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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 and Silver Nearing MAJOR Long Term Support

Gold and silver along with their related miners have been under a lot of selling pressure the last few months. Prices have fallen far enough to make most traders and investors start to panic and close out their long term positions which is a bullish signal in my opinion.

My trading tactic for both swing trading and day trading thrive on entering and exiting positions when panic trading hits an investment. General rule of thumb is to buy when others are extremely fearful and cannot hold on to a losing position any longer. When they are selling I am usually slowly accumulating a long position.

Looking at the charts below of gold and silver you can see the strong selling over the past two weeks. When you get drops this sharp investors tend to focus on their account statements watching the value drop at an accelerated rate to the point where they ignore the charts and just liquidate everything they have to preserve their capital. A few weeks ago I posted my outlook on precious metals which seems to be unfolding as expected: http://www.thegoldandoilguy.com/precious-metals-miners-making-waves-and-new-trends/

Gold Bullion Weekly Chart:

The price and outlook of gold has not really changed much in the past year. It remains in a major bull market and has been taking a breather, nothing more. Stepping back and reviewing the weekly chart it’s clear that gold is nearing long term support. With panic selling hitting the gold market and long term support only $20 – $30 dollars away this investment starts to look really tasty.

But if price breaks below the $1540 level and closed down there on a weekly basis then all bets are off as this would trigger a wave of selling that would make the recent selling look insignificant. And the uptrend in gold would now be over.

Gold1

 

Silver Bullion Weekly Chart:

Silver price is in the same boat as its big sister (Yellow Gold). Only difference is that silver has larger price swings of 2-3x more than gold. This is what attracts more traders and investors but unfortunately the masses do not know how to manage leveraged investments like this and end up losing their shirts.

A breakdown below the $26.11 price would likely trigger a sharp drop back down to the $17.50 level so be careful…

Silver2

 

Gold Mining Stocks – Monthly Chart:

If you wanna see a scary chart then look at what could happen or is happening to gold miner stocks. This very could be happening as we speak and why I have been pounding the table for months no to get long gold, silver or miners until we see complete panic selling or a bullish basing pattern form on the charts. We have not seen either of these things take place although panic selling is slowly ramping up this week.

There will be some very frustrated gold bugs if they take another 33% hair cut in value… You can view some of my trading charts, setups and analysis free at my stockcharts.com list. Be sure to vote for me chartlist each day so I know its of value: https://stockcharts.com/public/1992897

GoldMiners3

 

Precious Metals Trend and Trading Conclusion:

In short, the precious metal sector remains in a cyclical bull market. That being said and looking at the daily charts the prices have been consolidating and are in a down trend currently. Until we see some type of bottoming pattern or price action form it is best to sit on the side lines and watch the emotional traders get caught up and do the wrong thing.

The next two weeks will be crucial for gold, silver and miner stocks. If metals cannot find support and close below the key support levels things could get really ugly fast. If you would like to receive my daily analysis and know what I am trading then check out my newsletter at: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Precious Metals & Miners Making Waves and New Trends

The precious metals sector has been dormant since both gold and silver topped in 2011. But the long term bull market remains intact. As long as we do not have the price of gold close below the lower yellow box on the monthly chart then technical speaking precious metals should continue much higher.

Large consolidation periods (yellow boxes) provide investors with great insight for investments looking forward 6-18 months upon a breakout in either direction (up or down). The issue with investing during these times is the passage of time. One can hold a position for months and sometimes years having their investments fluctuate adding extra stress to their life when they really do not need to.

Once a breakout takes place a powerful rally or decline will start putting an investors’ money to work within days of committing to that particular investment compared to money invested waiting months for the breakout and new capital gains to occur.

Gold Price Chart – Monthly

Gold Monthly Price Chart

 

Gold Price Chart – Daily

The chart of gold continues to form a large bull flag pattern with a potential 3 or 5 wave correction. If price reverses this week and breaks above the upper resistance trend line then it will be a 3 (ABC) wave correction which is very bullish. But there is potential for a full 5 wave correction which is still bullish, but it just means we have another month or two before metals bottom.

Gold Futures Trading Daily Chart

 

Gold Miner Stocks – GDX ETF Chart – Daily

Gold miners do not have the sexiest looking chart. It was formed a strong looking bull flag but has continues to correct and is not nearing a key support level. This level could act as a triple bottom (bullish) or if price breaks below then it would be breaking then neckline of a massive head and shoulders pattern which points to 50% decline. I remain bullish with the longer term gold trend until proven wrong.

GDX - Gold Miner ETF Trading

 

Silver Price Chart – Daily

Silver remains in a long term bull market much like the monthly chart of gold shown earlier in this report. Silver continues to work its way through a large bull flag pattern with a positive outlook at this time.

Silver Price Chart Daily

 

Silver Miner Stocks – SIL ETF – Daily Chart

Reviewing the precious metals sector it seems that silver miners have the sexiest looking chart. All price patterns are showing strength and are in proportion to one other. If this chart plays out to what technical analysis is pointing to then we could see the precious metals sector put in a bottom and rally within the next week or two. And if this is the case then silver miner stocks should provide the most opportunity going forward. Keep in mind you can view my actual watchlist of stock and ETFs I trade in real-time with my analysis free: https://stockcharts.com/public/1992897

SIL - Silver Miner ETF Trading

 

Precious Metals Trading Conclusion:

In short, what you need to focus on is the yellow consolidation box on the monthly gold chart. A breaking in either direction will trigger a massive move that should last 6-18 months. Until then long term investors can simply sit back and watch the sector while they put their money to work in other active sectors.

From a short term traders point of view, that f mine. I am looking for a signs of a bottom on the daily chart to get my money working earlier to play the bounce/rally that takes place and actively managing the position until a breakout occurs. The charts overall are not that clear as to when a breakout will take place. Metals could start to rally next week or in a few months and all we can do is wait for a reversal to the upside before we get active.

Knowing the big picture trends and patterns at play along with major support and resistance levels (breakout levels) is crucial for success and piece of mind.

Get my analysis, daily updates and trade alerts each day at www.TheGoldAndOilGuy.com

Chris Vermeulen

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Yellow Gold Looks Strong Again…

The stock markets had a very solid session. Most charts shot higher after Apple beat estimates Tuesday night surging over 10%. This set the tone for stocks Wednesday. Also the FOMC said they would keep interest rates low until mid 2014 and projected a 2% inflation rate which took the market by surprise. Looking at the 10 minute intraday charts of gold, silver, oil, and the SP500 you would think it was the 4rth of July with everything shooting higher.

My gut feeling before the FOMC meeting was that there would be no QE3 announced. This I figured would trigger the dollar to rise which in turn would put pressure on stocks and commodities. But the low interest rates until mid 2014 was the wild card trumping that scenario.

Trading around FOMC meetings always brings a heightened level of uncertainty to traders and investors. The news is unpredictable making that much more of beast to try and out smart. I personally do not trade on any news because of the added risk involved.

Let’s take a quick look at gold and silver…

The Weekly Gold Chart:

Gold has started to break out of its down trend and if it can hold up into Friday’s close then it will be a very positive sign for the shiny metal. It is still mid week and a lot can happen, so let’s see how it holds up and go from there.

 

The Weekly Silver Chart:

Silver has some work to do before it’s back in an uptrend on the weekly chart. I would not be surprised to see it catch up with gold and run toward the $35 resistance level in the next couple days.

 

Mid-Week Trend Conclusion:

In short, gold is on the move and in the next few weeks I figure we will be getting involved. Silver I think will unfold a little different from a chart pattern point of view, but I do feel there will be a buying opportunity soon also.

Looking more broad based we are seeing the stock market continue to make new highs with solid volume behind it while Crude oil continues to tread water.

Get my free weekly reports and videos here: www.GoldAndOilGuy.com

Chris Vermeulen

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Does Panic Selling Pin The Market Bottom Again?

8:41am ET, May 21, 2010

Yesterday we started to see extreme panic selling in the broad market. This can be seen by looking at the up/down volume, advance/decline line for stocks and the speed at which the market was dropping. Only a few times a year do we get extreme levels like this and they tend to lead to sizable gains if traded correctly.

A lot has changed with my overall market outlook in the past month. At first I thought the intraday market crash was a human error and should be somewhat ignored but with the level of selling we are seeing now I am starting to think we have formed a market top in April. Don’t get me wrong, I do not have a bias as to which way I want the market to go. It does not really matter as I simply follow the trend and trade the setups.

Here are my charts and thoughts of what is happening in the market:

Broad Market – Indexes and Stocks

As you can see from the chart below the red broadening pattern is starting to concern me. During a bull market like we are in now, a broadening pattern is seen as neutral or bearish price action. This type of pattern has be on edge because in the past patterns like this have been the top. But I think we should see a bounce up to retrace half of the sell off from the April top. Then we will evaluate the situation from there.

Blue Support Levels currently the market is trading around a support level which tends to force the price to change direction. We have yet to break the May low and that could be broken today depending on the follow though from yesterdays panic selling. We could see the low get penetrated briefly then reverse back up sharply. This quick break of the early May low will shake out the final group of traders/investors before the market bottoms.

Green Panic Selling has helped to point out market lows for all of 2009 and 2010. Yesterday we had new high showing us that there were 37 sell orders for ever 1 buy order on the NYSE. I was getting a lot of emails yesterday from traders in panic wondering what to do. These emails are also an indicator that the market is bottoming…

SP500 - SPY - ES Mini Trading Newlsetter

US Dollar Index

The US Dollar chart below looks as though it has topped on the 4 hour chart. We could see the dollar drop for 1-3 weeks which in turn will help boost stocks and gold s they both seem to be bottoming.
US Dollar Index Trading Newsletter

Trading Conclusion:

In short, the market is trying to bottom as I mentioned in the Wednesday report. Volatility has spiked, stocks and commodities are jumping around shaking out stops and investors are in a panic selling what they own and getting back into cash…

It’s Friday and when a big move happens on Friday we have to expect some follow through on Monday as all the weekly chart traders and people not watching the market last week will see the sell off and exit their positions on Monday adding more pressure on the market.

With all the recent selling I feel most of the risk has been taken out of the market already but we must remain cautious still. I am looking to buy (scale in over a couple days) the SP500 and Gold using the Best Trading vehicles which members have access to along detailed trading information like entry, price targets, protective stops money management and trading education.

If this is of interest to you be sure to checkout my Stock, ETF and Futures Trading Services www.TheTechnicalTraders.com

If you want to receive my free weekly technical reports be sure to opt-in to this Free Trading Newsletter:

Chris Vermeulen

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Gold, Silver & SP500 Trading Charts & Video

May 16, 2010
Last week was amazing for both gold and index traders as gold surged higher and the SP500 tested a key resistance then fell 4% in our favor. The past couple weeks with the mini market crash and Euro issues making the market extra volatile both gold and the broad market (SP500) index has been wild.

The added volatility makes trading more difficult because price patterns become less predictable and price movements are much larger increasing risk for traders.

Below are the charts & videos of what to look for in the coming days…

GLD – Gold ETF Trading
Gold continues to trend higher at an accelerated rate. Friday we saw gold pullback and test a key support level then bounced to close in the middle of the days trading range. As you can see the trend line support has become very steep and once the trend line support is broken I figure there will be a sharp drop to digest the recent rally.

Gold Trading Newsletter

SLV – Silver ETF Trading
Silver popped and tested a key resistance level from a previous high as expected. It also tested the top of its trend channel providing even more resistance. This week will be interesting as we wait to see if precious metals have a small pullback or continue to rally.

Silver ETF Trading Newsletter

SPY – SP500 Index ETF Trading Chart
This chart clearly shows what I think is about to unfold by looking at the past market drop. Because of the mini market crash triggering everyone’s stops already I figure we have made the low and the dip we are seeing now will drift down a few more percentage points then bottom out.

SPY ETF Trading Newsletter

ES M0 – SP500 Mini Futures Trading Setup – Pre-Drop
Below is a chart of the SP500 which we shorted or bought the SDS bear etf trading fund last week looking to profit from a falling stock market. As you can see from the chart we saw the es mini contract drift into a key pivot point on light volume. What this means is that a large group of sellers will be waiting at that price, and because volume is light we know there are not many buyers at this price level. Simple supply/demand comes into play with more sellers causing the price to stop rising and eventually force the price lower which is what we were anticipating.

The green arrows show key support levels on the 60 minute chart where 1/3 of a position should be taken of the table to lock in gains which also reduces overall risk on the trade. Once we cash in the first 1/3 of the position we move our protective stop the breakeven which is the entry point for the remaining portion of our position. This turns the trading into a winner no matter what happens allowing us to enjoy the ride…

ES Mini Trading Service

ES M0 – SP500 Mini Futures Trading Setup – Current Price
Here is the same chart 24 hours later showing both of our profit targets triggered pocketing 2/3rds of our position for a very nice gain. Depending on the type of trading vehicle you traded there was potential to make up to 150% return in less than 24 hours.

We currently hold 1/3 of the position left with a loose stop allowing the trade to mature incase the down trend continues for several days or weeks. If not and the price rallies then our stop will get triggered for small profit on the balance of the position. Either way we win.

ES Mini Index Trading Service

Pre & Post Market Correction Video: http://www.thegoldandoilguy.com/sp500-market-correction-trading-videos/

Stock Market ETF and Futures Trading Conclusion:
In short, the market is trading on increased volatility making it difficult to find low risk setups. At the moment we are long gold and short the SP500 with both position deep in the money. All we can do now is manage our positions to make sure we maximize our profits.

If you would like to Get My Trading Signals be sure to check out my services at: www.TheTechnicalTraders.com

Chris Vermeulen

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28 Day Sector Rotation, Commodity & Index Update

March 17th 2010
Earlier this week I noticed a pattern in the market throughout an entire trading session that has inspired me to write a short piece on sector rotation.

On Tuesday March 16th, my quote screen was flashing green as sectors reached new intraday highs or 52 week highs. The interesting part was that every sector that was flashing green happened to be in sectors that strengthen at the end of a bull market cycle or strong rally. This would include basic materials, staples, services, utilities and financial.

Today I investigated the different sectors and came across some interesting numbers between the January market peak and this week’s price action as I show in the charts below.

JANUARY – ETF Sector Rotation Trading – 28 Day Cycle
I may not explain this well but try to follow me here 🙂
Just before the market rolled over and lost over 9% last January, all the proper bull market sectors were very strong during the previous 28 days. This is normal and a strong sign that market participants were bullish on the overall market.

But the market was overbought; trading volume was light indicating that not many people are willing to buy at these lofty prices. And the VIX (volatility index) had reached an extreme low (a level that has triggered large sell offs in the past). All this means one thing to me. And that is, trade with caution and tighten your protective stops.

General rule, if everyone is buying all the hot stocks at these over bought levels then you can’t help but think its time for the market to roll over and shake them all out.

MARCH – ETF Sector Rotation Trading –28 Day Cycle
The chart of March shows where the sectors have finished over the past 28 days. Notice how similar the sectors have appreciated in price…

I have overlaid John Murphy’s sector rotation image to show which sectors are strongest in a bull market.

Now the interesting part is that it appears to be the setup as in January. My quote system is flashing new highs for the bear market cycle sectors which are the one which have not performed well (Stapes, Services & Utilities) and I have to think the market is about to take a breather or do a swan dive.

Don’t get me wrong, I am not saying we are on the verge of a bear market. I actually think the market is strong and will trade sideways in a large range for most of this year or just continue to trend up.
What I am saying is that these sectors go in and out of favor during smaller market cycles and that can be very useful information.

Sector Rotation Explained
You can learn more about sector rotation from this detailed course How to Profit From Sector Rotation Using ETFs. This course explains how different sectors are stronger during different points within the economic cycle. The chart above shows the relationships and which of the various sectors should strengthen from the economy. The financial Market Cycle leads the Economic Cycle because traders try to anticipate the economy.

Market Update & Trading Conclusion:
Stock Indexes: The market in my opinion is way over bought on the daily chart and needs a breather. Volume is light, VIX is at the same level we saw in January just before the top and the bullish sectors are firing on all pistons. You won’t catch me buying up here. Any type of pullback will most likely be sharp and there is no need to put money to work right now.

Precious Metals: Gold and silver had a nice pop this week off of a support level. I did not have a low risk setup as momentum was not on my side at the time of the pop. Also the large gap up on GLD makes me nervous as gaps tend to get filled. I am just waiting for something to unfold which looks to be a few days away still.

Oil: It has popped higher also and is trading at resistance. As I mentioned in Sundays report, if the USD dollar completes this breakdown then we will see commodities and stocks surge to higher prices and most likely post a nice multi month rally.

Natural Gas: We are seeing natural gas prices dip below support, shaking out traders who had their protective stops set just beneath the previous low. Natural gas is a silent killer as it will shake even the best traders out of the market. I feel natural gas is over sold and ready for a bounce but until I get a low risk setup I remain on the side lines.

If you would like to receive my Free Technical Trading Reports please opt-in to my free newsletter here:
Chris Vermeulen
www.TheGoldAndOilGuy.com