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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.

Receive my Free Weekly Gold Trend and Market Analysis:

Chris Vermeulen
www.TheGoldAndOilGuy.com

The Triple Time Frame Breakout in Gold and Nat Gas

We have been waiting for gold to breakout above the 2008 high for almost 2 years. These charts show we are slowly working our way there.

Gold Stocks Index – The Leading Indicator for Gold Bullion
I watch the price of gold stocks very closely because when there is large divergence from the price action of gold bullion I can get in a trade before the general public does.
Tuesday we saw gold stocks put in a powerful rally yet gold bullion did not move much. This told me there was going to be some positive action Wednesday in gold and there was a very nice rally, indeed.

This monthly chart of gold stocks shows a monthly breakout which is exciting to see. Most rallies last between 3-6 months on a breakout like this. That being said we could still have another 1-3 months of sideways price action as gold bullion tries to clear out the over head supply.

If you follow Australian gold stocks check out http://www.sharefilter.com/ for more info.

Gold Trading Breakout Signal

Gold Trading Breakout Signal

Gold Bullion – Monthly Timing Chart
The gold chart clearly shows that we are near a major breakout. You can also see the similar price action before the last major breakout which is encouraging.

Gold Breakout Trading Newsletter

Gold Breakout Trading Newsletter

GLD Gold Bullion Trust – Weekly Timing Chart
Gold has broken out of is bullish pennant and now trying to break through the overhead resistance. So far the price action is strong but do not expect a breakout instantly. The market always has a way of dragging things out much longer than one may anticipate.

Gold Bullion Trading Breakout

Gold Bullion Trading Breakout

GLD Gold Bullion ETF – Daily Timing Chart
The daily chart clearly shows that if we continue to form a bull flag or some type of pennant formation it major breakout could takes weeks from here.

Gold ETF Breakout Trading

Gold ETF Breakout Trading

Natural Gas – Weekly Timing Chart
Several weeks’ back I pointed out that Natural Gas was extremely over sold and at 10 year lows which was a good point to start scaling into a position. This high risk setup has paid off well for those following actively trading the over bought and over sold conditions with me.

We now have a breakout and are waiting for a low risk entry point to buy more natural gas.

Natural Gas Breakout Signal Trading

Natural Gas Breakout Signal Trading


Crude Oil – Weekly Timing Chart

Crude oil continues to trade within a set of bull wedges making it difficult to get a low risk setup. I trade over bought, over sold and trends, not sideways/trend less investments which USO has been in my eyes for a few months.

Soon enough it will flash a buy or sell signal for me and we will be active again with USO and other oil funds.

Crude Oil Bul Market Trading

Crude Oil Bul Market Trading

Weekly Market Timing Conclusion:
Overall our precious metal stocks and bullion trades are doing well. We continue to wait for a breakout, hopefully to the upside, but have protection stops in place to lock in gains if prices drop on us.

The energy sector has been tricky because oil is trend less and natural gas has gone straight up. Again my focus is on low risk, high probability trades and I don’t chase or make trades when there is nothing to trade.

If you would like to receive my Free Weekly Trading Reports like this please visit my website: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Monday Jan 12 – Precious Metals & Oil Update

Special Swing Trading Report on Gold, Silver & Oil – CLICK HERE

PRECIOUS METALS

February gold closed higher on Friday as it consolidated some of this week’s decline. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. If February extends this week’s decline, trendline support drawn off the November-December lows crossing near 804.60 is the next downside target. Closes above the 10-day moving average crossing at 865.50 would signal that a low has been posted. First resistance is last Monday’s high crossing at 892.00. Second resistance is October’s high crossing at 938.80. First
support is Wednesday’s low crossing at 836.00. Second support is trading line support crossing near 804.60.

March silver closed higher on Friday due to short covering as it consolidates above the 10-day moving average. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI are neutral to bearish signaling that a short-term top might be in or is near. Closes below the 20-day moving average crossing at 10.908 are needed to confirm that a short-term top has been posted. If March extends the rally off October’s low, the reaction high crossing at 12.230 is the next upside target. First resistance is Monday’s high crossing at 11.770. Second resistance is the reaction high crossing at 12.230. First support is the 20-day moving average crossing at 10.908. Second support is Monday’s low crossing at 10.570. 

ENERGY MARKET
February crude oil closed lower on Friday as it extended Thursday’s breakout below the 10-day moving average crossing at 42.98. Today’s low-range close sets the stage for a steady opening on Monday. The door is open for additional weakness and a possible test of last week’s low. Closes below last Wednesday’s low crossing at 36.94 would temper the near-term friendly outlook in the market. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near-term. If February renews the rally off December’s low, the reaction high crossing at 52.95 is the next upside target. First resistance is the 20-day moving average crossing at 43.34. Second resistance is Tuesday’s high crossing at 50.47. First support is today’s low crossing at 39.38. Second support is last Wednesday’s low crossing at 36.94.