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Broad Market Internals Are Pointing To Higher Prices

It was another extremely volatile week sharp rallies followed by sharp sell offs. Fear is in no doubt controlling the market. The bulls and bears continue to battle it out. The charts below cover some important trends and market internals I pay attention to on a daily basis.

US Dollar Index – Daily Chart

The past two months the dollar as been in rally mode. The last 14 days we have seen a large bullish pennant form and this pattern typically marks the half way point for the current tend. The measured move for the USD is pointing to 93 over the next few months.

Gold Futures Prices – Daily Chart

Gold as we all know is seen as the major safe haven and the price per ounce has been steadily climbing. Friday we saw the major indexes sell down very hard but both the dollar and gold posted some solid gains. Gold does looks as though it needs some time to digest the recent move higher and this could take a week or two before anything exciting happens but I am on the lookout for low risk setups.

VIX – Volatility Index – 60 Minute Chart

This index measures the fear in the market. When fear is high and everyone is selling their positions we see the VIX jump in price. Over the past month we can see a possible Head & Shoulders pattern forming. If this pattern unfolds like it should then we will see the price of equities bottom in the coming week with the VIX dropping below the blue neckline. The old saying is “When the VIX is High is time to Buy, when the VIX is low its time to Go”.

Put Call Ration – 60 Minute Chart

In short, when the put/call ration is over 1.00 then there are more traders/investors buying Put Options than Call Options. Put options are when people are buying leverage to take advantage of lower prices. My thought/opinion about this is when more people are trading with leverage anticipating lower prices, I figure they have sold all their long positions and are now using leverage to profit from lower prices. Well if the majority of individuals have sold everything then in reality there should not be much left to be sold… So I feel this correction which started in April is almost finished.

NYSE Advance/Decline Line – 60 Minute Chart

This is one of my favorite charts to look at. While there are several indicators, market internals and technical analysis needed to clearly determine if the market is currently overbought or oversold, this chart is one that can help give you a good idea if you should be looking to buy, short or just stay in cash for the time being.

SP500 Futures Prices- 2 Hour Chart

The SP500 has been up and down like a yo-yo with some very dramatic moves. Up 2+% day down 2+% the next… very sharp and powerful moves can be both every profitable or costly if not traded correctly. Last week we caught a nice 2% gain in less than 24 hours which was an exciting trade. It looked at though the market was about to breakout to the upside and possibly reach the 1150 level but early Friday morning there were rumors about some Euro bank having serious problems and that was just enough to cause a domino effect sending the market lower throughout the entire session closing on a very strong negative note for the day/week.

That being said the market internals are indicating that equities are oversold at these current prices and a bounce is due any time. With the panic selling on the NYSE Friday reaching 119 sell orders for every 1 buy order I think we will see some follow through next week with lower prices, then a rebound once investors finish selling everything they own at which point we will be looking to get involved again.

Weekly Trading Conclusion:

In short, money continues to flow into the safe havens (Gold & US Dollar). The major indices are showing extreme panic selling and look ready to in the next few days. There is a possibility that the market could break down and start another major leg lower which is a big concern to me. I will be glued to the market internals and support levels for the major commodities and equity sectors in hopes to catch the bottom or to avoid another melt down.

If you would like to receive my Daily Pre-Market Videos and Trading Alerts please checkout my website at: www.FuturesTradingSignals.com

Chris Vermeulen

Get My Free Weekly Technical Updates Free Below:

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How to Read Market Internals for Trading the SP500 and Gold

It’s been a very exciting week so far for gold and SP500 traders as we take advantage of mass crowd behavior. Trading against the masses can be very profitable during certain situations but more times than not it’s a great way to lose money which is why I focus on taking the opposite side of these moves.

This week I decided to do the mid week report in a video format which I think not only saves everyone time but also allows me to get more information over to you. The video shows a low risk gold setup and a low risk SP500 trading setup which I think will open your eyes to some new things.

Last week we took a long position in gold at $1180-85 level buying near the bottom as investors panicked out of their positions. Using market internals, sentiment readings and my own special blend of technical analysis to find these low risk setups which pack a powerful punch when traded correctly.

The chart below shows gold from its bull market in 2009 right through to the current rally, which is making us some decent money. While I am bullish on gold and feel it will eventually reach $1400 per ounce I do think there will be several more opportunities to cash in on gold’s price action as this rally matures… I explain more in the video below.

Gold & SP500 Low Risk Trading Setups


Click Here to View the Video: http://www.futurestradingsignals.com/trading-education/gold-and-es-futures-trading-video/

Mid-Week Low Risk Gold & SP500 Trading Conclusion:

I hope you enjoyed the video as I showed you some important trading tools for helping to trade extreme conditions in the market. As my buddy from ActiveTradingPartners.com always says “Buy when they Cry, Sell when the Yell” which is exactly what needs to be done in order to profit from the market month after month.

If you would like to get my Low Risk yet Powerful Trading Alerts be sure to checkout my service at www.FuturesTradingSignals.com

Chris Vermeulen

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The Gold & Silver Precious Metals Correction

Wednesday May 26th
It’s been an exciting week for traders as volatility levels are through the roof and the broad market is moving up and down like a yoyo. You cannot take your eyes off the screen if you have a large amount of money invested as you can quickly find yourself with a large profit or loss in the matter of minutes….

Although we have seen stocks jump around the past few days precious metals have held strong with very little volatility. This is because of the economic fears looming for the US and other countries of possible financial collapse. This fear is helping to boost gold and silver prices because they are seen as the safe haven. Also we are seeing money move in the US dollar because the country is still seen as a leader in many ways helping to boost the US dollar.

Below are a couple charts on Gold and Silver ETF’s showing the end of last years rally and the correction in prices which are now looking to setting up for another leg higher.

GLD – Gold ETF Trading Vehicle – Daily Chart

I called this chart “The Golden Correction” because it literally is. We saw prices rally late in 2009 finishing off with a parabolic spike which we know is not sustainable and almost always results in a VERY sharp drop. This correction unfolded as planned with an ABC retrace which shakes out weak positions. We then we saw a reverse head & shoulders pattern form which again also shakes out weak positions. Once the neckline was broken from the reverse H & S the new up trend was started providing a couple trading opportunities for us along the way. The most recent low risk entry point can be seen on the chart as gold prices dropped back to a key support level.

ETF Trading Newsletter

Gold Futures Price – 60 Minute Day Trading Chart

Gold has been showing some very bullish price action the past week forming several mini bull flags with confirming volume levels. I think we should see gold pop another $5-10 bucks in the very near future if not continue higher for several days.

Index ETF Trading Newsletter

SLV – Silver ETF Trading Vehicle – Daily Chart

Silver formed much of the same patterns as gold but with much more volatility. Also silver has yet to break the 2009 high which is surprising but with a large part of silver being use for industrial purposes it does make sense as the economy is not as strong as it was thought to be in 2009. Silver carries much more risk when trading because it has more random moves and increased volatility.

ETF Trading Strategy

Mid-Week Precious Metals Trading Conclusion:

In short, gold and silver are in an uptrend and looking strong. Both are currently trading at short term resistance levels on the daily chart which has caused them to stop moving up today (Wednesday May 26th) but on an intraday basis they look solid and could break though these resistance levels.

That being said buying way up here adds a lot more risk because a good chunk of the move has already been made and if prices do roll over and start heading back down the next support level is several percentage points away for placing a protective stop with the proper amount of wiggle room.

If Trading Gold, Silver and Index Futures and ETFs interested you check out my trading services at www.TheGoldAndOilGuy.com

Chris Vermeulen

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How to Trade Market Bottoms for SP500 & Gold

May 23 2010
The stock market topped in April which was expected from analyzing stocks and the indexes. Back in April I posted a few reports explaining how to read the charts to spot market tops. Today’s report is about identifying market bottoms. Market Top Report: Click Here

It does not get much more exciting than what we have seen in the past 2 months with the market topping in April and the May 6th mini market crash. This Thursday we saw panic selling which pushed the market below the May 6th low washing the market of weak positions.

For those of you who have been following me closely this year I am sure you have noticed trading has been a little slower than normal. This is due to the fact that the market corrected at the beginning of the year and we went long Feb 5th and again on Feb 25th. Since then the market rallied for 2 months and never provided another low risk entry point. In April the market became choppy and toppy and we eventually took a short position to ride the market down. Now were we are looking at another possible reversal to the upside.

Only a few trades this year which I know frustrates some individuals but if you step back and look at my trading strategy you will learn that we only need to trade a few trades a year to make some solid returns. I don’t know about you but I would rather trade a few times a month and live life between trades… not trade all day every day getting bug eyed in front of the computer.

Ok enough of the boring stuff let’s get into the charts…

SP500 – Stock Market Index Trading ETFs & Futures
The pullback in the broad market was expected but the mini crash on May 6th really through a wrench into things for us technical analysts. We don’t really know the truth about what happened that day… was it just a simple error or was it a planned error for the US government to take a massive short position to move something in their favor quickly to generate MASSIVE gains? It leaves us technicians hanging wondering if that was a shift in trend from up (accumulation) to down (distribution)?

My thoughts are if the crash was truly an error then we will see months if not another year of higher prices… But if it was a planned sell off with banks moving to the sidelines then we are most likely headed into another bear market. Personally it does not matter what happens as big money will be made in either direction. Problem is if we do go into another bear market then the majority of individuals will lose capital as investor’s portfolios get smaller and smaller. That will lead to a lot of depressed people…

In short, I am neutral on the stock market for the intermediate and long term. Once we have a few more months of price action only then will I have a plan for longer term investments. But on the short term time frame the market is screaming at me with extreme sentiment levels lining up on the stock market and gold.

The daily chart of the SPY – SP500 Index shows several important points which help me time market bottoms. We have prices trading at a support zone. Buyers step back into the game here and should provide a decent bounce which started Friday Morning.

Next we have the panic selling spikes from an indicator I created. Generally the day after we see panic in the market like we did on Thursday we will see a big bounce and many times a large rally.

Down at the bottom you can see my custom market cycles which are both starting to bottom. During times like this the market has a natural tendency to move higher.

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VIX – Market Volatility Daily Chart
The VIX has an old saying “When the VIX is high its time to buy, When the VIX is low, its time to go”. Simple analysis clearly shows the VIX trading high and at a resistance zone.

VIX - Volatility Index Trading

Put/Call Ratio – Daily Trading Chart
This chart measures the amount of put and call options traded each day. When it is trading over 1.00 then we know for every 1 call option traded (wanting the market to go up) there is 1 put option traded (wanting the market to go down). Over 1.00 is extreme and when that many people are bearish and using leverage to profit from a drop in price then in my opinion it means everyone has already sold and the selling pressure is about to end.

Actually if you go back in time and review SP500 and this ratio you will notice 2-3 days after this ratio reaches 1.00 or higher the market bounces/bottoms.

Put Call Ratio Trading Strategy

NYSE Advance/Decline Line for Equities – Daily Chart
This chart shows us how many stocks are advancing or declining on any given day. When extremes are reached look for a short term bounce or bottom 1-3 days following.

NYSE Advance Decline Line Trading

How to Identify Stock Market Bottoms with Simple Analysis:
In short, I feel the market is forming a bottom here. How big of a rally will we get? I don’t know because of the mixed signals from the May 6th EXTREME heavy volume selling session. As usual I focus on trading with the trend, trading the low risk setups and I manage my money/positions scaling in and out of those positions as I see fit.

If you would like to receive my Real-Time Trading Signals & Trading Education check out my website at www.FuturesTradingSignals.com

Chris Vermeulen

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Does Panic Selling Pin The Market Bottom Again?

8:41am ET, May 21, 2010

Yesterday we started to see extreme panic selling in the broad market. This can be seen by looking at the up/down volume, advance/decline line for stocks and the speed at which the market was dropping. Only a few times a year do we get extreme levels like this and they tend to lead to sizable gains if traded correctly.

A lot has changed with my overall market outlook in the past month. At first I thought the intraday market crash was a human error and should be somewhat ignored but with the level of selling we are seeing now I am starting to think we have formed a market top in April. Don’t get me wrong, I do not have a bias as to which way I want the market to go. It does not really matter as I simply follow the trend and trade the setups.

Here are my charts and thoughts of what is happening in the market:

Broad Market – Indexes and Stocks

As you can see from the chart below the red broadening pattern is starting to concern me. During a bull market like we are in now, a broadening pattern is seen as neutral or bearish price action. This type of pattern has be on edge because in the past patterns like this have been the top. But I think we should see a bounce up to retrace half of the sell off from the April top. Then we will evaluate the situation from there.

Blue Support Levels currently the market is trading around a support level which tends to force the price to change direction. We have yet to break the May low and that could be broken today depending on the follow though from yesterdays panic selling. We could see the low get penetrated briefly then reverse back up sharply. This quick break of the early May low will shake out the final group of traders/investors before the market bottoms.

Green Panic Selling has helped to point out market lows for all of 2009 and 2010. Yesterday we had new high showing us that there were 37 sell orders for ever 1 buy order on the NYSE. I was getting a lot of emails yesterday from traders in panic wondering what to do. These emails are also an indicator that the market is bottoming…

SP500 - SPY - ES Mini Trading Newlsetter

US Dollar Index

The US Dollar chart below looks as though it has topped on the 4 hour chart. We could see the dollar drop for 1-3 weeks which in turn will help boost stocks and gold s they both seem to be bottoming.
US Dollar Index Trading Newsletter

Trading Conclusion:

In short, the market is trying to bottom as I mentioned in the Wednesday report. Volatility has spiked, stocks and commodities are jumping around shaking out stops and investors are in a panic selling what they own and getting back into cash…

It’s Friday and when a big move happens on Friday we have to expect some follow through on Monday as all the weekly chart traders and people not watching the market last week will see the sell off and exit their positions on Monday adding more pressure on the market.

With all the recent selling I feel most of the risk has been taken out of the market already but we must remain cautious still. I am looking to buy (scale in over a couple days) the SP500 and Gold using the Best Trading vehicles which members have access to along detailed trading information like entry, price targets, protective stops money management and trading education.

If this is of interest to you be sure to checkout my Stock, ETF and Futures Trading Services www.TheTechnicalTraders.com

If you want to receive my free weekly technical reports be sure to opt-in to this Free Trading Newsletter:

Chris Vermeulen

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Mid-Week Gold, Oil, Dollar and SP500 Report

May 19th 2010
It has been an interesting week in the market as stocks and commodities push to extreme support levels. Below I have posted some charts showing where the market is currently trading at and what I think is likely to unfold.

Gold Futures – 4 Hour Candle Stick Chart
The price of Gold is testing a key support level. I figure we will see gold try to stabilize over the next week or so as it digests the recent drop in value then start to head back up.

US Dollar Index – 60 Minute Candle Stick Chart
The US Dollar and gold have been moving together the past few weeks as more countries pop up on the radar for serious financial issues. This is helping to boost both the US Dollar and gold as investors around the world starting buying what seems to be safety. The dollar has had a sizable pullback and is now testing a key support level.

This could be the start of a possible Head & Shoulders pattern forming which means the dollar rally could be nearing maturity in the next couple weeks.

Crude Oil Futures – Daily Trading Chart
Oil has been under serious selling pressure because of the rising USD. It has now dropped to a key support level and is starting to look very interesting. If the US Dollar bounces in the next week or two it will keep downward pressure on oil. I think this bottom is going to be a process not a one day event.

SP500 – Daily Trading Chart
Stocks have been under dropping like flies the past few weeks and shorting the SP500 last week at 1170 has played out very nicely for members. The broad market is giving me mixed signals and when I am unsure of a trade I stand on the sidelines. It’s always better to sit in cash and watch things stabilize than it is to watch your hard earned money evaporate. We could see a wave of panic selling in the stock indexes testing the previous lows so be cautious.

Mid-Week Stock & Commodity Trading Report Conclusion:
In short, I feel gold and the dollar will bounce in the coming days from their support levels. This will keep pressure on oil & the SP500 holding them down near support. Once the US Dollar forms a possible right shoulder we will most likely see them pop and rally.

We are still 7 trading days away from a cycle low on the broad market making this scenario very likely to play out. At the moment I am getting a lot of mixed signals and during times like this I prefer to stay in cash because volatility will rise and it is easy to get shaken out of trades.

If you would like to get my Real-Time Trading Signals & Setups checkout my services at www.TheTechnicalTraders.com

Chris Vermeulen

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The Gold Bull Market and the SP 500 Index

May 17th 2010
Back in the third week of April I predicted here on Kitco.com a topping in the broader market indices. The theory was the VIX levels were extremely and historically too low concomitant with extremely high historical readings in investor bullish sentiment gauges. After thirteen Fibonacci months of a bull cycle rally, it was likely an A B C correction to the downside would begin. In further follows ups on TheMarketTrendForecast.com service I run on April 20th, I again outlined concerns with falling volumes on small cap stocks and too many “stories” being run up too far ahead of the economics.

At this point in the Bull market, it is common to have the crowd of investors move from a bias towards viewing all news as positive, to a negative slant on all news. Nothing has changed dramatically on the problems the world had before with Debt and currencies, but the reaction to those events turns negative. This works off the overly optimistic Elliott Wave patterns of the crowd, turning into a typical Zig Zag correction that lasts several months. There will be trading opportunities between that Mid-April topping forecast and my forecast for a bottom around mid-September. However, as recommended in April, Index investors and mutual fund investors should have been moving to the sidelines. I am looking for the SP 500 Index to drop to the 920-970 areas by mid-September before the next leg of the Bull market takes off. Now, the one caveat to that forecast is actually a lot more bullish. If the SP 500 can hold the 1100-1110 areas and pivot up strongly, we could move on to new highs. I put the likelihood of that around 20%, so be on guard. A counter-trend rally up in the next few weeks is highly probable, but the evidence continues to suggest working our way down into the 900’s in the SP 500 before the Bull resumes in earnest. We are selectively buying Gold and Biotech stocks in the Active Trading Partners service as well.

Gold has continued higher confirming my April 20th forecast on The Market Trend Forecast of a move from 1125 to 1235 in Gold. The Elliott Wave patterns remain extremely bullish for Gold to continue a 13 Fibonacci year cycle up into 2014. Gold has formed a very bullish pattern intermediately for a move to $1470-$1550 at the next major pivot top. In the interim, I expect continued consolidation in and around my $1,235 US levels before the next pivot high at $1300-$1,325 US. Fiat currencies are burning matches as foreign governments and other entities continue to attempt to put out a fire by printing more paper and covering the same fire with it. Until the analysts on CNBC stop questioning the validity of Gold and start questioning the validity of Fiat Paper, the bull will rage onwards with most of the pundits watching the caboose from the back of the tracks.

SP 500 Forecast from the Mid-May TMTF forecast service updates:
TheMarketTrendForecast

Gold Forecast is for $1570 over 6-9 months with pivot at $1300:

Stock Market Forecasting

Be sure to checkout my market forecating service at www.TheMarketTrendForecast.com

David Banister

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Gold, Silver & SP500 Trading Charts & Video

May 16, 2010
Last week was amazing for both gold and index traders as gold surged higher and the SP500 tested a key resistance then fell 4% in our favor. The past couple weeks with the mini market crash and Euro issues making the market extra volatile both gold and the broad market (SP500) index has been wild.

The added volatility makes trading more difficult because price patterns become less predictable and price movements are much larger increasing risk for traders.

Below are the charts & videos of what to look for in the coming days…

GLD – Gold ETF Trading
Gold continues to trend higher at an accelerated rate. Friday we saw gold pullback and test a key support level then bounced to close in the middle of the days trading range. As you can see the trend line support has become very steep and once the trend line support is broken I figure there will be a sharp drop to digest the recent rally.

Gold Trading Newsletter

SLV – Silver ETF Trading
Silver popped and tested a key resistance level from a previous high as expected. It also tested the top of its trend channel providing even more resistance. This week will be interesting as we wait to see if precious metals have a small pullback or continue to rally.

Silver ETF Trading Newsletter

SPY – SP500 Index ETF Trading Chart
This chart clearly shows what I think is about to unfold by looking at the past market drop. Because of the mini market crash triggering everyone’s stops already I figure we have made the low and the dip we are seeing now will drift down a few more percentage points then bottom out.

SPY ETF Trading Newsletter

ES M0 – SP500 Mini Futures Trading Setup – Pre-Drop
Below is a chart of the SP500 which we shorted or bought the SDS bear etf trading fund last week looking to profit from a falling stock market. As you can see from the chart we saw the es mini contract drift into a key pivot point on light volume. What this means is that a large group of sellers will be waiting at that price, and because volume is light we know there are not many buyers at this price level. Simple supply/demand comes into play with more sellers causing the price to stop rising and eventually force the price lower which is what we were anticipating.

The green arrows show key support levels on the 60 minute chart where 1/3 of a position should be taken of the table to lock in gains which also reduces overall risk on the trade. Once we cash in the first 1/3 of the position we move our protective stop the breakeven which is the entry point for the remaining portion of our position. This turns the trading into a winner no matter what happens allowing us to enjoy the ride…

ES Mini Trading Service

ES M0 – SP500 Mini Futures Trading Setup – Current Price
Here is the same chart 24 hours later showing both of our profit targets triggered pocketing 2/3rds of our position for a very nice gain. Depending on the type of trading vehicle you traded there was potential to make up to 150% return in less than 24 hours.

We currently hold 1/3 of the position left with a loose stop allowing the trade to mature incase the down trend continues for several days or weeks. If not and the price rallies then our stop will get triggered for small profit on the balance of the position. Either way we win.

ES Mini Index Trading Service

Pre & Post Market Correction Video: http://www.thegoldandoilguy.com/sp500-market-correction-trading-videos/

Stock Market ETF and Futures Trading Conclusion:
In short, the market is trading on increased volatility making it difficult to find low risk setups. At the moment we are long gold and short the SP500 with both position deep in the money. All we can do now is manage our positions to make sure we maximize our profits.

If you would like to Get My Trading Signals be sure to check out my services at: www.TheTechnicalTraders.com

Chris Vermeulen

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Are Precious Metals and Indexes Going Parabolic?

It’s been an exciting couple weeks in the market with gold now making new all time highs as money floods into this shiny safe haven. It has everyone all worked up wanting to take part or they are riding the rally up already. But the big question is when should some money be taken off the table to lock in gains and lower your overall risk during these crazy times?

Below are a few charts showing you how I see things at this time.

GLD – Gold Exchange Traded Fund
The price of GLD and gold appear to be going parabolic (straight up). The tough part about this type of price action is that large moves can happen in a very short period of time. But on the flip side, when the price reverses we tend to see prices fall just as fast if not faster. Trading this type of price action carries a very high level of risk. Those chasing it up buying at these overbought market conditions is a double edge knife.

ETF Trading Newsletter

SLV – Silver Exchange Traded Fund
Silver is trading similar to gold but the key difference here is that silver has not broken to a new high as of yet. The high was set in 2008 just over $20 per ounce. But from looking at the chart I think metals are ready for a breather.

Silver ETF Trading Newsletter

HUI Index – Gold Stocks
Gold stocks have yet to breakout along with silver as they both are nearing key resistance levels. With gold stocks and silver trading near resistance I figure we will see pause in the coming days as traders digest the recent strong moves up taking some money off the table incase prices get stuck under these resistance level.

Gold Stock Trading Newsletter

SPY – SP500 Broad Market Exchange Traded Fund
The broad market appears to be forming a possible short setup on the daily chart as the price continues to drift higher with declining volume. Also indexes are testing key resistance levels and the 10 period moving average. The next few days should be interesting…

SPY ETF Trading Newsletter

Mid-Week Precious Metals and Index Exchange Traded Fund Report:
In short, it looks like precious metals and the broad market could take a breather in the coming days. I’m not sure how large of a correction we will see but I do not think it will be all that big.

Gold and silver should have a quick dip with buyers stepping back in on weakness. The SP500/broad market is a little more tough to call as last weeks market crash messed things up washing out all the stops in one day instead of weeks… but we could easily see a 5% drop in the market still.

Anyways I hope this analysis helps everyone…

Check out my trading services at: www.TheTechnicalTraders.com

Chris Vermeulen