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

Last week was exciting as we saw stocks and gold close above the February highs which confirms we are in a new up trend. The question everyone is wondering is:
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How far will this market go before rolling over?

This is a tough question but we can get a good feeling about the risk and if it’s worth putting money to work or not at this point. Here are my quick points and thoughts about the stocks indexes at the current price (March 5th closing price).
• The market is extremely overbought on the hourly and daily charts. Buying here is just chasing prices around, and that is a net losing game.
• Small Cap stocks have been on fire making a new higher for the year. This is very bullish but again buying here carries too much risk because after such a sharp price appreciation, we can see it all be given back just as quick.
• Volume over the past three weeks has been below average and when I see higher prices on declining volume I expect prices to drop very quickly once the thrust upwards ends.
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Stock Market Indexes – 21 Trading Days
Here is a simple chart showing the past 21 trading sessions. It compares the Nasdaq, NYSE, Russell 2000, Dow Jones, SP500, and Amex indexes.

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

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

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

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

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

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

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

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

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Chris Vermeulen
www.TheTechnicalTraders.com

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Spot 60 Minute Trends for Gold, Oil, Nat Gas, and Indexes

Welcome back everyone! It’s time to buckle up and get ready for another exciting year of trading.

When the market is moving on light volume I tend to focus on very short term plays to minimize my exposure to volatility. The past couple of weeks have been great for day traders and futures trades as we took advantage of the short term seasonal holiday rally in the broad market and also by shorting gold when bounces reached resistance levels.

This year I will be providing many more trades as I focus more on 60 minute trading charts to scalp the market with low risk quick reward setups. Also I will start providing futures trading analysis and signals for those who want to be more active and generate more income on a monthly basis.

DIA – Dow Jones Exchange Traded Fund – 60 Minute Chart
The Dow has been trading in this range for a couple weeks providing some excellent short plays. Although I tell members not to short in a bull market, there are times when shorting in a bull market looks and feels right. The past month has been the perfect mix for shorting using the 60 minute charts.

Dow Jones Trend

Dow Jones Trend

GLD – Gold Exchange Traded Fund – 60 Minute Chart
Gold is in a strong bull market but the short term charts have provided over 13 short trades in the past 2 weeks for futures traders playing the bounces to resistance levels. The triangle on the 60 minute chart with declining volume is a continuation pattern of the short term trend which is down.

Because gold is trading near a support level on the daily chart, I am waiting patiently for a perfect setup to go short, or long depending on what happens in the coming hours. I predict lower prices with $102 area for the next support level.

Gold ETF

Gold ETF

UNG – Natural Gas Fund – 60 Minute Chart
Natural gas is trading at resistance on the daily and weekly charts. This 60 minute chart allows us to take a closer look at the intraday momentum which clearly shows there are more sellers than buyers at this level. I see lower prices in the coming hours/days.

UNG not a good fund for holding positions more than 2 weeks, it does provide excellent trading opportunities for day traders and 60 minute chart setups.

Natural Gas Tends

Natural Gas Tends

USO – Crude Oil Fund – 60 Minute Chart
Crude oil had a perfect bounce off of a support level on the weekly and daily charts back on the 14th. Oil is now trading at a short term resistance level and I feel it will head lower in the coming days. We still need more price action before taking a position. Let’s watch and wait.

Oil Trend Trading

Oil Trend Trading

Trends of Gold, Dow, Oil and Natural Gas Conclusion:
The broad market and commodities listed above seem to be trading at resistance levels with signs of rolling over. As a technical trader the charts do all the talking and they are pointing to lower prices in the near term which falls in line with my gut feeling that a sharp pullback across the board is lurking in January. Once the big money start getting pushed around again we will know who is in control, buyers or sellers.

Let’s continue to focus on these short term charts to take advantage of any low risk setups which come our way.

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Chris Vermeulen
www.TheGoldAndoilGuy.com

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Gold Trends, Hot Commodities and the Major Indexes, Trade the Trend!

December 20, 2009
Gold Trends:
Gold has been leading the market for almost a year. Last week gold and gold stocks were trading at support looking ready to bottom but as you will see in my charts below, both broke support on heavy volume.

With gold now under performing the stocks market, I get the feeling we could see the broad market top. Topping is a process and after this strong climb I figure it will be choppy (tough to trade). Much like the price action on the Dow and S&P500 the past month, but this time it will be on a larger scale.

From a technical stand point the major indexes are trading at a key resistance zone from Oct 2008. This has been an amazing year for trading but I think the time has come for a correction or another melt down depending on how you view the US economy. It does not really matter which happens as we can play both directions.

As far as the fundamentals go, well the US economy in my opinion is scary. All I know is that if the markets start to melt down everyone better make BIG money on the way down because a severe correction will cripple the county as millions more will become unemployed. I am concerned that current recession may turn into a depression.

‘If’ we get another stock market meltdown, literally every asset class will go down with it. The only difference I think will be the trend of gold. Everyone has started to buy gold or at least thought about buying some.

‘If’ a meltdown occurs I think gold will go down in price at first with everything else, but if we are headed for another market collapse EVERYONE will turn to gold as the safe haven, triggering a massive parabolic spike straight up which could last years.

Enough of this negative talk, Lets take a look at the short term gold trends.

Gold Trend – Daily & 60 Minute Chart

The trend of gold broke down from the red rising channel a couple weeks back as expected. We were taking profits at the $115 level.

The more recent price action shows two technical breakdowns on the daily chart and the small 60 minute overlaid chart. The daily breakdown crashed through our support trend line and the 60 minute chart shows the breakdown below the previous low. The price is currently trading at resistance and the odds now favor lower prices.

Gold Trends

Gold Trends

Silver Trend – Daily Chart

Silver is trading at support and has yet to break the previous low. I think we will see this happen in the next few days.

Trade Trends

Trade Trends

Crude Oil Trend – Daily Chart

Oil had a great setup last week with many readers profiting from the oversold bounce off support which I pointed out on the daily chart last week. When buying into an oversold setup like this I scale in over 2-3 days in case prices dip lower as the selling dissipates. Average price was $35.75 and sold at first target of $37 for a 3.5% profit. Many of us still hold a core position with a tight stop.

The 60 minute chart shows this play and how the price popped once the sellers were cleared out.

Trading Trends

Trading Trends

Natural Gas Trading Trend – Daily Chart

Trend lines provide excellent levels for support and resistance and this chart is a perfect example of that. Not much to say about this chart other than UNG is trading at resistance and volume is big. This tells me we could see lower prices from here or some sideways price action first.

Natural Gas Trends

Natural Gas Trends

Broad Market Index – Dow Jones ETF – Daily Chart

In short, the market is starting to correct as we thought. It still has more to go before testing support. But because this week is a holiday week, volume will be light and like volume favors higher prices. So we could see the highs tested or sideways action.

From looking at the monthly, weekly and daily charts of the major indices I think the market is about to have a sharp correction. If we get a breakdown then we are headed to the next support level which is about 9% down from the recent high in the DIA etf fund.

Major Index trends

Major Index trends

Gold Trend and Technical Conclusion:

The trend of gold has been very predictable over the recent months and this correction seems to be text book pullback. I see the short term trend of gold still down but the longer and more powerful underlying trend is up. Let’s wait for the price of gold and silver to sort itself out and wait for low risk entry points before jumping back in.

Crude oil is in pinball mode. It’s just bouncing around between support and resistance levels now. Not much we can do but wait for another setup.

Natural gas is trading at resistance and if we get the proper price action in the next few days we could have a great short trade. Only time will tell.

The broad market trend is looking and feeling very toppy. A lot of money has been moving out of stocks the past 4 weeks and January could be a roller coaster. Last week I exited all my positions except XTR.TO (Energy and Financial dividend fund) which many of us took a position in late February and first week of March. I have set a tight stop and hoping to get the 4th dividend payout before it corrects.

I want to note that I am not going to be shorting the market until the bear trend is definitive. This could be 2-3 months down the road still. But after a great year of trading and the market and economy looking the way it does I am happy to be sitting in cash.

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Chris Vermeulen
www.TheGoldAndOilGuy.com