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Commodities & Stocks Ready to Bounce or Rally?

Commodities and stocks almost look ready for a rally or at least a relief bounce. The market is down over 5% and the normal pullback this year has been 4%. Using technical analysis and inter-market analysis we can see that the market is reaching extreme lows and this usually means we are only a couple days away from a rally.

I work with several market technicians as we all analyze the market a different way and share our work with each other to gain maximum insight on the broad market moves. We analyze momentum cycles, magnetic cycles, volatility levels, support & resistance levels, volume analysis and inter-market analysis.

Each of us has found a formula which works for our individual style of trading. And by combining our work we have found that we can collectively produce some very exciting trading signals for the broad market. We focus on leveraged index funds in order to take advantage of our insights. While nothing in trading is ever perfect, the analysis for timing the broad market is very exciting.

Here are some quick charts on where the market is trading.

US Dollar – Daily Dollar Price Chart
This chart is a no brainer. The trend is down and trading at resistance. If the US dollar reverses back down we will see stocks and commodities move higher.

US Dollar Index Trade

US Dollar Index Trade

VIX – Daily Volatility Index
Again, overall the trend is down and trading at resistance. As the saying goes “When the VIX is high its time to buy”. Just to be clear, the VIX is low compared to the previous highs set back in 2008 which was around the 80 level. But, if we want to keep things simple for the current trend then the VIX is high for our current market condition. The VIX moves in the opposite direction of the equities market.

VIX - Volatility Index Trade

VIX - Volatility Index Trade

DIA – Dow Jones Industrial Average ETF Fund
Here is the Dow Jones index fund and it clearly shows that when investors are selling out of their positions and getting scared of a market collapse, volume rockets higher. When we see the price pullback to possible support levels and volume increases that is a time when we should be looking to scale into a long position for a bounce, such as now.

Dow Jones Index Trade

Dow Jones Index Trade

XLE – Energy Sector ETF
You can see that the energy sector is very close to a support level and volume is high. With the US dollar about to reverse back down it will help boost this sector as it is tied in with commodity prices which rise with a falling dollar. I expect we will see a price gap lower and fill this area before moving higher.

Energy Sector XLE Trade

Energy Sector XLE Trade

GLD – Gold ETF Fund & Silver
This chart has not changed much from last weeks report. We are getting the drop as expected this week. We could see the gap fill from early October before gold stabilizes.

Silver is in the same situation. Gold and silver move in tandem so we are waiting for a bottom before looking for a low risk entry point.

Gold and Silver Trading Tends

Gold and Silver Trading Tends

Commodity & Stocks Trading Conclusion:
To keep things short and to the point, I am seeing momentum cycle lows as of today, magnetic wave lows today, and most commodities and indexes trading at support. These observations, coupled with the US dollar at a possible resistance level and market volatility spiking to an extreme high, lead me think a bounce is in the cards.

The market has had an amazing rally so far this year and I feel that we will have a solid year end rally going into Christmas. That being said, the recent sharp correction could form an ABC retrace pattern which means we get a bounce in the next week or so, then one more multi day sell off which will scare even more bulls out of the market. I am going to be scaling out of this oversold play quickly to lock in some gains while allowing a smaller position to ride for larger gains.

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Chris Vermeulen

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Mid Week Gold, Silver, Oil and Nat Gas Trading Report

Commodities so far this week have not changed much. But I can point out a few things for us to watch Thursday and Friday.

Precious Metals – Gold GLD fund – Silver SLV Fund – PM Stocks GDX Fund
We could start to see a shift between the price relationship between gold and the broad market. I pointed this out last week mentioning that gold and silver are starting to hold up in value while stocks sell off on big days. For example, Wednesday’s sell-off in equities did not have much effect on precious metals. This is what we want to see. It means money is moving out of stocks and into gold and silver bullion as a safe haven.

These three charts of GLD, SLV and GDX show Wednesday’s price action as gold and silver moved higher while precious metal stocks sold down with the rest of the market. This is generally a bearish indicator for gold and silver but because I am starting to see this happen more often and traders are ready for the market to top any day, I am seeing this as a bullish indicator. If the market starts to slide I have a feeling investors will be dumping a lot more money into gold and silver.

Gold, Silver, Precious Metals Stocks

Gold, Silver, Precious Metals Stocks

Energy – Oil USO Fund – Energy Stocks XLE Fund
We are seeing a similar pattern in the energy sector. Oil had a nice move higher today while energy stocks sold off. Stocks are starting to fall out of favor.

Energy Oil Stocks

Energy Oil Stocks

Natural Gas – UNG Fund
Natural gas is still in a bear market and trading under a major resistance trend line. This commodity could go either way so I am going to wait for the odds to be more on my side before jumping on board with a long or a short trade.

Natural Gas UNG Fund

Natural Gas UNG Fund

Mid-Week Gold, Silver, Oil and Nat Gas Conclusion:
The market is starting to look and feel top heavy with many indicators and price action patterns giving cross signals. While the market could continue to rocket higher with new money getting dumped in from average investors because of solid 3rd quarter earnings, we must be cautious by tightening our stops and take some profits off the table. Until we get a short term oversold market condition I am trading very conservatively.

Waiting for a good trade is crucial in trading. If you always want to trade and force positions when the market is choppy you end up with lower probability trades.

To receive my free trading reports, please visit my website: www.GoldAndOilGuy.com

Chris

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Precious Metals, Oil & Nat Gas Trend Charts

Oct 18, 2009
Commodities continue to climb with several commodities making new highs for the year. The equities market continues to push higher with 3rd quarter earnings coming in better than expected. This good news has aroused more investors to put what’s left of their money back into the market which has been the fuel for this recent rally in stocks.

Here is my concern:
The market continued to make a new yearly high last week, company earning are better than expected and more retail investors (average working people) are dumping their money back into the market again because EVERY thing is going up in value and all they need to do is buy something. When it’s this easy to make money in the investment/trading world something drastic usually happens not long thereafter.

Here are a few charts for this week in precious metals and energy.

Precious Metal Stocks – Gold Bugs Trend
Gold stocks have performed well in the recent couple weeks. I figure we will see some sideways price action before another leg higher. The question is how far will this pullback go?

As you can see there are two trend lines which make for solid support levels. I will be looking for a low risk setup around those levels.

HowToTradeGoldStocks

HowToTradeGoldStocks

Precious Metal GLD Gold Fund
Gold had a great pop higher the first week of October but now it looks ready for some sideways chop. I tend to look at precious metal stocks as a leading indicator for trading gold so before we put more money to work in GLD I want a buy signal for gold stocks also.

HowToTradeGLDETF

HowToTradeGLDETF

Precious Metal SLV Silver Fund
Silver SLV and gold GLD generally move together with silver being the more volatile of the two on a percentage basis. As you can see from the chart below the support trend lines are much father away from the current price. If you don’t want to give back too much of your gain then raising your stops is a safe call. But if you get taken out of your position you should be looking to get back in at a lower price on the first sign of a bounce/reversal to the upside.

HowToTradeSLVETF

HowToTradeSLVETF

Energy Stocks – XLE Energy Fund
It does not matter which sector or commodity I am following it is important to analyze the stocks for that sector or commodity. These are as close as you can get to a leading indicator for possible trade setups.

In my opinion, it looks like energy stocks are about to have a pullback. The trend is still up, so I am not looking to short, rather I am tightening my stops to lock in some profits if we get a sharp pullback. Then I will be entering long again on the first sign up a reversal back up.

HowToTradeXLEETF

HowToTradeXLEETF

Energy USO Oil Fund
Oil had a great run last week and from the simple analysis above (energy stocks) I have a feeling we could see a quick one day sell off. This is common with USO and buying at the close after a long high volume sell off can provide an excellent trading opportunity.

HowToTradeUSOETF

HowToTradeUSOETF

Energy UNG Natural Gas Fund
Natural gas continues in a bear market rally as it tests our resistance trend line on Friday. I do feel that gas has bottomed and we will see much higher prices in the future. That being said, I still think we need some time for this commodity to bottom (form a base).

Depending on the price action of natural gas this week, we may have a low risk entry point with my trading model. I will keep members posted.

HowToTradeUNGETF

HowToTradeUNGETF

Precious Metals & Energy Trading Conclusion:
In short, I feel the market is ready for a multi month correction, but with solid 3rd quarter earnings, new money is being dumped into stocks and commodities as investor confidence rises. This is extending the rally making it even more over bought in my opinion.

That being said, I will not be shorting the market or stocks anytime soon. This market can continue higher because average investors are putting their money back into the market. If the market does actually top in the coming weeks, there will be plenty of time to short the market using leveraged ETFs. I am still long the market and applying tight stops to my positions.

If you would like to receive my free weekly trading reports please join my free newsletter at: www.GoldAndOilGuy.com

Chris Vermeulen

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Mid-Week GLD, SLV, UNG & USO Trading Charts

Commodities and stocks have been on fire the past two weeks and I think it just may be time for things to take a breather. While I continue to stay long, taking some money off the table to lock in profits is a safe play.

Just from a quick glance at the charts we can tell the odds are pointing to some type of pause or pullback in the coming days. I figure any day now we could see some profit taking.

Gold ETF Trading – GLD

The Gold ETF is one of my favorite trading vehicles. Using simple trend lines and looking at the recent price action you can see that the price of gold is looking ready for a pullback. Buying at this level is chasing and that generally means you buy at the high and panic out at the low.

How to Trade Gold GLD

How to Trade Gold GLD

Silver ETF Trading – SLV

The Silver ETF looks to be in the same boat as gold. I expect to see some sideways price action or a pullback.

How to Trade Silver SLV ETF

How to Trade Silver SLV ETF


Natural Gas ETF Trading – UNG

The Natural Gas ETF sure has given everyone a wild ride in the past 6 months. The bear market is still in place which can be seen on the daily chart. So far this week the price has broken down and trading at the $11 support level. This fund could generate a buy or sell signal with my trading model in the coming days so I am waiting for a clear entry and exit point before jumping on the gas wagon.

How to Trade Natural Gas UNG ETF

How to Trade Natural Gas UNG ETF

Crude Oil ETF Trading – USO

The Crude Oil ETF has broken above its resistance trend line this week but still struggling to move above the August high. Volume is declining while the price rises which is a bearish indicator. USO looks ready for some type of a pullback as it digests this breakout before moving higher.

How to Trade Crude Oil USO ETF

How to Trade Crude Oil USO ETF

Mid-Week GLD, SLV, UNG, USO ETF Trading Report

What does the general public hear and think about the stock market?
From recent emails, local financial news shows, family, friends etc… all I am hearing is how strong the market is. Indexes are making new yearly highs and company earnings are better than expected this quarter. Sounds like all we need to do is buy and life will be great!

Well in my opinion the market is the perfect tool for misguiding and frustrating the general public. All my indicators are telling me we need more of a correction before rallying much higher. The market (smart money) generally anticipates good and bad news several weeks if not a month in advance. So the question is:

Are company earnings already priced into the market?

Is all this positive market coverage getting the general public to buy up here at this possible market top?

The answer is, only time will tell. No one knows for sure what the market is going to do but short term moves can be predicted with relatively high accuracy.

Don’t get me wrong, I am still bullish on the market but with all this good news becoming public information you have to wonder what is next. I am still long the market but trimming my positions to lock in profits and still stay in the game.

If you would like to receive my free weekly trading analysis please visit my trading websites:
www.TheGoldAndOilGuy.com
www.ActiveTradingPartners.com

Chris Vermeulen

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Small Cap Stock Trading Service – ActiveTradingPartners

Hey Everyone,

I just wanted to mention the exclusive stock trading service David Banister and I launched in July. ActiveTradingPartners.com not only has an incredible track record of extremely high annualized gains on our Alerted Trade positions to Partners, but a very good track record of knowing when to Hold, Add, or Sell those same positions, as well as timely market commentary. Riding a stock or ETF to maximum gains is a difficult challenge, and ATP has successfully achieved this over and over again. Many services brag about how great they are at picking stocks or entering trades, but very few follow through with on-going advisories on those same positions, with sell advice at the right time, or with advice on whether to hold those positions through volatility.

Recently, before the recent market correction, ATP advised our Partners to close out of several of our very profitable positions completely. Below are a few samples:

VICL- Closed at $5.10, it dropped to $3.90 shortly thereafter.

SPPI- Closed at $7.15, it dropped to $6.27

CRXX- Closed at $1.80, it dropped to $1.27

JAZZ- Closed at $8.88, it dropped to $7.38

All of the above positions were recommended at much lower prices, and we trimmed profits at higher prices before closing them out. The last thing you want is to give back all your gains in the market.

Here is what some of our “Partners” in the service are saying recently:

Dave, I have not had the pleasure of talking/ meeting with you but just wanted to say how pleased I have been with the service thus far, Chris has been a good trading friend over the years and I am glad that he told me about this , I have probably made enough to pay for three years already.
Shaun Mahoney

We really appreciate the updates and information you supply on your site and your scorecard especially when the markets begins to worry us. When the market tries to shake us out, you provide a timely article to keep us on track. We are very pleased with the outcome of our trades since joining your service.

Thanks again for your constant support.
R.J and C.J–  Husband and Wife

“Hi Dave,
Just a quick note. Thanks so much for frequent updates and commentary. I have just finished first month as a partner. I have averaged over 15% returns even with losing one ATP pick as it got stopped out. Much of my portfolio was underwater when I joined up. I am turning things around as I am able and looking forward to big gains down the road. Very happy with the service. Thanks!”
Chris Webb, Wolfville, Nova Scotia

“Unbelievable. You guys are great. Keep up the good work and I will get you more subscribers. I am not kidding.”
Thorsten Bredberg

“To date this is the best financial service that I have ever subscribed to!”
Colleen Bowersock

“THANK YOU for the commentary on the various trading opportunities. I have made enough to fund the monthly costs of ATP for the next ten years. People at the office just do not understand why I am always smiling!!! Keep up the good work and I hope you enjoyed your vacation.”
Michael Swanberg

Learn more today at www.ActiveTradingPartners.com while we still have a few “Partner” positions available. The service is exclusive to only 200 subscribers.

Chris Vermeulen
www.ActiveTradingPartners.com
www.TheGoldAndOilGuy.com

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Dow Jones Commodity Index Fund Trading Opportunity

Dow Jones Commodity Index Fund – This index tracks the entire commodity market as a whole. Over the past two years we have seen commodities drop in value substantially. The good news is that we could be seeing prices rise going forward from here.

2009 has been a fantastic year for trading commodities with the market bottoming and starting to move higher. This commodity index clearly shows a Cup & Handle pattern and is looking ready to breakout in the coming weeks. The C & H pattern is the best chart formation we could get. Breakouts from these patterns generally provide a rally which can last months at a time.

Let’s take a look at what kind of opportunity looks to be just around the corner.

Dow Jones Commodity Index Chart – Weekly
Commodities appear to have bottomed and are getting squeezed into the apex of the bullish wedge. This index could easily rally to the 180 level which is about 35-40% Gain.

Dow Jones Commodity Index Chart

Dow Jones Commodity Index Chart

DJP iPath Commodity Index Fund – Weekly
After reviewing several different commodity index funds I like the characteristics for DJP the most. There is enough volume traded which makes for a smooth trading fund on an intraday basis when looking at the 10 minute chart. Several other funds were choppy and thinly traded.

This is Exciting – Everyone knows how most commodity funds vary from the underlying commodity price, well this fund trades identical to the index. What does this mean? It means we can trade the DJP commodity index fund for short term and long term positions because there isn’t any price decay over time.

iPath DJP Dow Jones - UBS Commodity Total Return Fund

iPath DJP Dow Jones - UBS Commodity Total Return Fund

Performance Chart of Commodity Index & Fund
This chart goes back almost 2 years. As you can see the % change for the index and the fund are virtually identical. We do not need to worry about Contango with this fund.

Dow Jones Commodity Index and Fund Comparison

Dow Jones Commodity Index and Fund Comparison

Major Commodities Breaking Out or Bottoming
Gold, Crude Oil and Natural Gas are highly traded commodities and will play a large role in the direction of the commodity index.

Gold is breaking out to a new high – Bullish

Gold Commodity

Gold Commodity

Crude Oil is consolidating in a bullish wedge – Bullish

Crude Oil Commodity

Crude Oil Commodity


Natural Gas is trying to bottom and should move higher into the winter – Bullish

Natural Gas Commidity

Natural Gas Commidity

Dow Jones Commodity Index Trading Conclusion:
Money has been moving into the commodity sector since March of this year. As a technical trader this opportunity jumps out at me. I wanted to share it with fellow traders because this could be once of the easiest trades of the year if the index breaks out in the coming weeks.

If you would like to receive my Free Weekly Trading Newsletter please visit my website: www.GoldAndOilGuy.com

Chris Vermeulen

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Oil, Gas, Silver Gold – Getting Ready for Next Rally

Commodities have and continue to be a fantastic trading vehicle for those who can stomach volatility. After last year’s market crash most commodities pulled back to normal if not lower than normal trading ranges. This allowed us to enter the market at 10+ year lows for natural gas.

If we look at the weekly chart for gold, silver, oil, natural gas and the CRB commodity index we can see that commodities in general look ready to skyrocket higher approximately 34% on average in the next 4-12 months.

Take a looks at this chart of gold. While this chart shows the basic technical analysis of the price of gold you can see the completion of the Cup & Handle pattern which is VERY BULLISH. Also you can see gold broke to a new high. While I don’t like to trade new highs it’s hard not to want to buy into this breakout. Most traders should be long gold already, but if you are not, you have a couple of options. Buy into this breakout with a tight stop or wait for a pullback and buy on a test of the breakout. Personally I am waiting for a pullback (test of breakout) before I add more to my position.

Trade Spot Gold

Trade Spot Gold

Silver has been strong but has not held up its value as well as its big sister (gold). As you can see silver must break through two more major resistance levels before making a new multi year high. Overall silver still looks strong and I will be waiting for a low risk setup for us to add more to our positions.

Trade Spot Silver

Trade Spot Silver

Crude Oil looks like a perfect Cup & Handle pattern and I am now looking for a low risk entry point which should form before we get a breakout it to the up side. I can see oil quickly moving to the $100 per barrel level once we get a breakout.

Trade Crude Oil

Trade Crude Oil

Natural Gas had a perfect shakeout in August and many aggressive traders who follow these reports followed my lead and bought natural gas around $2.90 (10 year lows). This was the move I wrote about for nearly 3 months as we waited for it to unfold. Down side risk was around 15% so it was not my signature low risk setup but this rally has been exciting. Currently natural gas is trading at resistance and taking some money off the table is a great play here. You will never go broke taking profits.

Trade Natural Gas

Trade Natural Gas

The CRB Index looks very similar to crude oil. Overall commodities look to be in the final stages of basing (bottoming) and from simple technical analysis the next more could be around 30-34%.

CRB Index

CRB Index

Commodity Trading Conclusion:
Overall commodities look like a great buy. We are seeing precious metals moving up strongly and gold making a new high which is very exciting as our golden rock stock plays push higher and our commodity ETF play continue higher as well.

Energy is a mixed bag. Oil looks bullish and ready for a nice rally, while natural gas looks a little top heavy as it trades just under resistance.

We continue to stay in the market and are waiting for another round of low risk setups which could happen in the next few days if we get favorable price action. Remember to move your stops up to lock in gains. There is nothing worse than giving back a large portion of your profits when you don’t need to.

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Chris Vermeulen