The dollar continues to control the equities and commodities market with its inverse relationship to them. The past couple years it seems that the dollar does what it wants and the all other investments move according to their relationship with rising or falling dollar prices.
Most of you know that I follow the dollar very closely. And each morning I provide my analysis with what I feel will take place throughout the session or next 48 hours.
In Today’s (Wednesday’s) pre-market trading analysis I talked about the strength of the equities market in the past few sessions and that it looks as though it still has more power behind it.
Dollar Index 60 Minute Chart
Taking a look at the US Dollar I noticed this morning that it was pointing to even lower prices and that it would likely happen today. It was only a few hours later that the dollar went into a free fall blowing through my downside price target of $73.30. It was this sharp drop in the Dollar which sent stocks, silver and gold soaring higher yet again in our favor.
Equities Market – SPY 60 Minute Chart
Stepping back a couple hours before the US dollar dropped in value sending stocks higher I did see fear creep into the market as traders started selling their shares and buying put options expecting the stock market to fall. When I saw this I got exciting because higher stock prices are usually just around the corner which they were! That’s when I sent an update out subscribers noting we should see some fireworks very soon.
While I am bullish on the stocks and metals at the moment and are long in several positions I am starting to see signs that a pullback is becoming more likely each trading session. This is when money management is important. I do not want to give back to much profit, but I must make sure we lock in some gains during times when the market is overbought like this.
Mid-Week Trading Conclusion:
In short, we continue to ride the trend of higher stock and precious metal prices as the US Dollar spirals down out of control. Our SP500 positions are deep in the money and we continue to ride it for all it’s worth raising our stops as we go.
The big question is if the Sell In May, and Go Away will take shape or not… Im thinking it will as when the time is right I will be looking to short the market.
It has been a very interesting week thus far. Monday kick started traders with a heart pounding equities sell off which sent money into the US Dollar, precious metals and bonds as the safe havens of choice.
A lot has happened this week on a technical analysis basis which I can’t really show in a written report like this. But can do so in detail within my video newsletter. There are just to many charts required and layers of analysis to cover… But I can cover some of the points and my thoughts using the charts below:
SPY 30 Minute Intraday Chart
This chart shows the volume traded at various price levels for the SP500 index. These high volume levels act as support or resistance depending if you are above or below them. On Wednesday we had large gap higher into a resistance level which the market could not break through. So I am expecting to see the market take a pause and fade back down to fill part or all of Wednesday’s gap window.
While most gaps tend to get filled. Gaps that occur right at the beginning of a new trend when momentum is strong. They generally do not fill all the way down to the bottom. I expect a couple days of sideways to lower price action. Buyers should step back in and send the market higher next week if this trend is to continue.
GDX – Gold Miner Stocks – Daily Chart
Gold stocks have been underperforming the price of gold bullion for several months. This typically is not a strong sign for physical gold prices. That being said I do feel the majority of investors are seeking true safety and want to own real gold and not some highly leveraged gold stock. This to me is more of a risk off trade for global investors and it explains the performance.
From the recent price action shown on the GDX chart I am expecting to see prices trade sideways or lower in the coming days. A sideways move would actually be bullish and would signal a possible breakout to upside. So that is what I am hoping will unfold in the coming days/weeks.
US Dollar Daily Chart
The dollar continues to get sold at a tremendous rate and the Fed is devaluing the currency as quickly as they can trying and save the world one dollar at a time…
The trend is strongly down but it’s starting to near a point where we should start to keep a closer eye on it for signs of a reversal to the upside. When the dollar makes a move higher and starts a rally it will put downward pressure on stocks and commodities. We must be prepared to move our protective stops ups and possibly take advantage of falling prices in the near future. Until then remain long equities and commodities.
Mid-Week Trend Conclusion:
In short, it looks as though stocks and commodities are in favor again. Monday’s panic sell off looks to have shaken the masses out of the market and the big money players were buying up all the shares they could. Members and myself are sitting nicely in our long positions and this could be the start of something exciting.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-04-20 22:35:542014-03-10 06:41:33Gold and Stocks Rally but is it time for a Little Pullback
I was starting to put on my bullish hat on Friday morning when out of the blue an ugly close has forced me to rethink my position. After viewing a few hundred charts, I have determined that while I am still leaning into higher prices at this point in time, I will not totally rule out a rollover on the S&P 500. In coming days the news flow will be extreme and headline risk will be everywhere we look. The S&P 500 has been able to deflect worry for quite some time now and in every case the resiliency is unquestionable.
However, we are nearing the beginning of another earnings season which will start in just a few weeks’ time. First quarter earnings for 2011 are going to be quite interesting and most analysts’ estimates are relatively challenging. Will the rubber hit the road into earnings? Are we about to see a double top play out into earnings, or is there going to be a breakout which will take us to the SPX 1,400 – 1,415 price level?
I know, I ask a lot of questions but quite frankly that is what is running through my head. The SPX is not out of the woods yet, and the price action on Friday indicated that there is some serious supply overhead and two key resistance levels to break through before the SPX gets back to clear blue skies overhead. That being said Chris Vermeulen has caught a nice part of the recent bounce with his subscribers. He does feel the market is about to get choppy but his analysis is pointing to overall higher prices in the coming weeks.
SPX illustrates the two key price levels:
In addition to the uncertainty that earnings season can bring, the primary reason why I am still leaning into a bullish move in the S&P 500 is the recent price action in the U.S. Dollar Index futures. The U.S. Dollar is scheduled to make its 3 year cycle low sometime this spring and the recent price action is indicative that the recent lows may not be the cycle lows. If the U.S. Dollar Index breaks down below recent lows, I would expect to see a nasty sell off.
The U.S. Dollar Index futures daily chart is shown below:
Whether readers believe that we are going to be in an inflationary environment or a deflationary environment is a topic for a different time, but the chart above is undeniable that recently the U.S. Dollar has declined in value and is exhibiting weak price action. Friday morning it looked as though the U.S. Dollar was going to rip higher, but by the end of the day sellers had stepped in and forced the U.S. Dollar into the red for the session. The price action on Friday highlighted the weakness in the U.S. Dollar and the high levels of overhead supply.
If the U.S. Dollar continues to weaken, in the short run I would view this as a positive for the S&P 500, crude oil, and precious metals. If the dollar breaks down to new lows, it should help buoy the S&P 500 and gold prices. Gold has been consolidating for nearly 6 months and a breakout higher from current price levels would make a trip to $1,500 an ounce very likely. I would not be surprised to see gold work even higher than $1,500 an ounce depending on how violent the selloff in the U.S. Dollar might be.
The weekly chart of gold futures is listed below:
I would think that most investors are aware that crude oil futures have been trading higher recently. On Friday oil prices climbed above recent resistance around the $107/barrel price level and reached new recent highs. Members that belong to my paid service enjoyed a relatively low risk options trade that we put on several weeks ago which involved selling cash secured naked puts on $USO. The trade was closed on Friday for a total gain of 85% of the premium that was sold. For long time readers, my stance on energy has been pretty obvious. In the longer term, energy prices almost have to go up as the world’s demand for energy increases while supplies remain flat.
I will likely get involved in another oil trade at some point in the future, but for right now I’m going to wait for a more prudent entry. Based on current price action, it would not surprise me to see crude oil futures test the $110 – $112 per barrel price range in the near future. If the $112/barrel price level is breached to the upside, a test of the $120/barrel price level will be likely.
The weekly chart of oil futures is listed below:
Weekend Trend Conclusion:
The S&P 500 is in an interesting place as far as the price action is concerned. With earnings season rapidly approaching and a possible break down in the U.S. Dollar Index likely, future price action is uncertain. I am leaning into the bullish camp at this point, but that could change rather quickly based on the price action later this week in both the S&P 500 and the U.S. Dollar Index. One thing worth mentioning is that if the U.S. Dollar Index were to bottom around these levels and a bounce higher transpired, it would put negative price pressure on most asset classes. The fact that price action in the U.S. Dollar Index has been weak lately makes me believe a break down is likely, but as most readers know Mr. Market offers few guarantees.
Assuming the U.S. Dollar breaks down, we should see the S&P 500, precious metals, and oil continue to work higher. My eyes are going to be watching the U.S. Dollar Index closely in coming days/weeks. If a breakdown transpires, the potential upside in precious metals and oil could be intense. Ultimately, I remain slightly bullish on stocks and extremely bullish on oil and precious metals. However, my entire thesis could change if the U.S. Dollar Index starts to firm up and begins to work higher. There are simply too many question marks surrounding price action to take on significant amounts of risk at this point in time.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-04-03 21:58:042014-03-10 06:49:23The U.S. Dollar’s Impact on Price Action in the S&P 500, Gold, & Oil
Over the past couple months everyone seems to have been preparing for a sharp market correction. Crazy part is that the SP500 dropped about 10% from the high and that is a typical bull market correction. The thing is… the stock market has a way of slowly unfolding making it look and feel minor, then before you know it, the correction is over and it’s back to an uptrend. That is kind of how this one unfolded.
The good news is that we caught the low risk portion of the correction locking in a 4.5% drop, and we are now in a long trade and in the money by 2.5% with very little down side risk at this point. Time will tell if this up trend is sustainable or not…
Now, let’s take a look at the charts…
Dollar 60 minute intraday chart
As you can see below the dollar looks to have started a breakdown today. If there is continued selling pressure in the next couple days then expect to stocks and commodities to move higher as the US Dollar drops. It is important to know that when a bullish pattern fails we typically see a very strong reaction in the opposite direction (down) catching the majority off guard and they rush to the door.
SPY Broad Market ETF – Daily Chart
A couple weeks ago we watched the market go into a free fall creating a washout bottom. From there we saw prices bounce back and retake my key moving averages. This gave us a bullish bias and dips should be looked at as buying opportunities. I will admit that stocks still have a long way to go before the masses are convinced. I feel we need to see the February and March highs get taken out first. Once they get taken out there should be strong buying as short covering (protective stops from traders who are short) causes a surge in buying pressure sending stocks sharply higher yet again.
My trading buddy David Banister at Active Trading Partners is starting to see small cap stocks come back to life. Money is starting to flow into these lucrative areas of the market and he is on top of things… This week’s trade is up 20% in less than 24 hours which is very exciting.
Gold Daily Chart
Gold has been moving up this year but the current price action is not really getting me excited to buy just yet. Recently we have seen strong selling volume and very light buying volume. My bias still favors higher prices but there is still a good chance we get another dip in the coming sessions.
Mid-Week Trading Conclusion:
In short, I feel as though the dollar will trigger the next wave of buying in stocks and commodities for the next week or two… We should see the dollar make a clean moving in either direction shortly and that will help guide my analysis, positions and setups. I hope this analysis helps you to see the market from a different perspective.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-03-30 23:21:012014-03-10 07:00:52Are Stocks & Commodities About To Start Another Rally?
Equities and Precious Metals are on the edge of another rally and it could start as early as tomorrow.
On March 13th I posted some of my analysis online showing how the market was trading at a key pivot point and that a sharp price movement was about to unfold. I also provided everyone with the direction in favor which played out perfectly catching a 4.5% in three days.
As of today we are getting the same setup I saw on March 13th, but this time it’s pointing to higher prices. Take a quick look at the charts I was looking at for both the SP500 and gold and you will notice that the SP500 and gold both moved to the support levels before starting to bounce: http://www.thegoldandoilguy.com/articles/it%E2%80%99s-do-or-die-week-for-equities-and-gold/
While we caught the move down on the SP500 playing the SDS Double leveraged inverse fund we did not take part in falling gold prices. Reason being, there is so much fear in the market and the amount of surprise news popping up each week I don’t think shorting precious metals is a safe call. Rather I am looking for a pullback to cleanse the holders of the commodity then I will buy once price confirms the continuation pattern has completed.
Now, stepping forward to this week’s price action
SPY Daily Chart
We can see in the chart below that price is currently testing a key resistance level. Before the week is over we could see some big price movement equities. I need to see what happens tomorrow but I have a feeling we could see a breakout to the upside for a long position.
Gold Miners Fund Daily Chart Gold stocks have be under performing the price of bullion for a few months but it looks as though they could be starting a sizable rally. If gold stocks continue to move sharply higher out of this pattern, then it’s a positive sign that gold and silver bullion will both continue to move up.
Gold Daily Chart Gold is testing a key resistance level and if it breaks above this pattern then expect much higher prices. I can see GLD moving up $5 from this level and gold futures moving up $60 per ounce fairly quickly.
Mid-Week Trend Report: In short, stocks and commodities may have shaken the weak positions out of the market during the recent pullback in price. Things could be ready to start another multi month rally and trade setups. Keep your eyes on the charts…
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Over the years I have found an indicator/trading tool which I find help spot intermediate trend reversals. I am going to quickly cover in this report. As most of you know the 20 simple moving average is a great gauge for telling you if you should be looking to buy the dips or sell the bounces. It’s an indicator I keep on the broad market charts like the SP500, Dow and NASDAQ.
The chart below shows the percentage of stocks trading above the 20 moving average. When this indicator falls below 20%, I make sure I start to protect my short positions with more aggressive protective stops and keep an eye on short term sentiment, volume ratios, options and price action as a bottom can take place at any time and very quickly. Bottoms tend to be more of an event happening quickly with a washout/panic selling day followed by a sharp rally, while intermediate market tops drag out taking weeks if not months to roll over and are very difficult to trade which is what we have been experiencing so far this year.
Mr. Jones once of my trading buddies who focuses strictly on Options Trading has been cleaning up with the current volatility making 21%, 50% and 67% returns on his last threes trades. This guy loves volatility and always seems to have an options strategy for every situation the market dishes out. Check out his service at OptionsTradingSignals.com
As you can see this indicator is currently trading in the lower reversal zone and I feel a bottom will form before March is over.
SP500 Daily Chart
The SP500 continued lower today, which is what I mentioned, would most likely take place in my pre-market video this morning. The trading session was a roller coaster with news on Japans reactors causing large waves of buy and selling throughout the day. I have not seen traders follow the news so close like this in some time… Everyone has their fingers hovering over the buy and sell button these days.
Looking at the bottom indicator which is my gauge of panic selling within the market, it has yet to close above 15 which is the minimum number I typically look for before I start zooming into the intraday charts for a long entry (market bottom). We still could see much lower prices before we see that.
Gold 4 Hour Chart
This chart is the same one I showed in my Sunday night report, which explained why gold should test the $1380-90 level in the coming days. We did see that unfold this week but now the chart is pointing to possibly even lower prices with a support range between $1360 -1380 taking place this week. Keep an eye on it as it should be swift if it does occur.
Mid-Week Trend Report:
In short, we are finally getting the correction everyone has been waiting for and now that it’s started and we are short, we must start watching closely for a bottom because they can take place very quickly.
My focus is still on playing the short side but I have my antennas up just in case signs of a bottom start showing up.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-03-16 21:45:242014-03-10 06:59:11How to Gauge the Equities Market so you don’t buy too Early!
The past couple weeks have been choppy in the equities market. While the strong intraday moves are great for day traders, it is extremely difficult for swing/position traders who normally hold positions for 3-60 days in length, which is my focus with this newsletter. That being said, we are reaching a do or die point for the equities market and next week there should be a strong move out of this trading range.
On the volume side of things, we have been seeing distribution taking place. Heavy volume continues to step into the market unloading large amounts of shares. The interesting part is that the majority of traders are bullish and sentiment levels are at extremes. Also, we are seeing the retail trader enter the market… What does this mean? It means we must trade very cautious and large positions on the long side shouldn’t be taken. The selling volume and extreme bullish sentiment are warning us that a correction is near.
There are a few things I watch to identifying trend reversals and they are accumulation or distribution of shares, Extreme sentiment readings, Market internals/breadth, and if the price relative to the 20 SMA. Currently we are seeing all the signs of a reversal to the down side, but it has yet to be confirmed.
My trading buddy JW Jones who focuses strictly on Options Trading has been cleaning up with the current volatility making 21%, 50% and 67% returns on his last threes trades. This guy loves volatility and always seems to put together an option play with very little risk yet big upside potential.
Let’s take a look at a couple charts…
SP500 60 minute chart going back 2 months
This chart shows a possible trend reversal unfolding. We are seeing distribution selling, lower prices with the current price trading under a key resistance level. Also my internal/sentiment indicators are showing waves of buying/bullish market action which is quickly met with strong selling pulling prices back down.
Trading during trend reversals is difficult because the potential downside risk is higher when entering a position. If traded, only small positions should be taken until a trend is established, then you can build/add to your position on pullbacks or bounces depending on the direction in your favor.
My current bias is for lower prices in the coming days, but until we break above February’s high or Last week’s low with strong volume it’s a little more of a guessing game. If we see the SP500 rise early next week and fill the gap and the market internal indicators show extreme short term overbought conditions, it will make for another great low risk shorting opportunity. Shorting just under a key resistance level means the protective stop is only 1-2% away from our entry point and makes for a solid 1:3 risk/reward ratio. On the flip side, if the market has a strong rally and closes above the key resistance level then the tables will have turned and a new up trend should start.
Gold 60 Minute Chart going back 2 months
Gold has had a nice push up in the past few weeks due to the issues in the Middle East. We saw this yellow metal make a new high but has since pulled back down and could have another move lower in the coming week. The $1380-1390 level should act as a strong support zone. The daily and 60 minute chart both show support at that area. Silver is in the same boat. Keep an eye this…
Weekend Trend Analysis:
In short, stocks and commodities are nearing a tipping point and there should be a large move in either direction starting this week if all goes according to plan. The big question is which way are prices going to go? My current bias is for more downside until we see a good washout in the market. It could be 2-8% lower from where the market closed on Friday. After that I think a grind higher into May could easily take place but we will see how the charts unfold going forward.
Each week there seems to be some type of surprise economic, political or natural disaster of some sort making trading not only tougher to trade but riskier because price swings are large. Keep trading to a minimum and small for now.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-03-13 13:33:492014-03-10 06:59:46It’s Do or Die Week for Equities and Gold
The past couple weeks we have seen strong distribution selling in the equities market followed by equally large days of buying. These buying and selling frenzies have formed a sideways consolidation.
Intraday movements have been sizable and more than enough to shake those trying to pick a direction early out of the market a few times. As fewer traders get involved the price range narrows and becomes compressed. Eventually there will be a breakout in a direction on heavy volume and with any luck it will start a new trend.
As much as I love to trade, I have been sitting on the sidelines for a few weeks giving this market some time to sort it’s self out… As we all know there are times when you get really aggressive and other times when it’s best to stand aside.
It is very important to note that each trader sees the market in a different way and once it is aligned with what you are comfortable with trading, only then should you step in and trade. If not, then it’s best to wait for more favorable price action. It took me years to figure this out but now that I know what I am looking for and on what time frames, trading is less stressful and I know I don’t need to be trading all the time, there is always another opportunity just around the corner…
Gold has been trading sideways for almost two weeks now as it tries to break free of the December high. It is much in line with the SP500 chart above. I feel Friday or early next week that the market, dollar, metals and oil make some sizable moves either up or down…
Mid-Week Conclusion:
In short, I don’t think it is wise to jump the gun and take on any large positions until we see what happens on Friday overseas…
If nothing happens which is kind of what I am thinking, we should see the extra fear value come back out of the price of gold, silver and oil (drop in price) and possibly help boost equity prices.
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Trading with multiple time frames – Every now and then it’s always a good idea to look at some different time frames to be sure you have a solid understanding for the longer term trends in play. I will admit that it’s easy to get caught up in trading the shorter time frames like the 1, 10, and 60 minute charts especially when there are large intraday movements. But every night you must reset your thinking by looking at the bigger picture.
Below are weekly and daily charts which I think provide a big picture view of things.
SPY – SP500 Index Fund – Weekly Chart
You will see that in both 2009 and 2010 we saw a 5-8% correction down to the key moving averages. I feel that we are in store for a similar pullback in 2011. After that we will most likely continue higher.
US Dollar Index – Weekly Chart
The dollar is trading down at a key support level which I am keeping a close eye on. If we get a close below this trend line then we should see the dollar sell off sharply which in turn will trigger another leg higher in commodities across the board.
Crude Oil – Weekly Chart
Crude oil has really taken off because of the fears coming out of the Middle East. From the looks of it the next key pivot level is the $110 level.
Gold – Daily Chart
Both gold and silver have made new highs but after such a run I expect we see a quick pullback before they go higher. Gold and silver are the two investments I think everyone should hold a core position for the long run no matter what happens to the price. But, if we do get a nice quick pullback into the key moving averages then I think it’s a great spot get involved with more money.
Mid-Week Trend Report:
In short, I am bullish on stocks and commodities and bearish on the dollar and bonds. The one issue I see going forward is that if the dollar breaks down it will most likely help boost oil prices which in turn puts downward pressure on stocks… So depending on how things unfold in the Middle East and a falling dollar, we may not see higher stock prices. Some individuals are forecasting $150-220 per barrel and I know if it gets back up there it will definitely slow the economy and stock prices down…
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-03-02 22:33:042014-03-10 07:00:42Gold, Silver, Oil, SP500 & the Dollar Long Term Trends
So far 2011 has been an interesting to say the least. Stocks and commodities have been jumping around with high volatility generating mixed trading signals. This choppy price action typically indicates trends are in their late stages. The late stages of a trend is very difficult to trade because volatility rises meaning larger day to day price swings, and at any time the price could either drop like a rock or go parabolic surging higher in value. Generally the largest moves take place during the final 10% of trend, but with a sharp rise in price keep in mind the day to day gyrations are much larger than normal, hence the false buy and sell signals back to back on some investment vehicles.
Taking a look at the charts it’s clear that we are on the edge of some sizable moves in both stocks and commodities. It’s just a matter of time before a correction is confirmed or this current pullback in stocks is just a dip (buying opportunity). I am in favor of the longer term trend at work here (bull market) but it only takes a 1 or 2 bid down days and that could change.
SPY (SP500 Price Action) – 60 Minute Chart
This chart shows intraday price action with my market internals. It is signaling a short term bottom within the overall uptrend on the equities market. The big question is if this is a just an opportunity to buy into this Fed induced bull market or the start of a larger correction?
Currently I am bullish but the next couple trading sessions could confirm my bullish view or a correction could be unfolding. Until then, we must remain cautious.
Price Of Gold – Weekly Chart
Gold has staged a strong recovery in the past four weeks. But it has yet to break to a new high. I do feel as though it will head higher because of the way silver has been performing (new highs). But it is very possible we get a pause for a week or two before continuing higher.
Because of the international concerns in the Middle East both gold and silver should hold up well even if the US dollar bounces off support. But, if the US dollar breaks down below its key support level we could see stocks and commodities go parabolic and surge higher in the coming months. It’s going to be interesting year to say least…
Dollar Weekly Chart
This long term view of the dollar shows a MAJOR level which if penetrated will cause some very large movements across the board (stocks, commodities and currencies).
In short, a breakdown will most likely cause a spike in stocks and commodities across the board which could last up to 12 months in length. On the flip side a bounce from this support zone will trigger a pullback in both stocks and commodities. This weekly chart is something we must keep our eye on each Friday as the weekly candle closes on the chart.
Weekend Trend Report:
In short, 2011 has been interesting but trading wise it’s has yet to provide any real low risk trade setups which I am willing to put much money on. There are times when trading is great and times when it’s not. It all comes down to managing money/risk by trading small during choppy times (late stages of trends), and times when we add to positions as they mature building a sizable portfolio of investments which I think will start to unfold over the next few months.
I continue to analyze the market probing it for small positions as this market flashes short term buy and sell signals.
Last week we say a lot of emotional trading and that typically indicates large daily price swings should continue for some time still so keep trades small and manage you positions.
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