Archive for category: Gold Forecast

After a gap in time of almost a decade the FED increased interest rates on December 16^th, 2015,. The SPX has a one day bounce from the news on the day of the announcement, then it turned negative and since that time the index plumeded 13%.

The markets, which were rising, due to the low-interest-rate environment, encountered a rude awakening, catching most investors off guard. Was this a surprise reaction from the market? Absolutely not. Just look back in time and compare interest rates and the stock market. When the fed starts to raise rates equities typically top out and fall.

On January 29th, 2016, the Bank of Japan lowered their interest rates into negative territory, which inspired the markets, thus causing them to “rally” by 2.4%.

Why is this important?

I had written in my earlier article of how the FED steps in with a QE, or an interest rate drop whenever there is a significant fall in the SPX.  During their recent policy meeting, they maintained their resolve to raise rates, albeit with caution; however, the market is skeptical, today. The FED is still far from obtaining their inflation objective while the recent GDP numbers came in at a disappointing 0.7%, for the fourth quarter.  Suddenly, the economy does not look to be standing on a strong footing.

What is the mood of the market?

Bonds are the best indicator in which they predict what the FED is likely to do.  Take a look at the chart below, of iShares Barclays 20 Year Treasury Bond Fund ETF (NYSEARCA: TLT) in order to understand the mood of the market participants.

TLT should have been declining, since the FED rate hike was implemented in December. It did begin to decline after the announcement was made but that only lasted a couple days. And with the US markets “tanking”, it has since turned its’ direction around as being a safe haven and presently reflects a fresh breakout (from a 10-month range).

The move has a pattern target of 132.7, which is also a resistance level from an earlier high. This means two things:  1) the equity investors are choosing the safety of the TLT rather than “buying the dip”, and 2) the market participants do not believe that the FED will raise interest rates, anytime soon.

There is a cool new site that provides Free Stock Ratings if you want more ideas.

The Utilities Select Sector SPDR (NYSEARCA: XLU) is also moving in the opposite direction towards a tightening interest rate environment.

The utility sector is a defensive sector which is popular among investors for its dividend yield. When interest rates rise, investors shift to the safety of the banks in order to earn a handsome return.  However, despite an increase by the FED, the utility sector has also broken out of a year long consolidation.  The chart pattern targets suggest a move towards 49.5. This suggests that traders are flocking to the defensive and are ignoring the commentary of the FED who are promising high-interest rates, in the future. They do not believe interest rates will rise to make the yield from the XLU less attractive.

What do these two charts indicate?

The two charts indicate that the market believes the FED will have to quickly reverse the direction of interest rates. They may need a sharper decline, in the markets, in order to reverse; however, the market believes that they are not only going to reverse but will also come out with a QE4 in order to appease the markets.

Will QE always work?

No, it can never ALWAYS work.  The market participants are already questioning the effects of QE and soon, there will come a point when the market will stop reacting to QEs. This may possibly happen in 2016 when the markets enter a freefall and stop responding to the FED actions. The market will correct the excesses of the past few years with a sharp selloff.

Conclusion:

The market is indicating the forthcoming FED actions. It does not believe that the FED will be able to stick to their rate tightening cycle. Traders must be prepared to face the forthcoming slide in the US stock market. There will be only a handful of asset classes which will put up a brave front. Timing, as always, is the key.

Crisis always brings opportunities for those who can see the obvious realities. I am very excited about what’s starting to unfold. You will be presented with these opportunities to make more profits in the next 3 years than you accrued in the previous 9 years.

Watch My Video About What Is About To Happen Next: www.TheGoldAndOilGuy.com

Chris Vermeulen

Are you getting excited to buy oil stocks? you may want to think twice because the bottom may be in for oil but that is only the beginning of the bloodbath that is in-store…

On Wednesday Jan 27^th I wrote an article that gave you a picture perfect trade setup. The trade is on sugar or the SGG sugar ETF. As of this writing sugar is now over 10% in our favor from the original entry and trading at short term support.

This is a critical level to lock in partial profits and move your stop in the money for the balance of the trade to be safe. I just want to keep following up with this trade as many followers are in this trade with me.

Daily Chart of Sugar

As you can see in the chart below sugar price formation has turned bearish. With price breaking through support we have seen a beautiful wave of stops being triggered and traders selling their long positions.

There were a few ways to execute this trade. You can do what I do and trade the sugar contract using CFD’s. I do this with AVAFX as I like being able to trade smaller position sizes than that of a full futures contract. Or you can trade the SGG sugar ETF, you will need to have a margin account and be approved for short selling so we profit from price falling.

Sugar Trade Idea Conclusion:

In short, sugar was poised for a strong move down as mentioned Jan 17^th Read Post. But now is the time to locking in gains and tightening your stop. This was a simple and profitable setup and there is no need to give back these gains.

If you like this type of trading: Slow, Simple, Logical, Tradable Ideas then be sure to watch my video and join me at www.TheGoldAndOilGuy.com

Chris Vermeulen

January was the worst start of a New Year in the history of the US stock market.

Last week was one of the most intriguing weeks in global equity markets ever. As the week got started, there was a powerful sense of foreboding that stock markets around the globe were going to crash. Last Wednesday, January 20, 2016, many global indices were making new yearly lows, some of which had fallen below the 20% mark which have been associated with a new bear market.

Investors have been so scared and they pulled $24 Billion from their equity funds so far this month. They are fleeing into US Government funds shifted $5 Billion so far this year. This was the largest inflow of cash in over one year.

As I mentioned in last week’s article we should see the stock market stage a bounce or rally, and why this was a good price level for it to start. With everyone jumping off the ship bodes well that the market should go against the masses emotional trade. I took a long position on the SPY on Wednesday, January 20th 2016 with subscribers.

The SPX index took out the low of August 24, 2015, while the DJIA is still 600 points higher. The Dow Jones Industrial Average held above their lows of August 24, 2015 for a clear case of intermarket bullish divergence. This was validated last Friday, January 22, 2016, when each of these indices closed above daily resistance as the DJIA up over 200 points. That is not a bad recovery. However, maybe it was not so great when you consider that it had fallen 2300 points from the 17,750 high of December 29, 2015 just three weeks earlier.

The Asian markets, except the Chinese Shanghai Index, broke below its low of August 26, 2016 last week. It bounced back spuriously by the end of the week. The Hang Seng of Hong Kong fell to 18,534, its lowest level since June 8, 2012. The Japanese Nikkei plummeted to 16,017 on January 21, 2016, its lowest point since October 2014.

Now everyone is wondering if this is the end to the stock market decline? Will stocks resume their bull market? Do not be surprised to see a bounce up first from these levels.

Rallies in bear markets tend to be quite strong, fueled by short covering. Investors will be quite surprised this week as this is only a “counter trend rally” and not a “buy the dip” investment opportunity.

This big problem will become crystal clear to everybody in 2016. Oil is likely to continue to struggle, and China will continue its struggle. There is no money printing, and with a recent interest rate increase the stock market is inevitably going to go down. It appears likely that we will see a point when the Dow Jones is around 15,000, the same place it was at its peak in 2007. The worst has yet to come.

We are still going to have to face all the same problems. The continued debt crisis in Europe is unsolvable and the psychology of the financial community is going to be very bleak heading into 2017.

Debt, which is always the root of financial crises and their resulting economic contractions, didn’t go away. The financial system is even more dysfunctional than the one the U.S. was facing in 2007 to 2008. The Office of the Comptroller of the Currency, as of September 30, 2015 which insures U.S. commercial banks and savings associations, reported that they had exposure to $192.2 trillion notional (face amount) of derivatives. The report goes on to verify that only four banks hold 90.8 percent of all derivatives: Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America.

January’s sharp decline, coupled with all the negative news regarding the stock markets, presents a situation where the market participants should go elsewhere with their investment capital.

Crisis always brings opportunities for those who can see the obvious realities. I am very excited about what’s starting to unfold. You will be presented with these opportunities to make more profits in the next 3 years than you accrued in the previous 9 years.

Watch My Video About What Is About To Happen Next: www.TheGoldAndOilGuy.com

Chris Vermeulen