Precious Metals and the Dollar’s Next Big Move Part II

We have seen some exciting moves in the market and with the market sentiment so bullish it should make for a sharp selloff in the coming weeks. Meaning everyone is overly bullish and owns a lot of stocks and commodities; therefore the market should top and leave them holding the bag while the smart money runs for the door. The market will not bottom until all of these individuals holding the bag finally cannot take the pain of losing any more money and once we see them panic and sell them all at once only then will we be looking to go long again.

The past couple weeks I have been bombarded with emails asking if gold and silver have bottomed and if they should be buying more on these pullbacks. Those of you reading my work for the past few months know that my analysis clearly has shown how both gold and silver have been topping out. There have been strong distribution selling and price patterns on the charts are also clearly signaling a top was near.

A couple weeks ago I posted an important report covering gold, silver and the US Dollar and where the next big moves will be. Well it’s time for another update on Gold, Silver and the Dollar as they have come a long way from my last report.

Take a quick 15 second look at Part One charts: http://www.thegoldandoilguy.com/articles/precious-metals-and-the-dollar%E2%80%99s-next-big-move/

Ok let’s move on to today’s charts…

Silver Daily Chart
Silver has formed a very nice looking top and it is now trading under its key moving averages. It is also currently testing a key resistance level after Friday’s bounce on the back of fears in Egypt. Unless something happens internationally I figure silver sill continue its trend down.

Gold Daily Chart
Gold futures are doing the same as its little sister (silver). I feel the general public is still very bullish on metals and before we see higher prices (new highs) the market will have to shake the majority out of their positions first. At this time gold looks like it should test the $1285 level. Depending on how long it takes to get there and the price action it forms in the following days that outlook could change but expect sellers to step in at the $1350-1355 area.

US Dollar 2 Hour Chart
The dollar has been grinding lower the past two weeks forming a falling wedge reversal pattern. It’s also important to note that on the daily chart the dollar tested a key support level last week. This should be an interesting week for the dollar and the rest of the market simple simply because when the dollar makes sharp movements it pushes the price of stocks and commodities around in a big way.

I am looking for a multi week rally in the dollar possibly longer but with small pauses or corrections along the way.

Pre-Week Metals and Dollar Trend Analysis:
In short, I feel gold and silver are nearing a short term resistance level and will find selling pressure in the coming days only to continue on their journey down for a few weeks. The dollar on the other hand broke out of its falling wedge on Friday and could have a strong rally for 2-3 days. I feel most traders and investors have been shorting the dollar for two weeks straight, so once they realize it’s going higher there will be a ton of short covering and the dollar should rip higher.

This shift in the Dollar from down to up has a direct effect on the SP500 and subscribers of my newsletter are going to take full advantage of these next big moves in the market.

If you would like to get my daily trading analysis and trade exactly what I am trading please join my newsletter here: http://www.thegoldandoilguy.com/free-preview.php
Chris Vermeulen

,

Trading Analysis The General Public Does Not Look At

Yesterday I pointing out how any weakness would most likely get bought back up into the close ahead of Obama speaking and we did get that. I also figured today the market would hold up or close positive also (post Obama) so the general public thinks and feels good about the USA and the financial markets.

Watch the Video Version of this report: http://www.thetechnicaltraders.com/ETF-trading-videos/TTTJ25/TTTJ25.html

Well today the market just happened to gap above yesterday’s key resistance level ans we all know that once we are above resistance be becomes support. After the gap up this morning the SP500 pulled back to this new support level which happens to be Friday’s, Mondays and Yesterdays high then it bounced, actually rallied up on solid volume almost like someone was making a point that this market is going up today and not to mess with it…

Personally I don’t get worked up over market manipulation because of two reasons:

1. There is Nothing you can do about it
2. If you see it and understand the idea behind it, then you can make really good money day trading it.

Chart of SP500 10 minute chart

As for our dollar position I still like the trade but I will admit that its really starting to drag out (wear us out of the position so we give up on it). Keep in mind that waiting for a trade to breakout and hopefully go in your direction is part of the excitement of trading… The suspense sure keeps are emotion flying high, which is why it is important to only trade position sizes which you can stomach during volatile times. Also the reason we scaled in at first key support and added more on the deeper pullback.

Posted below and in the member’s area is the chart:

Gold and silver have bounced a little and are trading back at resistance where they were in my pre-market video this morning.

Now, take a look at the different indexes below and you will see how the dow of only 30 stocks shows bullishness, while the key indexes for trend and strength are under performing…

As I mentioned a few weeks back, actually just before Christmas.. I figured the market would start to top out the second half of January. It looks as though that is unfolding but remember topping is a process and it become VERY difficult to trade and time and this is why I am taking my time here…Tops and bottoms are designed to suck traders into the wrong side one final time just before price reverses.

On another note it looks like metals are losing some ground here and may go lower… I’m figuring the dollar should bottom in the next couple days at most. Again tops and bottoms are a process and they always take much longer than we anticipate. If the market does not shake you out, it will wear you out..

You can get my trading videos, analysis and trade alerts by subscribing to my newsletter: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

,

The Good, Not So Good, Bad & Ugly on the Indexes

Depending what type of trader you are and what you focus on the most for trading you could be either bullish or bearish on the stock market right now. The charts below show how the Dow Jones Industrial Average is bullish while the Small-Cap Russell 2K is bearish. Options expiration last week really mixed the market up as the market makers and the big money players manipulate stock prices in their favor.

Let’s take a look at the charts…

DIA – Dow Jones Industrial Average Daily Chart
Crude oil has been holding up very well the past couple weeks and that has had an impact on the Dow. Additionally IBM had a huge move up which accounts for almost 10% of the DJIA’s price action. Both these factors have skewed the Dow index to look bullish.

Currently the price is trading above the 5 period moving average after briefly tagging it on Friday and then bouncing higher. Volume has picked up indicating more people are exchanging positions because of a shift in sentiment. Remember the Dow represents only 30 stocks so it does not provide a solid view of the overall market strength.


SPY – SP500 Daily Chart
This index closed below the 5 period moving average with rising volume once again indicating a shift in trader sentiment. The SP500 is heavily weighted with financial stocks and with the financial sector under pressure last week it helped to pull this index down. The fact that it closed below the 5 period moving average is just a warning sign to be cautious. Overall trend is still up in this index.

QQQQ – NASDAQ Daily Chart
As you can see the technology heavy index (Nasdaq), there has been more selling going on. The Nasdaq closed below both key moving averages and is now testing the 20 period moving average which is the line in the sand before I’m bearish on this sector. Tech stocks are typically a good indicator for the overall health of the market and if it does not recover this week or if it forms a light volume bear flag then watch out below.


IWM – Russell 2K Small Cap Stock Index
Small cap stocks are usually the first to pullback in the market. As you can see there is a big difference between this chart and the Dow Jones…

Small caps has broken key moving averages and are now nearing the 50 period moving average which I figure will provide a small bounce or pause before crashing through it. But with the amount of selling volume happening in the small caps it could just drop through that level and keep on going. Only time will tell and its best to wait for a low risk entry point before taking a position.

Weekend Trading Conclusion:
In short, the major indexes are giving mixed signals. While the Dow and SP500 are still bullish, we are seeing tech and small cap stocks breakdown. If things work out like they have in the past then the market is truly starting to put in a top. It could still take 5-10 days to play out. Usually the market will get choppy with large up and down days back to back and volatility will rise which can be seen by watching the VIX. I am currently neutral on the market and waiting for a low risk setup to unfold.

You can get my trading videos, analysis and trade alerts by subscribing to my newsletter: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

, ,

Panic Selling Hit SP500 Today, Silver and Gold Are Next!

Today the stock market bled out with a river of red candles. All of the recent gains vanished in one session. Strong selling volume sessions like this are typically a warning sign that distribution selling is starting to enter the market.

Distribution selling is when the big money players start unloading large positions in anticipation of a market top. They do try to hide it by selling into good news or earnings when the average investors are buying into all the hype of better than expected earnings on the news. As average investors jump into the market because of the good news, this extra liquidity helps the big money players (banks, hedge funds, etc..) sell large amounts of their positions to the eager buyers. This is why the “buy on rumor and sell on the news” saying is kicked around wall street….

To me, panic selling is typically seen as a bullish sign to enter the market simply because if everyone is/has rushed to the door to sell what they own, then really most of the down side risk has been taken out of the market. That being said after an extended multi month rally and higher than selling volume I look at it more like distribution selling and a shift in momentum.

I feel the precious metals sector will be starting something like this in the near futures, and possibly it has already started as seen in the rising volume on the down days.

Let’s take a look at the charts…

AAPL – Apple Stock 10 Minute Chart
Two days ago AAPL shares took big hit because of some medical issues with the CEO, the shares did float back up. But what is important here is the distribution selling which took place after Apple came out with much better than expected earnings. The general public loves to buy good news especially when it’s for a famous company. But large sellers stepped in unloading as much of their position as they could before making it look to obvious.

The average investor listening on the radio or catching snippets on the news do not pick up on these things which is why the big money players can get away with this over and over again.

GS – Goldman Sachs 10 Minute Chart
Goldman came out with average earnings being just above estimates and the share price took a beating with very strong volume.

Distribution selling looks to be entering the market and this is a bearish sign. I would not be surprised if we see the market top out in the next 5-10 trading sessions.

SPY – SP500 10 Minute Chart
Here you can see my green panic selling indicator spiking up much higher than normal dwarfing the past sell off spikes. This makes me think the big money is now starting to unload which will shift the current upward momentum to more of a sideways whipsaw type of price action. Eventually it will roll over and a new down trend will start.

As you can see from this chart the SP500 is trading down at a support level so a bounce is likely going to take place. If in fact today was the first distribution day then the big money should let the price inflate back up to the recent highs and possibly make a new high to help keep investors bullish before the hit their SELL BUTTON again… They like to play these games and understanding them is a key part of trading. Expect choppy price action for a week or two…

Silver Daily Chart – The Next Wave of Selling?
I look at silver and gold as one… so what I show here is the exact same for gold.

As you can see silver is trading under 3 of its key moving averages and todays bounce was sold into after testing the 14 and 20 period moving averages.

Take a looking at the bottom of the chart and you can see distribution selling volume as the spikes are all down days. If silver breaks below the $28 level then we could easily and quickly see the $26 and maybe even the $24 level.

The Mid-Week Market & Metals Trading Conclusion:
In short, the financial power players are pulling out all the tricks to shake traders out of their positions. A lot of people shorted the market in the past 2 weeks only to get hung out to dry and most likely stopped out of their short positions for a loss. Fortunately we did the opposite taking another long position in the SP500 ETFS because my market internal indicators, market breadth and simple trading strategy clearly pointed out that the average investor was trying to pick a top by shorting the market. As we all know, the market is designed to hurt the masses which is why I focus on the underlying trends, price action, volume and market sentiment for timing trend changes.

That being said, I still think the market could grind higher and make another new high. But any rally or new high will most likely get stepped on with heavy selling. Expect strong selling days followed by a couple days of light volume sessions where the price drifts back up into resistance levels. This could take a week or two to unfold so don’t jump the gun and short yet. It’s best to see more distribution selling before picking a top.

If you like this trading reports or if you would like to get my daily pre-market trading videos, intraday charts, updates and trade alerts be sure to join my newsletter: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

, ,

Precious Metals and the Dollar’s Next Big Move

There is a potentially big setup in precious metals sector along with the dollar which looks like its about to unfold. Since mid-October of last year gold started to show signs of distribution selling. Only a month later in November silver started warning us that some big players were taking some profits off the table also. Distribution selling is easy to spot on the charts. In short you will see heavy volume selling accompanied with strong moves to the downside.

Now if we look at the US Dollar chart we see the exact opposite price action. We see sharp rallies during October and November of last year. It’s normal to say that gold and silver move inverse to the Dollar so this price action makes perfect sense.

The interesting thing with the US Dollar is that in Nov-December it rallied breaking through a key resistance level and has been consolidating above support ever since. If this bullish pattern (bull flag) plays out, then it’s just a matter of time before the dollar makes another strong rally upwards, which will put downward pressure on stocks and commodities.

Take a look at the charts below…

US Dollar Daily Chart
The 50 period moving average has provided key support/resistance levels for the previous trends and if it holds true going forward then we are not far from another rally in the dollar.

Gold Futures Daily Chart
Gold moves inverse to the dollar so if we get a higher dollar then look for gold to have a stair step pattern lower.

Silver Futures Daily Chart
Silver looks about ready to do the same thing as gold.

Precious Metals and Dollar Trading Conclusion:
In short, we could see a major shift in momentum from up to down in both precious metals and the equities market. Keep in mind the market has a way of dragging out patterns/moves so while the chart looks bearish and I think a reversal is near, things could just chop around for another month or so before a definitive breakout is made. Choppy market conditions are great for trading options but no short term trend traders like myself. This is why you don’t want to anticipate moves (pick a top). Currently I am neutral on metals and the dollar waiting for a setup which must have clear risk/reward characteristics.

If you would like to receive these reports please join my free newsletter: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K

It was a great first week in the market for 2011. Volume picked up as traders slowly return from holidays focusing on the markets again. Looking forward volume should continue to expand because there will be more traders in front of their terminals excited to see what type of money they can make in 2011.

Let’s jump into what happened last week. On Friday the market generated a short term trading signals to go long SP500, Dow, Nasdaq or Russell 2k. This trade seemed to fall on a perfect day because if we look back over last year’s weird trading characteristics typically if you were to buy on a Friday and hold a position until Monday it would have netted you a profit. Well on Friday the market had a very nice intraday pullback to a level which there was strong support so we bought in with a small position.

Let’s jump into the charts for a visual of what I am talking about…

SPY – Daily Chart & Moving Averages
This chart shows the big picture. Currently we are in a strong uptrend and looking to buy significant pullbacks to key levels of support, and that is exactly what we had last week.

The market pulled back to a level which has support:
1. It pulled back to the 14 day moving average
2. It pulled back to the previous weeks high
3. It pulled back to a support trend line

Each of these levels happen are at the same level and each type of support will attract a different type of trader, meaning there should be a lot of individuals covering their shorts and or buying at that point.

Friday’s 1 Minute Madness Chart
This is a 1 minute chart of just last Friday scrunched together so I can fit everything into the chart. What I want to show here is how the short term time frame can help you spot a bottom as it is forming. This actually is a little more complicated that im showing here but I hope you get the point.

Every day there is either a short term top or bottom which forms usually between 10am – 2pm ET. When the daily chart is in an uptrend you should focus on only trying play bottoms as the bias is up and even if your timing is off a little the overall larger trend typically will save your butt.

The chart below shows how a morning support level was broken and the market started to fall. That is the first time in the day which stops get triggered and the start of a new trend was born. The jump in volume was from traders who were long and used the morning support as a level to exit the position if it was broken in order to cut their losses. Bearish traders on the other hand would have been shorting on the breakdown anticipating lower prices.

Usually after a break there is a test of the breakdown level and we got that a few minutes later as which point more traders took short positions hoping for a continues selling. That wave of selling led to a sharp drop and then the first real bounce.
My general rule is you can trade the first pullback after a breakout or price surge. Now this can be taken two ways. You can trade the first test of a breakout which in my opinion carries the lowest risk and then you can still trade the first real bounce which comes after strong and steep price movement.

When looking for the bottom I like to see multiple new lows with price spikes as it means stops are being triggered, and more traders keep shorting the new lows. Once the herd is heavily weighted on the short side and the chart forms an ABC retrace then I know a bottom is near and all those shorts will be covering sooner than later.

Market Sentiment Trading Indicators – 10 Minute Charts
Top Chart: SPY etf shows a possible ABC correction on the 10 minute chart along with panic selling as there we 3 sell orders to every 1 buy order. Everyone was running for the door.

Middle Chart: NYSE Advance Decline line was showing stocks were oversold on the short term basis and it’s just a matter of time before the price stabilizes or bounces.

Bottom Chart: Put/call ratio was telling me even the options traders were buying leverage to the down side. All of this tells me the majority of traders are selling and I like to do the opposite which you will learn over time.

SP500 Futures – 5 Minute Chart of Friday
This shows where our entry point was using all the above indicators and trading analysis. Because the broad market has been rising for so long and showing signs of correcting any day now, a trader must be very picky/timely with their entry point and the amount of money put to work in these trades. But just because the market feels like it’s ready to roll over it does not mean we should be looking to go short. I strongly believe we buy the dips but keep our position sizes much smaller than normal. For all we know this uptrend could go on into May…

During an overbought/overextended market condition which I think most of us agree we are in, I am not willing to risk much capital in new positions and also the reason why I am really zooming in on the charts to get us the best possible price to reduce risk.

Weekend Broad Market Trading Conclusion:
Last week’s entry point required us to be very timely, but keep in mind this is not the norm. During a new trend we sometimes have 2-3 days to enter a position before the market starts to really move and it is those larger swing trades which make some decent money and last weeks at a time.

Anyways, thought I would share this info with a little more detail. As you can see there is a lot of information and timing that must come together for a trade setup and entry point.

If you would like to get more of my daily analysis to join my newsletter at www.GoldAndOilGuy.com

Chris Vermeulen

, , ,

How to Play the Current Silver, Gold and Dollar Reversal

This has been an interesting week for traders and investors as precious metals melt down on the back of a rising dollar. Equities on the other hand bucked the trend and moved higher as they get bought into earning season. Once the earnings start to be released we should see the market get sold on the good numbers and retail traders will buy into the good numbers as the smart money selling their shares while there is liquidity in the market.

Speaking of pullbacks, I have been talking about silver and gold forming a top. A couple months ago in November I saw the first warning sign of distribution selling in the precious metals sector. There was a large drop in price with heavy volume which is a warning sign that the BIG MONEY is starting to roll out of that crowded trade (precious metals). The thing with tops is that they take a long time to form and become very choppy.

Since the November highs both silver and gold have more or less traded sideways. They never really went much higher and that’s because the big money is distributing their shares to smaller investors slowly overtime (retail buyers/average Joe’s). They try not to scare investors off so they sell their positions in chunks. What most people do now is that these sellers want higher highs to forming because once a new high has been created everyone become bullish again buying more on the breakout. It’s these waves of bullishness that the big money sells into which is why you see heavy volume after a new high has been formed.

Let’s take a look at some charts….

Silver Daily Chart

The silver chart clearly shows the bull market (markup phase) and also the distribution phase taking place now…. If things go according to plan then choppy/lower prices should take place in the coming 1-4 months.

Gold Daily Chart

Gold is doing the same thing as silver and I don’t think the selling is over yet.
Watch today’s video and price action: http://www.thetechnicaltraders.com/etftradingvideos/TTT192/TradingReport.html

Dollar Daily Chart

The past 12 months it seems like everything has been a dollar based play. Meaning if you were to pull up a 1 minute chart of the dollar and a 1 minute chart of the SP500 or Gold, you would now that when the dollar moves up stocks and commodities go down and vise-versa. That being said the SP500 has started to move up with the dollar in the past month so there is a shift happening but it’s a slow change and is not much of a concern for gold right now.

If the dollar starts another leg higher it will make for good timing as market sentiment is at an extreme and earning season is here. That typically means lower prices in stocks and commodities.

Mid-Week Silver, Gold and Dollar Trading Conclusion:

In short, in the next 1-4 weeks I am bullish on the dollar, and bearish/neutral on stocks and commodities. The reason I’m neutral is because I don’t like to short things in a bull market phase as they can keep going up much longer than we think at times. Rather hold my strong positions and wait for a correction to buy/add once I feel the selling momentum has stopped later this year.

I would not be surprised if we get a 4-10% drop in the next few weeks in both stocks and commodities, but until I see a clear roll in price I will not be looking for any trades to the down side. I’m not in a rush to pick a top/short the market but if we get a setup we will take a small position to play a falling market. Be sure to visit the link to today’s video which is posted in the gold chart section above.

Get my FREE Book, Pre-Market Trading Videos, Intraday Updates and Trades here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

, ,

How You Trade the Big Trends in 2011

I hope everyone had a great holiday and new years!

It’s time to reset our profit counter to zero and start looking for new profitable trades along with managing our current open positions on our small cap stocks which we continue to hold with gains of 66%, 35% and 10%.

Last year was a tough one as the stock market chopped around in a very large range giving off buy and sell signals every week and some times every other day… If you understand how to trade options then these conditions can make you a boat load of money.

Those who follow me or trade with me through my trading newsletter know how conservative I am when looking for low risk setups in both ETFs and stocks. And no doubt agree there were some extended periods of time when we did not have any trades because the volatility on a daily basis was making it the risk higher than what I wanted us to take, thus we waited for setups instead of chasing prices. We still locking in some solid gains with 8 winning trades, but feel we can better this year especially if we get less chop and more of a trending market.

It’s safe to say some people just do not like being in cash, hence the reason so many want stock picks and trades all the time. But to be flat out honest, I love being in cash or at least holding a good chunk in cash waiting for a high probability opportunity to pop up on my charts before committing my hard earned cash. It’s better to be wishing you were in a trade than to have all your money tied up in losing positions just because you wanted to be active… Because I give you only the trades I am making with my own money, I think that is the reason things are slower paced, unlike some other newsletters in this industry which fire off new trades each day or week just to keep those addicted (wanting stocks picks all the time) happy.

Anyways, 2011 should be a great year for trading, investing and education. Last years fast paced market I know either took your money and got you really frustrated, or you made money and was able to use the difficult conditions to fine tune your trading and money management stills like I did. 2011 feels like it’s going to start out similar to 2010 where we get a move up into mid January, but once earning season starts the market sells off on the good news for an 8-10% correction.

The good news is that after last years fast paced market and my constant refining of my strategy and money management rules, we should be able to catch the majority of the trends this year both up and down using stocks, regular ETFs and Inverse ETFs.

As much as I would like to forecast what I think will happen this year, I have decided to take the market one quarter at a time to keep everyone more in tune with what’s happening now and a glance forward up to 2-3 months.

Take a look my SP500 charts for the next 3-8 weeks below.

SP500 Index – Daily Chart
On this chart you can see that the overall trend right now is still clearly up. But with this current situation I feel one should be on the sidelines waiting for the market tip its hand telling us its headed higher or lower. If it prices start to fall we will look to short the market in order to profit from the correction as long as the market provides an optimal opportunity.

Currently the market sentiment levels are at extreme highs, which is the same as last January and April’s highs. With extreme sentiment, light volume (lack of buyers) and earning season just about to start I cant help but think a nice correction is about to take place which will cleanse the market before the next big leg higher.

If all goes according to plan we should see an 8-10% correction. A pierce of the November low is what I am looking for as that would trigger a lot of protective stop orders and create panic selling in the market. It is panic selling which creates a market bottom. That being said we may not get that large of a correction which is why we must continue to monitor the market closely as my analysis will change with the market.

Jan 2010 SP500 Correction
This time last year the market was in a very similar situation with market sentiment, light volume, and earning season just around the corner…

Its difficult to pick tops because they can stay overbought for an extended period of time, bottoms are a little different simply because fear is more powerful than greed and shows it’s self on the charts once you know what to look for and how to trade it. My point here that you should not jump the gun and start shorting just because you think one is around the corner. I prefer to wait for more of a clear signal that sellers are in control then ride the short term down trend and hope it blows up into the correction I think we are about to see.

During bottoms there are new low washouts, and the same goes for tops, we get several small new highs just before the price rolls over, and that has yet to happen.

Weekend Market Trend Conclusion:
In short, 2011 should have several great plays as I am looking at the SP500, Precious Metals, Oil, US Dollar, Bonds and Emerging Markets for some big moves. You can get my pre-market daily videos, intraday updates along with my stock and ETF trades by visiting my website and joining my newsletter: www.TheGoldAndOilGuy.com

Chris Vermeulen