After briefly reaching highs above $2000, Gold has fallen to $1785 (-14%) following the deep selling in the US major indexes throughout most of April & May 2022.

Interpretation Of The Current Consolidation In Gold

My team and I see the recent lows in Gold as similar to the April/May 2009 consolidation after the Global Financial Crisis. Also similar to the January 2013 consolidation before an extended -34% price decline took place – ending in December 2015.

The primary difference between now and then is that the US Federal Reserve is currently initiating a new round of Quantitative Tightening (QT), raising rates, while battling Inflation. In both the previous examples, the US Federal Reserve was moving aggressively into Quantitative Easing, attempting to aid in the recovery of the US & the global economy.

It seems to me, that the underlying factors driving the price of Gold have drastically changed. All it would take for Gold to break into a new trend, up or down, would be to see some new catalyst or contagion event come to life.

Gold Weekly Chart

Gold weekly chart

Gold Establishes An New Momentum Base While USD Rallied +15.75%

The strength of Gold over the past 15+ months while combating the strength of the US Dollar has been impressive. I’ve shared my thoughts in many interviews over the past year suggesting Gold was in a consolidation range (moving downward) while still holding up impressively as the US Dollar continued to skyrocket higher.

Trends in the US Dollar and Gold, I believe, are directly related to underlying global economic factors. These factors are prompting a shift away from traditional Growth sectors and pushing traders to reconsider the safety of precious metals. Another factor is that the US Federal Reserve has been actively telegraphing rate increases for nearly 12+ months as Inflation started to surge in early 2021.

I see the extended consolidation in Gold over the past 15+ months, above $1700, as a new momentum base for the price – similar to what happened in 2009 and 2013. The next question is “will it break upward or downward?”.

US Dollar chart

As time progresses, we’ll have to see how the US Dollar and Gold react to the Long-Term Resistance area I’ve highlighted on the chart above.

Plan A vs. Plan B For Gold Throughout 2022

I like to consider trading to take high probability opportunities within confirmed/defined trends. The smartest move for Gold traders right now is to wait for any future price confirmation before trying to guess which direction Gold will move.

Plan APlan B
Watch the $1775 level as critical supportWatch the $1735 level as critical support
Consider the current bullish price trend as Neutral
if any daily close breaks below $1775
Consider the current bullish trend as continued
Bearish if any daily close breaks below $1680
If the price recovers above $1775 after moving lower,
adjust to a potential bullish price trend for gold.
If the price breaks to below $1735, do not attempt
to ‘bottom-pick’.

These Plan A and Plan B constructs are how I think of trading in general.  It is not worth trying to guess where the price may go or if I’m missing out on some opportunity.  Risking 5% or 10% of my capital on a guess is just not worth it to me. I could be wrong in my guess multiple times trying to chase an emotional belief that a bottom or top is setting up. This, in turn, could destroy 25% to 40% of my trading capital in the process.

If I’m patient and wait for the market price to confirm a trend, then I’ll be able to execute a high probability trade with limited risk.

Falling Back To Long-Term Technical Analysis As A Guide

I created this chart in early 2021 highlighting my cycle expectations for Gold over the next 3+ years. Throughout most of 2021 and into early 2022, I expected Gold to trend downward – reaching a low price near $1625 sometime near February-May 2022. The recent low in Gold on May 16, 2022, was $1785. Prior to that, Gold reached a low of $1676.70 on March 8, 2021.

Although my $1625 level has not been reached yet, I am eagerly waiting for the next phase of my prediction – the potential rally wave that should start in June 2022 or soon after. This next rally phase may target $2000~2050, then stall for many months before continuing to trend higher, targeting $2400+.

Patience is the key to all trading and long-term success. Knowing there are opportunities for very short-term trades every day is fantastic if that is your style. I prefer to trade longer-term swing trades, protecting my capital and trading the most efficient setups.

In my opinion, the best opportunity for Gold traders is to wait for price confirmation of my predicted cycles. Once this happens, then look for opportunities when we know Gold has exited this consolidation phase.

WHAT STRATEGIES CAN HELP YOU NAVIGATE THE CURRENT MARKET TRENDS?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens. This is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there? How can they be deployed in a bond replacement strategy?

Sign up for my free trading newsletter so you don’t miss the next opportunity!

We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies which include a real estate ETF. We can help you protect and grow your wealth in any type of market condition. Click the following link to learn more: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

In today’s trader tip video, Chris talks about SMH which is the Semiconductor ETF. We are just starting to see technology stocks come back to life, and money is starting to flow back into these gross stocks.

Overall, we are keeping our eyes on this trade setup in SMH. It has a good potential rally of 6 to 7% rally over the next week or so, which has potentially already started. SMH is a very quick trade. We get in, look for the move, and start to scale out as it moves higher.

TO LEARN MORE ABOUT SMH – WATCH THE VIDEO

Subscribers: Please let us know what you would like to learn and we will add it to the roster of our weekly Technical Trader Tips!

Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!

TO EXPLORE THE Total ETF Portfolio, PLEASE VISIT US AT The technical traders. You’vE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American stock trader who made a $100 million trading profit by shorting stocks in the great crash of 1929. He is considered a pioneer of day trading and was the basis for the main character of the best-selling trader’s book by Edwin Lefevre called Reminiscences of a Stock Operator (www.Amazon.com).

Jesse Livermore stated: “When trading stocks I always look for favored groups to get weaker and collapse.” “This usually meant a correction was coming in the overall market.”

This is how Livermore called the market turn in 1907, and 1929, as the market leaders rolled over first.

Here are some additional Livermore quotes that are relevant to our current market environment:

  • Stocks are manipulated to their highest prices possible and then sold (distributed) to the public on the way down by selling the stock into the rallies.”
  • “The big money was not in the individual fluctuations but in the main movements—that is, not in reading the tape but in sizing up the entire market and its trend.”
  • “The speculator who insists on trying to profit from daily minor movements will never be in a position to take advantage of the next important change market-wise when it occurs.”
  • “After establishing my position all I had to do thereafter was just sit tight and let the market run its course.”
  • “Cash was, is, and always will be king.” “Always have cash in reserve.” “Often money that is just sitting can later be moved into the right situation at the right time and make a vast fortune.”
  • “There are times when a trader must be out of the market and waiting on the sidelines.”

Livermore also correctly stated that “What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly built into human nature, that always gets in the way of human intelligence.”

We don’t have to look too far to find favored stocks whose prices have completely collapsed. But to keep things reasonable let’s just look at Apple, a stock that was highly favored that has recently been experiencing weakness.

APPLE DROPPED -27.36%

Apple (NASDAQ: AAPL), is a popular American multinational technology company that specializes in consumer electronics, software, and online services. Interesting side note: Apple now has cash and marketable securities that exceed $200 billion.

Apple was one of the most favored stocks in 2020-2021. It rallied from a March 2020 $53 low all the way up to its January 2022 $183 high. It then experienced a three-month sell-off where it gave up about –18.04%. However, it immediately followed that downswing with an impressive $30 rally of +20%. But that rally turned out to be nothing more than distribution at the top as the stock then plummeted by $50 per share -26.42% as it breached $132.

APPLE INC AAPL NASDAQ DAILY

Apple price movement chart

THE ANATOMY OF A TRADE USING PRICE – APPLE STOCK EXAMPLE

When using price to trade, it is a good idea to measure the price swings and record their movements: $ amount, a percentage amount, number of bars, and number of days. We then utilize this information to let the market tell us what to do and when we should do it.

The following examples will act as a price guide to walk us through the process of measuring, using, and benefiting from the knowledge we glean from looking closer at the price swing action:

APPLE INC AAPL NASDAQ 4-HOUR DOWNSWING

This downswing was from September-October 2021: it measured -$19.00, -12.06%, 38-bars, and 27-days.

Apple downswing 4-hour chart

APPLE INC AAPL NASDAQ 4-HOUR UPSWING

This upswing was from October 2021 – to January 2022: it measured +$44.66, +32.28%, 127 bars, and 91-days. It was more than two times greater in price and three-times greater in time than the previous downswing.

Apple upswing 4-hour chart

APPLE INC AAPL NASDAQ 4-HOUR DOWNSWING

This downswing was from January 2022 – to March 2022: it measured -$33.04, -18.04%, 94 bars, and 68 days. Its percentage of -18.04% exceeded the previous downswing of -12.06%. This increase in percentage is a big red flag as the price is telling us that the trend is changing.

Apple downswing 4-hour chart

APPLE INC AAPL NASDAQ 4-HOUR UPSWING

This upswing was from March 14, 2022 – to March 29, 2022: it measured +$29.62, +19.73%, 23 bars, and 15 days. This upswing gave us the perfect opportunity to liquidate our long position or at the very least downsize our position.

Apple upswing 4-hour chart

APPLE INC AAPL NASDAQ 4-HOUR DOWNSWING

This downswing was from March 2022 – to May 2022: it measured -$47.50, -26.39%, 73 bars, and 51 days. Its percentage of -26.39% exceeds both previous downswings of -18.04% and -12.06%. This increase in percentage confirms that we are now in a downtrend.

Apple downswing 4-hour chart

As the market is currently working on an upswing, we should keep in mind that the previous upswing was +$29.62 or +19.73%. Apple is giving us another opportunity to liquidate any remaining holdings anywhere from our current price level to over $160.

The Sign That The Trend For Apple Has Changed

It should also be noted that the 2020 Covid downswing from January 29, 2020 – to March 23, 2020, was -$29.50, -35.85%, 74 bars, and 53 days.

The current 2022 downswing from the $183 peak to the $132.50 low is -$50.68, -27.67%, 193 bars, and 139 days.

The 2022 downswing exceeds the 2020 Covid downswing in both price and time: -$50.68 vs -$29.50, and 139 days vs 53 days. This is a major red flag signal that the trend in Apple has changed.

Let us remember Jesse Livermore stated: “When trading stocks I always look for favored groups to get weaker and collapse.” “This usually meant a correction was coming in the overall market.”

This is how Livermore called the market turn in 1907, and 1929, as the market leaders rolled over first.

LEARN more about price action FROM OUR TEAM OF SEASONED Traders

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover. 

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.

HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY

At TheTechnicalTraders.com, my team and I can do these things:

  • Reduce your FOMO and manage your emotions.
  • Have proven trading strategies for bull and bear markets.
  • Provide quality trades for investing conservatively.
  • Tell you when to take profits and exit trades.
  • Save you time with our research.
  • Provide above-average returns/growth over the long run.
  • Have consistent growth with low volatility/risks.
  • Make trading and investing safer, more profitable, and educational.

Sign up for my free trading newsletter so you don’t miss the next opportunity!

We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies which include a real estate ETF. We can help you protect and grow your wealth in any type of market condition. Click the following link to learn more: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Managing emotions you say? Often we hear that we are supposed to trade without emotion as if we’re robots.   That’s a big fat myth. 

If you can keep your head when all about you are losing theirs….
From “If,” by Rudyard Kipling

We’re in a challenging market.  Here are some thoughts on how to not just survive but thrive as we work through a significant peaking phase of the economic and market cycles. 

Know Thyself

It’s critically important that we understand ourselves and what trading or investing style we’re best suited to.  We’re all different, and approaches to trading are not a one size fits all proposition.  Some people are suited to long-term investing, while others are better suited for the hyper-fast action of day trading.  Or something in between or a combination thereof.  

Many traders and investors do not understand and accept their own biases, strengths, and weaknesses. Often they invest in the stock market as the trader they want to be rather than the trader they actually are. They may fail if they’re playing at the wrong place on the trading spectrum.

If you’re a long-term investor, there’s nothing wrong with sitting on the sidelines in cash or mostly in cash.  A bullish trend will re-emerge eventually.  Relax.  Enjoy the pause.  Preserve capital.  Have cash and a shopping list prepared for longer-term holdings as conditions improve.  

If you’re a daytrader, market volatility gives opportunities.  But you better be very good at what is a challenging game if you don’t want to blow up your account.   Shorter timeframes can be the most difficult to be consistently profitable. 

If you find that you can’t sleep at night, you’re exposing yourself to too much risk.  Get smaller if you need to and wait for more favorable conditions.  Pick strategies and sizes that can’t hurt you too badly.  You don’t want to have a huge setback and have to wait ten or twenty years or more to recover.

Making Sense of the Information Deluge

The “Information Age” that was so heralded as I grew up, has become a raging “Mis-Information Age.”   

The analogy of trying to drink from a firehose seems inadequate.   We’re in more of an information tornado these days.  We can easily let ourselves be inundated from all directions with too much information, prolific misinformation, and often conflicting and useless opinions.  

How do we make sense of it all? What are we looking for? 

We’re, of course, looking for precious signals amongst the noise.  Those insights can help us to make good decisions consistently.   Such signals are there, but they can easily be drowned out and lost.

I can’t consistently guess what the Fed will do, where money will flow, or what some talking head on TV or social media says.  Opinions, including my own, are not necessarily reliable.  But I can study and follow the visible signs of money flow in the charts.

Here is where Technical Analysis keeps me on track.  Price and volume do not lie.  Support, resistance, trendlines, and other indicators give us essential clues to what is happening versus what is “supposed” to happen.   It’s critical that we not just see reality but also accept it and adapt our plans appropriately.

Have a Trading Plan

A well-thought-out plan is a roadmap that can keep us sane, solvent, and making progress.

A good plan starts with a clear and realistic objective.  For most, that is long-term financial security and the preservation and growth of our resources.  For some, the focus is more on immediate income.

The plan should detail how much and what kind of risk you’ll take on and how you’ll manage that in a way that can’t take you out of the game.

Be willing to revise and improve that plan.  But be aware of changing your plan willy-nilly.  Don’t be a “holy grail” seeker constantly changing strategies in search of the perfect one.  It doesn’t exist. 

If we think we know it all, that’s a warning sign of missteps to come.  The words “I know that” can be very dangerous and keep us closed to further learning.  We should always be students.  We’re better off if we’re constantly learning, improving our approach, and executing as per our plans. 

Understand the role of emotions 

There’s a model of how the human brain works, with the left brain being analytical and the right brain being emotional.   The left brain tries to make logical sense of things through the dissection of data and rational analysis and is easily occupied with numbers and charts.

If only it were that simple.

The right brain is the source of emotional responses.  Try as we may, we can’t just shut that off. Many studies show that our decisions are greatly influenced by the right emotional brain, mostly made unconsciously.

Rather than trying to suppress our emotions, I find it more helpful to observe and acknowledge them.  For example, when I’m feeling FOMO, it’s better to recognize what I’m feeling and maintain awareness of how that may affect my decision-making.  That works a lot better than pretending that I’m immune to FOMO altogether.  

Take a Step Back

It’s essential to keep the big picture in mind.   Nobody likes to hear, “It’s only money,” and I don’t like saying it.  Money is important.  It’s the fungible resource that allows us to be more of who we are – for better or worse.   Money can provide abundance and financial security for ourselves and our loved ones.  It enables a good quality of life and the means to be generous.   

Intrinsically, money is neither good nor evil.  How we obtain it and what we do with it is what matters.    Pursuing and preserving money is a noble cause for the overwhelming majority of us with noble intentions.   It is okay – actually imperative — for us to do everything we can to be skilled at getting it and keeping it. 

We can’t forget to take care of our own mental and physical health.  We need to take care of ourselves to be here for those we care about.   Don’t neglect to spend quality time with friends and family.  For all of its usefulness, no amount of money can replace our health and loved ones.   Never forget to keep those ends in mind.  They are our raison d’être.

Conclusion

After many years of buying and selling options using a wide variety of strategies ranging from the simple to complex, I find that a simple strategy, like selling puts, can be one of the easiest to manage and most reliable for generating regular profits.  Don’t make it more complicated than it needs to be!

Sign up for my free trading newsletter so you don’t miss the next opportunity!

want To Learn More About Options Trading?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.   

Our Options Trading Specialist, Brian Benson, has been on fire. Of the last 24 trades he has made, 20 of them have finished in the money – that’s a 77% win rate!

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. Brian, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to subscribe, click here:  TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders.com

In today’s trader tip video, Brian talks about why you should trade the SQQQ in the bearish market that we are in. The SQQQ is a triple leveraged inverse ETF, inverse to the QQQ. SQQQ has excellent liquidity in both the shares and the options.

One way to take advantage of that expensive option premium is a Call Diagonal Spread. In this volatile market, what we are looking to do, is roll this forward with a short call a couple of times. We can also collect some additional credits against that.

TO LEARN MORE ABOUT THE SQQQ – WATCH THE VIDEO

Subscribers: Please let us know what you would like to learn and we will add it to the roster of our weekly Technical Trader Tips!

Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!

TO EXPLORE THE Total ETF Portfolio, PLEASE VISIT US AT The technical traders. You’vE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

Traders have access to an overwhelming amount of market indicators. But does a trader really need any of these indicators to be successful at trading? At the end of the day, the price determines our loss or profit. Therefore, we should focus our research on price action rather than time lagging indicators or market fundamentals.

Following and trading price simply means that the market tells the trader what to do and not the other way around. Being one with price deposits money into a trader’s account. Whereas fighting price withdraws money out of a trader’s account. The price action is “Always” right as it does not care what a trader’s opinion or bias is.

Bull markets can go on for many years, but bear markets happen unexpectedly and can quickly destroy a trader’s profits or even their account. Bear markets move with a greater velocity than bull markets and they are accompanied by high volatility due to investor emotions (Fear, Greed, & Hope).

The simple definition of a bear market is a drop in price of -20% or greater from its recent maximum peak. Therefore, once a market drops -by 20% or greater, it is a bear market.

SUDDEN BIG price action UP DAYS CAUSE “FOMO”

Bear markets behave differently than bull markets in that bear markets are known for having sharp rallies. These rallies may last from 1-2 days to a few weeks. When these rallies occur, they tend to be an irresistible trap for many investors who are experiencing the fear of missing out “FOMO” syndrome. Institutions and professionals use “FOMO” to liquidate existing holdings and/or short the market.

History has shown that some of the greatest stock market percentage gain days have occurred during bear market periods. The following table is from Wikipedia and shows us that most if not all the extreme daily percentage gains or losses occurred within bear market time periods.

LIST OF LARGEST DAILY CHANGES IN THE S&P 500 INDEX

https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_S%26P_500_Index

“SUCCESSFUL INVESTING IS A BATTLE FOR FINANCIAL SURVIVAL” – G.M. LOEB

Volatility generally has ruined many investors and traders. It’s one thing to trade a stock that experiences a 1-3% daily move. Trading in a stock, however, that is swinging 5-10% or has a sudden earnings surprise gap down of -20% is dangerous as it has the potential and high probability of eventually bankrupting most trading accounts.

Gerald Martin Loeb (July 24, 1899 – April 13, 1974) was a founding partner of the E.F. Hutton & Co. brokerage firm, acquired by Shearson Lehman Brothers in 1987 for almost $1 billion. He was a renowned wall street trader and the author of The Battle for Investment Survival (www.Amazon.com).

Loeb stated: “When I started investing about 1921, it seemed a peaceful enough occupation. By 1943, I started calling it a “Battle”, though a lot of people might have used the term much earlier from 1929 to 1932. But now in 1957, it seems to be a “War”.

Here are some relevant quotes for our current market environment from Loeb’s book:
  • “I favor doing one’s major forecasting from the tape or, to put it another way, from the price movement.” “This to me is elemental and necessary to success.”
  • “The preservation of capital should be looked upon as something that normally costs a price.”
  • “It is far better to let cash lie idle than to buy just to “keep invested” or for “income”.”
  • “Losses must always be cut. They must be cut quickly, long before they become of any financial consequence.”
  • “The lessons of the 1923 stock market break taught me what I had to know to not get caught in the crash of 1929 to 1932.”
  • “There have been at least 8 periods since the turn of the century (1000) when the stock market, as measured by the Dow Jones Industrial Average, has dropped as much as 40%.” “It has happened before and of course will happen again.”

Let’s review and study some current markets that are now in a bear market.

SPY S&P 500 -20.58%

SPY S&P 500 ETF – The SPY has experienced a sharp -18.04% sell-off during the last 51-days. Even though the SPY has not closed below the dreaded -20% peak-to-trough level, price action has violated this level intraday.

If or when we are fortunate enough to get a sharp multi-day rally back up, we should be looking to liquidate any stocks that we are still holding. Depending upon the rally magnitude a trader may want to consider buying an inverse ETF of the SPY such as SH ProShares Short S&P 500 Inverse ETF (-1x).

Market volatility remains high, and history has shown it may expand considerably. For most traders, the best advice is to go to cash and ride out this storm from the sideline. In case you think this statement seems extreme please review the accompanying stock charts.

SPDR S&P 500 ETF TRUST SPY ARCA 4-HOUR

SPY S&P 500 price action

DEERE & COMPANY -29.01%

Deere (NYSE: DE), is a major American multinational manufacturer of farm machinery and industrial equipment.

Deere’s price action, after taking out a 10-month triple top and making a new all-time high, plunged by -29.19% in just 30+ days. This is the worst drop in 14-years as Deere cited supply chain snags, rising inflation, and unfavorable currency translation headwinds.

DEERE & COMPANY DE NYSE 4-HOUR

Deere & Company price action

TARGET CORPORATION -43.42%

Target (NYSE: TGT), is an American department store chain and the eighth largest retailer in the United States.  

Target’s price action has dropped about -40% in the last 30-days including a whopping -25% a single day. Target had missed its earnings forecast by -$1.50 citing inflation, and supply chain factors. This was the biggest loss in Target’s stock price since 1987.

TARGET CORPORATION TGT NYSE 4-HOUR

Target Corporation price action

ROSS STORES INC -47.23%

Ross (NYSE: ROST), is an American chain of discount department stores.

Ross price action has dropped more than -35% in the last 30-days including an opening price plunge of just shy of -25%. Ross’s massive opening price drop was precipitated by the company’s first-quarter 2022 earnings update where they reported comparable-store sales declined -by 7% due to inflation pressures impacting the retail consumer.   

ROSS STORES INC ROST NASDAQ 4-HOUR

Ross Stores price action

TESLA INC -48.95%

Tesla (NASDAQ: TSLA), is an American automotive and clean energy company that designs and manufactures electric vehicles, battery energy storage from home to grid-scale, solar panels and solar roof tiles, related products, and services.

Tesla’s price action has dropped more than -44% in the last 45-days.  Only a few months ago Tesla’s market cap was over $1 trillion. At its current level, Tesla’s market cap is now $687 billion which represents approximately a $400 billion loss in value from its early January 2022 high.

TESLA INC TSLA NASDAQ 4-HOUR

Tesla price action

LEARN more about price action FROM OUR TEAM OF SEASONED Traders

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover. 

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.

HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY

At TheTechnicalTraders.com, my team and I can do these things:

  • Reduce your FOMO and manage your emotions.
  • Have proven trading strategies for bull and bear markets.
  • Provide quality trades for investing conservatively.
  • Tell you when to take profits and exit trades.
  • Save you time with our research.
  • Provide above-average returns/growth over the long run.
  • Have consistent growth with low volatility/risks.
  • Make trading and investing safer, more profitable, and educational.

Sign up for my free trading newsletter so you don’t miss the next opportunity!

We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies which include a real estate ETF. We can help you protect and grow your wealth in any type of market condition. Click the following link to learn more: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

You bet there is, and I will touch on what real estate investors need to know shortly, but first, let us review the following.

We follow the US and Canadian real estate markets closely. Real estate is a very slow-moving asset, and it’s not always that exciting. When we receive our monthly rental property checks each month, it’s almost as boring as watching paint dry.

​​But, any wise investor knows that consistent and sustainable wealth is built over time and pays huge dividends down the road. This means that in 10 – 20 years, the rental properties will be paid off by the renters. The home values will be 1-4x more valuable, and it provides cash/income for life.

I invest in real estate and think it’s one of the best long-term investments, beating out the stock market if you were to factor in risk/volatility. But there are times when buying real estate is not so good, and 2022 is one of those years.

In one month, real estate fell 14.7% in parts of Canada and the USA. In fact, the IYR real estate ETF fell 15% as well which helps confirm this during the same time window.

Here is some proof from the town where Technical Traders Ltd. is based.

My question to you is if you think it is wise to pay al time highs for a property or wait for another 15-25% correction before investing in a new home or rental property?

Source: Ruby Konkol Collingwood Real Estate Agent: https://rubykonkol.royallepage.ca/resources/

High-level view of investing in 2022

The US stock market contracted sharply in early 2022 while traders attempted to identify the risks associated with the US Fed rate increase. Behind the scenes, real estate investors and homeowners are under pressure due to higher costs on nearly everything. Gas, food, everyday items, credit card interest payments – almost everything costs more due to inflation and increasing fuel costs.

I remember in 2007-08 when Oil reached levels above $140ppb and the seemingly high costs of everything just before inflation peaked and the markets turned bearish. Back then, much like today, a period of extreme speculation seemed to permeate buyers and investors throughout the US.

What broke this trend was the Global Financial Crisis. When the economy started to unravel, excessive credit/debt levels suddenly became unmanageable for nearly everyone. What seemed like a reasonable and manageable amount of debt suddenly became excessive as the US Fed raised the Fed Funds rate from 1.0% to 5.5% – a 450% increase.

Recently, we’ve seen the US Federal Reserve raise rates from 0.25% to 1.0%. The Fed may raise rates again soon, trying to tame inflation. I don’t have a crystal ball, but it is not difficult to understand how inflation, higher consumer costs, and increased debt servicing costs are going to panic many real estate investors, especially after many years of ZIRP and low inflation.

real estate investors and homeowners Burdened By Higher Costs & Dwindling Incomes

US investors are struggling to manage their finances as inflation and higher cost of living expenses continue to eat away their extra cash. Remember, what happens on a consumer/retail level is often the “canary in the coal mine” type of scenario related to broader economic trends.  As consumers shift their spending habits, news travels quickly to other consumers about how the economic conditions are threatening their future.

The extreme measures taken when COVID-19 hit in February 2020 helped many real estate investors and homeowners, and consumers survive the extreme economic contraction that took place. Now that we are beyond extreme measures, prices have risen more than 25% over the past 24+ months for almost everything. Investors are struggling to manage their monthly expenses while still trying to enjoy their lifestyles.

A recent article highlighting former Federal Reserve Chairman Ben Bernanke suggests the current US Fed waited too long to address inflation issues. The steps now necessary to tame inflation could be very painful going forward. I see this as a very clear warning for traders/investors to keep their assets very liquid and to reduce their exposure to risk factors.

New Mortgage Demand Collapses As most real estate investors Are Priced Out Of Buying Homes

Sharp declines in mortgage demand is indicative of a collapse in consumer confidence and willingness to believe the economy is going to continue to grow. The warnings from the US Fed, as well as signs that international market conditions are deteriorating quickly, have US consumers and property owners on edge – watching for the next shoe to drop for real estate and home prices (again).

real estate investor mortgage demand
Real Estate Investing Mortgage Demand

(Source: https://www.investing.com/economic-calendar/mortgage-market-index-1427)

US Fed On Target For An 1100%+ Rate Increase Over 4+ months – Fastest In Recent History

The US Federal Reserve has continued to suggest further rate increases are necessary to help tame current inflation trends. By many conservative estimates, the US Fed is targeting levels at or above 2.0%. These extremely aggressive targets would represent the fastest and potentially largest rate increase in recent history on a percentage basis.

If the US Fed next raises interest rates by 0.50%, that would represent a 1100%+ rate increase in just 90 days.  Rates moving to 2.0% or higher soon, will represent a 1500%+ increase over 4 to 5+ months.

Consumer pressure - Federal Funds Effective Rate for real estate investors

(Source: https://fred.stlouisfed.org/series/FEDFUNDS)

Extreme Post-COVID Speculative Wave May Have Extreme Consequences

Inflation and many other economic issues are suddenly front-n-center for central banks and property investors across the globe. News that China’s real estate price levels continue to decline may be a very clear sign that China/Asia has peaked ahead of the US and other global markets. We’ve never seen anything like the sharp rally in global real estate price levels except for a brief period from 2004 to 2008 (see chart below).

real estate investors - median sales prices in US
Investment Home Prices

(Source: https://fred.stlouisfed.org/series/MSPUS)

That rally ended with the Global Financial Crisis. Home prices declined nearly -20% from the peak in Q1:2007 to the bottom in Q1:2009. If history repeats, US home prices will fall more than -20% to -25% for real estate investors as history has a way of repeating.

US Equity Market May Not Follow Asset Prices Downward As Economy Shifts

I want to urge you to consider how capital works in a shifting global market environment. Capital is always seeking out the best, most opportunistic, instruments for future gains and protection again risks.  Even when the markets were turning downward in 2009, a bottom set up in the US stock market long before other assets found their bottom in price. This same type of scenario may play out over the next 12 to 24+ months.

If my interpretation of market conditions is correct and the US Fed attempts to raise rates further to mitigate inflationary trends, it is likely that various asset classes, including real estate, ETFs, and individual sectors will unwind risks (as we are now seeing) and will possibly turn into future opportunities. What was overvalued in the past may turn into an incredible opportunity as capital shifts towards sectors/trends showing opportunities for future ROI.

The current market trends will present incredible opportunities for traders/investors that are able to protect capital, see and understand the risks and opportunities unfolding, and time their investments/trades properly in the markets.

LEARN FROM OUR TEAM OF SEASONED real estate Investors

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Managing risk and expectations for both investments in real estate and the stock market is the key for long-term success. Do this, and you can avoid the rollercoaster ride of doing nothing to protect your investments.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or months, while a 50% drawdown may take years to recover. 

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason. Most of them learned this principle the hard way.

HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY

At TheTechnicalTraders.com, my team and I can do these things:

  • Reduce your FOMO and manage your emotions.
  • Have proven trading strategies for bull and bear markets.
  • Provide quality trades for investing conservatively.
  • Tell you when to take profits and exit trades.
  • Save you time with our research.
  • Provide above-average returns/growth over the long run.
  • Have consistent growth with low volatility/risks.
  • Make trading and investing safer, more profitable, and educational.

Sign up for my free trading newsletter so you don’t miss the next opportunity!

We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies which include a real estate ETF. We can help you protect and grow your wealth in any type of market condition. Click the following link to learn more: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

In today’s trader tip video, Chris talks about the 9% rally in SVXY over the next 3-9 days. The stock market has been falling for quite some time, and the S&P 500 is down about 16% on the year. The VIX has been spiking and rallying up which means there’s a lot of fear in the markets. When the stock market continues to dive and if the VIX does go any higher, that’s a sign we are getting close to a short-term bottom in this market.

TO LEARN MORE ABOUT THE SVXY RALLY – WATCH THE VIDEO

Subscribers: Please let us know what you would like to learn and we will add it to the roster of our weekly Technical Trader Tips!

Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!

TO EXPLORE THE Total ETF Portfolio, PLEASE VISIT US AT The technical traders. You’vE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

Following and trading on price can be compared to the reading of a good book. As we read each page, we acquire additional information that may give us a better understanding of the unfolding story.

The same is true of the market, as each day is like the reading of another page. The pages of a book make up chapters. These chapters in trading represent bull markets, bear markets, distribution and accumulation, and time frames of high and low volatility.

Unfortunately, in trading, we cannot skip to the end of the book to learn how everything turns out. However, as traders, we have learned that studying and remembering the past can pay great dividends.

Trading price in its rawest form is simply plotting and studying price without the use of moving averages, stochastics, RSI, or other technical indicators. This simplified but often overlooked methodology can offer everything a trader needs to be successful.

NASDAQ 100 LOWER LOWS & LOWER HIGH

QQQ – The Nasdaq 100 ETF has been making lower lows and lower highs. A longer-term analysis of price is showing us that the 2022 low is lower than the lowest price that the QQQ had traded in 2021. The QQQ in 2021 had a peak to trough range of 26.03%. So far in 2022, the QQQ has had a peak to trough range of 28.71%.

Therefore: Price is showing that QQQ is breaking down and volatility is expanding as it is greater than last year.

QQQ INVESCO QQQ TRUST ETF NASDAQ 4-HOUR

QQQ Trading Price chart

S&P 500 LOWER LOWS & LOWER HIGHS

SPY – The S&P 500 ETF has been making lower lows and lower highs. The SPY in 2022 has had a peak to trough range of 18.74%.

Therefore: Price is showing us SPY is breaking down and it appears to have put in a major top with confirmation being a new swing low.

SPY SPDR S&P 500 ETR TRUST ARCA 4-HOUR

SPY Trading Price Chart

DOW 30 LOWER LOWS & LOWER HIGHS

DIA – The Dow Jones Industrials 30 ETF has been making lower lows and lower highs. The DIA in 2022 has had a peak to trough range of 15.02%.

Therefore: Price is showing us DIA is breaking down and appears to have put in a major top with confirmation being a new swing low.

Note: the DIA is doing better than the QQQ or SPY as money flow is rotating out of previously high-performing stocks and seeking safety in blue-chip lower performing stocks.

DIA SPDR DOW JONES INDUSTRIAL AVERAGE ETF ARCA 4-HOUR

DIA Trading Price chart

US DOLLAR HIGHER HIGHS & HIGHER LOWS

UUP – The US Dollar ETF has been making higher highs and higher lows. The UUP in 2022 has had a peak to trough range of 10.43%. UUP has also taken out the highest high that it made in 2021.

Therefore: The price is showing us UUP has broken out to the upside and is in a bull market with confirmation being a new swing high.

According to the 2019 Triennial Central Bank Survey conducted every three years by the Bank of International Settlements: trading in FX markets reached $6.6 trillion per day in April 2019. The BIS report further noted the USD is associated with 88% of all trades, which is $5.8+ trillion in USD daily transactional volume.

The US Dollar continues to attract capital from investors all over the world. But this may prove to be a double-edged sword for US stocks. As capital flocks to the USD, this, in turn, hurts US multinationals as they need to convert their weak foreign currency profits back into USD.

The USD safe-haven trade may eventually trigger a broad and deep selloff in US stocks. As the USD continues to strengthen, corporate profits for US multinationals will shrink or disappear.

UUP INVESCO DB USD INDEX BULLISH FUND ETF ARCA 4-HOUR

UUP Trading Price Chart

LEARN FROM OUR TEAM OF SEASONED TRADERS

In today’s market environment, it’s imperative to assess your trading plan, portfolio holdings, and cash reserves. Experienced traders know what their downside risk is and adapt as necessary. Successful traders manage risk by utilizing stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.

Successfully managing our drawdowns ensures our trading success. The larger the loss, the more difficult it will be to make up. Consider the following:

  • A loss of 10% requires an 11% gain to recover
  • A 50% loss requires a 100% gain to recover
  • A 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months, while a 50% drawdown may take several years to recover. 

Depending on a trader’s age, they may not have the time to wait on the recovery or the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason, as most of them learned this principle the hard way.

HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY

At TheTechnicalTraders.com, my team and I can do these things:

  • Reduce your FOMO and manage your emotions.
  • Have proven trading strategies for bull and bear markets.
  • Provide quality trades for investing conservatively.
  • Tell you when to take profits and exit trades.
  • Save you time with our research.
  • Provide above-average returns/growth over the long run.
  • Have consistent growth with low volatility/risks.
  • Make trading and investing safer, more profitable, and educational.

Sign up for my free trading newsletter so you don’t miss the next opportunity!

We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Crude oil, like most commodities, is not priced as a single data point like a stock. Instead, commodities, like oil, trade via futures contracts. A futures contract is an agreement to buy or sell a particular commodity or security at a predetermined price at a specified time in the future. Futures contracts are standardized for quantity and quality specifications to facilitate trading on a futures exchange.

Unlike options, futures contracts do not have a time value component in their pricing. Each futures contract is a standalone contract with its own ending date, supply and demand, and market-determined price for the underlying product. Another key difference between options and futures is that while an option gives the holder a right to buy or sell at a specific price, exercising that right is optional. A futures contract is a legal contract for delivering an underlying physical product or, in some cases, a cash equivalent. Futures contract performance is a legally binding agreement and is not optional.

ETF vs. Futures Contracts

Many products that have futures contracts also have Exchange Traded Funds (ETFs) that attempt to approximate the performance of the underlying product. In the case of West Texas Intermediate (WTI) oil, the ETF with the ticker symbol USO is a popular product. Shares of USO trade on a stock exchange rather than a futures exchange.

Owning shares of USO is not the same as owning oil futures contracts. 

USO invests primarily in crude oil futures and other oil-related contracts and may invest in swap contracts. These investments are collateralized by cash, cash equivalents, and US government debt with two years or less maturities.

The objective for USO is for the average daily percentage change in USO’s net asset value (NAV) for any period of 30 successive valuation days to be within plus/minus 10% of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period.

While the intent of an ETF like USO is to track the price of oil, there will be tracking variation that could be substantial at times.

An ETF like USO trades continuously, whereas the futures contracts the fund may hold have expiration dates. To facilitate continuity, a fund like USO will sell futures contracts close to their end date and replace those contracts with new contracts that are longer-dated. The futures contracts that USO owns spread out over a range of contract dates.

Why Trade an ETF?

ETFs like USO trade like shares of stock. That structure carries less risk than trading futures contracts directly. And you don’t need a futures account to trade an ETF like USO. You can even trade USO in retirement accounts like IRAs.

Contango and Backwardation

We can visualize the futures term structure or the forward curve by plotting the prices of a series of futures contracts over time. 

When longer-dated contracts are trading at a higher price than the front-month contract, that forward curve is in “contango.”  Alternately, when longer-dated contracts are trading at a lower price than the front-month contract, the forward curve is in “backwardation.” 

The front-month price and the longer-dated price will meet in the middle somewhere as time goes by.  But that does not necessarily mean that oil prices will go down.  Over time, the oil price can go up or down, and the forward curve will adjust.

Physical products like oil are often in contango because of the costs associated with storage and transportation.  These costs are assumed to make oil for future delivery more expensive.  But when near-term supply is constrained, the front-month contracts for sooner delivery can be more expensive, and the forward curve will be in backwardation.

Roll Yield

An ETF like USO is maintained by rolling contracts forward over a 10-day period. The closer in contracts are sold, and farther dated contacts are purchased to replace them.

The gain or loss from completing those rolls creates a roll yield that can be either positive or negative.

Positive roll yield exists when a futures market is in backwardation when short-term contracts trade at a higher price than longer-dated contracts. When the market is in contango, the longer-term contracts are more expensive than short-term contracts, and roll yield will be negative.

Currently, the oil futures curve is in backwardation. The contract for one year away is trading nearly $25 lower than the front-month contract. That implies that supply is tighter now than expected in the future.

Backwardation can provide a bit of a tail-wind to an ETF like USO when the fund managers are selling relatively expensive short-dated contracts and replacing them with lower-price contracts dated further out.

Conclusion

After many years of buying and selling options using a wide variety of strategies ranging from the simple to complex, I find that a simple strategy like selling puts can be one of the easiest to manage and most reliable for generating regular profits.  Don’t make it more complicated than it needs to be!

Sign up for my free trading newsletter so you don’t miss the next opportunity!

want To Learn More About Options Trading?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.   

Our Options Specialist, Brian Benson, continues to bring in the money. During the last month, of the 20 trades he has made, 17 of them have been winners!

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to subscribe, click here:  TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders.com