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Precious Metals & Miners Flash Short-Sell Signal

It has been a bumpy ride for precious metal investors over the past couple of years and it unfortunately I do not think its over just yet.

The good news is that the bottom has likely been put in for gold, silver and gold miners BUT the recent rally in these metals and miner looks to be coming to an end. While we could see another pop in price over the next week or so the price, volume and momentum see to be stalling out.

What does this mean? It means we should expect short term weakness and lower prices over the next month or two.

Below are three charts I posted several months ago on my free stockcharts list. These forecast were based off simple technical analysis using cycles, Fibonacci and price patterns. As you can see we are not trading at my key pivot level which I expect selling pressure to start to increase and eventually overpower the buyers sending the prices lower.

 

Gold Trading Weekly Chart:

Here you can see that gold is technically in a bear market when viewing it on the weekly chart. If you were to pull up a daily chart you would likely notice how the price of gold is trading at a key resistance level on the chart and has reached its full flag measured move.

What does this mean? It means the odds are pointing to lower prices for gold in the next few weeks. Keep in mind though I do feel as though a major bottom has been put in place for the precious metals sector. So buyers are likely to step back in around the $1300 area.

goldoverbought

 

Silver Trading Weekly Chart:

Silver has a little bit different looking chart but the same analysis applies here as it did in gold.

silveroverbought

 

Gold Miners Trading Monthly Chart:

Gold miners may have bottomed on this monthly investing timeframe chart but the daily chart which you will see next clearly shows short term weakness has started.

GDXLongtermBottom

 

Gold Miners Trading Daily Chart:

This daily chart really shows my thinking for miners and the overall precious metals sector as a whole. The recent weakness in gold miners to the down side point to distribution of shares. This is very negative for the price of physical gold and silver as gold mining stocks tend to lead physical metals.

The yellow box shows a possible major stage 1 basing pattern forming. If this is the case, then we will have a great opportunity in the coming months when the precious metals down trend completes a reversal and start heading higher.

gdxoverbought

 

How to Trade Precious Metals & Gold Miners Conclusion:

In short, I think that staying in cash or shorting metals is the play for the next couple weeks. After that anything can happen and until price breaks down or finally completes the basing pattern and confirms a market bottom I would be very cautious trading here.

In the last week members of my trading newsletter took profits on our short SP500 trade and we closed a long trade in natural gas for a quick 6.5% gain. Join our community of traders and have your money on the right side of the market!

Chris Vermeulen
www.GoldAndOilGuy.com

 

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Gold Traders and Investors Get Ready To Rumble!

On April 12th I wrote a blog post titled Precious Metals Melt-Down, and How To Manage It. I talked about how gold, silver and gold mining stocks have been flying under the media radar for over a year and that they were not catching the attention of traders, investors and the public anymore. I also said it would take some sharp price action (breakdown or rally) for it to be front and center again on TV, Radio and Newspapers.

But since gold has plummeted 17.5% dropping from $1600 down to $1320 per ounce with silver and gold stocks falling also they are now headline news once again. This move has caused some serious damage to the charts when looking at it from a technical analysis point of view. Below are some basic analysis points that show a new swing trading entry point.

The Technical Traders Chart Analysis:

Broken Support – Once a support level has been broken it becomes resistance. Gold is trading under a major resistance level.

Momentum Bursts – Since the April 15th low, gold has been setting up for another short selling entry point. Remember the market tends to move in bursts of three, seven or ten days then price reverses direction or pauses. It has now been 10 days.

Moving Average Resistance – Gold has worked its way up to the 20 day moving average which can act as resistance.

Bearish Inside Bars – This type of chart pattern points to lower prices. When there is a big down day followed by 3, 7 or 10 up days inside the price action of the down bar we can typically expect another sharp drop which tests the recent lows as shown with the arrow on the chart.

GoldBear

 

Gold Short Selling Conclusion:

In short, gold is setting up for a low risk entry point that should allow us to profit from lower gold prices. Using an inverse ETF like DZZ or even the gold mining stock inverse ETF DUST could be played. These funds go up in value as the price of gold falls.

While I expect gold to pullback, I do not think it will make another leg lower. Instead, a test of the recent low or pierce of the low by a few bucks then reverse and start building a bullish basing pattern before going higher.

Get My Book Free and Learn How To Manage Your Trades, Money & Emotions: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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Gold and Silver on the Verge of a Big Move

The past few months have been tough for those holding precious metals stocks, PM futures contracts or physical bullion. With silver is trading down 41%, precious metals stocks down 30% and gold 15%. It has people scratching their head.

The question everyone keeps asking is when can I buy gold and silver?

Unfortunately that is not a simple answer. With what is unfolding across the pond and the bullish outlook for the US Dollar index the next move is a coin toss. That being said, I do feel a large move brewing in the market place so I am preparing for fireworks in the first quarter of 2012.

If you step back and look at the weekly trend charts of the dollar index and the SP500 index you will see the strength in the dollar along with a possible top in equities forming. What these charts are telling is that in the next 3 months we should know if stocks and commodities are going to start another multi-month rally or roll over and start a bear market sell off.

With the holiday season nearing, hedge fund managers sitting on the sidelines just waiting for their year end performance bonuses, I cannot see any large sell off start until January. Sell offs in the market require strong volume and the second half of December is not a time of heavy trading volume.

This leaves us with a light volume holiday season, major issues overseas and no big money players willing to cause waves.

So let’s take a quick look at the charts as to where the line in the sand it for the dollar index, gold and silver.

Dollar Index Daily Chart

This week we have seen a strong shift of money out of risk on assets (Bonds) and into risk off (Stocks). This shift is happening before the dollar has broken down indicating the dollar may be topping and could be an early warning of higher stocks prices going into year end. Also note that light volume market conditions also favour higher prices.

 

Gold Price Daily Chart

Gold could still head lower but at this point it is holding a key support level. If we see the dollar breakdown below its green support trendline then I expect gold to have a firm bounce to the $1675 – $1700.

 

Silver Price Daily Chart

Silver continues to hold a key support level. If the dollar breaks down the silver should bounce to the $31.50 – $32 area. But if the dollar continues to rally then silver and gold may drop sharply.

 

Mid-Week Trend Conclusion:

In short, I think the best thing to do is enjoy the holiday season with family and friends. Trading right now is not that great and with the market giving mixed signals. I am keeping my eyes on the market in case it flashes a low risk setup and I will keep you informed if we get one.

I am still bearish on gold and silver longer term but the next week or so its likely we see higher prices.

Be aware that Monday is a holiday and once January arrives the market could go crazy again. If you want all my swing trades that I personally do be sure to join my alert service www.TheGoldAndOilGuy.com

Happy Holidays to you and your loved ones!

Cheers,
Chris Vermeulen

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The Three Safe Havens Where Big Money is Going

It seems everyone is looking for a place to put their hard earned money as uncertainty around the globe continues to rise. Oil, Gold, and Silver which have been the hot investments for the past few years took it on the chin over the past month with oil falling 13%, gold dropping 15%, and silver with a whopping 30% decline. We did actually see sharply lower prices, but last week these oversold commodities had a bounce and recouped some of their losses.

It has been a month since I covered the dollar index in detail and back on August 31st I pointed to a potentially large shift in the US dollar. The charts were pointing to a sizable rally which would likely send stocks and all commodities crashing lower. Since then we have seen just that and the so called safe havens (Gold, Silver, Oil) have dropped taking most investment and retirement accounts down with them. I did talk about these so called safe havens a couple weeks back stating my point of view on them.

My Cole’s Note Summary: “I do not consider any investment vehicle a safe haven if it can drop 15% in value within 1-2 days. And I would never put a large position of my account especially a retirement account into these investments if I were over 50 yrs of age.”

So where are the big, smart, and conservative traders putting their money to work?

Let’s dig down and take a quick look at the charts…

The 20 Year Bond – Daily Chart:

US Dollar – Daily Chart:

 

Utility Sector (Dividend Paying Stocks) – Daily Chart:

 

Weekend Trading Conclusion:

In short, I feel both stocks and commodities are oversold but need more time to bottom and we may see a few more days of lower prices in the near future. I see the dollar starting to get toppy on the daily chart and once that rolls over then stocks should bottom along with gold, silver, and oil.

Once equity prices start to bounce I anticipate money to flow out of the safe haven (Bonds) and into stocks where there are much larger potential gains to be had. All this could play out in a couple days so I am keeping a very close eye on everything.

Last week we bought the inverse SP500 etf (SDS) anticipating another surge higher in the dollar which would send stocks down in value. So far we are sitting with a gain of 8.2% and the potential for another 4 – 10% if things play out as I expect. If you would like to receive my daily pre-market trading videos so you know exactly what to expect each session along with my ETF trades be sure to join my free newsletter and get my free book here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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Market Sentiment and Volume Reach Extreme Panic Levels

It was a crazy session as the stock market slid over 2% on heavy volume. This type of price action means fear has taken control of masses and they are unloading (selling their stocks) in anticipation of much lower prices.
Trading off extreme levels of fear can be very rewarding if done right. That’s because fear is the most powerful reaction we as humans have and it’s somewhat predictable. Fear can make people do crazy and or stupid things and it’s these extreme reaction which investors do in the market that lead to great trading opportunities. Buying into fear and selling into greed is what I focus on.

Gold and Silver Showing Greed and Fear
For example, if we take a look at the 4 hour chart of gold and silver you will see how investments which have a large amount of speculation like Silver move the opposite to what other related investments like gold are doing.

The first chart which is gold, shows how today’s fear had investors moving into this shiny safe haven. Silver on the other hand has been the investment of choice for every Tom, Dick and Harry trying to play the popular headline investment. So on a day like today when prices start to slide in the stock market these speculative holders of silver get scared and dump (sell) their position in stocks and silver. The problem with silver is that the market is still small and its does not take many people hitting the sell button to send it 5% lower which is what took place today. This is one sign which is telling me traders are getting scared of a market selloff.

Evidence #2 Showing Signs Of Fear
These data points below clearly show sellers were in control today. I like to look at the NYSE because it holds all the big brand name stocks which the masses like to buy when they feel lucky. So when I see this many traders selling and so few buying I know the masses are dumping shares and going to a cash.

The NASDAQ had 10 shares being sold to every one share being bought which is half the fear level of what the NYSE and that makes good sense. The NASDAQ has many smaller companies which the masses just don’t know about or own so there was not as much selling taking place on that exchange. So brand name stocks getting dumped all at once is another sign of extreme fear hitting the market.

Evidence #3 Showing Signs Of Fear
This chart below provides the momentum of the market. I think of it as the rubber band effect. If the market selling momentum is strong enough then it pulls this indicator down to a level which it cannot go much further before it gives way and moves back a neutral or positive extreme level. This little hidden gem of an indicator can help time entry and exit points with ease once you understand it. Currently its telling us that a pause or bounce is likely to happen tomorrow.

Evidence #4 Showing Signs of Fear and an Oversold Market Condition
Take a look at the 10 minute SPY (SP500) chart below. Simple visual analysis shows that today’s strong selling which has brought the market down into a support zone should provide a pause or a bounce very soon. The question is how big will the bounce or rally be?

Given all the confirming is looking ready for a bounce and I feel we could be nearing not a bounce but an intermediate bottom and higher prices going forward. But if we break strongly below this support level then all bets are off and much lower prices should occur.

Mid-Week Trading Conclusion:
In short, today’s sharp move lower has put the market in a short term oversold condition. Meaning, a bounce is very likely to take place within the next 1-3 sessions. With the masses selling all their positions in stocks and commodities it generally takes 1-3 days after a day like this for the selling pressure to dissipate and for value buyers to step back into the market providing support.

I think both stocks and commodities will strengthen in the next few days and we will see if the market can get some traction and start a new rally. But until everyone has sold out of the market giving their shares to the big money (smart money) at a sharp discount I feel we have a rough road ahead.

Get these trading reports free each week here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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Parabolic Moves are Only Temporary for Silver and Gold

The past few weeks we have been seeing the US Dollar slide to new lows at an increasing rate. The strong devaluation of the dollar has sent precious metals like silver and gold rocketing higher out of control sending them parabolic!

During the past 6 weeks both silver and gold have been rising in a parabolic formation. Meaning the price is going straight up with strong volume as everyone gets greedy and buys into the commodities at the same time. Most of you who follow my work already know that if the general public is piling into an investment rocketing prices higher, you better start focusing on tightening your protective stops and or taking some profits off the table before the price collapses.

Take a look at the weekly chart of Silver below:
Silver was grinding its way higher from July into March of this year. Only in the past 6-7 weeks did we start to see silver open up and run with expanding candles growing at an accelerated rate. This virtually straight up rally is a signature pattern and tells me that price action is now VERY unpredictable and anyone getting involved should be tightening their stops and or taking partial profits on price surges.

Parabolic moves can provide some big gains but most traders end of giving it all back and then some because the price can drop very abruptly as seen on this chart.

The weekly chart of gold below shows much of the same thing but without the extreme volatility that silver has.

Now, if you take a look at the US Dollar chart it’s starting to look very bullish in my opinion. The chart shows a falling wedge which typically means the selling pressure should be coming to an end soon. I’m not sure how large the bounce/rally will be. I do think a quick move to the 75 level is very likely in the near future though.

I find that metals tend to turn just before the dollar does. So I’m very cautious here on buying any stocks or commodities at the moment. The past 2 years we have seen stocks and commodities have an inverse relationship with the dollar so a rising dollar means a market pullback will take place. Sell in May and Go Away…?

Mid-Week Trading Conclusion:
In short, we exited our SP500 position this week for a nice 6% gain in a couple weeks making that our third profitable back to back index play. At this time I’m not ready to buy or short the market until all the charts line up for another low risk entry point. Things are 50/50 odds here and that’s not good enough for me.

That’s it for now, but remember you can get my free trading reports each week at: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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Mid-Week Dollar, Gold and SP500 Trend Report

The dollar continues to control the equities and commodities market with its inverse relationship to them. The past couple years it seems that the dollar does what it wants and the all other investments move according to their relationship with rising or falling dollar prices.

 
Most of you know that I follow the dollar very closely. And each morning I provide my analysis with what I feel will take place throughout the session or next 48 hours.

 
In Today’s (Wednesday’s) pre-market trading analysis I talked about the strength of the equities market in the past few sessions and that it looks as though it still has more power behind it.

 

Dollar Index 60 Minute Chart
Taking a look at the US Dollar I noticed this morning that it was pointing to even lower prices and that it would likely happen today. It was only a few hours later that the dollar went into a free fall blowing through my downside price target of $73.30. It was this sharp drop in the Dollar which sent stocks, silver and gold soaring higher yet again in our favor.

Equities Market – SPY 60 Minute Chart
Stepping back a couple hours before the US dollar dropped in value sending stocks higher I did see fear creep into the market as traders started selling their shares and buying put options expecting the stock market to fall. When I saw this I got exciting because higher stock prices are usually just around the corner which they were! That’s when I sent an update out subscribers noting we should see some fireworks very soon.

 
While I am bullish on the stocks and metals at the moment and are long in several positions I am starting to see signs that a pullback is becoming more likely each trading session. This is when money management is important. I do not want to give back to much profit, but I must make sure we lock in some gains during times when the market is overbought like this.

Mid-Week Trading Conclusion:
In short, we continue to ride the trend of higher stock and precious metal prices as the US Dollar spirals down out of control. Our SP500 positions are deep in the money and we continue to ride it for all it’s worth raising our stops as we go.

 
The big question is if the Sell In May, and Go Away will take shape or not… Im thinking it will as when the time is right I will be looking to short the market.

If you are not yet getting my pre-market chart analysis be sure to join my trading service at http://www.thegoldandoilguy.com/free-preview.php

Chris Vermeulen

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Another Do or Die Point for Equities & Gold – Get Ready!

Equities and Precious Metals are on the edge of another rally and it could start as early as tomorrow.

On March 13th I posted some of my analysis online showing how the market was trading at a key pivot point and that a sharp price movement was about to unfold. I also provided everyone with the direction in favor which played out perfectly catching a 4.5% in three days.

As of today we are getting the same setup I saw on March 13th, but this time it’s pointing to higher prices. Take a quick look at the charts I was looking at for both the SP500 and gold and you will notice that the SP500 and gold both moved to the support levels before starting to bounce: http://www.thegoldandoilguy.com/articles/it%E2%80%99s-do-or-die-week-for-equities-and-gold/

While we caught the move down on the SP500 playing the SDS Double leveraged inverse fund we did not take part in falling gold prices. Reason being, there is so much fear in the market and the amount of surprise news popping up each week I don’t think shorting precious metals is a safe call. Rather I am looking for a pullback to cleanse the holders of the commodity then I will buy once price confirms the continuation pattern has completed.

Now, stepping forward to this week’s price action

SPY Daily Chart
We can see in the chart below that price is currently testing a key resistance level. Before the week is over we could see some big price movement equities. I need to see what happens tomorrow but I have a feeling we could see a breakout to the upside for a long position.

 

Gold Miners Fund Daily Chart
Gold stocks have be under performing the price of bullion for a few months but it looks as though they could be starting a sizable rally. If gold stocks continue to move sharply higher out of this pattern, then it’s a positive sign that gold and silver bullion will both continue to move up.

 

Gold Daily Chart
Gold is testing a key resistance level and if it breaks above this pattern then expect much higher prices. I can see GLD moving up $5 from this level and gold futures moving up $60 per ounce fairly quickly.

 

Mid-Week Trend Report:
In short, stocks and commodities may have shaken the weak positions out of the market during the recent pullback in price. Things could be ready to start another multi month rally and trade setups. Keep your eyes on the charts…

Get these reports sent to your inbox each Sunday & Wednesday: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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Gold/Silver – Controlling Your Trades, Money & Emotions

Last week we had typical pre-holiday light volume trading going into US Thanksgiving. The previous week I warned every one to trade with extreme caution because of the light volume and the fact that the market is on the verge of a sizable drop for both stocks and commodities. Any price action could not be taken seriously because of the light volume. We will not know until later this coming week what the big money wants to do… Buy or Sell, also what the manipulators will do… Seems like there are a lot of wild cards out there with Europe issues and both unemployment and payroll numbers out on Friday morning.

Below are a few charts showing my intermediate term outlook for gold and silver.

Gold & Silver Futures – Daily Chart
You can see both metal are showing a possible reversal head and shoulders pattern. While they have yet to confirm and close below the neck line we must be aware of this pattern and the risk/potential it provides us with. Both metals are still in an uptrend but showing signs of weakness.

US Dollar Index – Weekly Chart
This chart is not really that helpful for trading stocks, commodities or options right now but I wanted to post it because it allows me to show you how I analyze the market and my trades.

As you can see, the past 3 weeks have been in a strong uptrend reaching the first resistance level. The point of this chart is to show you that if you step out to the next longer time frame you can get a solid feeling of where an investment will find major support and resistance levels. Any investment not matter if it’s a stock, commodity or currency, if the price is trading in the middle of a large range like this chart you should not be taking large positions because it almost becomes a 50/50 bet on the market which is not a good winning strategy unless you are very experienced at managing your trades and money.

If you are going to trade then you want to focus on the underlying trend and you do that by looking at the next larger time frame. For example: if you focus on trading the daily chart, then you must step back each week and review the weekly chart to be sure you are trading with the underlying trend which is up for the dollar right now.

Weekend Trading Ideas:
Tuesday morning we saw the SP500 gap lower and continue to sell off. Traders started panicking out of their long positions and we could see it using the intraday market internals charts, which I cover each morning in the pre-market trading videos. Me being a contrarian (buying into market fear, selling into market strength) I used that high level of fear in the market along with the expected light volume holiday week ahead as an excuse to book profits near the lows on SP500 using the SDS bear fund allowing us to profit from the falling market. I feel we are going to have some crazy moves on the markets going into year end and it should be a lot of fun if done correctly.

Trading in general is a very difficult task especially if you are doing it for a living and planning on using your monthly income to pay bills, salaries etc… We all know the stress which comes with trading and if do not have a solid trading strategy, rules and cannot properly manage yourself (emotions) then you are most likely running into problems like over-trading, getting shaken out of trades easily, and taking bigger risks than your account can handle. Each of these cause more traders to blow up their accounts and big up on trading.

I am giving away my book on how you can control your trades, money and emotions. This short and to the point guide is full of my trading techniques, tips and thoughts which will help you get a handle of your emotions turning the market noise into music.

Download Book: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

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High Volume Resistance Plagues Precious Metals, Oil & SP500

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

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

SLV – Silver Bullion ETF Trading

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

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

GLD – Gold Bullion ETF Trading

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

USO – Oil ETF Trading

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

SPY – SP500 ETF Trading

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

Weekend Equities and Commodities ETF Trading Report:

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

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

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

Chris Vermeulen