Over the past few week, we have seen the price of crude oil pullback from its recent high of $42 per barrel level. Last week April 4-8th the price of crude oil pulled back to a technical support zone and then posted a strong gain closing the weekly chart at the high.

Based on short-term technical indicators, along with the current momentum which crude oil has, I feel we will see the recent highs of $42 a barrel tested once again.

So what does this mean for energy stocks in the stock market as a whole? Well, if things unfold this week as I expect they will then we should see oil rise along with, energy stocks, and the S&P 500 index.

Take a look at the chart of crude oil below:

This weekly chart of oil shows what I expect will happen over the next one to three weeks, a bounce in price.

 

XLE Energy Sector Index Fund:

Energy stocks of had a strong rally since the lows earlier this year. But as you can see from the chart and basic technical analysis the price is now running into resistance at the moving average.

The moving average has acted as resistance for price and price is currently struggling at that level once again. I wouldn’t be surprised though to see the XLE fund push higher one last time testing the recent highs from last month before it tops and starting another large correction.

 

The US stock market:

While the US stock market has posted strong gains since the January low, I feel this rally is going to come to an abrupt stop this month or in May.

If oil and energy stocks continue to move higher than we should see the stock market follow suit and for the S&P 500 to rally one last time up into a resistance zone before the next big wave of sellers step back into the market.

 

Energy & Stock Market Conclusion:

In short, I feel the US large-cap stocks are setting up for an epic drop in price. My technical analysis and cycle analysis are lining up very similar to what I saw during the 2000-2001 market top and the 2007 – 2008 market top. Investors should expect a 35% to 50% market correction over the next 12+ months.

With that said, the next few weeks will become very difficult to trade simply because the market is starting to get choppy with wild intraday price swings. This is because the average market participants are becoming more bullish than ever on stocks again while the large institutions are starting to distribute huge amounts of shares to these undereducated investors who don’t know technical analysis and stock market cycles.

My current mindset has been to go into the markets for as little as 48 hours and then exit with a nice handsome profit using a strategy known as Price Spikes.  This has worked out very well this year capturing very quick profits from these special “price spikes’.  It’s a simple “Get-In & Get-Out” strategy for highly volatile markets.

Good times are coming for us active traders and investors so buckle up!

If you would like to know when to buy and sell as a short-term trader or long-term investor using ETF’s and join me at www.TheGoldAndOilGuy.com

Chris Vermeulen

Last night Thursday Night I sent follower an email with the Spike Trade Setup and Profit Potential Table you see below. Today (Friday) the market moves sharply in our favor yet again for a quick $900 profit by 10am this morning.

How? you could have bought one ES mini futures contract, minimum required trading account size $5000, Bam… $900 morning or 18% ROI.

You could have traded with the ETF’s listed in the table also, but in order to do that, you will need a brokerage account that allows you to buy and sell ETFs during pre and post market hours like I do. If you cannot do this, then I highly recommend you use the broker I use because they ROCK!

Best execution fills, trade anything from one account (stocks, ETFs, Options, Futures, Forex) and super low commissions.

 

Friday’s Morning Trade Setup & Profit Taking!

APRIL 11th – Quick $400 Profit From Todays Spike Trade:

 

Start Trading With Me Today – Learn, Profit, and Prosper!

CLICK HERE TO GET MY TRADE ALERTS

Chris Vermeulen

I have to trade and invest in the markets that I have before me and not the ones that I desire!  Therefore, I must be able to approach the market place from a completely ‘unbiased’ perspective. I do not care if the markets doubles in price, or if it is cut in half.  I take advantage of moves in both directions by using my ‘short term spikes’ which I have shown you, over the past couple of weeks, in order to lock in profits in as short a period as 48 hours.

I implement my longer term cycle analysis to take advantage of moves in both directions which last several weeks or months.

Today, there are two ‘psychological’ situations that lead to big events within the markets. They represent ‘mirror images’ of one another.

The first issue is ‘overconfidence’.  Whether this is ‘overconfidence’ in a market, a strategy of oneself, ‘overconfidence’ leads to carrying the largest position at the most inopportune time.

The second issue is ‘indecision’.  There are times, when a market approaches critical levels and yet the trading population appears ‘uninterested’ or even ‘frightened’ to respond.  In either case, ‘indecision’ leads to fewer participants, while ‘overconfidence’ leads to too many.

Currently, my focus is the examination of a ‘very bullish’ net commercial trader position in the face of the lowest commercial participation rate since the economic collapse of 2008/2009.

I may frequently reference the ‘net commercial trader’ position and ‘commercial trader momentum’, in my analysis.  The total position is really only meaningful at its’ ‘extremes’.  The most important factor to keep in mind, while reviewing the following charts, is the mathematical relationship between the ‘total and net positions’.

The ‘net commercial trader position’ is measured by subtracting the reported short positions from the reported long positions, of the given traders.  Long contracts minus short contracts equal the ‘net position’.

This measure of sentiment is generated by the ‘consensuses of the commercial trader population.

This ‘net position’ predicts the degree of bullish or bearish sentiment.  The total position measures the overall level of interest in a market, at any given point in time.  This is one of those times when total interest must be used in conjunction with the net position in order to avoid trading while under a false set of assumptions.  Therefore, while the current sentiment is positive, most of the ‘collective smart money’ is sitting on the sidelines, ‘uninterested’.

Fear is the primary reason for ‘smart money’ to be sitting on the ‘sidelines’ as the Dow Jones and SPX futures near their all- time highs.  Commercial traders would most typically be the sellers of this rally.

Their ‘indecision’ is again noted by their exceptionally low participation rate, as the current global economic environment continues to waiver back and forth, from one economic announcement to the next, as I refer to as ‘news driven events’.

U.S. growth versus global stagnation appears to be the order of the day as the FED attempts to commence withdrawing a decades’ worth of stimulus.  ‘Commercial traders’ are typically the most well-informed group of market participants and usually leads the markets’ next move.  Their uncertainty is, significant, at this point in time.

The SPX futures represent an interesting situation!  The ‘commercial trader’ participation rate is at the lowest point that it been since 2008, yet the ‘net commercial position’ is close to a multi-year high.  This means that the ‘commercial traders’ currently in the market are exceptionally bullish, despite it being only a few of them.

The question to ask today is… ‘Are they still right?’  My opinion is that they may be right, for a while.  My expectation is that we will see the broad stock market continue to rally into ‘nominal new highs’ over the next week still.

However, I also believe that this ‘nominal new high’ could coincide with the ‘peak’. This will present itself with weaker underpinnings and momentum divergence, or new ‘net commercial selling pressure’, informing us of the first confirmation of a ‘top’.

The Nasdaq 100 futures’ recent new high was not confirmed by the ‘commercial trader’.  In fact, they are completely disinterested.

The Nasdaq 100 futures chart is beginning to display what a top may look like.  ‘Commercial buyers’ of the September decline were rewarded with new highs, less than a month later.  They were quick to rush into this years’ decline and their current ‘net position’ nearly matches the total from the last run-up.

However, note the large decline in the total commercial position since the October 2015 highs.  Their participation rate is the lowest since 2008.

Hence, the ‘commercial participation rate’ has been trending lower since March of 2014, at which time the Nasdaq made its high around 3680.  This is just below the August 2015 and February 2016 lows, in the Nasdaq. The Nasdaq appears to be the leader of the group and has begun most of the recent moves.

Therefore, my outlook is that the Nasdaq may not breach its’ recent high around of 4725. It will be very interesting to see if the ‘commercial traders’ will confirm this rally by returning to the market place.  Until, and if they do, sentiment should remain ‘bearish’.

The Dow Jones futures recent rally is showing all the classic signals of a rally out of breath via divergences in price and momentum between price and commercial trader action, while guarded under the umbrella of declining volume and open interest.

I have illustrated a similar pattern to the Nasdaq on the Dow Jones’ futures chart.  As you can see, ‘commercial traders’ set a ‘bullish net position’ record on the late summer decline of 2015.  Much deeper analysis reveals that the new ‘net long record’ came on the heels of the smallest total commercial position in years.  While it still created a fantastic trading opportunity, that I was able to capture on a short-term basis.  I believe the broader pattern is ‘indicative’ of a ‘bearishly divergent’ top based on ‘commercial trader behavior’ patterns and activity.

The table below should provide a perspective on the commercial traders ‘lack of interest’ during this economic and geopolitical climate.

‘Fear’ is the primary cause for the declining commercial participation rate.  The ‘commercial traders’ are among the most well-informed group amongst market participants.  Their unwillingness to participate, at these prices, reveals two main key factors;

1. The current prices are distorted enough so as not to draw them into the market, on either side.

2. The current banking and political environment is far too ambiguous for them to place any long-term bets before the U.S. Presidential elections take place.

 

CONCLUDING THOUGHTS:

There are many moving parts and influences that create major market trends and one of the most powerful forces is that of the Commercial Positions. When large financial institutions and funds are buying so should we.

The US stock market is at a critical juncture. Times like these are tough to gauge, time and trade but as long as we understand this we can tread lightly until we have confirmation of a new major trend.

The writing is on the wall and has been for over a year. Stock market tops are process and take a long time to mature before breaking down and starting a new bear market. I feel we are in the final days of the large cap topping stage and will see substantially lower prices this time next year.

Get My Simple ETF Swing Trades: www.TheGoldAndOilGuy.com

Chris Vermeulen

Currently, we are experiencing the SPX topping formation. Again, it is dangerously overextended.  The SPX staged a strong rally due to the repeated actions of Central Bankers, during the month of February 2016.

Presently. we are truly living, investing and trading in ‘unprecedented’ times.  Another push higher is not out of the question, at this time, into ‘nominal’ new highs as we experienced this past Friday, April 1^st, 2016 and then within a week or two it should start cycling back down.

There are strong ‘headwinds’ straight ahead for any attempted rallies that may take place.  There is ‘bearish’ divergence within several momentum oscillators.  This is signaling major warning signs!  There are no bullish or favorable long setups in the marketplace environment.  I would look towards ‘unexpected’ choppy price movements across the board.

Investor sentiment has reading levels associated with ‘peaks’ in the equity market advances. Courtesy of ivewmakets.com

It is dangerous when the markets have nothing of substance sustaining them, other than their dependence on the FED’s announcements regarding its’ monetary support.   It is extremely dangerous when the FED tailors its’ remarks so as to support financial asset levels.  This is not the mandate of the FED, however, we are all waiting with anticipation, to hear their future announcement!

When Dr. Janet Yellen can make a couple of phone calls and implement an equities rally into new highs in 2016, of the equity markets, as of last Friday, April 1^st, 2016, then we become the ‘fools’ who believe and buy into it!

Interventions by Central Banks, cannot change the long term trend from ‘bearish’ to ‘bullish’ I don’t think anymore.  They are merely delaying the inevitable and just creating a ‘slow roasting bear market’ (as I have previously mentioned for several months is starting to unfold in the US large cap stocks).  While these actions of the Central Bankers are now behind us, we are currently entering the earning season, which is most likely to disappoint Wall Street analysts.

The U.S. is currently experiencing the worst financial and economic recovery during the history of the countries’ worst financial crisis’ and ‘recession’, since the Great Depression. Most people don’t realize what is happening and thus don’t see or feel much of this recession, but it’s there building momentum in the background and it will be a rude awakening for most once the breaking point is reached.

 

Concluding Thoughts:

In short, the US stock market is at the topping point. Odd favor a major market downturn that will last before the next bounce, and then continue yet again even lower.

This will be a big surprise to most but my followers and I have been watching this unfold for months and are stocking the market to time the next BIG SHORT to make our killing.

Learn with my FREE ETF Newsletter Alerts

Chris Vermeulen

Learning to generate profits with trading systems is important, but it is what you add to your net worth that will make a lasting difference in your lifestyle and future. It is difficult to explain the difference that having a substantial net worth can make in your attitude. When you feel truly wealthy, the things and the experiences that your money can buy are secondary to the prosperity of the mindset that you develop. T. Ecker is fond of saying “The rich really are different and that it is their mindset, not just their bank accounts”.

READ FULL ARTICLE: CLICK HERE