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Sector Rotation Giving Mixed Signals About The Future

It seemed the markets wanted to make a point to alert us that volatility may be here to stay very early in trading this week.  After a fairly flat overnight session with very little price volatility, the markets opened up to a moderately large price rotation (first downward, then back higher) before settling into a broader downside move in the early afternoon in New York.  The interesting facet of this move is that it seemed to be related to price valuations and expectations in certain sectors. Before we get into the details, be sure to opt-in to my Free Market Forecast and Trade Ideas Newsletter so stay on top of these market moves.

As we’ve been suggesting for many weeks and months, we are not out of the woods quite yet.  The US markets may be subject to more price volatility than we have considered while the continued Capital Shift (foreign capital pouring into the US markets) may also be shifting.  One thing is certain, now is not the time to try to set up positional trades in the market expecting longer-term price trends to set up and run over the next few months.  This appears to be a traders market where skilled technical traders will shine by finding opportunities and executing very skilled and targeted trades for profits.

Many months ago we authored an article about the US Presidential election cycle and how that event plays into market uncertainty and price activity.  We are currently entering the prime span of time where price rotation and volatility because of this election event should take place.  This “price malaise” typically happens about 16 months before the election date.  As we move closer to the elections, the markets typically become much more volatile and enter a period where the price tends to consolidate near recent lows or establish moderate new lows as attention shifts away from the economy and towards the election news.

If you are serious about trading, this is when you want to pay very close attention to the various market sectors and understand that opportunities may be very short and sweet for profits.

Mid Cap Stock Index 30 Minute Chart Pattern

This first chart is the MC (S&P 400 Midcap) which shows how price strength in this sector moved against the overall price trend of the ES, YM, and others.  From the start of trading, the MC appeared to have a stronger upside price bias than the other US major market sectors.  This may mean that traders are finding real value in the Midcap sector and are stepping back into this sector thinking it may have some real opportunity for growth.

Transportation Index – 30 Minute Chart

Additionally, the Transportation Index moved higher in a similar structure.  The Transportation Index typically leads the US stock market by 3 to 6 months as an indicator of future price expectations related to the need for trucks, rail, shipping, and other economic-related activities.  More need for shipping/transportation solutions means a more active economy.  A more active economy means more buying and selling of goods, services, and other items.  Thus, if the Transportation Index can break recent high levels and begin a new upside price move, it would be a very clear sign that the US economy is strengthening and that the US major indexes may begin a new upside price move soon.

VIX – Volatility Index 30 Minute Chart

The VIX, on the other hand, is still showing us that price volatility has not vanished quite yet.  The VIX started moving higher early in trading and continues to push a bit higher right now.  If the VIX moves back above 18 or 19 quickly, the we are likely going to see increased volatility in certain sectors of the market which could present real problems for traders.  As long as the VIX stays below 18, then the volatility may stay a bit muted going forward.

Pay attention to the VIX and what happens to the major stock indexes over the next 2+ weeks.  Trade accordingly.  This is not your simple, safe trending market any longer.  This is larger volatility with increased risks.

If you are not a very skilled technical trader that understands risks and position sizing, then this market is probably not for you.  This is where you will likely chew through your account trying to run longer-term setups in a very choppy market environment.

Volatility is key.  Until the VIX settles back down below 12, we are going to continue to experience bigger, more volatile price rotations.  Some may be as large as 2% or 3% as news hits.  This is why we must understand the risks that are at play here and how to protect our assets from losses.  Remember, you don’t have to be in a trade all the time in order to profit from the markets.  Watch for the proper setups and wait for the proper entry point before this market chews you up and spits you out.

We believe our super-cycle research and other proprietary modeling systems are suggesting that price weakness will dominate the markets for the next few months. Ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis and recession.

In short, you should be starting to get a feel of where commodities and asset class is headed for the next 8+ months. The next step is knowing when and what to buy and sell as these turning points take place, and this is the hard part. If you want someone to guide you through the next 12-24 months complete with detailed market analysis and trade alerts (entry, targets and exit price levels) join my ETF Trading Newsletter.

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Chris Vermeulen – www.TheTechnicalTraders.com

Price Structure Still Suggests We Are Within Volatile Rotation

This shortened holiday week has been full of crazy price rotation, political intrigue, surprise news events and, we are certain, full of headaches for some traders.  Still, we managed to pull out four consistently profitable trades for our members by sticking to our proven trading systems and deploying effective position sizing techniques.  Not a bad week for us at all.

Today, we are writing this research post to highlight that price is still not “out of the woods” in terms of price structure and/or price rotation.  Yes, there was quite a bit of external news that drove prices higher on Thursday and Friday (BREXIT, Earnings, and China decreasing the lending rates as well as decreasing bank asset levels in an effort to prompt more lending).  These news items continue to drive price action and rotation.  The VIX has settled at 15.00 as of Friday – the lowest level seen since early August 2019.  Our opinion is that this is just a brief pause before more chaos hits the markets.

The BREXIT news was straight out of a suspense novel.  At the very last minute, a coalition of political interests changed direction in an effort to stop the NO-DEAL BREXIT that seemed to be almost a sure thing.  We don’t have any more information than what is printed in the news publications, but we believe the NO-DEAL BREXIT will happen this year.

Earnings were mixed with some interesting surprises.  Jobs data came in relatively strong on Friday with higher earnings and higher working hours, yet job creation levels fell a bit from expected levels.

China seems to be relaxing its bank restrictions in an effort to jump-start their local economy.  We read that current debt levels are 300% of GDP in China (and that only accounts for debt that is stated in official economic data).  If one were to include the shadow banking system and corporate debt/bonds, we believe it could be as high as $425% of GDP or higher.

Then we have multiple countries in crisis (risk of bankruptcy) where the IMF is likely to try to develop some type of “bailout” solution.  The most recent is Argentina.  Additionally, the IMF has introduced new Cryptocurrency regulations that may stifle some emerging market ICO and existing Crypto operations as the IMF attempt to get a handle on these unregulated threats to traditional currency policies.

And we are just scratching the surface so far…  What next – right?

Well, here is a Weekly ES chart highlighting the Fibonacci price structure that appears to be, very much, in need of establishing fresh new highs in order to confirm this continued bullish trend.  Right now, very similar to what happened in 2018, we are nearing an October date, near all-time highs, with fresh signs of weakness appearing throughout the global economy.  Trade issues continue, people are talking about recessions and Gold and Silver have started an incredible upside move.  Will the US stock market continue to rally from this point or rollover into a price correction?

It all depends on what happens over the next 2+ weeks and if the “capital shift” that we have continued to suggest is driving capital in the US stock market hasn’t broken rank yet.  If foreign capital is continuing to pour into the US stock market for safety, then we may very well see another attempt at new all-time highs.  If the recent weakness has spooked some investors out of the markets as Gold and Silver have caught their attention, then this capital shift may be much more muted at this time – meaning price volatility is much more of a concern.

SP500 Stock Index – Weekly Chart

The ES price will attempt to either move to new all-time highs or roll lower and take out the 2728 level.  We believe the key to this future direction lies in which news items play out over the next 2+ weeks and if the price is able to return back to a “true price exploration” mode (without the news events).

Weekly Transportation Sector Index Chart

This weekly TRAN, Transportation Index, highlights a broader picture of why our researchers are still concerned about a market correction.  The fact that the price peaks have continued to move lower as a series of lower high price peaks is very concerning.

This is indicative of a downward price trend or a trend that is consolidating lower.  The strength of support near 9695 is the only real strength we see in this TRAN chart in terms of “support for an upside move”.  The TRAN chart price must break this downward series of lower price peaks in order for the US markets to really enter a new bullish price trend.  Until that happens, we continue to stay worried that the foundation of the US markets may be crumbling below our feet while the party rages on in the US major indexes.

CONCLUDING THOUGHTS:

Our August 19th prediction of a breakdown event has obviously been invalidated by this recent upside price move.  Depending on which way price breaks out of pattern will either validate or invalidate our expected forecast. As of right now, it looks like our August 19th prediction has been invalidated and we were wrong thinking it would break down. With that said, we had three winning trades we closed out last week for solid profits and a new high water-mark for our trading portfolio.

Although, until the US stock market rotates higher to establish new all-time highs, we are not out of the woods yet.  This recent upside price move has not completely invalidated the chance of a breakdown because we have not already validated “new price highs” which are required in Fibonacci price theory.  Right now, we are in the midst of volatile price rotation and we are loving every minute of it.

This is the type of price action that is perfect for skilled technical traders.  Trade setups continue to pour into our systems.  As we stated near the top of this article, we had a series of great trades this week resulting in nearly +15% total profits for our members.  If you are a skilled technical trader, then this is the market for you to really shine.

Be prepared for these price swings before they happen and learn how you can identify and trade these fantastic trading opportunities in 2019, 2020, and beyond with our  Wealth Building & Global Financial Reset Newsletter.

Join me with a 1 or 2-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a 1oz Silver Round or Gold Bar Shipped To You Free.

I can tell you that huge moves are about to start unfolding not only in currencies, metals, or stocks but globally and some of these supercycles are going to last years. A gentleman by the name of Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. 2020 Cycles – The Greatest Opportunity Of Your Lifetime

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

FREE GOLD OR SILVER WITH SUBSCRIPTION!

Chris Vermeulen – www.TheTechnicalTraders.com

Transportation Index Warns Of Trouble Ahead?

Any weakness in the Transportation Index near current levels would indicate investors and traders believe the global economy may continue to contract going forward and may be an ominous sign for the global stock markets.

The Transportation Index is a measure of the current expectations related to shipping, trucking, trains and all measure of forward expectations for goods, products and raw materials to be moved across nations, seas, states, and locations.  When the economy is gaining strength, we typically expect to see the Transportation Index moving higher.  When the economy is weakening, we typically expect to see the Transportation Index moving lower.

Since the peak in September 2018, the Transportation Index has moved much lower to establish a base near $8625 in December 2018.  After that base formed, a series of price rotations pushed the Transportation Index up to $11,148, where it peaked, then began to trail a bit lower since May 2019. Our concern is that the Support/Resistance level, highlighted by the GREEN rectangle on this Weekly chart, represents a critical historical price that must be breached before any renewed strength in the global markets will be seen.

After the G20 meeting, last weekend, and the rally in the US stock market on Monday, we were a bit surprised that the Transportation Index failed to move dramatically higher following the global markets.  This leads us to believe investors were taking advantage of a pricing issue related to the G20 and US/China trade war news that was not rooted in strength seen in the global economy.  In other words, buy the rumor, sell the news.  It would appear the rumor hit the markets Sunday in Tokyo and the news hit the US markets on Monday.

We talked about the G20 meeting results and how G20 will move gold and the US stock indexes.

Skilled technical traders already know we must be cautious near these current all-time highs.  Volatility can increase dramatically on news or other earnings data which may drive prices higher or lower over the next few weeks.  As we start July (Q3) 2019, we should be preparing for earnings data to be released over the next 30+ days as well as continued news related to global trade issues.  Additionally, the items which will be sold for Christmas and the holidays are already being shipped across the globe and being distributed to warehouses over the next few months prior to the start of the holiday season.

Historically, July through September are somewhat weak for the Transportation Index.  Overall, the Transportation Index loses approximately 500 to 600 points over this 90-day span with a range (potentially) of over $3000 points in volatility.  Bullish trending strength returns in October and November where the Transportation Index typically rallies approximately $5000 pts with a volatility range of about $7000 points.  These historical trends suggest we could see quite a bit of volatility over the next 90 days with a decent chance at seeing a downward price move targeting recent December 2018 lows.

CONCLUDING THOUGHTS:

In previous articles, we’ve suggested a simple trade setup technique we use to identify entry and exit points – the 100% Fibonacci Extension Move.  If this move holds true for the Transportation Index, then a move to levels near $8250 is about to unfold based on the move from Sept 2019 to Dec 2019.  It would make sense that this move would likely happen between now and September 2019 – followed by a solid rally into the end of 2019 as our historical data suggests.

Now is the time to stay on top of these moves and to target the opportunity these bigger price rotations provide for technical traders.  Simply put, we have just described a downside price move of about $2000 points in the Transportation Index followed by an upside price move of over $4000 to $5000 points.  You don’t want to miss this one, folks.

I can tell you that huge moves are about to start unfolding not only in real estate, but metals, stocks, and currencies. Some of these super cycles are going to last years. Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

I urge you to visit my Wealth Building Newsletter and if you like what I offer, join me with the 1 or 2-year subscription to lock in the lowest rate possible, get a FREE BAR OF GOLD and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next set of crisis’.

Chris Vermeulen
Technical Traders Ltd.