retracement level of the 2009-2001 decline crossing at 79.71 is the next upside target. Closes below the 10 day moving average crossing at 77.52 would confirm that a short term top has been posted.

First resistance is today's high crossing at 79.00
Second resistance is the 38% retracement level of the 2009-2001 decline crossing at 79.71

First support is the 20 day moving average crossing at 77.79
Second support is Tuesday's low crossing at 77.52

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Oil Extends Drop After Report Shows Increase in U.S. Gasoline Inventories

Crude oil fell to a four week low after a U.S. Energy Department report showed that refineries slashed operating rates as fuel demand declined. Plants ran at 78.4 percent of capacity last week, the lowest rate since September 2008 when hurricanes struck the Gulf of Mexico. Gasoline supplies surged to the highest level since March 2008. Fuel use in the past four weeks fell 1.8 percent from a year earlier. Oil also dropped as the dollar strengthened and stocks declined. “Refineries aren’t running and we still got a big build in gasoline inventories,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This is a signal that demand is very weak in the U.S., and there is no sign that it will increase anytime soon.”

Crude oil for March delivery fell $1.22, or 1.6 percent, to $76.52 a barrel at 11:57 a.m. on the New York Mercantile Exchange. Futures touched $76.02, the lowest level since Dec. 23. Oil traded at $77.41 before the release of the report at 11 a.m. in Washington. The greenback strengthened after a report said the European Union was preparing a loan for Greece, which Finance Minister George Papaconstantinou denied.
The U.S. currency traded at $1.4095 per euro, from $1.4106 yesterday. The greenback touched $1.4029, the highest level since July 30. The Standard & Poor’s 500 Index slipped 1.5 percent to 1,121.37 and the Dow Jones Industrial Average declined 1.8 percent to 10,416.79.....Read the entire article.

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Crude Oil Bulls Struggle to Hold the 50% Retracement Level

Crude oil was steady to slightly lower overnight but remains above the 50% retracement level of the December-January rally crossing at 77.41. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term.

If February extends this month's decline, the 62% retracement level of the aforementioned rally crossing at 75.85 is the next downside target. Closes above the 10 day moving average crossing at 80.00 are needed to confirm that a short term low has been posted.

Thursday's pivot point for crude oil is 78.08

First resistance is the 20 day moving average crossing at 79.59
Second resistance is the 10 day moving average crossing at 80.00

First support is Tuesday's low crossing at 77.07
Second support is the 62% retracement level of the December-January rally crossing at 75.85

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Crude Oil Technical Outlook For Thursday Morning

Intraday bias in crude oil remains neutral as it's still staying is tight range above 76.76. Another fall is expected as long as 79.62 minor resistance holds and below 76.76 will target 83.95 towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 79.26 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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