Archive for month: October, 2019
Over the past few weeks and months, a number of key economic data has continued to rally the US major indexes towards new highs, hopes of a US/China trade deal, a continued shift of capital in the US markets for protection and safety, and moderately strong US economic indicators and an earning season that appears to be moderately strong for Q3 of 2019. The interesting facet of this move higher is that it is happening while trading volume has diminished dramatically in the SPY. The futures contracts, the ES, YM, and NQ, continue to show relatively strong volume activity though.
Additionally, the overnight Repo markets have risen to the attention of many skilled analysts. The concern is that the continued US Fed support of the overnight Repo facility may be a band-aid attempt to support a gaping credit crisis that is brewing just outside of view. We’ve been doing quite a bit of research over the past few weeks regarding this Repo market support by the US Fed and we believe there is more to it than many believe. We believe certain institutional banking firms may be at extreme risks related to derivative investments, shadow banking activities and/or global commodity/stock/currency/asset risk exposure. The only answer we have for the extended Repo facility at increasing levels is that the institutional banking system is starting to “fray around the edges”. Thus, we believe some larger credit risk problems may be just around the corner.
Our longer-term analysis continues to suggest that “all is fine – until it is not”. Our belief that a capital shift that has been taking place over the past 5+ years where foreign capital continues to pour into the US markets is driving US stock market prices higher. There is evidence that the capital shift into the US has slowed over the past 5+ months, yet one would not notice this by looking at these longer-term charts. The point we are trying to make today is that price peaks near current highs have, historically, been met with strong resistance and collapsed by 8 to 15% on average.
SP500 INDEX – 2 MONTH LONG TERM CHART
This ES 2 Month chart highlights the resistance channel initiated near the 2003 lows (the lower YELLOW price channel line) and how that level has continued to act as moderate price resistance throughout most of 2017, 2018 and 2019. We believe that price, at current levels, must either rally above this level and be capable of sustaining higher price levels (which would be supported by stronger forward guidance, earnings, economic data and/or investments), or will attempt to rotate lower from these current highs because price is simply unable to support/sustain higher price levels given the current global economic data.
When we attempt to rationalize the potential for price given the Repo issues, the current global economic data/news, the uncertainty of a US Presidential election cycle only 12 months away, the BREXIT deal hanging out in the near future and recent currency rotations, we believe is transitional shift is taking place in the markets in preparation for some type of surge in volatility associated with a very strong potential for extended price rotation.
NASDAQ 2 WEEK CHART – ADAPTIVE DYNAMIC LEARNING (ADL)
Our Adaptive Dynamic Learning (ADL) price modeling system on this NQ 2-Week chart highlights what the ADL system suggests as a moderate price rotation setting up over the next 2 to 8+ weeks. This data originates on August 5, 2019, and the alignment of the future predicted price levels (the DASHES) on this chart shows how accurate the ADL future price predictions have been over the past 3+ months. Currently, the ADL predictive modeling system is suggesting a price reversion is about to take place in the NQ where price may fall 10 to 15% over the next 2 to 6+ weeks. Then, the price will attempt to set up a momentum base and begin to move higher near the end of 2019 or early into 2020.
DOW 2 WEEK CHART – ADAPTIVE DYNAMIC LEARNING (ADL)
This YM 2-Week chart showing the same type of ADL predicted price levels suggests the YM may also see some type of price reversion, yet the size of this reversion is much smaller than the NQ. The ADL predictive modeling system is suggesting the YM may rotate to levels near 26,000 or lower before finding immediate support and attempting a renewed rally back to levels near 27,000.
CONCLUDING THOUGHTS:
What this suggests is that the NASDAQ and S&P500 may become much more volatile than the Dow Jones index over the next 2 to 6+ weeks. Volatility may surge on a reversion move in the ES and NQ over the next few months while the YM remains rather calm comparatively. Skilled traders must understand that subtle risks are starting to show throughout the global markets. Foreign markets are starting to show signs of extended contraction – China and Asia in particular. The situation in Europe and with the Euro are open to interpretation. Our opinion is that risk levels have already exceeded a comfort level in this arena.
Should some event take place where the global banking system and/or Repo market continue to attempt to take up the slack – traders will become even more concerned that “something is broken” and could pull massive amounts of capital out of the markets fairly quickly. If this happens when volume and volatility are very low, we have a situation where simple price exploration could present a real problem (think FLASH CRASH).
Skilled traders need to stay very cautious near these new highs. We may see a surge in volatility over the next few weeks unless the markets are able to settle the concerns raised by analysts and others. Headed into the end of 2019, into a contentious US presidential election cycle and with obvious signs that something may be breaking in the global banking system, now is the time to protect and prepare for the unknown. We can’t make this any clearer – consider this a warning alert from www.TheTechnicalTraders.com.
The US Stock market rallied on Friday, October 25, on TESLA earnings crushing expectations as well as news that any positive US trade deal outcomes could see almost immediate removal of future tariffs that are scheduled to be implemented near the end of October. This was enough for the markets to rally from the start of trading and continue to push higher until near Noon in NY. After new highs were reached, the markets contracted a bit headed into the close.
Gold shot up early this morning before the news related to the US trade deal hit. Our opinion is that this is a natural advancement in precious metals that is not new related or muted by some external factors. Precious metals have been setting up a sideways FLAG formation for over 2 months and we believe the apex/breakout move is near.
Oil was somewhat flat to close out the week and closed trading near $56.63. The past three days we have seen oil rise from the $53 level to the current price levels, but we believe oil is still fundamentally oversupplied and that price will continue to weaken over time.
The real question before all of us right now is will this new nominal high represent a new breakout bullish price trend heading into a US Presidential Election cycle, or is this more price rotation within a defined price range?
If you consider all the shifting aspects of the US political and economic landscape as well as the current geopolitical and economic factors, we believe any real breakout move will come as we get closer to November 2020 – not now. We believe this is still price rotation and we believe the NQ is the likely cause of this new nominal price high on Friday. Tesla crushed earnings and that set a positive tone for Friday’s trading.
TRANSPORTATION INDEX DAILY CHART
The TRAN, Transportation Index, is still trading near current resistance and has not shown any true new price high yet. It will be interesting to see how the markets open up early next week and what news may drive a new price trend by then.
MID-CAP SECTOR DAILY CHART
The Mid-Cap has failed to rally to recent price highs which suggest this is not a broad market rally. We would want to see more defined price advancement across all sectors and above recent price highs to call this a broad market rally/breakout
Pay attention to the new that originates this weekend. We don’t believe a deal will be reached with regards to trade as quickly as some others may believe and we still believe the next 12+ months of the US Presidential election cycle will be full of surprises. We may start to get more clarity of a true price trend after the New Year (2020). Until then, we’re staying cautious of these price rotations and picking our trades.
I urge you visit my Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!
I can tell you that huge moves are about to start unfolding not only in metals, or stocks but globally and some of these supercycles are going to last years. A gentleman by the name of Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
Chris Vermeulen
www.TheTechnicalTraders.com
Recently, Mark Zuckerberg appeared before the US Congress to discuss his new Libra project and to attempt to calm concerns related to his new global alternate currency project. It appears this project is putting global political leaders in a particularly powerful position of either accepting the Libra project as a viable future solution and implementing new laws and regulations in support of it or to shelve the idea while they consider the local and global risks associated with a project that creates a new class of global currency. (Source: https://www.bloomberg.com)
We believe the risks associated with a massive corporate and international backed Crypto/Alternate currency are far too great, at this time, for the US government to attempt to consider with only 12+ months to go before the US Presidential elections. This is almost like opening Pandora’s Box in terms of total global risks and outcomes. It becomes almost impossible for the US government, Federal Reserve or any other global central bank to be able to protect its citizens from the risks associated with any type of technology collapse, fraud, hacking or any other unknown risks associated with such an idea.
The concept of a “Safe-Haven” may come into question over the next 10+ months as investors continue to question what may happen in the global markets, global political events and asset valuations related to Cryptos, Precious Metals, and foreign currencies. Our researchers believe mature economy currencies will quickly become new currency Safe-Havens for global investors over the next 10+ months as banking, credit and economic risks continue to shake out weaker markets.
Cryptos may see some support as price rotates over the next 10+ months prior to the US Presidential elections, yet we believe the real global asset markets (stocks, currencies, debt/credit, and bonds) will take center stage as the world transitions through a very tumultuous period prior to the November 2020 US elections. Even for a period of time shortly after the US elections, global assets will continue to reposition as future economic and regional asset value expectations shift.
There is a very real potential that global investors continue to seek safety and liquidity in the global major markets, economies and global currencies. Additionally, Precious Metals continue to show very little signs of weakening over the past 12+ months.
In fact, Precious Metals have continued to stay much stronger than many other investments over the past few years. Gold is up +17.60% from October 2017. Palladium is up 78.81% since October 2017. Silver is up 4.9% over that same period of time. Once the next upside price leg begins in Precious Metals, we may see a massive price increase in Gold and Silver. Supply issues continue to push Palladium prices higher as well.
Imagine being able to trade the precious metals sector easily with little downside risk and only being involved during the rallies and not the selloffs, all while generating 2x the return that GDXJ has return in 2019. Take a look at this trading strategy here.
Gold is setting up in a manner that is very similar to what happened in April 2019 – a sideways momentum base pattern that eventually broke to the upside in early June 2019. Once that move higher began to take place, the continued move to the upside was very quick and extensive. We believe the next upside move in Gold and Silver will be very similar – a moderately slow rotation out of the momentum base, then a fast acceleration to the upside as global investors realize the shift to safety has begun again.
We believe Cryptos may be left on the sidelines as investors prefer more traditional assets as a measure of safety as global concerns continue to weigh on investor’s minds headed into a very contentious US presidential election. Currencies, Metals, Mature global market assets and true value stocks may become the investment of choice until we see some real clarity for the future from the global markets, global central banks, and global political leaders.
I urge you visit my Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!
I can tell you that huge moves are about to start unfolding not only in metals, or stocks but globally and some of these supercycles are going to last years. A gentleman by the name of Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
Chris Vermeulen
www.TheTechnicalTraders.com
As we near the end of October 2019, a very interesting price setup is taking place across many of the US market sectors recently. We only have a total of about seven trading days left in October 2019 and the Financial Sector ETF is rolling over with what appears to be an Engulfing Bearish price pattern near price channel highs. Additionally, the tech-heavy NASDAQ (NQ) has been mostly weaker compared to the ES and YM.
On September 30, 2019, we published this research post that highlighted why our predictive modeling systems suggested the S&P 500 and NASDAQ market sectors would become much more volatile than the Dow Jones Industrials: MODELING SUGGESTS BROAD MARKET ROTATION IN THE NQ & ES.
We believe this research is still very valid given the current price rotation near these price channel highs and given the potential that the Dow Jones stocks may become relatively stronger alternatives than the S&P 500 and NASDAQ sector stocks.
We believe a downside price rotation is setting up in the US and global stock markets and we believe the potential for large price moves exists in at-risk sectors like the Financials, Technology, Biotech, Energy, Services and other sectors that do not directly relate to what we feel are “essential consumer staples”. The Dow Jones Industrials Index is full of companies that traditionally perform better in a consumer-based economic contraction for investors – which is why we believe the YM will present a very unique opportunity going forward for skilled traders.
FAS DAILY CHART, THE DIREXION FINANCIAL BULL ETF
This first FAS Daily Chart, the Direxion Financial BULL ETF highlights the price channel in YELLOW and highlights the recent price rotation near the $80 price level which constitutes a potential “new lower high” price rotation. Our longer-term cycle analysis tools predict a downside price move initiating over the next 7 to 10 trading days. We believe this new downside price trend could push price levels below the lower price channel level if this move is associated with external news or economic data that panics the markets.
IWM, RUSSELL 2000 ETF, DAILY CHART
This IWM, Russell 2000 ETF, Daily chart highlights an “island Doji top” formation that is setting up as a very unique price formation. When Doji type candles form with a gap above the previous bars, this is often considered an “island top” type of formation. Doji candles represent indecision and uncertainty. They are often found near-critical top and bottom formation. In this current formation, we believe the island top formation is a very clear warning that a major price top is setting up in the Mid-Caps which would also be considered a “new failed price high” formation. Ultimately, the $144.50 level becomes critical support if price falls.
SSO, PROSHARES ULTRA S&P 500 ETF, DAILY CHART
This SSO, ProShares Ultra S&P 500 ETF, Daily chart highlights a similar price range setup. Notice how all of these sectors have rotated into these ranges over the past few months – very similar to what happened in 2015/16 prior to the 2016 elections. We believe the uncertainty related to global trade, global economics and the US political “circus” will continue to put pricing pressure on the US stock market and global markets. We believe the inability to achieve “new price highs” throughout many sectors is a very clear warning that a larger downside price move, a type of price reversion, maybe setting up and we have been trying to warn our followers to be very cautious in taking unnecessary risks at this time while trading.
If our cycle research and predictive modeling systems are correct, we could be setting up for a downside price move that may act as a “true price exploration/reversion event” and potentially target levels that may be below the June 2019 lows. If this move is associated with some external news event or global crisis event, we may see prices fall to levels below the December 2018 low price levels.
Overall, we urge all skilled technical traders to stay very cautious over the next few months. Target solid trades that present very clear opportunities and properly position your trades to attempt to mitigate unknown risks. This is not the time to go “all-in” on anything as the markets are far more capable of being irrational than you are likely to be able to handle the risks that are associated with a crazy market move.
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!
Chris Vermeulen
www.TheTechnicalTraders.com
NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed. Visit our web site to learn how to take advantage of our members-only research and trading signals.
Nearing the end of October, traders are usually a bit more cautious about the markets than at other times of the year. History has proven that October can be a month full of surprises. It appears in 2019 is no different. Right now, the markets are still range bound and appear to be waiting for some news or other information to push the markets outside of the defined range.
We still have at least one more trading week to go in October, yet the US markets just don’t want to move away from this 25,000 to 27,000 range for the Dow Industrials. In fact, since early 2019, we have traded within a fairly moderate price range of about 3200 points on the YM – a rotational range of about 11% in total size. Historically, this is a rather large sideways trading range for the YM – nearly 3x the normal volatility prior to 2015.
DAILY YM CHART
This Daily YM chart highlights the trading range that has setup over the past 5+ months with the YELLOW LEVELS. Price continues to tighten into a more narrow range as we progress towards the end of 2019. Our researchers believe a moderate price breakdown will occur near the apex of this move which will act as a “price reversion event” and allow the markets to rally into 2020 and beyond. We are using our proprietary price modeling tools to attempt to identify any signs that can help us validate this research. Until we have some type of validation of the move, we can only wait as the risks associated with taking trades at this time are much higher than normal.
The SP500 cycle analysis I did last week provides some solid forward-looking direction as well.
TRAN – TRANSPORTATION INDEX
The TRAN (Transportation Index) is also confirming our analysis of a sideways price range with very little opportunity at the moment for a high-risk trade. The TRAN gapped higher on October 21 which may set up a massive top pattern formation, possibly a Three River Evening Star pattern of a massive Engulfing Bearish pattern. We’ve highlighted the resistance range in RED on this chart and the support range in GREEN. Caution is the name of the game right now. Let the markets tell us what is going to happen next.
THE WEEKLY CHART OF THE TRAN
This Weekly chart of the TRAN shows a clearer picture of the sideways price range that is setting up and how close we are to the APEX of the Flag/Pennant formation. Again, we know the markets are going to break clear of this Flag/Pennant formation, but the direction of the breakout will likely depend on future news events that we can’t predict. Any global failure or crisis may push the markets lower. Any global victory or success may push the markets higher. Right now, we believe the risk factors are very high and we are suggesting that traders need to be extremely cautious throughout the end of the year.
CONCLUDING THOUGHTS:
There are still massive opportunities in sector ETFs and commodity ETFs for traders that want to find quick/short-term trades. Gold and Silver are setting up major momentum bottoms. Natural Gas continues to set up a massive momentum bottom and Technology continues to set up a major topping type of pattern. The shift in capital away from risk will surely drive some really big trends over the next few weeks and months. A clear picture of what to expect looking forward up to 45 days I still rely on my market trend charts to know when I should be buying or selling positions. Skilled technical traders will be able to find incredible opportunities if they are patient and don’t “blow up” their accounts chasing risky rotation.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!
As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
Chris Vermeulen
www.TheTechnicalTraders.com