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Gold Stocks, SP500 & the Dollar – What’s Next?

Investors around the globe are concerned with the economic outlook, not only with the United States but with virtually every country. This has caused not only investors but banks and countries to start buying gold & silver in order to be protected incase of a currency melt down in the coming years. The price of gold continues to rise because investors are not selling gold, instead holding it for long term gains/profits.

While the majority is concerned about the eroding economy, we have seen the opposite in the financial market. Gold and equities have risen… That being said the volume in the market remains light simply because the average investor is no longer putting money into the market for long term growth. Instead individuals are now focusing on saving and paying down debt.

That being said we all know light volume market conditions allow Wall Street powerhouses to bid the market up. Not to mention with quantitative easing taking place I’m sure that has also helped the market of late. While we don’t know for sure that QE is taking place as we speak, the sharp drop in the dollar and strong move up in gold are pricing this into the market.

Let’s take a look at some charts…

HUI – Gold Stock Index

This long term monthly chart of the HUI index provides valuable trading signals for both gold stocks and gold bullion. As you can see below this index is trading at a key resistance level after forming a bullish 3 year Cup & Handle pattern. The next 1-2 months for the precious metals sector will be interesting as it tries to break above key resistance. I would really like to see the HUI:GLD ratio break to the upside to confirm if the breakout occurs.

SPY – Daily Long Term Trend

The broad market looks to be forming a short term topping wedge. If this is to occurI expect it to take several weeks to play out. Looking at the chart if we use Fibonacci retracements along with trend line support we can get a feel for where this pullback should correct to.

That being said the broad market breadth and internals seem to be holding up indicating higher prices over the long run. While the short term price action is overbought and I expect a pullback to form, my analysis is pointing to higher prices as we go into year end.

UUP – US Dollar Daily Price Action

Although the majority of investors have a bearish outlook on the economy, we have seen a large price appreciation in equities and precious metals. This is largely due to the fact that the US dollar is quickly getting devalued. Simply put, as the dollar drops, it helps boost commodities and stock prices.

While a rising stock market is great to see, at some point the dollar will become so cheap that it will start to have a very negative affect on the US economy, commodities and stocks. Being from Canada it has always been more expensive to take holidays in the United States, and I remember paying $1.50-$1.70 for every $1 green back. But now the dollar is almost at par making holidays very affordable. The big question/concern is when will they ease off on the printing? At the rate which they are printing the greenback will be at par with peso… well not that extreme but you get the point Eh!

Weekend Market Conclusion:

As we all know the market has a way of making sure the majority of traders miss major turning points. The saying is, “If the market doesn’t shake you out, it will wear you out” and it seems we are getting the later…

The never ending grind higher in precious metals has not had any big shakeouts, rather its wearing out any short positions before rolling over to take a breather. As for the stock market, we are getting much of the same thing as the market grinds higher day after wearing out the shorts before rolling over.

That being said, there is more at work here than just regular market movements. With the light volume in the market we know there is price manipulation and QE (quantitative Easing) which is helping to boost prices and exaggerate market movements.

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Let the volatility and volume return!

Chris Vermeulen

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The Gold, Silver, Oil & SP500 Trading Charts

We are at the tail of another light volume choppy options expiry week and a big move is brewing… So I thought I would do a mid-week update on what I think is about to unfold in the coming days.

First off I will touch on gold. Everyone is in love with this shiny metal. But as I mentioned last week I think we are nearing a sharp correction. Previously I pointed out that we needed gold to make a new high to the $1275- 1285 area before everyone piles in and gets married to it, only then will the market reverse… Remember the market is out to take money from the masses and the gold trade is getting a little crowded in my opinion.

There are fundamentals which can be taken into account… but when has any investment moved perfectly inline with the underlying fundaments? I’ve seen investments lead fundaments by years, and other times lag the fundamentals by years, not to mention manipulation… but that’s a whole different subject. That being said I don’t hold gold long term for the simple reason I don’t believe much in the buy and hold strategy, nor do I like to watch investments go much more than a few percent against me… I would rather sit in cash jumping in and out when things look ripe for the picking.

Ok let’s jump into the analysis…

Gold Futures Price – Daily Chart

As you can see gold is forming another rising bearish wedge. The last one lead to a $100 drop in gold earlier this year. The part that I find exciting is that this recent run up has been on relatively light volume and without any decent pullbacks along the way. What does that mean? It means fewer people are willing to pay top dollar for it and the big money is riding this train up until they feel its getting exhausted then they will start unloading large amounts at a premium. We also just saw another new high on Thursday which happened on light volume tells me this rally just may have the herd all rounded up before the slaughter.

Silver Futures Price – 15 Minute Intraday Chart

While I don’t trade silver as much as gold due to the added volatility/whipsaw action, this intraday chart is starting to show signs of weakness with a rising bearish wedge today. This is just an intraday chart but these short term patterns tend to lead the longer term charts pointing out exhaustion is starting to creep into the market. Both gold and silver could still have a blow off top and shot up, which is why I have been saying to stay long metals (if you have a position) and to keep raising stop as it could continue higher for some time if a new wave of buyers step in.

Crude Oil – 4 Hour Chart

Oil has been choppy recently making it difficult to get a good read off the chart. Currently it is testing support and looks to be forming a possible right shoulder. It could have some good potential to the down side if we get a neckline break. I’m keeping my eye on it for another low risk entry point.

SP500 ETF – Daily Chart

This chart clearly shows some extreme bullish sentiment levels in the market. The bottom indicator is the total put/call ratio and when it is below 0.80 in an environment like this, it means there are too many people bullish on the market. So with todays spike low its easy to tell that the majority of traders/investors are bullish as they buy all the call options they can.

That being said, we generally get a serious shake out before the market reverses. What I mean by that, we should see the market gap substantially higher or spike up intraday as key resistance is broken. This forces all the shorts to cover their positions just before the market rolls over and sells back down. That’s what I am looking for to take action.

Mid-Week Trading Conclusion:

In short, gold and silver are looking and feeling toppy here. While I am bullish on them long term, we could see sharp pullback which could take months to regain these prices. I am not short metals yet but very close to taking a short counter trend trade.

Oil continues to looks bearish but is taking a long time to play out. This is a 4 hour chart and if we do get this neckline breakdown, it would still take 1-2 months to pay off. That being said, it looks like it will go lower.

SP500, I think the chart gets the point across. The important part to know is that it should go another 0.5% – 2% higher before it goes lower as that would make for a perfect pop & drop reversal pattern which I will alert members to when the time comes to short.

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 2-4 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis per customer’s request, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of traders and they will receive direct personal responses regarding trade ideas and analysis going forward.

Let the volatility and volume return!

Chris Vermeulen
www.TheGoldAndOilGuy.com

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Gold forms Overbought Rising Wedge at Resistance

Sunday Sept 12
Precious metals soar as investors flock to gold and silver. But are they looking deep enough to truly understand the current trends at hand?

When reviewing the metals sector I like to look at it from different angles to get a solid understanding of the patterns and trend forming. I follow multiple time frames along with monitoring the gold mining stocks. Gold stocks tend to lead the price of gold bullion and when its out performing the price of gold substantially by 10% or more you should be expecting a pause or pullback in both gold stocks and gold bullion prices temporarily.

Below are a few charts showing the long and short term trends for gold.

Gold Bullion Price – Weekly Trend Chart

Gold continues to be in a strong up trend. The occasional test of support at the major moving averages can provide great long term points for adding to a position. The 50 period average is one which is tested frequently.

Looking at the weekly chart does give me a red flag for the intermediate price of gold. While the trend is clearly up I can’t help but notice the rising wedge which is a bearish pattern. During an uptrend we want to see bull flags and pennants, not a grind higher forming a narrowing range. This grind higher could unfold much similar to the price action of 2005 and 2007 instead of a correction but I am leaning more towards a sharp correction because more people are bullish on gold now then they were during the June top.

For those looking at gold as a long term investment/currency can be patient and wait for a pullback to a major moving average before adding to your position then you would lower your overall risk for this position. You will understand after reviewing the following charts.

GLD – Gold Bullion ETF – Daily Chart

(This fund moves identical to spot gold price so even though I am showing you GLD fund, the spot gold chart is doing the exact same thing.) As you can see below the price of gold is trading at resistance and becoming choppy. Buying gold at resistance does not make much sense to me. There is a very good chance gold will move lower in the coming weeks providing a better price for long term investors to add to their positions. For example, if you waited for the weekly chart to pullback to the 50 period moving average that would be like buying this GLD fund at $113, which is an 8% discount.

Gold continues to hold up within its channel but this week we could see fireworks if the price breaks below the blue support channels.

Gold:Gold Stocks Comparison – Daily Chart

This chart shows the performance of gold vs gold stocks from the Feb 2010 lows. The blue line is the performance of gold stocks while the red line shows gold’s performance. It’s obvious that when everyone is bullish on gold they buy the highly leverages gold investments in order to take full advantage of the upcoming move. This is much like reading the put/call ratio for trading the SP500 and it measures the bullishness of the precious metals sector.

When gold equities are strongly out performing gold bullion you should be thinking about raising your stops, taking partial profits and or hedging your long term position until the sector stabilizes is not trading at a premium.

Precious Metals Sector Trading Conclusion:

In short, Gold is in a strong up trend and will remain in one for a long time. Commodities have higher percentage of going parabolic. That means there’s a small chance that gold continues to move up quicker and quicker surging hundreds of dollars in a very short period of time. That being said, it’s not very likely, and from a technical point of view those buying gold now are paying a premium in my opinion.

Being a patient trader is not easy, but waiting for low risk entry points is very rewarding on many different levels when done correctly.

Get my detailed ANALISYS and TRADES for Oil, US dollar, Treasury notes, the broad market, and Sectors. Be sure to join my ETF Trading Service at: http://www.thegoldandoilguy.com/specialoffer/signup.html

Chris Vermeulen

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Precious Metals Equity Index Form a Triple Top, What’s Next?

Wed Sept 8th, 2010
I am going to step out on a limb in this report and cover what I think to be an intermediate top in the precious metals sector. Everyone I speak with and from the hundreds of emails I get I would say the vast majority are bullish on gold and silver. That being said, I feel we are 3-8 days away from a pop and drop in the price of gold.

Below are my explanation and charts of what I think is unfolding.

HUI – Gold Bugs Index

This chart tracks a basket of gold companies and can be used as a leading indicator for gold bullion at times. This index tends to lead the price of gold before rallies and also during declines. I have seen this lead by a few hours and even up to 7 days. I find it out perform when gold is about to rally, and under perform when gold is topping or about to start another move down.

It looks as though we are forming a triple top which also happens to be at a previous 2009 resistance level. Each time this level has been reached sellers take control and send the market sharply lower. There have been several long upper wicks formed in the past few sessions telling me that buyers are pushing the price up, but sellers hit the sell button pulling the market right back down. If this triple tops plays out, I would expect a multi month correction to take place.

UUP – US Dollar ETF

The US Dollar looks to have found support at the March/April lows and has put in a very solid rally. If the chart pattern is correct then it looks as though the dollar will breakout to the upside and run to $24.75 area. The relationship between the dollar and the precious metals sector is generally inverse, meaning if the dollar rallies both gold and stocks should fall.

GLD – Gold Bullion ETF

The chart of gold has identical patterns no matter if it’s this ETF or spot gold price. So this analysis goes for both ETF and gold bullion prices. Anyways, the past two times gold rallied for this length of time without any sizable pauses we saw the price of gold drop $70 per ounce, and $140 per ounce which is equivalent to $7-$10 drop on this GLD fund which is a decent size move.

The chart is screaming of a nasty correction to occur any day now. With gold testing the June highs I feel its only days away. What I am looking for is a pierce of the June high. That will suck in the rest of the bulls as they jump on the band, and cause all the shorts to cover their positions. This causes a pop, and once buying starts to dry up, the big money will start to sell down the price to trigger the stops and start a multi day waterfall sell off.

With the declining volume as the price grinds its way higher it tells me fewer individuals want to buy in at these high prices. Once the price starts to slide it will cause the stops to triggered. And because there have not been any substantial pullbacks along the way, there is a larger number of stops sitting in the market waiting to get hit.

Mid-Week Precious Metals Trading Report:

In short, I feel precious metals are on the verge of a sharp correction which may only last a few days, but the drop will be substantial. I still think we could see a few more up days or sideways session before this happens as the June high for gold bullion should be penetrated before the market truly reverses back down.

Anyone long gold, silver or PM stocks should be thinking of tightening their stops and for the gold bugs to mentally prepare them selves for a correction.

I hope my bi-weekly trend reports helps shed some light on the market for you. My trading alerts and frequent updates are reserved only for subscribers, so if you would like more trading analysis, updates and trades please join me at: www.TheGoldAndOilGuy.com

Chris Vermeulen

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High Volume Resistance Plagues Precious Metals, Oil & SP500

Sunday Aug 29th, 2010
Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.

Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.

SLV – Silver Bullion ETF Trading

Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.

Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.

GLD – Gold Bullion ETF Trading

Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.

USO – Oil ETF Trading

The oil ETF broke down from its large multi-month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.

SPY – SP500 ETF Trading

The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.

Weekend Equities and Commodities ETF Trading Report:

In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.

That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.

If you would like to get my ETF Trade Alerts for Low Risk Setups checkout my service at: www.TheGoldAndOilGuy.com/specialoffer/signup.html

Chris Vermeulen

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How To Trade Gold and Silver’s Volatility

Wed Aug 25th
Understanding the key differences between both gold and silver’s risk/volatility levels plays a large part in how I choose a low risk trade setup. Those of you who follow me already know the GLD etf is my favorite trading vehicle as it provides me with low risk trading setups along with a very high win rate.

Ok, let’s jump into to comparing gold and silver as trading instruments. I get the same questions from new traders all the time and I think these two questions will help clear them up.

The questions are:

1. Why don’t you give silver (SLV) trading analysis/signals?
2. Why don’t you trade silver?

My answer to the questions are simple and the chart below displays my view.

The gold (GLD) signals I provide work with silver so you can just trade silver when I have gold long or short trade. This is the reason I don’t provide much silver analysis because it’s duplicate info.

The chart below shows how gold and silver trade together when it comes to rallies and sell offs. But notice how volatile silver is while gold had a nice slow and steady trend upwards… Gold’s low volatility trending characteristics is what I love about it. Silver on the other hand is all over the place making it easy to have protective stops triggered before the majority of the trend is over. The silver charts almost always look terrible (tough to read for a direction). I really don’t like getting shaken out of a winning trade…

The pink circles show a quick short trade we did this week catching a quick 1% drop. The short trade was for FuturesTradingSignals where we capture 1-3 day extreme market sentiment shifts.

GLD – Gold ETF Trading Chart

The chart below shows several points as to why gold/silver was screaming BUY ME on Tuesday afternoon. The two things that carry 90% of the strength in my opinion are the candlestick pattern (Bullish Engulfing) and the volume surge. Those two things when seeing on virtually any time frame are a good indication to go long for 1-3 candlesticks minimum.

Gold VS Silver – 5 Minute 3 Day Chart

This chart clearly shows the power of trading a more volatile commodity with silver being the one. This week’s buy signal in gold is dwarfed by the performance of silver. Silver has always shined more in my opinion but when it comes to trading… It tougher than it looks to trade because of the wild whipsaw action it makes on a regular basis.

Gold and Silver Trading Conclusion:

In short, gold is the safe haven when it comes to actively trading. I do trade silver here and there but the size of my position is much smaller because of the difficulty level and volatility associated with it. I will not that I do trade gold and silver futures at times but for this report I focused on ETF’s.

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Chris Vermeulen

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Gold, Silver, Oil & SP500 ETF Trends & Reversal Levels

Trading commodities and indexes through the use of exchange traded funds sure keeps things simple for an average trader. These funds allow individual investors to buy and sell things like gold, silver, oil, the sp500 and other investments which where not available only few months ago like “wheat” for example.

One of the nice things with ETFs is that is allows everyone to follow the price of a commodity or index using any charting website and can even apply indicators to help spot key support and resistance levels using volume by price analysis. There is no need for a expensive data feeds, charting programs and you don’t have to worry about contract expiration.

Below are a few charts of the trend and my short term forecast.

GLD – Gold Bullion ETF

As you can see gold broke out of its support zone this week and popped into the next resistance level. This is very typical price action in the stock market. It is important to look at the price charts like an apartment building. It’s nothing but a bunch of floors and ceilings.

How it works; if a ball breaks though a floor it will naturally fall to the next floor and bounce. The same for if a ball breaks through a ceiling, it will hit the next ceiling then bounce back down. This is essentially how the market moves.

SLV – Silver ETF

Silver is forming a large pennant and nearing its apex. With the amount of volume traded within this large volume channel I would expect a sharp breakout once a direction is made.

USO – Oil Traded Fund

Crude oil had a funky day. Early Wednesday morning in pre-market trading we saw virtually every investment drop at the same time which was strange. Anyways the US dollar dropped sharply and oil when down also. Normally as the dollar drops oil rockets higher but that was not the case today.

Currently oil is trading between two trendlines and is trying to hold up. If we get a breakdown then we could see a sharp drop in oil over the next 1-2 weeks.

SPY- SP500 ETF Trading Fund

The SP500 is trading within a high volume channel, similar to silver. Once a breakout in either direction is made I would expect a sizable move lasting a few w

Mid-Week Commodity and Index ETF Report:

In short, the market looks bearish for the short term of 5-10 trading sessions. This is because everything looks to be trading near resistance levels. That naturally brings sellers out of the woodwork putting pressure on prices.

Silver and gold stocks tend to lead the metals sector on breakouts so it will be important to keep an eye on them as we near a possible breakout or breakdown in the metals. If you see SLV or GDX ETFs out performing the GLD gold fund by 2-3x then I would expect to see gold move higher later that session or the following day.

The US dollar trend usually helps to identify if oil will have downward pressure or not. Also energy stocks tend to lead the price of oil by a few hours and some times a day. I keep an eye on XLE energy etf for a feel of how the energy stocks are doing and also UUP US dollar fund.

As for equities tech, financials and the Russell 2K (small cap stock) tend to lead the way for the broad market. Watching XLK, XLF and IWM help to confirm breakouts.

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Chris Vermeulen

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How to Take Advantage of Panic Selling for SP500 and Gold

Did you close out any long positions today? Well if not then you are one of a few!

Today (Wednesday) the market gapped down 1.5% at the opening bell which set a very negative tone for the session. Volume was screaming as protective stops triggered and traders close out positions before prices fell much further. This gap seemed to have caught several traders off guard but those of you who follow my newsletter knew something big was brewing and to keep positions very small.

Just before the close on Tuesday I had a buy signal for the SP500 which was generated from the extreme readings on the market internals. After watching the market chop around and get squeezed into the apex of the rising wedge the past 3 weeks I knew something big was about to happen and I did not want to get everyone involved because I felt a large gap was about to happen and the odds were 50/50. Instead we passed on the technical buy signal and waited to see what would happen Wednesday.

Below are a few charts showing one of my extreme reading indicators I use which helps me to identify possible short term bottoms.

SP500 – SPY Exchange Traded Fund

This daily chart of the SPY etf clearly shows that when we see panic selling in the NYSE which I consider 15+ sell orders to each buy order to be PANIC SELLING. This is shown using the purple indicator at the bottom of the chart. Today there was an average of 37 sell orders to every buy order which tells me the majority of traders are closing out all their long positions.

In an uptrend this indicator works very well and can help time a bottom within 1-4 days. As you can see on the chart below we just had a huge sell off and everyone seemed to be exiting their positions. This panic selling tends to carry over for a couple sessions until the majority of traders around the globe are finished selling.

The problem with this indicator is that in a down trend we tend to get these panic selling spikes regularly which means this time it may not work out because of the trendline break today which I think has officially changed the trend from up to down. Because of this possible down trend starting I feel its best to wait and see if it’s a dead cat bounce or if there are real buyers behind it, then we will take action to go long or short the market.

Market Internals – Put/Call Ratio & NYSE Advance/Decline Line – 60 Min Charts

Here are two charts which are currently at extreme levels. This typically means we a bounce should occur the following day or a gap higher. If you did not know there was a strong trendline breakdown today you most likely would have taking a small long position into the close.

The Put/Call ratio when above 1.00 means more people are buying put options, meaning they are leveraging themselves to make money if the market drops. As a contrarian indicator, if everyone is buying leverage to the down side then they should have sold their long positions already. That would mean most of the selling has already taken place in the market thus it should have some upward bias in the near term.

On the other side you can see the NYSE A/D line which shows how many stocks on the NYSE are advancing and how many have moved lower. When this indicator is below -1750 then we know the market is oversold on a short term basis and there should be some upward bias in the near future.

Now Lets Take A Look At Gold

Gold was left on the side of the road today as traders and investors focused on the equities market. I was actually a little surprised that it didn’t make a big move today because the US Dollar rocketed higher for the entire session. Anyone who has been watching gold closely already knows that gold is doing its own thing now… Some days it moves with the dollar, other days it does not… its become much more random than it used to be.

Anyways it looks to be forming two patterns… first one is a bull flag. If a breakout to the upside occurs that would send gold to the $1230-40 level.

The second pattern is a mini head and shoulders pattern which would send gold down to the $1180 area if the neck line is violated. It is a very tough call for gold.

Mid-Week Technical Traders Update:

In short, it’s going to take a day or two before we get a feel for the SP500 as we wait to see if it bounces with volume behind it. I personally would like a bounce so we can short it. It is unfortunate how the market broke down today. We were so close to getting a really good setup in either direction but the FOMC meeting shook things up and caused the large gap which in turn made a large group of traders miss that beautiful drop… It’s frustrating when you wait for something only to have a piece of news mess things up. That’s just part of trading though.

As for gold, I feel it’s a 50/50 trade and could go either way so I am not going to take a position right now. I’m just going to wait for the market to tip its hand a little more before I jump.

I hope you found this information useful. If you would like to receive these trading reports, updates and ETF alerts be sure to visit my service at: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Stock Market Report – What To Do Now!

Another blood bath in the market today but this time it’s a total market melt down with Stocks, commodities, precious metals, and the US Dollar plummeting lower.

Since late April the market has become very unstable with large intraday price swings. Since then it has only gotten tougher and tougher to trade. While there have been some decent setups having caught a few nice SP and gold trades, this is a time when the big money guys step back from the market until the dust settles. Only taking small quick trades to profit from the wild daily swings which happen in a blink of an eye.

Gold, its trading at a key support level now that is dropped $20 to $1220. But this type of selling tends to carry over for a 1-2 days in gold as the rest of the world realizes the drop and they sell out of their position. So I’m not doing much on gold right now. If we get a nice low volume drift up today or tomorrow we could take a short position but going into the long weekend I think cash is the safe thing to do. We could see gold dip to the 1200, 1175, or 1150 area depending on how the rest of the world reacts to today’s sell off.

Oil, it’s in a down trend selling off hard with the US dollar which is not normal. If we see the US dollar bounce I figure oil will take another beating… It could drop to $62 a barrel over the next month or so…

SP500 is WAY oversold, and has been for about a week now. The index went from an uptrend and we bought the oversold dips, but then the market turned into a down trend and shorting the bounces is what we are now looking for. On the short term basis, trading the SP with a swing trade carries a ton of risk. If this is the breakdown of the head & shoulders pattern everyone is talking about then we could see the market drop another 100 points real quick. On the other side of that coin, this week we have seen 90% of volume being selling volume which indicates washout panic selling and tends to be a bottom for a bounce or rally. So you can see how shorting an oversold market is dangerous and why buying a falling knife is also equally dangerous. Waiting for a setup is crucial.

I am not sure if I will be around for the close today as I’m spending the holiday with my wife and daughter which is much needed. But what I am thinking could happen if the market stays down at least 0.5% lower for the day is an afternoon sell off around 3:40-3:45 when end of day orders, margin calls and the leveraged ETF rebalancing starts to happen. This sell off tends to last 4-10 minutes but it has the chance of triggere a much larger sell off into the close so scale out quickly once some of your position is in the green.

If any of you are day traders then you will know trading between 11:30 – 3:00 is a waste of time in most cases. The best trading is between 9:35 – 11:00, and 3:30 – 4:00pm. That’s when the market makes real moves/trends which are tradable for making real money. Many of you are trading through the afternoon and just churning your account trying to make money but you just paying a lot in commissions and adding more stress and risk to trading than there needs to be. As much as we don’t like to see large moves without us, part of trading is to wait for some good plays and not get sucked into trading the noise in the market…

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Talk to everyone later
Chris Vermeulen

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Market Meltdown & Metal Missiles – SPX, Gold, Silver & Oil

June 30th, 2010
What a nutty week for the equities market! The bleeding has not led up with almost 2 weeks of straight selling. Also we are seeing oil break down with a rather large bear flag and if that happens, which it looks like it will… then hold on tight or cash out of the market!

There has been nothing but negative news for the past month and its not looking like there is much light at the end of the tunnel for a long time still… The only places which people feel some safety is in gold and silver. That being said the market is way over sold here and we could get a bounce lasting a couple days soon. But that bounce will be sold and pulled back down as it looks like a new bear market is starting.

Here are few charts of how I am seeing things in general.

Gold ETF GLD – Daily Chart
Gold has formed a large cup & handle pattern. It has held up well during the recent weakness. But zooming into the intraday charts I do have some concerns about a sharp sell off in the very near future. We recently bought gold at $1226 and sold out between $1255-1260 a couple days later because it’s not just screaming at me as a great buy. I am not a gold bug, I’m a trader who finds low risk opportunities, gets in and out with maximum profits and minimal draw downs spending most of my time in cash. They way I see things is that there is always another trade just around the corner.

Silver ETF SLV – Weekly Chart
This is a weekly chart and goes all the way back to 2008 showing a very large cup & Handle. We could technically still see silver trade sideways for several months before it reaches the apex and is forced to breakout in either direction. The up side potential for a cup and handle pattern is 100- 300% of the height of the cup. So this means $1450 gold and $29 silver using the minimum potential. Now you can see why so many people are buying precious metals… they want a big move… All that excitement and greed could catch up to them if we see a complete market melt down again which will pull EVERYTHING down with it including gold and silver. This is one of the reasons why I cashed out this week near the high.

Crude Oil Fund – Weekly Chart
Oil formed a triple top over the past 10 months and has started to head south. We have seen selling volume drop during the test of resistance which is not a good thing. A heavy sell off from resistance as everyone bailed out of the investment sent oil tumbling and just this week oil started to break down from its bear flag. We are looking at USO to possibly drop to the $25-27 area and oil to drop to the $60-62 level over the coming 2-3 months.

SP500 ETF SPY – Weekly Chart
The SP500 along with several other indexes have formed a head & shoulders patter and appear to be in the process of breaking down through the necklines. If this unfolds then we are looking at much lower prices for stocks. It is important to buy some protection on the down side or get into cash until the dust settles as we can always buy back in, but we cannot get back lost money as easily.

Mid-Week ETF Trading Conclusion:
In short, I really hate to be negative on the market and economic outlook. I know if the market crashes again the majority of individuals who have worked hard, saved money and invested using mutual funds will lose most of their money in a fraction of the time it took to create the wealth, and that is a uncomfortable thought. Nothing worse than just getting to retire then seeing half of your money vanish.

Anyways, the good news is that we can avoid these market crashes and actually take advantage of them using inverse ETFs which go up 2 or 3 times faster than what the market is declining. These powerful trading tools if used correctly can make us a fortune while others are losing their shirts.

Currently I am in cash and have taken a couple scalp short trades taking advantage of the market falling on Tuesday and again today. These trades only last about 10 minutes but generate some fast profits. You can see the short I did yesterday which explains what I saw and when I put on the trade: http://www.futurestradingsignals.com/trading-education/es-mini-scalp-trade-video/

On another note, Tomorrow is Canada Day and I am Canadian so… I will be done around 10:30am ET once the jobs numbers come out and the market trades for an hour incase there is a nice short or long trade for some quick money – eh!

If you would like to get my trading alerts please check out my websites at www.TheGoldAndOilGuy.com or www.FuturesTradingSignals.com

Chris Vermeulen