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Gold, Silver and Stock Prices at their Tipping Points

Over the past year we have been learning more about the financial situations across the pond in Europe. With international issues on the rise, investors are panicking trying to find a safest haven for their capital. This money has been bouncing from one investment to another trying to avoid the next major crash in stocks, bonds, currencies and commodities. It seems every 6 months there is a new headline news issue at hand forcing the smart money to withdraw from one investment class too another hoping to avoid the next meltdown.

To make a long story short, I feel the market (stocks, bonds, currencies and commodities) are about to see another major shift that will either make you a boat load of money or you lose a lot of money if you are not positioned properly.

So the big question is “Which direction will these investments move?”

Let’s take a look at the charts…

Gold Weekly Chart – Long Term Outlook

Gold has just finished seeing a strong wave of selling this summer so it’s early to give any real forecast for what is next. That being said this long term chart may be telling us that gold’s rally could be nearing an end or a 12+ month pause could take place. If you have followed the market long enough then you realize that when everyone is in the same trade/position the market has a way of re-distributing the wealth to those who are savvy investors. Over the next 4-6 weeks there should be more price action which will allow me to get a better read for what is going to happen next.

Gold ETF Trading Newsletter

 

Silver Weekly Chart – Long Term Outlook

Silver has been showing strong signs of distribution selling. Meaning the big money is moving out of this industrial and highly speculative metal. The interesting part here is that silver topped out much sooner than gold. Many times in the past silver has topped and or bottomed before the rest of the market reverses direction. So it is important to keep an eye on silver as we go forward in time because it tends to lead the market 1-2 months in advance some times.

Silver ETF Trading Newsletter

 

SP500 Weekly Chart – Long Term Outlook

Stocks in general are still looking ripe for another major bull market rally. But if we do not get some follow through in the coming 1-2 months then this almost 3 year bull market could be coming an end.

SPY ETF Trading Newsletter

 

Mid-Week Trend Trading Conclusion:

In short, the market as a whole is trying to recover from a strong bout of selling over the past few months. In my opinion the market is ripe for another leg higher. The reason I see higher stock prices is because decisions are being made across the pond to deal with their issues. Looking back it is similar to what the United States did in late 2008 – early 2009 just before the market bottomed.

Everyone right now seems to be saying Europe is screwed and that they are going about things in the wrong way, but if you think back that is exactly what took place in America not that long ago. And back then it was all over the news that the resolutions to fix the US would not work…. In the end, life continued, businesses continued to operate. Soon after decisions were made the stock market and commodities rallied and are still holding strong today.

Over the next week or two I am anticipating the market will provide some solid trade setups which I plan on taking advantage of using leveraged ETFS. During the volatile sideways market in August through till now I have navigated my subscribers using both bull and bear funds pocketing over 35% return in two months. If you would like to receive my pre-market morning videos, intraday updates and trade alerts visit my newsletter at: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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Precious Metals Charts Point to Higher Prices – Get Ready

Chris Vermeulen – www.GoldAndOilGuy.com

Over the past week precious metal investors have had a wakeup call from their big shiny nest eggs. Last week’s free fall in both gold and silver spot prices was enough to get investors into a panic. More on this in a minute though…

The fall was triggered by three key factors which caused the powerful move down. The first factor is based on pure technical analysis (price and volume patterns). Because the metals had such a strong run up this summer and prices had moved to far too fast, it is only natural so see price correct back to a normal price level. In general any investment that surges in one direction in a short period of time almost always falls back down shortly after. As I stated in my weekly report on August 31st, gold is forming a topping pattern and all investors should take profits or tighten protective stops (exit orders)”. Three days later gold popped to the new high completing the pattern and was quickly sold off which continues to unfolding as we speak from $1920 down to $1532 in only a couple weeks.

The second factor which I think had the most power behind the drop were the margin requirements changes. This new rule literally overnight caused traders and investors holding to much of the metals in their account to liquidate (sell) their positions without having any say in the matter. That is when the most damage was done to the price of gold and silver.

The key factor was the US Dollar which rocketed higher and adding a lot of pressure to the metals. I also covered this in my Aug 31st report in detail. Overall, past few years we have seen both gold and silver move in opposite direction of the dollar. I don’t expect that to change much going forward. Back in August the US Dollar was coiling (building power) and it was only a matter of time before it would explode to the up side and rallied. This high probability move in the dollar was what triggered me to exit our long gold positions shortly after. I expected the dollar rally to last a month or more and that means we would see a lot of pressure on equities and metals going forward.

Now keep in mind, if Greece or other countries continue to get worse then we could see the dollar and gold move higher together as they are seen as the safe haven at this time. But with the nature of the two I am anticipating a rising dollar and sideways trading range for gold.

Ok, so back to precious metals investor sentiment…

Last Friday and all of this week I have been getting emails from traders and friends saying they are going to sell their gold and silver because they are concerned metals will continue to fall and because many of them are now losing money after chasing prices higher through the summer. The good news is that one of my best indicators for helping to time market tops and bottoms is to just read my emails and answer the phone. During market tops, generally the final month when prices are soaring to new highs every day/week is when everyone contacts me and says they just bought gold or are about to buy more gold cause it’s such a great investment. Once I start getting 2-5 of these messages a day alarms start going off in my head. This works the same with market bottoms. So with everyone now in a panic and selling their positions I feel we are darn close to one if we did not see it already…

Let’s take a look at the charts…

Silver Spot / Futures Price Chart

As you can see on the hard right edge silver is forming a very similar pattern which happened this past spring. I would like to note that this type of pattern is typical with extreme market selloffs as to how they generally bottom. I am anticipating silver trades in this range for a couple months and that we could see lower prices in the near term. But my upside target for silver in the coming few months is the $35-$36 level.

 

Gold Spot / Futures Price Chart

Gold is doing much the same as silver but I have noticed that when gold falls hard the second dip generally does not make a new low as often. If we do get a new low, all the better for buying on the dip but overall I feel gold should trade sideways for a couple months. My upside target for gold is the $1750-$1775 area.

 

US Dollar Index Price Chart

The Dollar index is looking ripe for another bounce and possibly another rally to new highs in the coming week. If this happens then we should see the SP500 short position (SDS) which we took Tuesday afternoon (Sept 27th) to continue rocketing another 5-8% in our favour again.

 

Mid-Week Trading Conclusion:

In short, I feel the US dollar is going to continue higher and that will put the most pressure on stocks, oil and silver. Depending how things evolve overseas gold could hold up and possibly rise with the dollar.

So far subscribers have pocketed over 40% gains this month using ETFs on the SP500, Dollar and Oil and are holding another winning trade in the SDS etf taking partial profits today. If you would like learn more about etf trading and receive my daily pre-market videos, intraday updates and detailed trade alerts which even the most novice trader can follow then join my free trading education newsletter and my premium trading service here: http://www.GoldAndOilGuy.com

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Gold, Oil, SPX Trading Around the Election

This week we have a major wild card (Election) happening on Tuesday. Most of you know I don’t get involved with political discussion for several reasons… one of them being that I am Canadian “an outsider” looking in.

That being said, it looks and feels as though the market has been propped up and oil has been held down from an invisible force. Lots of theories going around saying higher stock and lower/stable oil prices will give voters the warm fuzzies to keep the current leaders elected… I prefer trading the charts and not getting caught in the Wall St. hype.

Let’s take a quick look at some charts

SPY – SP500 ETF Trading Vehicle

The broad market has been finding buyers as the beginning of each month and it looks as though it’s ready for another bounce. I do want to note that Tuesday or Wednesday we could see a very sharp move in the market as investors around the world digest the outcome. It is very important to keep positions small and or use protective stops incase of a flash crash or flash rally for those of you trying to pick a top.

Gold Price – Futures Contract

The price of gold looks to be setting up for another wave down in my opinion. More often than not we see a sharp pullback, sideways chop then a pop above recent highs. It’s that pop above recent highs which tends to suck in long positions only to roll over and make new lows quickly after. As noted in previous reports, gold has support around $1300 area and that’s what I am looking for. Again this week’s election will trump recent price action so we really just need to sit tight until the smoke settles.

Crude Oil Futures:

Crude oil has been trading sideways for a solid month while the US dollar has been dropping at tremendous rate. Many oil traders believe the price is being manipulated to stay down until the election is finished because of the strong negative affect rising oil prices have on the economy/end user/voters.

Weekend Trading Conclusion:

In short, this is a going to be a wild week in the market. Keeping position sizes small and using protective stops is crucial during times like these. We have taken profits on both of our positions from last week and have moved our stops to breakeven for the balance just incase of a crash.

Overall, I am neutral on the market for a couple days until we see what type of blip we get on the charts.

If you would like to receive my Daily Trading Commentary, Charts and Trades be sure to join my newsletter: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Mid-Week Gold, Oil, Dollar and SP500 Report

May 19th 2010
It has been an interesting week in the market as stocks and commodities push to extreme support levels. Below I have posted some charts showing where the market is currently trading at and what I think is likely to unfold.

Gold Futures – 4 Hour Candle Stick Chart
The price of Gold is testing a key support level. I figure we will see gold try to stabilize over the next week or so as it digests the recent drop in value then start to head back up.

US Dollar Index – 60 Minute Candle Stick Chart
The US Dollar and gold have been moving together the past few weeks as more countries pop up on the radar for serious financial issues. This is helping to boost both the US Dollar and gold as investors around the world starting buying what seems to be safety. The dollar has had a sizable pullback and is now testing a key support level.

This could be the start of a possible Head & Shoulders pattern forming which means the dollar rally could be nearing maturity in the next couple weeks.

Crude Oil Futures – Daily Trading Chart
Oil has been under serious selling pressure because of the rising USD. It has now dropped to a key support level and is starting to look very interesting. If the US Dollar bounces in the next week or two it will keep downward pressure on oil. I think this bottom is going to be a process not a one day event.

SP500 – Daily Trading Chart
Stocks have been under dropping like flies the past few weeks and shorting the SP500 last week at 1170 has played out very nicely for members. The broad market is giving me mixed signals and when I am unsure of a trade I stand on the sidelines. It’s always better to sit in cash and watch things stabilize than it is to watch your hard earned money evaporate. We could see a wave of panic selling in the stock indexes testing the previous lows so be cautious.

Mid-Week Stock & Commodity Trading Report Conclusion:
In short, I feel gold and the dollar will bounce in the coming days from their support levels. This will keep pressure on oil & the SP500 holding them down near support. Once the US Dollar forms a possible right shoulder we will most likely see them pop and rally.

We are still 7 trading days away from a cycle low on the broad market making this scenario very likely to play out. At the moment I am getting a lot of mixed signals and during times like this I prefer to stay in cash because volatility will rise and it is easy to get shaken out of trades.

If you would like to get my Real-Time Trading Signals & Setups checkout my services at www.TheTechnicalTraders.com

Chris Vermeulen