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[CU]

Trends for Stocks & Commodities: Gold, Oil & Indexes

Stocks and metals have been on a steady rise this week.  The US Dollar drifting lower has helped to add fuel to the oversold bounce in equities and metals we are seeing.

Stocks - NYSE 65 Minute Chart
Stocks have started to show signs of a possible reversal to the upside. So far this week we have seen the major indices form a higher high and as of today are stuck under the key resistance level shown on the chart below. The rally seen this week has been on light volume indicating there is not much strength behind it at this time.

If buying volume picks up and we see the NYSE break this resistance level then money should start to pour back into the market as the first set up of higher highs and lows will have formed and that is the definition of an up trend.



Gold – 24 Hour Trading Chart Using 8 Hour Bars
This chart allows us to look far enough back to see key support and resistance levels. Today we saw gold sell down with rising volume which is bearish.



Oil – 10 Hour Candle Chart
The Oil fund is currently in the same situation as gold. It had a nice rally/bounce which was expected from the rather large sell off over the past couple weeks.



US Dollar Index – 2 Hour Chart
This chart shows the dollar rally that triggered the recent sell off in gold & silver from Jan 25th to Jan 31st.  So far in February, the dollar has drifted lower into a support level and bounced sharply on Wednesday. This is very bullish price action and points to higher dollar prices in the near future.



Stock & Commodity Trading Conclusion:
In short, stocks and metals rallied on light volume which is a sign of weakness. They are both stuck under a key resistance level and selling volume has started to pickup. To add more logs to the fire, the US Dollar appears to be picking up speed for another surge higher in the next couple days.

All of this leads me to believe this weeks rally is just a dead cat bounce and lower prices are just around the corner. But, because the 60 minute intraday charts have made a higher high, the down trend is now in question. When in doubt, just stay out. During possible tops or bottoms I find it best to stay clear of the market, even for day traders unless there are very strong price and volume surges occurring.

If you would like to receive these free trading reports please visit my website: www.TheGoldAndOilGuy.com

Chris Vermeulen

[CU]

Gold & SP500 Psychology:  They Bail, We Buy

Understanding market psychology is crucial for a trader’s success. But so many people get caught up in the daily market volatility, media coverage and “noise” of the trading environment, it’s almost impossible to not think and trade in agreement with the majority of traders.

However, effective technical analysis allows us to use trends, patterns and other indicators to evaluate the market's current psychological state.  Fortunately, this analysis can both enable us to independently forecast whether the market is heading in an upward or downward trend and do so against the grain of the majority.

It takes a disciplined trader to be able to watch and listen to the market doing one thing, filter out the noise, then do the opposite - all in a controlled manor. To this day I still find myself fighting the herd mentality at times and that is when I step away from the computer and regroup.

I have a simple rule that has saved me thousands over the years. I would rather miss a trade and learn what caused me to get confused, then to take a loss. 


Rule # 1 - When in Doubt, Stay Out!


There are two types of traders:

1.   Herd Mentality Trader – Someone who trades off fear and greed buying near tops and panic selling out at the bottom with the masses.
2.   Black Sheep Trader – A trader who stand apart from the masses and trades opposite to the “herd” during extreme levels.


Last weeks market action really allowed us to see which way the masses were moving. The extremely high selling volume and sharp price decline notified us that the market was trading off FEAR. And, last Thursday we actually saw PANIC which tells us the balance of the market (retail investors, John Doe’s, The “Herd”) were exiting their positions.

When we see this happen, it’s generally a good time to start scaling into long positions, as most of the down side has already happened.

I have been talking about an ABC retrace pattern for the indexes and gold for some time and last week we got just that. An ABC retrace is when we have 3 waves which are, down, small up, then another leg down.
In short this wave breaks the uptrend of higher highs and lows, as it forms a lower low telling novice traders to sell and go short. This is what causes the high volume and sharp sell offs.

Below are a few charts showing the 2009 July lows and where we are now, February 2010:

SP500 – Daily Trading Chart


SP500 – Daily Trading Chart


SP500 – Daily Trading Chart


SP500 – Daily Trading Chart


Intraday Price Action – If you want to see some exciting intraday trading charts check out the setups last week: http://www.thegoldandoilguy.com/articles/how-to-trade-intraday-gold-and-sp500/


Market Psychology Trading Conclusion:
Most get involved with the stock market because it looks like something they can quickly learn and start making money from home. But it doesn’t take long before they quickly realize there is more to trading than meets the eye.

While trading looks easy from a glance, in actuality I think its one of the toughest jobs out there.

Why?  Well, this is what you are up against:
1.   You are trying to predict something that is unpredictable
2.   You are trading against millions of other highly skilled traders
3.   You are trading against automated computers with complex algorithms
4.   You are trading with your hard earned money which causes fear and greed
5.   You must accept losing trades as that is part of the business
6.   You must trade with a proven trading strategy and follow the system
7.   You must understand money management and apply it to every trade
8.   You must truly love the market cause it will break you down mentally


I don’t want to say you must be a contrarian, but in reality you must do the opposite of the masses during times of extreme price behavior.

These extremes happen on a daily basis when trading intraday charts and every 4-6 weeks when looking at daily charts. The toughest part is to pull the trigger when emotions are flying high in the market and you are looking to do the opposite. It takes several trades before you even start to get comfortable doing this.

I hope this helps shed some light on market psychology.

If you would like to receive my Trading Newsletter and Analysis please visit my website: www.GoldAndOilGuy.com

Chris Vermeulen

[CU]

How to Trade Intra-Day Gold & SP500 with Low Risk Setups

Last week was an incredible week for trading the intraday charts. With rising volume and volatility prices began to move up or down for extended periods of time allowing traders to profit from these powerful short term price swings.

During times like these traders using the daily charts for their guide found the market very difficult to time because of the whipsaw action each day. In this case, it is definitely best to stay clear of the market until the dust settles.  But for a trader who watches the intraday charts, this is when serious money is made on a daily and consistent basis.

Most traders avoid using intraday charts because they either:
1.   Think it’s day trading and do not want to sit in front of the computer all day
2.   Do not understand how to trade in these “intraday” time frames.

Intraday trading is one of the most over looked yet most profitable trading strategies, in my opinion. One of the reasons I like/love it so much is the fact that it provides high probability setups on a weekly basis and trades generally last 2 -36 hours. Also, this strategy carries very low risk simply because you are in cash most of the time, putting your money to work only when high probability setups form.

If you are an active trader you should have been making money hand over fist last week. Below are close up shots of my charts:

My eSignal Trading Platform
This is my main trading screen which allows me to see the entire market. This, to me, is like a dashboard of an airplane. Each mini intraday chart is like a gauge hinting to what the plane in doing (horizon indicator, fuel, air speed etc.)  My custom dashboards quickly allow me know if the market is heading up or down, what speed it is moving measured by  volume and momentum, and if all pistons are firing which sector is really moving.

My Custom Dashboard
Quotes for every index and sector
Top Row:  60 minute charts with volume of:  DIA, SPY, QQQQ and NYSE
Second Row: 60 min chart of NYSE TRIN, NYSE Adv/Dec, 60min Gold, 60min Oil
Bottom Row: 120 minute chart of the US Dollar, Interactive Brokers Trade Window

In short, I can see waves of money flowing in and out of each sector.  These views give me a strong sense as to the strength of momentum.  From these observations I determine whether the setup is favorable for shorting into light volume rallies, shorting into resistance levels or buying oversold sell offs in up trends.

Also, the chart patterns on the 60, 240 and 480 minutes charts are so powerful and accurate that you only need 2-3 trades a week in order to make decent money.

I would like to note that I do have 4 larger charts with different time frames allowing me to really get a feel for a trade before I commit money. These charts are Weekly, Daily, 240 minute and the 60 minute chart.

If you want to see some exciting daily charts of gold, sp500, oil and silver check out my weekend report: http://www.thegoldandoilguy.com/articles/gold-sp500-psychology-they-bail-we-buy/



SP500 Day Trading Futures Signal – 30 Minute Chart
The SP500 ES mini contract, or you could have traded the SPY exchange traded fund, provided an excellent intraday short trade last Wednesday.

All the indexes (NYSE, NASDAQ, SP500, DOW)  drifted higher on light volume. While you can play the long side of these low volume rallies I prefer to stay in cash and wait for another short setup. Trading with the short term trend (240, 480minute charts) is crucial. Counter trend plays tend to be weak and short lived.

In short, the SP500 drifted into a resistance level on light volume and the NYSE TRIN indicator was rising in a very strong way. The combined information of price, volume and the TRIN indicator were screaming - short the market.

When the TRIN is above 1.00 it means the majority of the trades being executed on high volume NYSE stocks are sell orders. You don’t see the TRIN rise this high without the market selling off as it did on Feb 3rd.  But when it does, Bombs Away – time to go short!

The next day the index crashed with panic selling across the board. The NYSE had over 30 sell orders for every 1 buy order. Now that is panic selling and, coincidentally, exactly as has happened at each bottom formed throughout 2009.



Intraday Trading SP500 – 60 Minute Chart
This chart clearly shows the high probability setup which took a few days to form. A short position was taken during the small bear flag pattern. My short position was covered on the break of a new high formed on heavy buying volume.



Intraday Trading Gold Futures – 120 Minute Chart
Gold had virtually the same setup as the SP500.

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Intraday Trading Gold & SP500 Futures or ETF’s
As you can see intraday trading is nothing like what most people think it is. Trading using the 60, 240 and 480 minute charts really opens one’s eyes, allowing a panoramic view of the price action the market has to offer.

As most of you know, my goal is to trade low-risk, high-probability setups. And, the less time my money has to be in the market, the better.

If you are interested in getting My Intraday Analysis and Setups be sure to join my free newsletter for Trading Futures and ETF’s: www.TheTechnicalTraders.com

Chris Vermeulen

[CU]

Have Metals and Stocks Bottomed Yet?

Everyone is wondering if gold, silver and the indexes have bottomed after last week’s heavy selling. To put things into perspective there were over 30 sell orders for every 1 buy order at the NYSE. That is pure panic and to confirm extreme fear, several of my broker buddies said last week was crazy with clients demanding to liquidate their positions ASAP to be 100% in cash.

This type of sentiment and price movement warns us of a possible market bottom. I am getting the feeling that traders and investors have been expecting this sharp drop I don’t see or feel a large amount of fear in the marketplace. Last Thursday and Friday war crazy but I think we need one more drop to really shake things up before a bottom is set.

Below are some charts showing where the market currently stands and what the charts are pointing to.

GLD Gold ETF Trading – Daily Chart
Gold is clearly trending down on the daily chart. One more thrust down should shake things up enough to trigger the next rally.


SLV Silver ETF Trading – Daily Chart
Silver has formed a Head & Shoulders pattern and has broken through multiple support levels. A measured move to the down side would be $14 for silver which could happen in the coming days.


SP500, NYSE, GOLD Futures, US Dollar Index – Intraday Charts
These charts clearly show the price action of the past month. As you can see the trend of stocks and gold are down with consolidations (pauses). This is the exact reason why you must trade with the trend and not do counter trend trades. Bounces are more like sideway movements making it very difficult to try and play bounces in a down trend.

If you focus on selling at key resistance levels then moves tend to be much more profitable. That being said, we did go long last Friday because of the extreme oversold market level. I was expecting a follow through Monday or Tuesday which has yet to happen. We have now moved our stops to break even or better to eliminate our down side risk.


Spot Gold 24Hr Trading Chart
This chart says it all. The market and gold is very volatile making it difficult to trade right now. Bulls and bears are battling it out. Only time will tell!


Stocks & Commodity Trading Conclusion:
In short, it’s been a slow week without any real exciting moves. Thursday and Friday could be interesting if traders exit their positions going into the long weekend in order to protect themselves from any surprise economic news.

From the looks of gold, silver and the indexes I sense selling could be just around the corner. We are currently long a few positions with our stops are break even or better in hopes for a pop and rally going into the holiday weekend but only time will tell.

My wife and I have our first child due on Saturday so I may disappear for 1-2 days in the coming week as we welcome our little princess into this new and exciting world.

If you would like to receive my trading reports directly to your inbox please visit my website at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Disclaimer: I currently do not own any of the investments listed above.

[ysh02]

Hi Lion;
Happy New Year to you & your family
Congratulation to you for upgrading to become father!

Please inform if you have trading ideas to me.


yours sincerly


ysh02