Typically, the week before Christmas, stocks and commodities drift higher due to the lack of participants. Light volume favours higher prices, which is why stocks want to rise going into the holiday season.
The big money players, like hedge fund managers, are finished for the year. They’re sitting on the sidelines enjoying the holiday season while waiting for their year-end bonus checks.
Let’s take a quick look at how the week finished…
Friday was an interesting session as stocks and oil reached some key resistance levels. Below are my thoughts, charts, and a possible trade idea for next week.
Gold & Silver Thoughts:
Looking at the long term charts of gold and silver, I feel they could head much lower in the first quarter of 2012. The inverse relationship between the dollar index and gold makes me think this is a high probability scenario.
The weekly dollar index chart remains strong at this point and could start another very strong rally any day. Once the dollar starts heading higher, expect precious metals to move down along with equities.
SP500, Dollar and Volatility Index
Below are three charts stacked on top of each other. They are marked with my analysis and thoughts for next week. Personally, I don’t feel shorting stocks is a safe play. The last week of the year, we can see the volatility index (VIX), and the dollar, rise without putting pressure on stocks. So be aware of that.
TRADE IDEA – View Chart:
Crude oil looks like a great low risk opportunity (a real “Christmas” present!) from Mr. Market. SCO would be the ETF for US based traders. HOD, which is listed on the TSX, is good for Canadians. I favour this setup because I don’t feel that oil will be as affected from the holiday bulge as will American equities.
Pre-Holiday Trading Conclusion:
I was planning on avoiding the market Friday, but the charts were calling my name… The session ended with what looked to be a short squeeze. The remaining short positions didn’t get their expected drop in price. Consequently, when the traders all started to cover their shorts (buy) just before the close, it caused a strong surge higher.
I do not recommend shorting stocks next week because of the light volume. However, oil looks good to me.
Just thought I would share my end of the week thoughts, and wish you a Merry Christmas!
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This will be an interesting week as we look for the stock market to pullback.
The US dollar has pullback this morning and that has help lift stocks back up to their Friday’s high. This type of move is normal for the stock market as it tests trader’s emotions and trading skills. As we all know the market knows how to shake out the masses just before a big move. With any luck this morning’s move up will cause a lot of traders to cover their shorts and then the market will roll over and sell down sharply.
The dollar still looks bullish in my opinion and should continue up today/this week. If this happens it will put pressure on both stocks and commodities.
Gold and silver are trading sideways/down slightly this morning, nothing significant.
Oil is trading up near resistance in a rising wedge and my actually start to pullback very soon. I’m keeping my eye on it for a setup as we may go long an inverse oil fund this week looking for a 2-5 day pullback.
In this morning’s video I talk about how the market in generally likes to test high and lows and where we stand with our current position.
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I think you will admit that we are in the middle of one major crazy financial mess. The part that makes things really crazy is that it’s not just in the United States anymore but rather serious global problem which if not handled properly could change the way we live our lives going forward or possibly even spark some type of war, hopefully things don’t get that crazy… But I do know one thing. Fear is the most powerful force on the planet and people do some crazy things when they are backed into a corner.
Anyways, on a more positive tone… today China decided to help provide more liquidity for the financial system along with the central banks. This news triggered a monster rally in overnight trading making the market gap up sharply at the opening bell. This news did hit the US dollar index hard sending it sharply lower but the question remains “Will today’s news be a one week hiccup in the market?” If Euroland starts printing money it will likely send the dollar higher and stocks lower for 6- 12 months.
Just today I was joking with Kerry Lutz of the Financial Survivor Network about how each country should just give each other country a second chance. Wipe the dept clean and start over knowing this time around exactly how each country truly operates at a financial level allowing everyone to avoid a repeat of this BS. Some countries will get off way better than others because they would get so much dept wiped clean but isn’t it better than years of problems and possibly wars over food, gold, guns, oil and Canadian water? – EH
All joking aside, let’s take a look at the weekly long term charts…
Dollar Index Showing Possible Massive Rally If Euro Starts Printing Money:
I’m sure my off the cuff options/thoughts will cause a stir but I am fine with that. Everyone I talk to is thinking the dollar is about to fall off a cliff while I think it’s very possible that it does just the opposite. Either way I will be looking to benefit from which ever move unfolds.
Weekly Gold Chart:
Weekly Silver Chart:
Weekly SP500 Chart:
Long Term Thoughts:
I would first like to say that tonight’s report is out of my norm. Generally I do not focus on the big picture negative stuff and I like to avoid it for a few reasons… One, it’s just downright depressing to talk and think about. And Second I don’t want to be labelled as one of those “The Sky Is Falling” kinds of guys.
So, that being said I think these charts above show a situation what is very possible to happen in the coming 6-12 months. Keep in mind that my focus is on short term time frames as it allows me to avoid and actually profit from major market moves while providing enough information for my followers to learn technical analysis and trade management. And the obvious idea of not looking too far into the future with a negative outlook…
With headline risk changing the market direction on a weekly basis, this negative outlook could easily change in a couple months. I will recap on the big picture as things unfold in January/February.
Get these Free Weekly Reports EVERY WEEK
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I am not one to discuss fundamentals or macro views, but this situation in Europe is beginning to morph into a media frenzy. Price action in the marketplace is changing rapidly in short periods of time based on the latest press releases coming from the Eurozone summit.
I cannot help but comment on the seemingly arbitrary actions coming from this high profile meeting. Nothing has happened that market participants were not already privy too. The European Union is going to strengthen their EFSF fund by levering it up roughly 4 : 1. I have yet to hear how exactly they plan on doing this, but this action was no surprise to anyone that has read an article about the sovereign debt crisis in the past month.
There was also discussion about backstopping European banks’ capital position. Since European banks are holding billions (Euros) of risky sovereign debt instruments, it would make sense that their capitalization is a primary concern of Eurozone leaders based on current fiscal conditions. I would argue that the banks should be well capitalized regardless of economic or fiscal conditions in order for a nation to have a strong, vibrant economy that has the potential to grow organically.
The final piece of this week’s political nonsense involves write-downs on Greek debt in the neighborhood of 50% – 60% in order to stabilize Greece’s debt to GDP ratio. Apparently Eurozone leaders want to structure the write down so as to avoid payouts by credit default swaps which act as insurance against default. How does a bond take a 50% – 60% valuation mark down without a creating an event that would trigger the payout of CDS swaps?
If a write down of that magnitude does not trigger the CDS swaps, then I would argue they are useless as a tool to hedge against the default risk carried by sovereign debt instruments. If the CDS swaps do not payout as projected by European politicians, the risk assumed by those purchasing government debt obligations around the world would be altered immediately.
The impact this might have on the future pricing of risk for government debt instruments could be extremely detrimental to their ability to raise funds in the private market. Additionally, the write downs would hurt European banks’ capital positions immediately. If the CDS swaps were to pay out, bank capital ratios would suffer as those who took on counter party risk would be forced to cover their obligations thereby straining capital positions even further potentially.
Price action today suggested that the equity markets approved of the package that European leaders were working on. However, the biggest push higher came when news was released that China was interested in purchasing high quality debt instruments as a means to help prop up poorly capitalized banks and sovereign nations in the Eurozone through an IMF facility.
The market did an immediate about-face which saw the Dollar selloff while the S&P 500 rallied higher into the close reversing a great deal of Tuesday’s losses. Inquiring minds wish to know where we go from here? I would be lying if I said I knew for sure which direction Mr. Market favored, however that did not stop me from looking for possible clues.
It has been a while since I checked out the short-term momentum charts that are focused on the number of stocks in U.S. domestic equity markets that are trading above their 20 & 50 period moving averages. The charts below illustrate the current market momentum:
Equities Trading Above the 20 Period Moving Average
It is rather obvious that when we look at the number of stocks trading above their 20 period moving average that momentum is running quite high presently. This chart would indicate that in the short-term time frames equities are currently overbought.
Equities Trading Above the 50 Period Moving Average
A similar conclusion can be drawn when we look at the number of stocks trading above their 50 period moving averages. It is rather obvious at this point in time that in the short to intermediate term time frames, stocks are currently at overbought levels. This is not to say that stocks will not continue to work higher, but a pullback is becoming more and more likely.
Additional evidence that would support the possibility that a pullback is likely would be the recent bottom being carved out in the price action of the U.S. Dollar Index. The U.S. Dollar has been under selling pressure since the beginning of October, but has recently started to show signs that it could be stabilizing and setting up to rally higher.
The daily chart of the U.S. Dollar Index is shown below:
The U.S. Dollar Index is sitting right at major support and is oversold based on historical price action. If the Dollar begins to push higher in coming days and weeks it is going to push equity prices considerably lower. Other risk assets such as gold, silver, and oil would also be negatively impacted by higher Dollar prices.
Members of my service know that I focus on several sectors to help give me a better idea about the broader equity markets. I regularly look at the financial sector (XLF), the Dow Jones Transportation Index (IYT), emerging markets (EEM), and the Russell 2000 Index (IWM) for clues about future price action in the S&P 500.
During my regular evening scan I noticed that all 4 sector/index ETF’s are trading at or near major overhead resistance. With the exception of the Dow Jones Transportation Index (IYT), the other 3 underlying assets have yet to breakout over their August 31st highs. The significance of August 31st is that is the date when the S&P 500 Index put in a major reversal right at the 1,230 price level before turning lower. It took nearly two months to regain the 1,230 level and its significance continues to hold sway.
The daily chart of IWM is shown below illustrating its failure to breakout over the August 31st highs:
The chart above illustrates clearly that IWM has failed to breakout above the August 31st highs. I am going to be watching IWM, XLF, & EEM closely in coming days to see if they are able to breakout similarly to the S&P 500. If they start to rollover, it will not be long before the S&P 500 likely follows suit.
Currently the underlying signals are arguing for lower prices in the short to intermediate term. While it is entirely possible that the S&P 500 rallies higher from here, it is without question that current market conditions are overbought in the short to intermediate terms.
Key sectors and indices are not showing follow through to the upside to help solidify the S&P 500’s recent break above the key 1,230 price level. Additionally, the U.S. Dollar Index is currently trading right at key support in addition to being oversold. At this time I am not playing the S&P 500 in either direction, but I will be watching the underlying price action in the U.S. Dollar Index closely. I will be watching for additional clues in the days ahead.
Market and headline risk is high presently.
Subscribers of OTS have pocketed more than 150% return in the past two months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at http://www.optionstradingsignals.com/specials/index.php and take advantage of our free occasional trade ideas or a 66% coupon to sign up for daily market analysis, videos and Option Trades each week.
By: Chris Vermeulen & JW Jones
This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.
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How to trade oil is not an easy thing to do in today’s headline driven market. Even the best oil analysis which may have been correct will still be wrong at times. This is due to the fact that oil has many factors which play into its price. Things likes like extreme weather conditions, geopolitical events, currency fluctuations, economic conditions and supply and demand.
During any time of the day oil traders and their oil analysis stand a good chance of having one of these factors directly affect the price of crude oil messing up their charts.
But, I am a firm believer that these factors (news events) generally fall in line with the overall larger trend of oil. So understanding how to spot trends in oil is a vital part of the equation.
Another important aspect of trading crude oil along with stocks and commodities is for you to understanding how to trade price and volume at an intraday time frame. If you don’t understand candle sticks, chart patterns and volume will get your head handed to you more times than not.
Let’s take a look at some charts and my short video which cover everything you need to know in great detail…
How to Trade Oil Daily Chart Analysis:
Below you can see clearly how the overall trend is down for oil. You can also see the repeated bearish patterns and key resistance levels. In my oil analysis I focus on finding and trading the trend. You will not find me trying to pick a major top or bottom with my strategy; rather I focus on low risk high probability continuation patterns within a trend.
Once the trend stops and reverses there will likely be one or two losing trades as the investment shakes things up and sentiment slowly comes around and shifts to support the new trend in oil.
Intraday Crude Oil Analysis:
This is a chart of Oct 19th using a 5 minute interval. The annotations on the chart explain clearly what I saw and was hoping to see for an oil etf trade setup this week.
In short, I have been waiting for this setup to unfold for a few days now. This report goes to show that if you have the patients to site back, watch and wait you will trade with much less risk. By doing this you reduce risk on your overall position because you can time your entry 1-3 days before oil moves in your favour getting you the best possible price. Also the less time you have to keep your money in a trade the better because of the factors (news events) I told you about earlier. Cash is king! Get my bi-weekly reports and videos by joining my free oil newsletter here: www.GoldAndOilGuy.com
Chris Vermeulen
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Over the past year we have been learning more about the financial situations across the pond in Europe. With international issues on the rise, investors are panicking trying to find a safest haven for their capital. This money has been bouncing from one investment to another trying to avoid the next major crash in stocks, bonds, currencies and commodities. It seems every 6 months there is a new headline news issue at hand forcing the smart money to withdraw from one investment class too another hoping to avoid the next meltdown.
To make a long story short, I feel the market (stocks, bonds, currencies and commodities) are about to see another major shift that will either make you a boat load of money or you lose a lot of money if you are not positioned properly.
So the big question is “Which direction will these investments move?”
Let’s take a look at the charts…
Gold Weekly Chart – Long Term Outlook
Gold has just finished seeing a strong wave of selling this summer so it’s early to give any real forecast for what is next. That being said this long term chart may be telling us that gold’s rally could be nearing an end or a 12+ month pause could take place. If you have followed the market long enough then you realize that when everyone is in the same trade/position the market has a way of re-distributing the wealth to those who are savvy investors. Over the next 4-6 weeks there should be more price action which will allow me to get a better read for what is going to happen next.
Silver Weekly Chart – Long Term Outlook
Silver has been showing strong signs of distribution selling. Meaning the big money is moving out of this industrial and highly speculative metal. The interesting part here is that silver topped out much sooner than gold. Many times in the past silver has topped and or bottomed before the rest of the market reverses direction. So it is important to keep an eye on silver as we go forward in time because it tends to lead the market 1-2 months in advance some times.
SP500 Weekly Chart – Long Term Outlook
Stocks in general are still looking ripe for another major bull market rally. But if we do not get some follow through in the coming 1-2 months then this almost 3 year bull market could be coming an end.
Mid-Week Trend Trading Conclusion:
In short, the market as a whole is trying to recover from a strong bout of selling over the past few months. In my opinion the market is ripe for another leg higher. The reason I see higher stock prices is because decisions are being made across the pond to deal with their issues. Looking back it is similar to what the United States did in late 2008 – early 2009 just before the market bottomed.
Everyone right now seems to be saying Europe is screwed and that they are going about things in the wrong way, but if you think back that is exactly what took place in America not that long ago. And back then it was all over the news that the resolutions to fix the US would not work…. In the end, life continued, businesses continued to operate. Soon after decisions were made the stock market and commodities rallied and are still holding strong today.
Over the next week or two I am anticipating the market will provide some solid trade setups which I plan on taking advantage of using leveraged ETFS. During the volatile sideways market in August through till now I have navigated my subscribers using both bull and bear funds pocketing over 35% return in two months. If you would like to receive my pre-market morning videos, intraday updates and trade alerts visit my newsletter at: http://www.thegoldandoilguy.com/trade-money-emotions.php
Chris Vermeulen
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The past month has been a wild ride for both equity and commodity traders around the globe. Novice traders have had their heads handed to them and their investment accounts drained. When fear, uncertainty and volatility are running high, some of the best opportunities become available to those who know what to look for. These market conditions force you to focus and strive for perfection in finding low risk entry setups and to also actively managing positions with laser focus because within hours a winning trade can turn into a losing trade.
Looking back on the daily charts of the dollar, SP500, gold, and also the overseas markets it looks as though we are nearing a market bottom. I say NEARING because I think investments need more time for the current selling pressure and bearish sentiment to run its course, which could take another few weeks and possibly a few month before truly bottoming.
Let’s take a quick look at some charts…
SPY 30 Minute Chart Looking Back 2 Months
As you can see below price action has been wild. But for subscribers to my newsletter it has been a fun and exciting time having pocketed over 40% return from August 1st – up until today.
The point of this chart is to show you the basic market phases (Impulse, Uncertainty, and Corrective). Understanding how to identify each phase using momentum, price action, volume analysis and market sentiment is crucial for success in today’s volatile market. Once mastered you can trade virtually any investment with a high level of confidence, though I recommend mastering 3-4 investments at most and just trading those full time with pinpoint accuracy. Through my newsletter members learn exactly how to read the market and manage positions from my daily video market analysis, intraday updates, trade alerts and trading tips.
As you can see below I am anticipating weakness in the market over the next few days. Once those levels are reached or if the charts start hinting that a reversal back down is imminent I will be ready to take action using an inverse leveraged ETF.
Gold 30 Minutes Chart Looking Back 2 Months
This chart will piss some people off for sure… but the chart to me is still pointing to lower prices at this time. Until we get a breakout above the upper resistance level I am not bullish on gold. Keep in mind that during strong selloffs in the stock market almost all investment drop together (gold, silver, oil, stocks).
German DAX Daily Chart Looking Back 3 years
This chart shows the long term chart of the DAX which I think is giving us some insight to a global market bottom in the coming months. You will notice I painted the phases over the chart and where I feel the market is trading and where it is headed looking forward.
Dollar Index Daily Chart Looking Back 3 Years
The dollar also shows us three years for price action. If this strong rally continues in the dollar we will see lower stock and commodity prices for a few more months.
Trend Trading Idea Conclusion:
In short, I feel we have some very exciting times ahead along with huge potential trades starting to unfold. While I don’t want the market to collapse I will admit I prefer trading the short side of the market because fear is easier to trade than greed, not to mention prices drop much quicker than they rise… I’m sure you like making money fast also… J
I can email you my bi weekly reports and videos by joining my free newsletter here: www.GoldAndOilGuy.com
Chris Vermeulen
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-10-06 11:03:222014-03-06 13:03:38Gold, DAX and Dollar Still Pointing to Sharply Lower Prices
Over the past week precious metal investors have had a wakeup call from their big shiny nest eggs. Last week’s free fall in both gold and silver spot prices was enough to get investors into a panic. More on this in a minute though…
The fall was triggered by three key factors which caused the powerful move down. The first factor is based on pure technical analysis (price and volume patterns). Because the metals had such a strong run up this summer and prices had moved to far too fast, it is only natural so see price correct back to a normal price level. In general any investment that surges in one direction in a short period of time almost always falls back down shortly after. As I stated in my weekly report on August 31st, “gold is forming a topping pattern and all investors should take profits or tighten protective stops (exit orders)”. Three days later gold popped to the new high completing the pattern and was quickly sold off which continues to unfolding as we speak from $1920 down to $1532 in only a couple weeks.
The second factor which I think had the most power behind the drop were the margin requirements changes. This new rule literally overnight caused traders and investors holding to much of the metals in their account to liquidate (sell) their positions without having any say in the matter. That is when the most damage was done to the price of gold and silver.
The key factor was the US Dollar which rocketed higher and adding a lot of pressure to the metals. I also covered this in my Aug 31st report in detail. Overall, past few years we have seen both gold and silver move in opposite direction of the dollar. I don’t expect that to change much going forward. Back in August the US Dollar was coiling (building power) and it was only a matter of time before it would explode to the up side and rallied. This high probability move in the dollar was what triggered me to exit our long gold positions shortly after. I expected the dollar rally to last a month or more and that means we would see a lot of pressure on equities and metals going forward.
Now keep in mind, if Greece or other countries continue to get worse then we could see the dollar and gold move higher together as they are seen as the safe haven at this time. But with the nature of the two I am anticipating a rising dollar and sideways trading range for gold.
Ok, so back to precious metals investor sentiment…
Last Friday and all of this week I have been getting emails from traders and friends saying they are going to sell their gold and silver because they are concerned metals will continue to fall and because many of them are now losing money after chasing prices higher through the summer. The good news is that one of my best indicators for helping to time market tops and bottoms is to just read my emails and answer the phone. During market tops, generally the final month when prices are soaring to new highs every day/week is when everyone contacts me and says they just bought gold or are about to buy more gold cause it’s such a great investment. Once I start getting 2-5 of these messages a day alarms start going off in my head. This works the same with market bottoms. So with everyone now in a panic and selling their positions I feel we are darn close to one if we did not see it already…
Let’s take a look at the charts…
Silver Spot / Futures Price Chart
As you can see on the hard right edge silver is forming a very similar pattern which happened this past spring. I would like to note that this type of pattern is typical with extreme market selloffs as to how they generally bottom. I am anticipating silver trades in this range for a couple months and that we could see lower prices in the near term. But my upside target for silver in the coming few months is the $35-$36 level.
Gold Spot / Futures Price Chart
Gold is doing much the same as silver but I have noticed that when gold falls hard the second dip generally does not make a new low as often. If we do get a new low, all the better for buying on the dip but overall I feel gold should trade sideways for a couple months. My upside target for gold is the $1750-$1775 area.
US Dollar Index Price Chart
The Dollar index is looking ripe for another bounce and possibly another rally to new highs in the coming week. If this happens then we should see the SP500 short position (SDS) which we took Tuesday afternoon (Sept 27th) to continue rocketing another 5-8% in our favour again.
Mid-Week Trading Conclusion:
In short, I feel the US dollar is going to continue higher and that will put the most pressure on stocks, oil and silver. Depending how things evolve overseas gold could hold up and possibly rise with the dollar.
So far subscribers have pocketed over 40% gains this month using ETFs on the SP500, Dollar and Oil and are holding another winning trade in the SDS etf taking partial profits today. If you would like learn more about etf trading and receive my daily pre-market videos, intraday updates and detailed trade alerts which even the most novice trader can follow then join my free trading education newsletter and my premium trading service here: http://www.GoldAndOilGuy.com
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What a trading session Wednesday was with the FOMC meeting and the FED coming out leaving the Fed Funds Rate unchanged at 0.25% and saying the economy is looking weak and will not likely to get better any time soon. This wave of negative news triggered a selling spree across the board in stocks, metals, and oil. On the flip side all that money being pulled out of those investments was being dumped into bonds and the dollar currency.
So the question everyone is asking is why almost every asset class sold off after the Federal Reserve’s statement today? The next question is how do we position ourselves to profit?
Understanding how the market moves is not a simple task, if it was that easy everyone would be pulling money out of the market on a daily or monthly basis. With that being said, moves can be anticipated if enough indicators are pointing to the same outcome.
Gold, SP500 and Oil 10 Minute Charts Showing Todays 2:15 FED News
Over the past few weeks we have been seeing stocks, oil, and gold turn bearish with similar price and volume action. Having three major investment vehicles hinting towards a move in the same direction as each other increases the odds for that move to occur. With the Fed coming out with negative news and no quantitative easing on tap, a rally in the dollar was triggered because inflation (printing of money) is not in the picture for some time still.
Bonds and Dollar Index 10 Minute Charts Showing Today’s 2:15 FED News
Now if we look at the safe havens we can see the positive side to today’s news.
Bonds have been trading higher for some time and the key in trading is to trade with the trend. Though it’s easier said than done… In this morning’s pre-market analysis I talked about bond prices and how they are looking toppy but we need one more large surge higher before I will consider looking for a short trade setup. Today’s news sent bonds surging higher which I feel will happen for a few more days. Once the momentum stalls out of bonds, then I may be looking to short bonds using the TBT inverse bond fund.
The fact that there is no quantitative easing planned is bullish for the dollar. Stepping back a few weeks we have seen the dollar index rally very strongly. The move up was an impulse wave meaning a trend reversal from the multi-month down trend. Knowing that the dollar had shifted from a down trend to a strong uptrend prior to the Fed’s announcement today was our tip off to being long the dollar several days ago at a much lower price level.
Mid-Week Market Trend Conclusion:
In short, I feel the intermediate trend (5-20 days) remains firmly down for stocks and crude oil. Silver is more of a wild card because it is more of an industrial metal/speculative investment and it can move at times with gold or down with stocks…
Looking at gold. I am bullish on gold long term but at this time I remain neutral until I see how the next couple trading sessions play out.
Bonds I remain neutral because they have moved a long way without any substantial pause or pullback and I feel one really positive headline news item could send bonds sharply lower.
The dollar index shifted from a strong down trend to a very strong up trend last month and I feel we could see another substantial rally unfold. I have an 80.00 – 81.00 price target on the dollar index at this time.
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-09-22 00:56:312014-03-06 13:25:38Recent Market Trends Remain In Place – Get Positioned!
The past few weeks traders and investors have been completely spooked from the surge of negative news and collapsing stock prices. This fear can be seen by looking at the volume on the GLD gold ETF fund. With gold being in the spot light for several years now and the fact that anyone can own gold simply through buying some GLD shares. It only makes sense that reading the volume on this chart gives us a good feel for what the masses are feeling emotionally.
If we step back to trading basics we know that fear is the strongest force in the financial market for moving prices. And that there are a few ways to read fear in the market and the more which line up at the same time means there is a higher probability of trend reversal in the near future.
The first thing I look for is a rising volatility index (VIX). This index rises when investors become fearful of stock prices falling be hedging positions or flat out buying put options to profit from a falling market.
Second, I look for a high selling volume ratio meaning at least 3:1 shares traded are from individuals hitting the sell button in a panic thinking that the market is about to collapse.
And last but not least… I look at the GLD gold etf volume and price action. A surge in GLD volume after a strong move up means everyone is scared and dumping their money into a safe haven.
Let’s take a look at some charts to get a better feel.
GLD Weekly Gold Chart:
As you can see there are sizable price movements which ended with strong volume surges. Those volume surges mean that the majority of investors have reached the same emotional level and bought gold for safety (GLD ETF). Keep in mind that the big money players and market makers can see this taking place and that is when they start selling into that surge of buying volume locking in maximum gains before there are no more buyers left to hold the price up. Tops generally take a few weeks to form so don’t expect a one day collapse.
The recent rally in gold has taken place when stocks have fallen sharply. Money has been pulled out of stocks and pushing into gold but I think that is about to change…
SPY Weekly SPX Chart:
The past month has been a blood bath for stocks. But from looking at the charts, volume and the fear in the market I can’t help but think we are going to see higher stock prices as investors see stocks moving higher, they will pull money out of gold and dump it back into stocks and likely high dividend paying stocks…
Mid-Week Trading Conclusion:
In short, everyone piled into gold sending it rocketing higher and I feel it has moved to far – to fast and is ready for a pullback (pause lasting 2-12 weeks). In association with gold’s pullback I feel investors are now realizing they sold their stocks at the bottom of this correction because fear took hold of their investing decisions. Now they are starting to think about getting long stocks but it still may be a bumpy ride for a few weeks yet…
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Chris Vermeulen
http://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.png00adminhttp://www.thegoldandoilguy.com/wp-content/uploads/2014/11/tgaoglogo.pngadmin2011-08-17 23:18:042014-03-07 11:45:15Gold & Stocks Are About To Move in Opposite Directions Get Ready!
