The past two months we have seen all the focus from traders and investors be on the equities market. And rightly so and stocks run higher and higher. But there are two commodities that look ready to explode being gold and oil (actually three if you count silver).
Below are the charts of gold futures and crude oil 4 hour charts. Each candle stick is 4 hours allows us to look back 1-2 months while still being able to see all the intraday price action (pivot highs, pivot lows, strong volume spikes and if they were buyers or sellers…).
The 4 hour chart is one time frame most traders overlook but from my experience I find it to be the best one for spotting day trades, momentum trades and swing trades which pack a powerful yes quick punch.
As you can see below with the annotated charts both gold and silver are setting up for higher prices in the next 1-2 weeks from a technical point of view. That being said we may see a couple days of weakness first before they start moving up again.
Also if you have not signed up for Stocks, Futures and Options Magazine which is Free, you should do so now. They have had some great educational articles recently and if you want to master the market you must understand futures prices and how they are inter-connected. Get this Free Magazine Now
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http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2012-03-26 08:58:312012-03-26 08:58:31Monday Pre-Market Video Analysis on What is About To Happen
This week may provide some trading opportunities for us if all goes well now that most traders are investors are all giddy about stocks again. Last week we saw money move out of bonds and into stocks and the bullishness vibe in the air reminds of many market peaks just before a 5%+ correction in stocks.
Depending how the SP500 unfolds we may be going long or short equities, long precious metals, long bonds, and our VXX trade may spike in our favor.
Bonds: After last week’s strong move down in bonds as the HERD moved out of bonds and into stocks it may be providing us an opportunity to catch a dip or bounce in the price of bonds. If the stock market sees strong selling this week money will run back into bonds.
Looking at precious metals it looks as though gold, gold miners and silver may still head lower this week. The charts are still bearish and pointing to another multi percent drop in value. Gold will look bullish around $1600, Gold miners (GDX) around $48, and Silver around $30 but we need to see one more wave of strong distribution selling for that to take place.
Crude oil has recovered nicely from its 5 wave correction which shook us out of the trade for a profit. I still like the chart for higher prices but with it trading at resistance and a high possibility of sellers stepping back in at this level I am not getting involved here.
The SP500 made a new high last night but has run into sellers early this morning taking prices straight back down. The chart in pre-market looks as though we will see lower stock prices later today and with any luck the fear index (VIX) will continue to rise in our favor.
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Friday Technical Take Blog Post:
We are seeing stocks, oil and the dollar move up nicely today.
Stocks are pushing deep into a resistance level with very light volume… not a bullish sign. This is why we took profits yesterday with our SSO trade once we reached our dead cat bounce target of 2.5%. With it being Friday volume should only get lighter as the say progresses. I am starting to look at buying SDS as risk is low in my opinion but I’m going to let the morning play out first and re analyze in the afternoon.
Pre-Dead Cat Bounce Warning:
The rising market has sent the volatility index tumbling lower and this just goes to show why you must manage position and use protective stops. I know many of you were angry that I said to take partial profits and that we got stopped out yesterday on the VXX trade for a net gain of 2.9% in three days. Maybe one day emotional traders will see that you must trade with the market and adjust your trade outlook while in the trade. The market does not stop and wait for you to see the light, rather it will just steam roll you and never look back.
So with that being said I am starting to really like the VXX again for another buy signal. With any luck it could keep dropping for most of the session and we could go long this afternoon.
Crude oil is moving nicely in our favor today up another 2% on our 2x leveraged ETF’s. I am keeping my stop at breakeven for now as but that may change by the end of the day if we break the $109 level which is unlikely. Where to put your stops for any trade is always a tough call. It varies on the time frame, overall market condition and the size of your position so don’t think it’s just as simple s using the previous pivot high or low. That being said, those are good places for them if you have the timing correct or if the market co-operates with you…
*One key thing to point out today, the dollar bounced off support which is what I warned about last night and again this morning in pre-market. The strong bounce in the dollar has not caused any selling in oil or stocks this morning. I think that is based on the strong jobs report this morning. More jobs means businesses should be getting stronger and the more gas/oil will be consumed. But if the dollar keeps on moving higher and breaks above this key resistance level in the next few trading sessions then it will likely cause selling in stocks. Oil may hold up because demand will still be there.
Let’s see how the morning and lunch unfolds and regroup.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2012-03-09 11:13:372014-03-06 12:12:13The Dead Cat (SP500) Did Bounce Just As We Expected!
Over the past 5 months we have seen volatility steadily decline as stocks and commodities rise in value. The 65% drop in the volatility index is now trading at a level which has triggered many selloffs in the stock market over the years as investors become more and more comfortable and greedy with rising stock prices.
Looking at the market from a HERD mentality and seeing everyone run to buy more stocks for their portfolio has me on edge. We could see a strong wave of fear/selling hit the S&P 500 Index over the next two weeks catching the masses with their hand in the cookie jar . . . again.
If you don’t know what the volatility index (VIX) is, then think of it as the fear index. It tells us how fearful/uncertain investors are or how complacent they are with rising stock prices. Additionally a rising VIX also demonstrates how certain the herd is that higher prices should continue.
The chart below shows this fear index on top with the SP500 index below and the correlation between the two underlying assets. Just remember the phrase “When the VIX is low it’s time to GO, When the VIX is high it’s time to BUY”.
Additionally the Volatility Index prices in fear for the next 30 days so do not be looking at this for big picture analysis. Fear happens very quickly and turns on a dime so it should only be used for short term trading, generally 3-15 days.
Volatility Index and SP500 Correlation & Forecast Daily Chart:
Global Issues Continue To Grow But What Will Spark Global Fear?
Everyone has to admit the stock market has been on fire since the October lows of last year with the S&P 500 Index trading up over 26%. It has been a great run, but is it about to end? Where should investors focus on putting their money? Dividend stocks, bonds, gold, or just sit in cash for the time being??
I may be able to help you figure that out.
Below is a chart of the Volatility index and the gold exchange traded fund which tracks the price of gold bullion. Notice how when fear is just starting to ramp up gold tends to be a neutral or a little weak but not long after investors start selling their shares of securities we see money flow into the shiny yellow safe haven.
Gold & Fear Go Hand-In-Hand: Daily Chart
Looking at the relationship between investor fear/uncertainty and gold you will notice scared money has a tendency to move out of stocks and into safe havens.
Trading Conclusion Looking Forward 3 months…
In short, I feel the financial markets overall (stocks, commodities, and currencies) are going to start seeing a rise in volatility meaning larger daily swings which inherently increased overall downside risk to portfolios and all open positions.
To give you a really basic example of how risk increases, look at the daily potential risk the SP500 can have during different VIX price levels:
Volatility index under 20.00 Low Risk: Expect up to 1% price gaps at 9:30am ET, and up to 5% corrections from a previous high.
Volatility index between 20 – 30 Medium Risk: Expect up to 2% price gaps at 9:30am ET, and up to 15% corrections from recent market tops or bottoms.
Volatility index over 30 High Risk: Expect 3+% price gaps at 9:30am ET, and possibly another 5-15% correction from the previous VIX reading at Medium Risk
Note on price gaps: If you don’t know what I am talking about a price gap is simply the difference between the previous day’s close at 4:00pm ET and the opening price at 9:30am ET.
To continue on my market outlook, I feel the stock market will trade sideways or possibly grind higher for the next 1-2 weeks, during this time volatility should trade flat or slightly higher because it is already trading at a historically low level. It is just a matter of time before some bad news hits the market or sellers start to apply pressure and either of these will send the fear index higher.
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