Welcome back everyone! It’s time to buckle up and get ready for another exciting year of trading.
When the market is moving on light volume I tend to focus on very short term plays to minimize my exposure to volatility. The past couple of weeks have been great for day traders and futures trades as we took advantage of the short term seasonal holiday rally in the broad market and also by shorting gold when bounces reached resistance levels.
This year I will be providing many more trades as I focus more on 60 minute trading charts to scalp the market with low risk quick reward setups. Also I will start providing futures trading analysis and signals for those who want to be more active and generate more income on a monthly basis.
DIA – Dow Jones Exchange Traded Fund – 60 Minute Chart
The Dow has been trading in this range for a couple weeks providing some excellent short plays. Although I tell members not to short in a bull market, there are times when shorting in a bull market looks and feels right. The past month has been the perfect mix for shorting using the 60 minute charts.
Dow Jones Trend
GLD – Gold Exchange Traded Fund – 60 Minute Chart
Gold is in a strong bull market but the short term charts have provided over 13 short trades in the past 2 weeks for futures traders playing the bounces to resistance levels. The triangle on the 60 minute chart with declining volume is a continuation pattern of the short term trend which is down.
Because gold is trading near a support level on the daily chart, I am waiting patiently for a perfect setup to go short, or long depending on what happens in the coming hours. I predict lower prices with $102 area for the next support level.
Gold ETF
UNG – Natural Gas Fund – 60 Minute Chart
Natural gas is trading at resistance on the daily and weekly charts. This 60 minute chart allows us to take a closer look at the intraday momentum which clearly shows there are more sellers than buyers at this level. I see lower prices in the coming hours/days.
UNG not a good fund for holding positions more than 2 weeks, it does provide excellent trading opportunities for day traders and 60 minute chart setups.
Natural Gas Tends
USO – Crude Oil Fund – 60 Minute Chart
Crude oil had a perfect bounce off of a support level on the weekly and daily charts back on the 14th. Oil is now trading at a short term resistance level and I feel it will head lower in the coming days. We still need more price action before taking a position. Let’s watch and wait.
Oil Trend Trading
Trends of Gold, Dow, Oil and Natural Gas Conclusion:
The broad market and commodities listed above seem to be trading at resistance levels with signs of rolling over. As a technical trader the charts do all the talking and they are pointing to lower prices in the near term which falls in line with my gut feeling that a sharp pullback across the board is lurking in January. Once the big money start getting pushed around again we will know who is in control, buyers or sellers.
Let’s continue to focus on these short term charts to take advantage of any low risk setups which come our way.
Dec 27th 2009
Another holiday trading extravaganza!!!
Last week the market fell into its regular holiday tradition of light volume, as institutions and big traders enjoyed the holidays thus allowing prices to drift higher. We still have one more week of light trading volume before this year and holiday season is officially over.
Trading during low volume times is regularly misinterpreted. Many traders figure they should not be trading this time of the year but from my experience, the last two weeks of the year are amazing for short term swing plays or day trading. The market seems to be much more predictable when the large program traders are not involved.
Also the more speculative plays (small and mid cap stocks) always seem to out perform as buyers bid the prices higher into the light selling volume. This is most likely why we are seeing the NASDAQ and Russell 2000 indexes making some nice gains of late.
Take a look at the charts…
Broad Market & NASDAQ Low Volume Rally
Stock Market Trend
GLD ETF Trading – Daily Chart
Gold prices broke down as expected in early December and are now nearing a possible bottom. The past 3 weeks have provided some very exciting day trades shorting spot gold prices. In the next few weeks I will be starting to provide more spot gold charts and intraday price action for all the international traders and futures traders ?
I did not provide the chart of silver as it trades very similar to gold. When the time comes I will provide detailed analysis for entry and exit points for members.
Gold Market Trend
Crude Oil USO Trend Trading
USO fund had a very nice pullback in early December and I pointed out a spec play at $35.50 with targets set at $37, $38 and $40. So far the first two profit taking targets have been reached.
Sorry for all the lines on the chart but sometimes it’s the only way to remember where all the crucial levels are for trading pivot points.
Oil Trend Trading
Natural Gas UNG Trend Trading
Natural gas trades like a bucking bronco. It’s a tough ride if you do not understand market psychology and apply strict money management to your positions.
Last weeks price action closed with a bearish candle after testing resistance twice. We could get a short trade this week depending on what happens from here. Let’s keep our eyes open for a low risk setup.
Natural Gas Trend
Market Trends Trading Conclusion:
This year has been fantastic for making money, but next year will most likely be much more difficult if we see the market top and head south or trend sideways. The market topping is not an event; rather a process and trend following systems will start having more losing trades than winners as the market momentum shifts from up, to sideways then down.
Don’t get me wrong, I am not saying I think its going to roll over and head south, cause quite frankly no one knows what its going to do from this point forward. This is the reason we are in cash and patiently awaiting new low risk opportunities to place our money. The joy of trading with technical analysis is that you don’t care which direction the markets go because the analysis, if done correctly, allows you to profit in all market conditions using different trading strategies.
The board market, in my opinion, is way overbought due to the holiday rally. But we must remember there is another low volume week as we approach New Years and this could extend the rally more. Smaller trading positions should be used until we enter the New Year and volume steps back into the market.
Gold and silver are in a short term down trend and trading near a resistance level. We could see prices drop quickly or rally from here. So we are letting things unfold before making a commitment.
Oil continues to move higher and last weeks weakening US dollar helped give oil a boost.
Natural gas is trading at resistance and looks ready to head back down. The daily and 30 minute chart did not setup a signal to short Natural Gas, but it was very close.
As usual, I will update on the market and provide daily updates and trades to members.
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Dec 26th, 2009 – Gold Trends
How did your Dad pay his college tuition with a part-time summer job? Why does it take two breadwinners to support a family these days? What with all the recent fuss about gold?
The answer to these seemingly unrelated questions have a common answer.
Cause and Effect
Governments have a curious tendency to run deficits; and when they do, they have two options.
1) Decrease disbursements
This usually takes the form of spending cuts. Public servants are laid off, social programs lose funding and government bureaucracies are consolidated. Politicians typically consider spending cuts a last resort and have a dubious record of fiscal discipline in this regard.
2) Increase receipts
This usually takes the form of tax hikes and loans from foreign creditors. Politicians frown upon this option as well, especially during an election year.
There is also third, sneakier option that you may not hear about on the campaign trail or in state-of-the-union address.
3) Monetize the difference
This simply means governments fire up the printing press and create enough cash to cover the budget deficit. No cuts, no taxes. Needless to say, politicians love this option and have abused it for decades.
So what is the effect of money creation?
Inflation
“By a continuing process of inflation, governments can confiscate secretly and unobserved an important part of the wealth of their citizens.” -John Maynard Keynes
There are three things guaranteed in nations with fiat currencies: death, taxes, and inflation. Inflation is, by definition, expansion of the money supply. As the newly printed money circulates in the economy, the value of the old money is diluted. In other words, as freshly created dollars – conjured up by elected officials to balance the budget- filters into the money supply, it steals value from pre-existing dollars. That means every dollar printed by the government appropriates purchasing power from every dollar in existence. From cash in your wallet to money in your bank account and dollars held by foreign creditors, all money in the system is indiscriminately deprived of value.
Think of inflation as a hidden tax or a trade-off. When governments create money to engage in aggressive foreign policy, enact socialized health care and slash taxes, citizens pay in the form of inflation. Most of us, however, are oblivious to the root cause of inflation and tend to ignore its devastating effects.
The by-product of all this excess money in circulation is higher prices. As money loses purchasing power it takes more cash to buy things. Food, rent, gas, tuition, movie tickets and anything else denominated in dollars becomes more expensive. Even wages and salaries increase, but not at the rate of consumer goods. As a result, a larger portion of our income is allocated towards basic expenses like groceries and mortgage payments and less money is available for discretionary spending. Inflation gives us the illusion of wealth. Our stocks, houses and wages may be appreciating from a nominal standpoint, but relatively speaking, we are become poorer.
Gold Trends
This explains why even though we are being paid more, our standard of living is plummeting. Mom and Dad have to work full time to make ends meet. Summer earnings become insufficient to cover tuition and students are forced to take out massive student loans. The benefactors are the politicians who get their hands on the hot-off-the-press cash while it still has full value. By the time the new money gains velocity and consumer prices rise sharply they are long out of office collecting their pension checks.
This vicious cycle has perpetuated itself for decades and is reaching a tipping point in many countries. The United States in particular has raised the stakes with bailouts, stimulus packages and promises to insure virtually every American mortgage and bank account. Of course, tax hikes and spending cuts are not funding these bold initiatives; the monopoly-money maker at the Fed is.
Unless the fundamental laws of economics are magically repelled, inflationary pressures will ultimately engulf deflationary ones. Unfortunately, no nation is immune from the cause and effect nature of economics. Governments who venture away from the principals of sound money and create grotesque amounts of unbacked cash are locking their currency into a long-term downward trajectory.
Hyper inflation has many precedents in modern society and has crippled a myriad of robust economies.
Gold Holds Value
Gold
Gold is a dynamic metal. Aside from being industrially useful, gold has a variety of attributes that naturally lend itself as a medium of exchange. Gold is easily divisible, fungible, has a superb value to weight ratio and never decays or rusts. It is rare, difficult to mine, nearly impossible to counterfeit, and has a magnificent track record of holding its value.
In fact, according to Jeff Clark at Casey Research, in 1935, when an ounce of gold was worth $35, you could buy:
• a top-quality tailored suit for $19.75 – or 0.56 ounces of gold
• a family car for $500 – or 14.3 ounces of gold
• a house for $7,150 – or 204.2 ounces of gold
Today, with an ounce of gold worth north of $1000 an ounce:
• that same top-quality, tailored suit costs $600 – or 0.56 ounces of gold
• the family car now costs $15,000 – or 14.2 ounces of gold
• the house averages $181,100* – or 204.6 ounces of gold*
• *average house price from 2008 / gold at 2008 price of $880/ounce
If your grandfather locked $7,000 USD – the approximate value of an early 20th century home- in a vault when he was young, the state-run printing press would relentlessly dilute the purchasing power of his saved money. 75 years later, you would be hard-pressed to find a decent used car for the same amount. Conversely, if he instead purchased 200 one-ounce gold coins with his $7000 in cash and locked it in the same vault, his hard earned wealth would be remarkably preserved. With proceeds from your grandfathers gold coins you could buy an average American house, just like he could have back in 1935.
Today, gold’s inverse relationship with the USD continues. As money creation continues to destroy the value of USD’s, gold casually mirrors the decline. In essence, the fuss about gold is really just a reaction to drastic government spending programs.
Implications, Considerations and Recommendations
The prospects of gold look increasingly bullish.
• Gold as a hedge against inflation is becoming more mainstream. It is only a matter of time before inflation rears its ugly head.
• Central banks are expected to be net buyers of gold in 2010 for the first time in decades.
• Gold production is in a state of perpetual decline. Old mines are closing at alarming rate while capital for new mines has dried up. New deposits are being reported less frequently and at lower grades.
• China is allowing and even encouraging its citizens to buy physical gold.
• Ben Bernake occasionally refers to his mystical exit strategy yet refuses to budge interest rates. All sign point to more stimulus, more bailouts and more government spending.
This all adds up to gold turning the corner in 2010 and cementing its bull-market status.
In the context of recent events, any day trader will tell you that unprecedented interventionism by world leaders has spelled unprecedented volatility in stocks and commodities. From a macro-economic standpoint, we expect this trend to continue for the foreseeable future. Technical analysis and experienced advice is vital to playing today’s gold market profitably. Opportunities are everywhere.
As gold continues to march higher at the expense of the USD, there are many ways to profit. Purchasing physical gold bullion, gold ETFs and gold funds are a great way to insure your wealth against over-zealous elected officials. For even better returns, consider leveraged plays like gold producers and explorers. Regardless of the platform, it is highly recommended that you have a portion of your portfolio exposed to gold in these uncertain times. And if you want to pleasantly surprise your future grand kids, please, don’t bury stacks on 20’s in a time capsule.
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It’s been a great year as we head into the final few trading sessions. The past several weeks the indexes have not done much of anything which is why we are now in cash.
I feel as though the market is about to change direction abruptly in the coming days or weeks. I feel this way for several reasons:
1. NYSE, Dow Jones, S&P500 are all drifting higher into resistance levels on the 10 day, 60 minute charts. Light volume tends to favor higher price hence the reason for the holiday rally. 2. Broad market momentum waves are topping 3. These same indexes are trading at resistance levels from early 2008 4. Money flow is indicating large institutions have been big sellers over the past 3 weeks. 5. US economy I think is worse than most want to think
So take a look at these 10 day charts which clearly show resistance and support trend lines. Each, if broken will lead to a sharp decline. I used ETF’s as substitutes for the indexes.
Dow Jones – DIA – Top Chart SPY – S&P500 – Middle Chart NYSE – Bottom Chart
Stock Market Trend
Stocks have started to decouple for the US dollar in recent days so I am not focusing much on what affect the dollar will have on the above indexes.
That being said, the US dollar (UUP etf fund) is at a pivotal point. It’s either going to bounce off the trend line support level (blue line) and send gold back down to test the previous low, or breakdown through the support trend line. A falling dollar will give gold some power to muscle its way back up to the next short term support level.
Dollar and Gold Trends
Yesterday (Tuesday Dec 22nd) we said gold stocks and silver prices would move higher. I consider gold stocks and silver my leading indicators for the price of gold. Today (Wednesday Dec 23rd) gold stocks and silver shot higher – out performing gold by 7:1 which is very bullish for gold.
Crude oil had a large rally today sending the USO oil fund surging 3.5%, confirming a bounce off our support level 2 weeks ago. It could be warming up for another rally.
Natural gas opened lower but put in a strong session as it trended up all day. This also looks very strong and if prices breakout and follow through next week natural gas could be making a real rally for once.
This is a short trading week with Thursday only a half trading session and Friday being closed for Christmas/Holidays. We will not have any low risk setups this week and because we are sitting in cash, let’s take this time to enjoy our family, friends and pets ?
Get my Trading Charts, Reports and Signals:
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Commodities so far this week have not changed much. But I can point out a few things for us to watch Thursday and Friday.
Precious Metals – Gold GLD fund – Silver SLV Fund – PM Stocks GDX Fund
We could start to see a shift between the price relationship between gold and the broad market. I pointed this out last week mentioning that gold and silver are starting to hold up in value while stocks sell off on big days. For example, Wednesday’s sell-off in equities did not have much effect on precious metals. This is what we want to see. It means money is moving out of stocks and into gold and silver bullion as a safe haven.
These three charts of GLD, SLV and GDX show Wednesday’s price action as gold and silver moved higher while precious metal stocks sold down with the rest of the market. This is generally a bearish indicator for gold and silver but because I am starting to see this happen more often and traders are ready for the market to top any day, I am seeing this as a bullish indicator. If the market starts to slide I have a feeling investors will be dumping a lot more money into gold and silver.
Gold, Silver, Precious Metals Stocks
Energy – Oil USO Fund – Energy Stocks XLE Fund
We are seeing a similar pattern in the energy sector. Oil had a nice move higher today while energy stocks sold off. Stocks are starting to fall out of favor.
Energy Oil Stocks
Natural Gas – UNG Fund
Natural gas is still in a bear market and trading under a major resistance trend line. This commodity could go either way so I am going to wait for the odds to be more on my side before jumping on board with a long or a short trade.
Natural Gas UNG Fund
Mid-Week Gold, Silver, Oil and Nat Gas Conclusion:
The market is starting to look and feel top heavy with many indicators and price action patterns giving cross signals. While the market could continue to rocket higher with new money getting dumped in from average investors because of solid 3rd quarter earnings, we must be cautious by tightening our stops and take some profits off the table. Until we get a short term oversold market condition I am trading very conservatively.
Waiting for a good trade is crucial in trading. If you always want to trade and force positions when the market is choppy you end up with lower probability trades.
The market continues to whipsaw traders out of positions as volatility rises. I have put together a few charts to show you where each of our commodities are trading along with the SPX (SP500 index).
My Gold Stock Breakout Model – Monthly Chart
I use this chart to keep my big picture trades on the right side of gold. I found that gold stocks tend to lead the price of gold so watching this gold stock index on the monthly, weekly and daily charts can provide me with short term tops and bottoms for trading gold bullion, GLD or DGP exchange traded funds.
The monthly chart clearly shows the rally in stocks has now sold back down to my resistance trend line. If we do not get a rally this week in gold stocks, then I think we could see gold trade sideways or down for several months.
HUI Gold Stock Newsletter
GLD Gold ETF Trading Fund – Newsletter
The daily gold bullion fund shows the recent price action and what I think could happen in the coming weeks. In the past couple days gold has moved to a short term support level where I think we could see buyers step in.
We took some profits near the high and continue to hold a core position until we have another technical breakdown or new setup to add more to the position again.
GLD Gold ETF Trading Newsletter
SLV Silver ETF Trading Fund – Newsletter
Silver is in the same boat as gold. We have taken some profits and are still holding a core position with protective stops in place just incase the market does head lower from here.
Silver SLV ETF Trading Newsletter
USO Crude Oil Trading Fund – Newsletter
Crude oil started to bleed lower last week as the price sliced through the multi month support trend line. Volume shot up as stop orders get triggered on the way down. We finally have a move outside of the pennant formation that has been in place for several months. Now we can start looking for a low risk setup for trading crude oil again.
Crude Oil USO Trading Newsletter
UNG Natural Gas Trading Fund – Newsletter
Natural gas has really come back to life. I mentioned on September 2nd that natural gas (UNG) looked like a buy between $9 – $9.50 and it has now rallied 25% since that point. But stepping back and looking at the chart we can see resistance is hovering over head between the $12 – $12.25.
I may send out a setup for a short play if we get one but I feel the heavy sell off in August was the final wave down, flushing out traders. Speculative traders seem to have moved into natural gas and I think they will continue to buy it for some time. Pullbacks will be sharp but most likely followed with more buying as we enter the cooler months of the year.
Natural Gas UNG Trading Newsletter
SPX Index Trading – Active Trading Partners
I thought that I would show a quick picture of the SPX because it shows the psychology of traders and how it repeats it’s self over and over. The black and green waves are virtually the same patterns.
I feel as though the market is ready for a larger pullback than what we had in June/July but my focus will be to buy in the oversold dips and lighten my positions in overbought conditions (scaling in and out of positions) until the trend confirms it has reversed.
SPX SP500 Trading Newsletter
My Market Trading Newsletter Conclusion:
Gold stocks are pulling back and precious metals continue to move with the overall market action. I do feel that gold and silver will break this relationship and start to move higher in the coming months but until that happens I remain cautious with my positions tightening my stops.
Crude oil is starting to come alive and I am now looking for some low risk setups for energy related funds. Last week’s technical breakdown could provide us with a big move in the coming months.
Natural Gas continues to hold up but is now trading near resistance. Depending how many spec traders there are still lingering around (as most lost their shirts in the recent months), will dictate how much higher natural gas will move. The 25-30% rally in the past month has been very powerful and this could be just the beginning. I am now waiting for another setup that could be a long or a short trade depending on what happens next.
Gold is back in the spot light as it flirts with the $1000 per ounce level. This closely watched commodity looks as thought it will rocket higher because of the multiple trading time frames indicating breakouts.
I mainly focus is on trading the daily chart but I always refer back to the longer time frames which are the weekly and monthly charts. Knowing the momentum and trend on these long term trading charts allow me to identify the strength of the rallies and sell offs on the daily chart. I use this analysis for determining how large of a position to take, and where to place profit targets and stop loss levels.
Trading gold stocks does provide explosive opportunities when the price of gold moves. The past couple years I have only been focusing on trading gold to the long side because the overall long term trend is up. Trading with the longer term trend always improves the odds of winning the trade. I will short GLD or GDX funds for an intraday trade using my simple Kitco gold overlay Day Trading Strategy. I have posted this strategy a couple of times on the internet, if you want to read more about it.
Below is my analysis explaining the price action of gold stocks on the daily, weekly and monthly charts. I also a listed the US and Canadian funds which I trade.
HUI Gold Stocks Index – Daily Chart – Short Term
The daily chart of the HUI clearly shows buy and sell signals, which were generated in the past 2 months. Using resistance trend lines for breakout levels is very important. I also use pivot lows to draw and connect my support trend lines, which allow me to calculate down side risk and buy signals. The recent breakout is very strong and that is because the weekly and monthly charts are showing a breakout to the upside triggering longer term traders/investors to buy.
Daily chart buy and sell signals are for short term trades which last between 2-20 trading days. My focus is to lock in 1-5% gains but in a strong trend I can pocket 10-20% return in a short period of time.
Gold Stocks Newsletter
HUI Gold Stocks Index – Weekly Chart – Intermediate Term
Weekly chart patterns and breakouts provide a much larger move in general so watching this chart is crucial for long term success. Following the weekly chart goes for trading every investment vehicle whether you are trading stocks, futures, FOREX etc…
This chart generated a buy signal in December of 2008, which we took advantage of. And just 2 weeks ago it gave us another buy signal. Again using my simple trading strategy which involves trend lines and the MACD momentum indicator, we are able to establish clear buy and sell signals.
Gold Stocks Trading
HUI Gold Stocks Index – Monthly Chart – Long Term
Long term investors will use the monthly chart for timing their buy and sell signals because once the momentum has shifted direction it tends to last for several months if not years. I do not focus on trading these long term signals but I use them to help me know the momentum (power) of the next possible breakout. This also helps me in deciding whether to scale out on rallies with some of my position locking in some profit and buying back on dips, while leaving a core position incase the price continues to rally.
The monthly chart of the HUI shows a breakout this month and if the price can hold until Oct we will have a complete long term buy signal. I use the MACD for momentum and the HUI:GLD ratio to confirm the breakout which puts the odds more in my favor.
Gold Stocks Newsletter
Precious Metals Funds for Trading Gold and Silver Moves – Daily Chart
Here is a list of the precious metals funds I trade on a regular basis. I trade both US and Canadian funds. Because I am based in Canada I focus on Canadian gold stocks and gold funds when there are intermediate/long term signals which I trade in my retirement account.
The funds I trade are GLD (gold bullion), GDX (gold miner stocks), SLV (Silver Bullion), XGD.TO (Canadian Gold Stocks), CEF/A.TO (Canadian Gold & Silver Bullion). If you look at a comparison chart you will see some funds provide much larger moves than others. In general I like to own a bullion fund and a precious metal stock fund so that I get the best of both worlds.
Gold Trading Investments GLD, SLV, HUI, GDX
My Gold Stocks Newsletter Trading Conclusion:
In short, Gold and gold stocks are on fire. The next 13 trading days are very important for gold as it battles to breakout above the $1000 – $1033 level which is the 2008 high. With gold trading at this MAJOR resistance level also known as a “Pivot Point”, the risk level is higher for traders. The odds are pointing to higher prices but we must recognize that price action becomes volatile and fast moving. We could see the price breakout and rally to the $1500 level within months which is what are currently positioned for. But we must realize that gold could create a double top and sell off very quickly which is why we have stops in place to protect us.
So those of you who are long be sure to lock in some profit and be ready for some wild price action in the coming weeks.
If you would like to receive these Free Weekly Reports please Opt-in to my newsletter at: www.GoldAndOilGuy.com
Chris Vermeulen
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April gold closed sharply higher on Friday and above December’s high crossing at 892.20 thereby renewing the rally off October’s low. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If April extends this week’s rally, October’s high crossing at 938.20 is the next upside target. Closes below the 10-day moving average crossing at 842.60 would confirm that a short-term top has been posted. First resistance is today’s high crossing at 905.50. Second resistance is October’s high crossing at 938.20. First support is today’s low crossing at 853.80. Second support is the 10-day moving average crossing at 842.60.
March silver closed higher on Friday and above the upper boundary of this fall’s trading range crossing at 11.770. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If March extends this week’s rally, the reaction high crossing at 12.430 is the next upside target. Closes below the 20-day moving average crossing at 10.047 would temper the near-term friendly outlook in the market. First resistance is today’s high crossing at 12.075. Second resistance is the reaction high crossing at 12.430. First support is the 20-day moving average crossing at 10.047. Second support is last Thursday’s low crossing at 10.320.
CRUDE OIL TRADING
March crude oil closed higher on Friday and above the 20-day moving average crossing at 45.09 signaling that a short-term low has been posted. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near-term. If March extends today’s rally, this month’s high crossing at 54.74 is the next upside target. Closes below December’s low crossing at 38.00 would open the door for a possible test of psychological support crossing at 30.00 later this winter. First resistance is today’s high crossing at 47.00. Second
resistance is this month high crossing at 54.74. First support is Tuesday’s low crossing at 39.11. Second support is December’s low crossing at 38.00.
METALS: February gold futures closed down $35.50 at $819.50 today. Prices closed near the session low, hit a fresh four-week low and saw a bearish downside “breakout” from a trading range on the daily chart. Bearish “outside markets”–lower crude oil prices and a firmer U.S. dollar–did pressure the gold market today. Near-term chart damage was inflicted today.
March silver futures closed down 73.0 cents at $10.59 an ounce today. Prices closed near the session low and hit a fresh three-week low today. Bearish “outside markets”–lower crude oil prices and a firmer U.S. dollar–did pressure the market today. A 2.5-month-old choppy uptrend on the daily bar chart was penetrated on the downside today.
ENERGY MARKETS
ENERGIES: February crude oil closed down $3.07 at $37.76 a barrel today. Prices closed near the session low and hit a fresh two-week low today, amid a firmer U.S. dollar and more recent dour world economic data that suggests less demand for energy worldwide. Bears still have the overall near-term technical advantage and have regained downside momentum recently. Prices remain in a six-month-old downtrend on the daily bar chart.
GLD Gold ETF – Taking advantage of the gold market using the GLD exchange traded fund to generate consistent profits in any market condition.
As I mentioned before, the past 5 months have been very frustrating for most traders as we are stuck in this sideways price action. I also noted that August to December is generally the stronger months for gold. Although gold has been under selling pressure during the last 4 weeks I think there is light at the end of the tunnel. It’s usually the darkest before dawn, but there are some hurtles for gold to over come before we are in the clear which I explain below.
Chart 1 – The Gold Mining Stocks Index
This is a 10 year chart with a cup and handle pattern complete with a breakout. As you can see in the chart below gold mining stocks have continued to collapse below their support level. This does not mean gold is going to follow but it is a red flag which needs to be noted for future long entry points. Gold mining stocks in general are seen as volatile and high risk types of investments so I understand why investors are unloading their positions to lock in profits.
Gold Mining Stocks Index
Gold mining stocks are pushed below long term support level.
Chart 2 – Gold Stocks Index
This is an 8yr chart of the price action of gold stocks and you can see that they are currently testing long term support levels. If this monthly bar closes below this trend line then long term investors should be sitting in cash until we have a new opportunity to enter long or short. The HUI generally makes the move before the price of gold so I follow the HUI in all time frames.
Gold Stocks Index
The HUI is testing long term support.
Chart 3 – Performance Chart (Gold Stocks vs Price of Gold)
The past 2 years from 2006 to present gold stocks have slowly been underperforming the price of gold. This is generally not a good thing to see if we want higher prices for gold. But the good news is that gold stocks appear to be reaching levels at which new rallies have started.
Gold Stocks vs Gold Spot Price
Gold stocks under performing the price of gold but near support.
Chart 4 – Daily HUI Chart
I follow the HUI like a hawk as it fine tunes my entry and exit point for trading GLD, DGP and DZZ funds. Last month the HUI made a lower high and a lower low which is a red flag. While I don’t predict prices I am thinking these lower prices for gold stocks are just panic sellers over extending a sell off. I would really like to see an August rally kick into place.
HUI Gold Stocks Index
The HUI makes a lower high and lower low on the daily chart.
Chart 5 – GLD Gold ETF Chart
While gold stocks have been selling down, gold has so far been able to hold some ground. As you can see in the chart below the last three months gold has made higher highs, and higher lows. Currently gold is testing Major Support at the 200 EMA.
GLD Gold ETF Trading
Gold ETF GLD at long term support still holding its ground.
Conclusion:
My analysis of gold using the charts provided above shows that gold stocks and indexes are oversold and are at major support levels. Thus an August rally is not out of the picture and we could have some favorable setups in the near future. I would prefer higher prices, but in the end movement is movement and we can profit in either direction evenly.
GLD gold etf trading for me is the most accurate trading vehicle I have come across. I have been using my proven trading model which avoids the price gaps and keeps risk under 3% for each trade. GLD makes it simple to profit from the markets using a proven trading model for trading long and short term gold setups in all market conditions (bull, bear, and sideways).
My focus for short term trading is simple. Wait for a breakout which satisfies my trading model, enter the trade and then exit 50% of position on the first sign of weakness. Exit second half on a trend line break. My goal for GLD ETF is 2-5% and we are in trades for 2-10 days unless prices continue to run. I generally have 10-20 trades per year with gold.
Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com. There he shares his highly successful, low-risk trading method. For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris’ uniquely consistent investment opportunities that carry exceptionally low risk and high return.
