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Weekend Gold, Silver, Oil & Index Charts

Three weeks ago on February 5th, we saw an extremely high level of fear in the market with selling vs. buying volume at a 9:1 ratio.  We note that in 2009 this extreme level of fear occurred at the bottom of each significant pullback.

Since this panic selling low in February 2010 we have seen stocks and commodities work their way higher, which we expected. Overall the broad market looks as though it’s trying to make a move higher.

Below are some ETF charts of gold, silver, oil and the indexes.

GLD Gold ETF – Daily Trading Chart
Gold lead the market higher in 2009 and also lead the market lower in December of 2009. It looks as though gold could be starting a new trend higher.

You can see the clean breakout of the down channel and then a test of the channel at support.  This type of price action also forms an inverse head and shoulders pattern for those who like trading patterns.     This is very bullish price action.


SLV Silver ETF – Daily Trading Chart
Silver has much of the same chart features as gold, but is slightly skewed.  This is not particularly surprising though, as silver virtually always behaves with less defined chart patterns due to its characteristically funky price action.


USO Oil Fund – Daily Trading Chart
As with gold and silver, oil’s trading chart has formed a pivot low also, but the trend line is much steeper than what I am looking for.  I prefer a flatter trend line as price growth is more sustainable.

As you can see in on the USO chart, back in December price rallied at almost the same angle as is currently the case, and then notice what happened.  Once the momentum died out the price dropped straight back down.  I call steep trends like this a Parabolic Rally.

Scroll up and look at the first chart (GLD) and observe the parabolic rally going into December.  It too suffered a sharp drop straight back down when momentum died out.


Stock Indexes – SP500, Dow Jones, Russell 2000
Last week the market sold down the first half of the week, then bounced back up forming a possible pivot low. The daily chart for these indexes look virtually the same as the GLD, SLV and USO charts above for the past 5 trading sessions.

But, one little thing has me concerned….
When looking at the 5 minute intraday charts (posted below) you can see at the very last minute before the market closed HUGE selling volume flooded the ETFs.  The market ended up losing all of its gain for the day.

With any luck this was just end-of-the-month hedge, mutual fund, etc. portfolio rebalancing.  But I am somewhat concerned that more of this selling could step back into the market Monday or Tuesday.


Weekend Trading Conclusion:
Overall, last week started on a negative note but ended strong after forming a reversal pattern.

It looks as though stocks and commodities have formed an ABC retrace pattern and are now ready to move higher.

How much higher you ask?

Well, I believe 2010 is going to be a traders market. I envision an 8-12 month sideways consolidation (large bull flag) forming. If this materializes then buying on over sold dips, as we did on Feb 5th, and scaling out on strength at resistance levels will be our goal in the coming months.

A bunch of 4-8% trades is what I’m figuring, but with leveraged etfs we can double and triple those type of returns.  Now that is something to anticipate with delighted optimism!

If you would like to receive my free weekly trading reports please visit TheGoldAndOilGuy at: www.TheTechnicalTraders.com

Chris Vermeulen

[CU]

Gold & SP500’s One Candle Rebound To Riches

It’s been a great year for trading!
So far February, last week and this week have being absolutely amazing for both swing traders and intraday traders.

On February 5th we had extreme panic selling with nearly 35 sell orders for every 1 buy order on the NYSE. That extreme panic and dumping of shares was the day we jumped into the market and we nailed the bottom.

As my trading buddy David Banister from ActiveTradingPartners would say “Buy When They Cry!” and that is exactly what subscribers did. Since then our gold, silver and the index funds have been moving up nicely.

I would like to note that there were several more technical reasons why we jumped into the market that day but I won’t get into the nitty-gritty cause this mid-week update would be a trading book…


Explanation of What happened Last Week & This Week
Ok this may get a little confusing but try to stick with me here…

If you recall last Wednesday’s mid-week report which was called “Gold, Silver & Stock Indices on the Verge of Rolling Over”, I talked about how I was bearish on the overall market. This report has a bunch of detailed charts explaining what was most likely to happen next and some trading.

Well, the market played out just as we had expected. The market dropped 1.35% in over night trading and the following trading session providing intraday traders using ETF’s, Futures or CFD’s a net profit between 1.35% to over 100% return within 17 hours of entering a trade depending on which trading vehicle you used. Check out how this trade was executed by reading my report titled “How To Use Multiple Time Frames For Setups” which I send out the next day. Understanding how to trade using different time frames is a must for all traders and this report shows you how.


Now here is the part that has thrown a lot of traders off
Just to recap, I posted an extremely bearish report saying the sky is falling on Wednesday. Thursday morning the market moved down as expected, and then late Thursday afternoon I sent out a trade alerts to buy a bunch of precious metal and stock etfs.

I understand why emails flooded my inbox that afternoon…. Everyone wanted to know how I can say the market is falling then turn around and buy the very next day.

It’s actually a really simple answer. “I don’t fall in love with my positions” and “I re-evaluate the market after each new candlestick on the chart”.

Trading is not an easy task, that we all know. The market tests and bends my brain to the limit on a regular basis and if one cannot control their emotions and stick with a set of trading rules, then you will eventually lose all your money.

I have placed thousands of trades in my lifetime and pulling the trigger to get in and out of a position does not phase me anymore. But the problem is most people don’t want to exit a losing trade because then they are proven wrong and most people hate being wrong. If that’s what you are feeling, then you need fix it or get out of trading.

My general rule is “when in doubt, get out”. I would rather watch a trade move without me knowing I had it right, than be stuck in a losing trade, saying to myself, “Why the hell did I get into this trade?”

Re-Evaluating the Market or Your Investment
After each new candle is formed on a chart it is crucial to re-evaluate the charts. In other words if your main focus is to trade the daily chart then you better re-evaluate the strength of the chart each day and also check the 1 hour intraday chart for possible bullish or bearish patterns.

On the other hand, if you are an intraday trader focusing on trading the 1 hour chart, then you better be evaluating things every hour, and also check the 5 or 10 minute charts for patterns to keep an eye on price and volume action.

Below are daily charts of some ETF’s I trade showing how we have been trading the market. You can see February 25th the market reversed to the upside and that is when we went long again as prices formed an outside reversal candle and these funds have been moving higher ever since.


Mid-Week Trading Conclusion:

In short, it’s been a great start to the year with the market performing within its regular trading patterns between fear and greed.

I believe 2010 is going to be very tough for individuals who do not fully understand the market and how to manage risk. I figure the market is about to top in the next week or so then start to head lower. 2010 will most likely trade in a large sideways range for 8-10 months and maybe even longer. Being able to spot market reversals and trade them actively is were the money is this year. No grand slams, just a bunch of single base hits.

I would like to see the market rally and makes new highs but I am ready for what ever the market dishes out in the coming months.

I hope this report helped you to understand that trading is an active sport and being able to change directions one day to another is just part of the game.
If you would like to learn and trade at the same time I will be launching a service where I provide all my personal trades and analysis for your to follow along in real-time. Members will receive all my intraday and swing trade alerts for indexes and commodities Futures allowing you to trade which ever vehicle you want whether it’s an ETF, Leveraged ETF, Futures Contract or CFD. This way your timing is accurate and you can trade which ever investment you are comfortable trading with.
There will be a 24/7 chatroom allowing us to trade around the clock when setups arise. Also, members can swap ideas, ask me questions, make new trading buddies etc… There is even a squawk box feature! I can talk live with audio to everyone in the chatroom to the site can hear me for important news or trades alerts.
All trade alerts are instantly posted in the members area, chat-room and sent via email making it one of the most powerful trading services I have seen available online.
If you are interested please fill out the form to be notified for this service which will start the last week of March or the first week of April. It will have limited availability to keep it personal.
If you are interested check our my Trading Alert Services at www.TheTechnicalTraders.com

Chris Vermeulen

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How Much Higher for the Indices, Gold and the Dollar?

Last week was exciting as we saw stocks and gold close above the February highs which confirms we are in a new up trend. The question everyone is wondering is:

How far will this market go before rolling over?

This is a tough question but we can get a good feeling about the risk and if it’s worth putting money to work or not at this point. Here are my quick points and thoughts about the stocks indexes at the current price (March 5th closing price).
•   The market is extremely overbought on the hourly and daily charts. Buying here is just chasing prices around, and that is a net losing game.
•   Small Cap stocks have been on fire making a new higher for the year. This is very bullish but again buying here carries too much risk because after such a sharp price appreciation, we can see it all be given back just as quick.
•   Volume over the past three weeks has been below average and when I see higher prices on declining volume I expect prices to drop very quickly once the thrust upwards ends.



Stock Market Indexes – 21 Trading Days
Here is a simple chart showing the past 21 trading sessions. It compares the Nasdaq, NYSE, Russell 2000, Dow Jones, SP500, and Amex indexes.

As you can see the Russell 2000 (small cap stocks) and Nasdaq (tech stocks) have been on fire the past couple weeks while the solid large cap stocks lag.

Are The Small Caps Stocks Telling Us Something?
Its means investors and traders are confident enough to buy higher risk companies. This is good for the overall market because small cap stocks tend to lead the market in both up and down trends. What has me concerned is the low volume rally, which I don’t like.

One thing to note is that small cap stocks tend to do well during times when the US Dollar is rising. This is because they are not multinational dealing with currency exchange. So this small cap stock rally has me wondering if the US Dollar is about to continue its up trend or if investors really are comfortable with buying riskier stocks?


GLD Gold ETF – Daily Chart
Gold gained some ground last week but the majority of the money seemed to flow into small cap stocks. But take a look at this bullish chart.

This is a text book bull flag pattern complete with and ABC retrace, trend line break, and reversal candle off of a support zone. I am bullish on gold long term but think we could see prices rise a couple percent from here but will trend sideways/down for the next 2-3 weeks to digest the recent move up.


US Dollar Index – Weekly Chart
I have posted this chart several times in the past few months with 83 being a key resistance level. The dollar’s recent price action is very bullish and it is flagging just under this key resistance level. I feel the price is heading lower from here but only time will tell. A breakout to the upside will put a lot of pressure stocks and precious metals.


Weekend Trading Conclusion:
Last weeks strong rally into the close will most likely carry over into Monday and possibly Tuesday. The reason being is simply because retail traders and investors (John Doe’s) get excited when they see higher prices, thus it attracts more money into the market.

In short, I feel the market is overbought.  All indexes are trading at resistance other than the Russell 2K index, and volume is below average. I am going to wait and see how things unfold this week before thinking about getting committed to any more long positions. If anything I will be looking to short the market using the intraday charts for a quick trade. Again low volume rallies that are overbought tend to snap back very quick on an intraday time frame providing a 1-4 hour trade.

Get My Free Weekly Trading Reports: www.GoldAndOilGuy.com

Chris Vermeulen

[CU]

Gold, Silver, Oil and Natural Gas Mid-Week Trading Charts

So far this week has been pretty slow.  Large cap stocks continue to lag the market which can be observed by looking at the Dow Jones Industrial Average which still has room to move higher before breaking the January high.

One important thing to note is that volume has picked up this week considerably - particularly on the SP500 and OEX. It’s difficult to say if this volume is a good sign or not.

A lot of stocks and sectors are trading near their January high and this gives traders a reason to unload shares. On the flip side, the several sectors and indexes have broken their January high and this triggers a surge in volume as breakout traders try to take advantage of the new high and momentum. So you can see how the surge of volume is not a useful indicator right now.

Here are some charts of what I think we could see in the coming weeks.

US Dollar Index – Daily Trading Chart
I follow the US dollar index very closely simply because it affects the prices of stocks and commodities. I used a line chart below in order to take out the daily candle stick noise which made it very difficult for our eyes to pick up this pattern.

The chart shows a possible head & shoulders pattern and if that is the case then we should see the dollar start to slide lower.  In turn, this would boost stocks and commodities. This is the fuel that I think could really move the market sharply higher in the coming weeks.


GLD Gold ETF – Daily Trading Chart
The price of gold looks to be setup for a nice bounce off support and the timing could just work out if the US Dollar starts to drop over the next few days. There could be a low risk setup just around the corner.


SLV Silver ETF – Daily Trading Chart
Silver has held up well but today’s reversal candle to the downside scares me a little. The odds are that silver will carry this strong momentum selling down for another 1-2 days. Again, with any luck, it will test support and the US Dollar will start to slide lower.


Crude Oil – Daily Trading Chart
Oil has had a great run the past month but as you can see it’s currently trading at the top of a large trading range. I would like to see a sideways move before it takes another run at the $84 level, but the 7 day bull flag that formed two weeks ago may have been enough to maintain the upward momentum. Again, if the Dollar drops we will see oil rally.


Natural Gas – Daily Trading Chart
This chart is actually very attractive looking. Even if you do not understand how to read charts I think it’s safe to say this one is a no brainer 

I will be closely watching for a potential low risk setup in the coming days.


Mid-Week Trading Conclusion:
In short, stocks and indexes are trading at resistance levels with many of them making new highs and that is great to see.

A lot of things are trading in limbo waiting to see what the US Dollar is going to do. Several months ago I posted some charts showing that 81 would be a key resistance level for the dollar. If it broke above that then 84 would be the next key level to watch. So we just have to wait and see… the hardest part of trading is the waiting.

Gold, silver, oil and natural gas all look like they could continue higher in the next few days if things unfold that quickly. But the market always finds a way to drag out moves so we could still be a 2-3 weeks away.

I hope this report helps give you an idea of where things are at in the market.

If you would like to receive my Free Trading Reports and Analysis be sure to visit my website: www.GoldAndOilGuy.com

Chris Vermeulen

[CU]

Are Crude Oil & Natural Gas about to Explode?

Last weeks price action unfolded just as we expected. Money poured into stocks with the focus being on small cap, banks and technology stocks.  The fact that these sectors are showing strength while utilities, health care and consumer staples lag is a good sign that investors are once again taking risks in the market.

Because investors and traders are bullish on the stock market again the money flow into the safe havens like precious metals and energy has decreased.  I believe this is the reason stocks moved up last week while precious metals drifted lower.

Below are weekly charts (Natural Gas, Crude Oil and the Dollar) showing what I think is most likely to happen in the next few weeks and what should fuel the fire.

Natural Gas – Weekly Chart
Natural has been out of favor for the past 3 months with most of the selling happening recently as seen on the chart. In my opinion natural gas is over sold and about ready for a bounce.

The price of NG is now trading at a key support level but until the selling momentum stops and reverses back up I would steer clear of this commodity play. Natural gas is known for taking peoples money time and time again so trade this commodity very carefully.


Crude Oil – Weekly Chart
Crude oil has been trading in a channel for several months and is now testing the upper level. If we see the US Dollar drop in the coming weeks then I expect oil to surge higher along with natural gas. If oil breaks out then I expect to see the $90 level reached within a month.


US Dollar Index – Daily Chart
The US Dollar has put in a very nice bounce/rally since the low in November 2009.  Last month the dollar finally reached a key resistance level of 81.  I have been talking about this major resistance level since January as the Dollar would find it difficult to break above this level.

There is a strong chance we could see 78 reached which is the measured move down.  If we get follow through selling next week then I would expect 78 to be reached within 1-2 weeks and over the next few months we could very well test the 2008 low of 72.50.


Natural Gas – It’s the Season
Natural gas’ seasonal price action shows that the price tends to strengthen between February and April. So with NG at support and we are in March you can guess what I’m thinking… higher prices are where the odds are pointing.


Crude Oil – It’s the Season
It’s the same story as natural gas above….
Higher prices seem to be where the best odds are.


Energy Trading Conclusion:
As a technical analyst the above charts are pointing to higher prices in the coming weeks for natural gas and crude oil, which is exciting for us all.  BUT when things are this perfect looking we must be very cautious as the market has way to suck traders into these “perfect setups” and spit us out a couple days later for a nasty loss.

Understanding how the market moves is crucial for avoiding and/or minimizing losses when trades go against us.  That is why I continue to wait for my signature low risk setup before putting any money to work.

My focus is to take the least amount of trades possible each year, only focusing on the best of the best setups. My low risk setups require risk downside risk to be under 3% for the investment of choice. and the broad market needs to be showing signs of strength as well.  I use several different types of analysis to confirm if a setup has a high probability of winning and those which do are the trades I take along with my subscribers.

It is very important to wait for the market to confirm a move higher before taking a position when there is this type of setup.  The market could go either way quickly and jumping the gun is not a safe bet.

If you would like to receive my Free Energy Trading Reports, please visit my website: www.GoldAndOilGuy.com

Chris Vermeulen