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How To Be Positioned for SP500, Gold & Oil

The second half of last week we saw some strong price action in the equities market. The SP500 broke through the 5 and 50 day moving averages closing the week just under key resistance levels. The SP500 futures will find resistance at the June high $1099.25, $1100 which is whole number then at $1103 which is the 200 day moving average. Each of these are clumped together making it really just one solid area which sellers will be waiting to short the market.

The market momentum and internals are looking strong for the equities market overall. With last weeks strong close we have seeing the percentage of stocks closing above their 50 and 200 day moving averages surge from 40% to 68% from the previous week. Stocks closing above their 20 day moving average jumped from 40% to 82% from the previous week. Seeing this type of shift in the market Momentum is generally a bullish indicator.

From a quick glance at the internals it looks as though Monday will trade flat/negative for the session. Reason being is that the NYSE Advance/Decline line is telling us the market is overbought when looking at a short term time frame. I would expect some selling Monday or possibly we get a gap up, then a sell off early in the session while the market digests last weeks strong closing.

Gold

Bullion has been giving mixed signals for while now. It looks like there has been a possible ABC retace, but on the other hand it looks to be forming a stair step pattern lower (series of bear flags). Until we get something more concrete from the charts lets just keep our eye on it for now.

Crude Oil

The past month we have seen oil form a bear flag which generally leads to lower prices. That said oil continues to grind its way higher closing at a key resistance level. This could be a possible double top before heading lower or we could get a breakout and rally this week. I know that does not sound helpful but remember oil is very sensitive to weather (hurricanes), US Dollar and geopolitical events making it much more unpredictable than one may think. That said I am not trading it right now.

Pre-Week Trading Warm Up:

I feel the equities market has some strength behind it. But we must see the SP500 futures contract close strongly above the $1103 area. With the market overbought and trading at resistance I am favoring some early weakness Monday

As for the gold and oil, I am just going to keep an eye on them. I’m just not feeling/seeing the patterns which I find tradable at the moment for a low risk setup.

Quick Trading Tip: I try to always analyze and trade the market the way which has always worked for me. Keeping my emotions in control and filtering out as much news, events and opinions as possible so I can think clearly while I focus on my low risk setups. The past couple months have had big news and events unfolding making it harder for traders to stay focused. It is crucial for traders to step back and clear their heads from all the news, hype and opinions shared across all the mediums and just look at a simple chart analyzing the price, volume and trend.

If you would like to receive my Free Weekly Trading Reports or my ETF Trade Alerts be sure to visit my website at: www.GoldAndOilGuy.com

Chris Vermeulen

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Back 2 Back Reversals for the Stock Market

The market continues to become quicker and fiercer as it move up and down 2+% on a regular basis This week we have seen some wild price swings due to earnings, events and the Fed’s which just makes trading that much more intense.

I have pointed out yesterday that this market only gives you a brief moment to take profits before it starts going wild shaking traders out of positions. This increased volatility is caused from a couple of things:

1. Traders/Investors know the financial system is still riddled with unethical practices/manipulation. This causes everyone to be extra jumpy/emotional and causes volume surges in the market as the herd starts to get greedy or fearful.
2. Volume overall on the buying side of things just isn’t there… I see some nice waves of buying but it doesn’t move the market up much… then it only takes a small wave of sellers for the market to drop… Investors are just scared to buy stocks and that is not a good thing…

I keep a close eye on the buying and selling volume for the NYSE as it tends to help pin tops and bottom within a 2-3 day period. In short when we get panic buying meaning 75%+ of volume is from buyers then I know the general public is jumping into the market buying everything up and that’s when the smart money starts to scale out of their position selling to these retail investors. These retail investors are buying on news and excitement much like what we are seeing now with earnings season. Stocks have run up for 5-10 days, as the smart money buys in on anticipation of good news, then the earnings are released which are better than expected and the stocks pop and drop. Well the pop higher on BIG volume are all the retail investors buying and are generally the last ones in. The smart money is quickly selling into this buying surge so they end up getting out at high prices.

My point here is that in general I see 4-6 of these panic buying or selling days a year which I find are tradable. The crazy part is that we have seen 11 of these panic days (both buying and selling) in just 8 weeks… We are seeing more selling than we did at the bottom in 2009! Something big is about to happen and I want to make sure we get a price of it once the moves starts.

Anyways, below is a chart of the SP500 showing how its trading under some key resistance levels. Today the market gapped up testing the 50 day moving average and above the 5 day moving average then sold down very strongly during Ben Bernanke’s speech. This is not a good sign for the overall health of the market.

On the commodities side of things we are not seeing much happening with gold or oil at the moment. Gold is still in a short term down. And gold took an $8 drop today when Ben Bernanke said inflation would remain low for an extended period of time.

As for crude oil, yesterday afternoon I pointed out to members that oil had a big run up on virtually no volume Tuesday and it would most likely give back those gains today. We saw this today with oil dropping from $78 down to 76.50 per barrel. Overall Oil looks like it wants to go higher but has some work to do before that can happen.

Mid-Week Trading Conclusion:
In short, the market remains choppy and we are getting more than normal news/events which are moving the market and this is causing extra noise and volatility for traders. Cash is king during volatile times and if you are doing some trades be sure to keep the positions small for another month or so.

If you would like to receive my detailed trading analysis and alerts be sure to checkout my websites at www.TheGoldAndOilGuy.com or www.FuturesTradingSignals.com

Chris Vermeulen

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SPX, Gold & Oil on the VERGE of Something BIG

Wednesday June 9th
Market volatility continues to shake things up making it profitable for traders who are quick to spotting key reversal points, manage risk and taking profits before it evaporates. On Tuesday we saw the market go up and down more than I have seen in a long time… It moved over 5% as it trended up then down in 1% increments as shown in the chart below. Members of FuturesTradingSignals were able to capture a 1-2% gain which may not sound like much but when trading the leveraged ETFs, Futures or CFD’s we are making 4-200% profit within a few hours. That being said this type of price action is proof that the market just does not know which way to go and why trades must be very quick to enter and exit positions.

The SP500 daily etf chart shows my simple volume analysis during market corrections. During the early stages of a trend, pullbacks are quick and simple. But as a trend matures we start to see corrections become much more complex. We first saw the simple 1 wave corrections in 2009, then we saw a much deeper 3 wave correction which was enough to shake most retail (average Joe’s) out of the market before heading higher, and now it looks as though we are headed into a complex 5 wave correction which should be enough to shake out the majority again.

It’s important to note that the longer a trend lasts the larger the corrections/shake outs must be in order to get everyone out. From what I am reading and seeing everywhere online are doom and gloom scenarios. In my opinion this is good. One more leg down should be enough to shake everyone before we see a nice 10-20% rally. Once we see that bounce/rally then we can reanalyze the market to see if we are headed back up to test the 2010 highs or if its just a bear market rally. In the end it does not matter as we play both the long and short side of the market.

Gold ETF continues to unfold as planned. We caught a good chunk of the recent rally and are now in cash waiting for another low risk entry point in the coming days or weeks.

Crude oil Fund (USO) has been struggling to stay up the past 2 months. As you can see the chart below it’s trading at a key resistance level and at this point it could go either way… I don’t like to get involved in trades when they look to be a 50/50 probability of going each direction. If anything I would think oil will head back down as the US dollar continues its strong rally.

Mid-Week ETF Trading Conclusion:

In short, the broad market is in a down trend and selling volume continues to rise. Investors around the world continue to accumulate gold and the US dollar as they seem to be the safe havens for the time being. Oil is also in a down trend and trading at resistance which means we should see lower prices for oil and oil companies and this will weigh heavily on the equities market.

Cash is king and during times of uncertainty that’s for sure… It is very comforting to know we are in cash most of the time and only get involved with the market when there is a low risk, high probability setup on the charts.

If you would like to get my trading analysis and trading alerts check out my services at: www.FuturesTradingSignals.com and www.TheGoldAndOilGuy.com

Chris Vermeulen

GET MY FREE WEEKLY TRADING ANALYSIS

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How to Trade Market Bottoms for SP500 & Gold

May 23 2010
The stock market topped in April which was expected from analyzing stocks and the indexes. Back in April I posted a few reports explaining how to read the charts to spot market tops. Today’s report is about identifying market bottoms. Market Top Report: Click Here

It does not get much more exciting than what we have seen in the past 2 months with the market topping in April and the May 6th mini market crash. This Thursday we saw panic selling which pushed the market below the May 6th low washing the market of weak positions.

For those of you who have been following me closely this year I am sure you have noticed trading has been a little slower than normal. This is due to the fact that the market corrected at the beginning of the year and we went long Feb 5th and again on Feb 25th. Since then the market rallied for 2 months and never provided another low risk entry point. In April the market became choppy and toppy and we eventually took a short position to ride the market down. Now were we are looking at another possible reversal to the upside.

Only a few trades this year which I know frustrates some individuals but if you step back and look at my trading strategy you will learn that we only need to trade a few trades a year to make some solid returns. I don’t know about you but I would rather trade a few times a month and live life between trades… not trade all day every day getting bug eyed in front of the computer.

Ok enough of the boring stuff let’s get into the charts…

SP500 – Stock Market Index Trading ETFs & Futures

The pullback in the broad market was expected but the mini crash on May 6th really through a wrench into things for us technical analysts. We don’t really know the truth about what happened that day… was it just a simple error or was it a planned error for the US government to take a massive short position to move something in their favor quickly to generate MASSIVE gains? It leaves us technicians hanging wondering if that was a shift in trend from up (accumulation) to down (distribution)?

My thoughts are if the crash was truly an error then we will see months if not another year of higher prices… But if it was a planned sell off with banks moving to the sidelines then we are most likely headed into another bear market. Personally it does not matter what happens as big money will be made in either direction. Problem is if we do go into another bear market then the majority of individuals will lose capital as investor’s portfolios get smaller and smaller. That will lead to a lot of depressed people…

In short, I am neutral on the stock market for the intermediate and long term. Once we have a few more months of price action only then will I have a plan for longer term investments. But on the short term time frame the market is screaming at me with extreme sentiment levels lining up on the stock market and gold.

The daily chart of the SPY – SP500 Index shows several important points which help me time market bottoms. We have prices trading at a support zone. Buyers step back into the game here and should provide a decent bounce which started Friday Morning.

Next we have the panic selling spikes from an indicator I created. Generally the day after we see panic in the market like we did on Thursday we will see a big bounce and many times a large rally.

Down at the bottom you can see my custom market cycles which are both starting to bottom. During times like this the market has a natural tendency to move higher.

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VIX – Market Volatility Daily Chart

The VIX has an old saying “When the VIX is high its time to buy, When the VIX is low, its time to go”. Simple analysis clearly shows the VIX trading high and at a resistance zone.

VIX - Volatility Index Trading

Put/Call Ratio – Daily Trading Chart
This chart measures the amount of put and call options traded each day. When it is trading over 1.00 then we know for every 1 call option traded (wanting the market to go up) there is 1 put option traded (wanting the market to go down). Over 1.00 is extreme and when that many people are bearish and using leverage to profit from a drop in price then in my opinion it means everyone has already sold and the selling pressure is about to end.

Actually if you go back in time and review SP500 and this ratio you will notice 2-3 days after this ratio reaches 1.00 or higher the market bounces/bottoms.

Put Call Ratio Trading Strategy

NYSE Advance/Decline Line for Equities – Daily Chart
This chart shows us how many stocks are advancing or declining on any given day. When extremes are reached look for a short term bounce or bottom 1-3 days following.

NYSE Advance Decline Line Trading

How to Identify Stock Market Bottoms with Simple Analysis:
In short, I feel the market is forming a bottom here. How big of a rally will we get? I don’t know because of the mixed signals from the May 6th EXTREME heavy volume selling session. As usual I focus on trading with the trend, trading the low risk setups and I manage my money/positions scaling in and out of those positions as I see fit.

If you would like to receive my Real-Time Trading Signals & Trading Education check out my website at www.FuturesTradingSignals.com

Chris Vermeulen

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Another Batch of Trading Setups for the SP500 Are Here

May 2nd, 2010
The past few weeks I have been talking about the SP500 forming a top similar to the January top we saw earlier this year. Well the charts below show exactly what I have been waiting for to unfold and I think the time has come for the market to take a healthy breather before continuing this strong bull market which could last another 12 -24 months before really topping out.

SPY – SP500 ETF Trading Chart

I am showing the SPY etf because that’s a fund most people know and trade, but this analysis is the same for trading futures like the ES M0 Mini SP500 contract.

You can see the similar price action which formed in January and what has happened recently. I feel we are about to see a correction which would last several weeks which is very exciting for us traders.

SPY ES Daily Trading

SPY April Top – SP500 ETF Trading 60 Minute Chart

This chart shows the past few weeks of price action with the market becoming more volatile with waves of selling and buying. This indicates exhaustion and generally leads to a market correction or at least some sideways movement to digest the recent rally before continuing higher.

SPY January Top – SP500 ETF Trading 60 Minute Chart

Take a look at this chart of January….
Very similar price and volume action.

SPY January Sell Off – SP500 ETF Trading 60 Minute Chart

This chart shows the sell off last January and the setups I had when the market reached extremes generating trades with the underlying down trend.

SP500 Day Trading & Swing Trading Opportunities:

I hope these charts help you to see how I read the market and what I am looking for in trade setups. While its easy to see these setups in hindsight it requires a lot of research and experience in-order to time these plays in real-time when emotions are flying high and with BNN, Bloomberg, CNBC and other newsletters all saying different things…

Some words from fellow traders:
“I just wanted to let you know how much I’ve learned from you already. Understanding that you don’t always have to be in the market because another Low Risk Setup is just around the corner tops my list. Keep up the good work.” Matt Brennan, CA, USA

“Hey, Chris!
I really like the way you think and I’m already learning some useful stuff. I tend to be too aggressive, that’s another reason I picked you – I think you have just the medicine I need to learn to be a bit more cautious and to manage risk better. My biggest weakness is jumping the gun. Pretty typical, I guess. Already I can see I will learn to improve from following your lead.” George Faison, VA, USA

If you would like stock market training, how to find low risk setups with great potential along with my trading signals then check out my websites below:

Gold and SP500 ETF Swing Trading Signals: www.TheGoldAndOilGuy.com
Intraday, Swing Trades and Trading Strategy: www.FuturesTradingSignals.com
Trade Explosive Stocks: www.ActiveTradingPartners.com

Chris Vermeulen

Disclaimer: I currently do not own gold and SP500 ETFs or Futures contracts.

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How to be Disciplined Trading Gold with Cycles Analysis

Trading can be a lot of fun and profitable or a nightmare and very costly. It really just comes down to understanding the key areas, which will make or break your trading.

I have received a few emails asking me to explain more about how I stay disciplined, making sure my emotions don’t get the better of me. Some questions asked are:
How do I pick a trading strategy, which will work for me?
What reading material and habits do I recommend for keeping focused?
What are some of my experiences?

I will cover all this for you below because trading discipline and managing emotions is by far the most important and difficult aspect of trading.

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How do I pick a trading strategy, which will work for me?

Your strategy should be inline with your abilities to read the market also focuses on a time frame, which suits the time you have available to trade each day, week or month. In other words, you should not be trading ETF options if you cannot profit from trading ETF’s without leverage. Also if you don’t understand how options work in depth, then you need to spend some time learning about this type of trading vehicle before you ever place a trade using options. Simply put, if you don’t understand everything about what you are trading, then you will eventually give all your money to the market, leaving you with an empty account, decreased trading confidence and a frustration.

The point I am trying to make here is that you should focus on trading the types of vehicles where you understand the daily price action, how to trade that investment, what makes it move, is there leverage, and what time frame you should focus on, so that it works with your schedule. If you can only look at the charts at night, after the markets close, then you should not be focusing on day trading. So pick something you like, understand or want to trade and learn everything about it. Then find a trading system or create one yourself, which is profitable using the time frame and risk tolerance that fit your personality.

Over the years my trading strategy changed, as will yours. The more time you spend trading, the better you will become the more you will find yourself trading more of one type of investment that consistently makes you money. When I started trading back in the late 90’s I focused on stocks, but as time went on, my strategy evolved and now my main focus is on trading indexes and gold with a hybrid intra-day and swing trading strategy that I created. My focus is on ETF’s, because you can select different levels of risk/reward with the 1,2 or 3x leveraged funds. While ETF’s are fantastic to trade, they do have some limitations. Because the indexes and gold trade 24/7, you are limited to only regular market hours, 9:30am – 4pm ET. That leads me to the topic of Futures and CFD trading.

Depending on the type of trade and time of day a setup occurs, I will jump from ETF’s to futures or CFD’s. Let me explain, if there is a setup early in the morning before the regular market opens, or after the close late in the evening, then I trade futures or CFD’s because it allows me to trade 24/7 catching moves which would not even be seen by most North American traders. There are not a lot of these trades per year but enough to make it worth trading.

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What are some of my experiences?

In short, virtually every trader will eventually reach the tipping point. What I mean here is you will either lose enough money and/or become so frustrated that you will debate whether or not you should continue trading.

I reached this level many years ago and I still remember it crystal clear. I lost most of the money in my account, almost every trade was going against me and I had never been so frustrated and upset in my life. I’m sure many of you know what I am talking about… Unfortunately trading does break a lot of people down financial and emotionally, causing them to give up. But others reach this point and realize that if they can be wrong all the time, then someone who knows what they are doing should be making good money and that they just need to learn what they are doing.

This is the point at which you decide whether to give up a life long dream of trading full time to go back to your day job or you step back to re-evaluate your situation and seek profession help. All successful traders have or had a mentor at one point in their life and it does not matter which career you are in, learning from someone who knows how to do what you want is the fastest and most effective way to learn.

Those who decide to continue and take things serious shift their mind set from Trying To Trade to Learning To Trade. It is at this point, where trading becomes fun and profitable again. My point here is that trading is not something you can learn quickly on your own. You should get help from someone who is successfully doing exactly what you want to be doing, then shadow their every move and seek mentoring from them. This usually costs more than say just buying a book or mini e-course. There is no comparison between what you get out of them or obtaining practical experience. This is what I provide at FuturesTradingSignals.com

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What reading, and habits do I recommend for staying disciplined?

There is no easy answer, as everyone absorbs information differently. Some prefer reading and studying charts, listening to audio, watching videos and some prefer or need live mentoring and real-time examples.

I learned charting from the well known annalist, John Murphy, through his book “Technical Analysis of the Financial Markets”. This is a massive book with over 500 pages explaining technical analysis. This book is a lot to digest, but there is a lot of great free information online, which will allow you to read about the basics of trading including: chart patterns, volume, candle sticks, support & resistance levels and trend lines. Once you understand these key concepts and are able to read the charts, then you are literally ready to start paper trading and applying or creating a trading strategy, which manages entry, exits, scale out prices, and manages your money.

As most of you know, I am a very patient trader waiting for risk setups in the investments, which I understand best and have consistently traded for many years. Because of my strict trading setups and rules, which I have set for myself, it does cut down on the amount of trades the market provides. My focus is on low risk, high probability setups, which I completely understand, and that’s all I trade. This trading strategy works on any time frame allowing me to use it for day trading and swing trading.

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The question everyone wants to know is how to stay so disciplined and keep emotions from taking over?

This takes me back to the Tipping Point mentioned earlier. I always ask myself if the trade meets my setup criterion, which is a simple yes or no answer because my setup criteria is clear in my head. Either it has the characteristics I am looking for or it does not. Sometimes the setups are very close and I will admit it is very tempting to take the trade, but I always step back (walk away from the computer) to clear the emotions flying around in my head and ask myself, do I want to break a rule, which almost broke me financially and emotionally once before? The answer is always No. So I pass on the trade and wait for another one to unfold.

When I was first learning to day trade, I quickly learned that I did not have to take every setup that looked like it had potential. I realized that no matter what condition the market was in, there would always be another trade just around the corner, so its not a big deal. I admit, I hate to see an investment make a large move without me like this 7 day rally in gold happening right now, because my setup criteria was not met. But I know there will be many more trades through the year in gold and other investments, which will provide me with great returns. People who think they need and must catch ever big move in the market in order to make big money on yearly basis, are looking that things completely backwards. It only takes 5-10 good trades per year to out perform the market so I don’t understand people when they panic about every zig and zag the market makes.

Ok, lets take a look at the gold chart, which I have overlaid with two cycles, which I use to help time gold.

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9 Day Gold Cycle

The daily chart of gold below has my 9-day cycle overlaid. You can see how this cycle relates to the price movements of gold. After the recent low cycle, we saw gold continue to move higher and this is because the trend of gold turned up in March and the long term cycle is also moving up at the same time. These two bullish forces can over power the short term 9-day cycle at times.

That being said, the 9-day cycle will be topping in 2 days (Tuesday) and that should put some selling pressure on gold. I expect to see a pullback or consolidation (sideways movement) in the coming week.

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29 Day Gold Cycle

This cycle allows us to see the big picture and underlying trend for gold. This larger more powerful cycle of gold will top in one day (Monday) and that should put a damper on this rally. You can see how I think gold will play out from the lines on the chart.

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Combined Cycles on Gold

This chart clearly shows how both cycles will top this week which should put some selling pressure on gold and silver and one of the reasons I have not chased the price of gold higher buying in a panic.

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Gold Trading Discipline Conclusion:

In short, trading discipline is something you can become educated about from books, but the only way to actually take control of your trading, is to be honest with your self. Think of it this way, every time you break a trading rule, you are setting yourself up for failure. Do you really want to sabotage the most important person in your life, which you will have to live with every day (You)? If you cannot trust yourself from sabotaging and lying to your self, what type of person would you be? Do you want to lose money by taking positions, which are proven not to work and cost you money in the long run? Of course you don’t!

So the next time you see a trade, which is close to your setup but no exactly what you are looking for, just walk away and wait for the next one.

As for the current price of gold, I think we are about to see lower prices, or at least a pause, which will last for 5-15 days.

If you would like to Receive My ETF Trading Signals please check out my service: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Technical View of What’s Next for Precious Metals, Stocks & the Dollar

March 14, 2010
Last weeks price action unfolded just as we expected. Money poured into stocks with the focus being on small cap, banks and technology stocks. The fact that these sectors are showing strength while utilities, health care and consumer staples lag is a good sign that investors are once again taking risks in the market.

Because investors and traders are bullish on the stock market again the money flow into the safe havens like Gold and Silver decrease. I believe this is the reason stocks moved up last week while precious metals drifted lower.

Below are three charts (Dollar, Gold and Silver) showing what I think is most likely to happen in the coming week or two.

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US Dollar Index – Daily Chart

The US Dollar has put in a very nice bounce/rally since the low in November 2009. Last month the dollar finally reached a key resistance level of 81. I have been talking about this major resistance level since January as the Dollar would find it difficult to break above this level.

Take a look at the daily chart below. You can see a head & shoulders pattern and a neckline which appears to have broken late Friday afternoon. There is a strong chance we could see 78 reached which is the measured move down. If we get follow through selling this week then I would expect 78 to be touched within 5-10 days.

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GLD & SLV ETF Trading Charts

Precious metals have been moving very well for us recently. From looking at the charts using technical analysis we were able to catch the Feb. 5th low and also the Feb. 25th low on a several ETF’s.

As you can see from the GLD and SLV charts, both metals are now in an uptrend showing bullish chart patterns and trading at support. If we see the US Dollar break down next week then be ready to go long gold, silver and stocks.

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Precious Metals, Stocks and the Dollar Trading Conclusion:

As a technical analyst the above charts are pointing to higher prices in the coming day’s which is exciting for us all. BUT when things are this perfect looking we must be very cautious as the market has way to suck people into setups like this and spit them out a couple days later for a nasty loss.

Understanding how the market moves is crucial for avoiding and/or minimizing losses when trades go against us. That is why I continue to wait for my signature low risk setup before putting any money to work.

My focus is to take the least amount of trades possible each year, only focusing on the best of the best setups. My low risk setups require downside risk to be under 3% for the investment of choice when the broad market shows signs of strength, as well. I use several different types of analysis to confirm if a setup has a high probability of winning and those which do are the trades I take along with my subscribers.

It is very important to wait for the market to confirm a move higher before taking a position with this type of setup. The market could go either way quickly and jumping the gun is not a safe bet.

Get My Precious Metals and Index ETF Trading Alerts: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Gold, Silver & Stock Indices on the Verge of Rolling Over?

This week has been playing out as we expected. Last week we saw the market rally on light volume into a resistance zone on the daily chart. Light volume rallies are always a warning sign, much like the “Calm before a Storm”.

The way I look at bearish price action:

The First Heavy Selling Volume Day – I see this as large institution selling massive amounts of investments (stocks & commodities) because prices have risen enough for them to book profits OR they know something we don’t and they are getting out before the majority of traders find out.

Light Volume Rally/Drift Higher – After a heavy volume sell off we tend to see prices drift higher on light volume. This is when the institutions stop dumping investments and allow the retail investors (Un-educated Traders) to buy the market back up.

Bear Market Trend – In a down trend we see these two phases enter and exit the market. These patterns happen on every time frame from tick charts to yearly charts. Trends vary in length from 1-2 cycles and sometimes 10-20 cycles and more…

Current Market Conditions

So far this week we have seen the market sell down on increasing volume which is bearish and is pointing to lower prices. On Wednesday we saw prices move up on light volume with volatility rising into the close with a short wave of selling. This was indicating to me that sellers were starting to enter the market again.

The daily chart below clearly shows the heavy selling and drift higher on declining volume. The market is now trading deep into a resistance zone and looking ready to drop.

SP500 Intraday 2 Hour Candle Charts

You can see the same selling patterns repeat themselves. Since the Feb 5th bottom we have been forming a much larger bear flag which makes me think a BIG drop is only days away.

SP500 Trend Trading Conclusion:

Both stocks and precious metals are trading with the same chart patterns and volume levels. So if you are wondering about gold, silver and oil, I am seeing a similar scenario playing out for them also.

The reason I keep bringing these bearish patterns up in my reports is because once you master trading in a down market then you can make money during some of the fasted moving times in the market. I have always preferred shorting the market because prices drop much quicker then they rise. So profits are made quickly.

Also, if the broad market does eventually roll over later this year, and I am not saying it is, but “IF” it does, then you will feel somewhat comfortable with the positions we will be taking.

If you would like to receive these Free Bi-Weekly Trading Reports please visit my service for TheGoldAndOilGuy at: www.TheTechnicalTraders.com

Chris Vermeulen

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Stock Market Trends for Indexes and Precious Metals

This report is a mix of both current market action and educational material on how stocks and commodities trend (move).

Since mid October I have been on the look out for the market to top or make a multi wave correction. The market did top in January and has formed an ABC retrace (3 wave correction).

The question everyone wants to know is, is this market topping out or just a bull market correction?
Well the brutal truth is no one really knows what is going to happen next. So the only way to make consistent profits in the market is to clearly understand the main technical analysis skills (Chart Patterns, Trend Lines, Support & Resistance, and Volume). You must also understand how to manage your money/trades. I scale in and out of positions during key support and resistance levels to keep downside risk low.

One of the toughest parts of trading is “Trading Discipline”. If you cannot take losses easily then trading is not for you. You must be able to exit a trade when your stop level has been reached or you think the trade is starting to go wrong. Holding onto losers will blow up your account very quickly.

Other than those key skills, all you can do is watch the charts and re-evaluate each time a new bar (candle stick) pops up on the chart. Remember to trade with the larger trend of the chart 2-4 times longer than your actual trading chart.

Example: If you trade the 30 minute chart for entering and exiting trades, then you should be watching the 2 hour chart (120 minute chart) to understand the full picture.

Market Trends and Price Movement
As we all know, when the market is trending up we are seeing a series of higher highs and lows and the reverse for a down trend. We also know there are several different ways a market can top before reversing. The charts below show how the market generally moves on all time frames.

The market will top and bottom in 1 of 4 ways which are shown below:
Sideways Trend – A consolidation or triple top
Head & Shoulders – This is a great trading pattern
Double Top – Lower volume rally and sharp selling once high is reached
Blow Off Top/Bottom – This is when volume spikes and the price moves quickly (great for panic trading)

Silver and NYSE Daily Trading Charts
Take a look at the charts below and you will see exactly how the market moves and where the market is currently trading.

Trading Conclusion:
In short, stocks and commodities have been in rally mode for all of 2009. So far this year prices have started to slide forming some bearish looking charts. But it’s not the end of the world by any means. Depending what happens in the next 1-3 weeks we should know if the market is back in rally mode or still in sell off mode.

I am somewhat neutral at the moment and maybe a little bearish because from a technical stand point there are just as many arguments/technical analysis points for prices to move up as there are to move down. When I get in this situation I just site back and wait for a clearer picture before putting my money to work. When In Doubt, Stay Out!

I will update subscribers tomorrow on our current long positions as we need to tighten our stops to lock in more profits. And thank you everyone for your kind words and support for my new daughter 🙂

Get my reports send to your email: www.GoldAndOilGuy.com

Chris Vermeulen

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Gold & SP500 Psychology: They Bail, We Buy

Understanding market psychology is crucial for a trader’s success. But so many people get caught up in the daily market volatility, media coverage and “noise” of the trading environment, it’s almost impossible to not think and trade in agreement with the majority of traders.

However, effective technical analysis allows us to use trends, patterns and other indicators to evaluate the market’s current psychological state. Fortunately, this analysis can both enable us to independently forecast whether the market is heading in an upward or downward trend and do so against the grain of the majority.

It takes a disciplined trader to be able to watch and listen to the market doing one thing, filter out the noise, then do the opposite – all in a controlled manor. To this day I still find myself fighting the herd mentality at times and that is when I step away from the computer and regroup.

I have a simple rule that has saved me thousands over the years. I would rather miss a trade and learn what caused me to get confused, then to take a loss.

Rule # 1 – When in Doubt, Stay Out!


There are two types of traders:

1. Herd Mentality Trader – Someone who trades off fear and greed buying near tops and panic selling out at the bottom with the masses.
2. Black Sheep Trader – A trader who stand out from the masses and trades opposite to the “herd” during extreme levels.

Last weeks market action really allowed us to see which way the masses were moving. The extremely high selling volume and sharp price decline notified us that the market was trading off FEAR. And, last Thursday we actually saw PANIC which tells us the balance of the market (retail investors, John Doe’s, The “Herd”) were exiting their positions.

When we see this happen, it’s generally a good time to start scaling into long positions, as most of the down side has already happened.

I have been talking about an ABC retrace pattern for the indexes and gold for some time and last week we got just that. An ABC retrace is when we have 3 waves which are, down, small up, then another leg down.
In short this wave breaks the uptrend of higher highs and lows, as it forms a lower low telling novice traders to sell and go short. This is what causes the high volume and sharp sell offs.

Below are a few charts showing the 2009 July lows and where we are now, February 2010:

SP500 – Daily Trading Chart

Gold – Daily Trading Chart

Silver – Daily Trading Chart

Oil – Daily Trading Chart

Intraday Price Action – If you want to see some exciting intraday trading charts check out the setups last week: http://www.thegoldandoilguy.com/articles/how-to-trade-intraday-gold-and-sp500/

Market Psychology Trading Conclusion:
Most get involved with the stock market because it looks like something they can quickly learn and start making money from home. But it doesn’t take long before they quickly realize there is more to trading than meets the eye.

While trading looks easy from a glance, in actuality I think its one of the toughest jobs out there.

Why? Well, this is what you are up against:
1. You are trying to predict something that is unpredictable
2. You are trading against millions of other highly skilled traders
3. You are trading against automated computers with complex algorithms
4. You are trading with your hard earned money which causes fear and greed
5. You must accept losing trades as that is part of the business
6. You must trade with a proven trading strategy and follow the system
7. You must understand money management and apply it to every trade
8. You must truly love the market cause it will break you down mentally

I don’t want to say you must be a contrarian, but in reality you must do the opposite of the masses during times of extreme price behavior.

These extremes happen on a daily basis when trading intraday charts and every 4-6 weeks when looking at daily charts. The toughest part is to pull the trigger when emotions are flying high in the market and you are looking to do the opposite. It takes several trades before you even start to get comfortable doing this.

I hope this helps shed some light on market psychology.

If you would like to Receive My Gold Trading Newsletter and Analysis please visit my website:

Chris Vermeulen
www.GoldAndOilGuy.com