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After watching Crude Oil fall from the $65 ppb level to the $58 ppb level (-10.7%) over the past few weeks, we still believe the energy sector is setting up for another great trade for skilled investors/traders.

We are all keenly aware that Winter is still here and that heating oil demands may continue to push certain energy prices higher.  Yet Winter is also a time when people don’t travel as much and, overall, energy prices tend to weaken throughout Winter.

Over the past 37 years, the historical monthly breakdown for Crude Oil is as follows:
December: Generally lower by -$0.33 to -$0.86.  Averages to the downside: -3.65 to +3.08
January: Generally lower by -$4.57 to -$6.72.  Averages to the downside: -2.68 to +2.27
February: Generally higher by +$8.41 to +13.73.  Averages to the upside +3.07 to -2.54
March: Generally higher by +7.33 to +$15.62.  Averages to the upside by +2.84 to -2.14

Over the past 25 years, the historical monthly breakdown for Natural Gas is as follows:
December: Generally lower by -$2.34 to -$5.26.  Averages to the downside: -0.81 to +0.69
January: Generally lower by -$5.14 to -$7.97.  Averages to the downside: -0.69 to +0.45
February: Generally lower by -$1.48 to -$3.62.  Averages to the downside -0.50 to +0.49
March: Generally higher by +0.63 to +$1.88.  Averages to the upside by +0.41 to -0.70

Over the past 35 years, the historical monthly breakdown for Heating Oil is as follows:
December: Generally lower by -$0.16 to -$0.37.  Averages to the downside: -0.14 to +0.09
January: Generally lower by -$0.52 to -$0.96.  Averages to the downside: -0.09 to +0.10
February: Generally higher by +$0.48 to +$1.06.  Averages to the upside +0.11 to -0.08
March: Generally higher by +0.03 to +$0.11.  Averages to the upside by +0.09 to -0.10

This data suggests an extended Winter in the US may prompt further contraction in certain segments of the energy sector that may prompt an exaggerated downside price move in Crude Oil and Natural Gas.  Heating Oil may rise a bit if the cold weather continues well past March/April 2019.

Conversely, if an early spring sets up in the US, then Crude Oil may begin to base a bit as people begin to traveling more, but Heating Oil and Natural Gas may decline as cold weather demands abate.

Heating Oil has almost mirrored Crude Oil in price action recently.  Our modeling systems are suggesting that Crude Oil may attempt to move below $40 ppb.  This move would be a result of a number of factors – mostly slowing global demand and a shift to electric vehicles.  We authored this research post early in January 2020 – please review it.

January 8, 2020: IS THE ENERGY SECTOR SETTING UP ANOTHER GREAT ENTRY?

We believe any price level below $40 in ERY is setting up for a very strong basing level going forward.  We have identified two “pullback zones”.  The first is what we call the “Deep Pullback Zone”.  The second is what we call the “Deeper Pullback Zone”.  Any upside price move from below $40 to recent upside target levels (above $50) would represent a 25%+ price rotation.

Historically, February is a very strong month for ERY.  The data going back over the past 12 years suggests February produces substantially higher upside price gains (+1899.30 to -394.28) – translating into a 4.8:1 upside price ratio over 12 years.  Both January and March reflect overall price weakness in ERY over the past 12 years.  Thus, the real opportunity is the setup of the “February price advance”.

We believe any opportunity to take advantage of this historical technical price pattern is advantageous for skilled traders/investors.

This is a pure technical pattern based on price bar data mining.  This is something you may not have ever considered unless you had the tools to search for historical price anomalies and rotation patterns.  We have created a suite of tools and price modeling systems we use to help our members find incredible opportunities – this being one of them.

Get ready, February will likely prompt a very nice rally in ERY if historical price triggers confirm future price activity.  The price pattern in February suggests a large upside price move is likely in ERY and we believe these low price basing patterns are an excellent opportunity for skilled traders.

Join my Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  Visit our web site to learn how to take advantage of our members-only research and trading signals.

Everyone seems to be focused on Gold recently and seems to be ignoring the real upside potential in Silver.  With all the global economic issues, military tensions, geopolitical issues, and other items continually pushed into the news cycles, it is easy to understand why traders and investors may be ignoring Silver.

Silver has really not started to move like the other precious metals.  Gold is up over 45% since 2016.  Palladium is up over 350% since 2016.  Silver is up only 29% since 2016.  The Gold to Silver ratio is currently at 86.7 – very near to the highest level on record going back over 25 years.

Historically, Silver rallies 6 to 12+ months after Gold begins a price rally.  The big break in the Gold to Silver ratio comes at a time when Gold rallies by more than 30% to 60% faster than the price of Silver.  In other words, when a major disparity sets up in the price of Gold compared to the price of Silver, then Silver explodes higher – which results in a drop in the Gold to Silver ratio.

Currently, the relative price of Gold to Silver is over 200%.  Considering this fact and considering the under-performance of Silver recently, our researchers believe Silver is setting up a massive basing pattern in preparation for an explosive upside move.

Our research team put together this chart to help illustrate the real upside potential in Silver.  This Monthly chart highlights the Gold to the Silver ratio (Darker BLUE), the price of Gold (Gold) and the price of Silver (light BLUE) over the past 20 years.

Every time Gold broke a sideways Flag formation and began to rally substantially higher, Silver followed Gold higher 5 to 12 months after with an incredible upside price rally.  In 2005, Silver rallied over 100%.  In 2009, Silver rallied almost 400%.  Now, in 2020, could Silver rally 100%, 200%, 300% or more?

In the recent past, we’ve authored numerous articles about Gold, Silver and precious metals highlighting our expectations going forward.  Our incredible research from October 8, 2018, floored many institutional traders and researchers because we were able to accurately predict the future price moves in Gold 9+ months into the future.  Take a little time to read some of our earlier research posts

Metals & Miners Prepare for 2020 Liftoff – https://www.thetechnicaltraders.com/metals-miners-prepare-for-an-early-2020-liftoff/

ADL Trading System Confirms Gold Targets – https://www.thetechnicaltraders.com/adl-gold-prediction-confirms-targets/

VIX Is Set to Spike And What It Means for Gold – https://www.thetechnicaltraders.com/metals-vix-are-set-to-launch-dramatically-higher/

We believe the current setup in Gold and Silver is almost identical to previous setups where Gold rallied on economic or global concerns, prompting a massive disparity ratio between Gold and Silver.  We believe Silver is setting up in a massive basing pattern that may be an incredible opportunity for skilled traders.

In Part II of this research post, we’ll highlight why we believe all skilled traders and investors should be paying very close attention to the metals markets, Miners and, in particular, Silver.

As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, 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 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 and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.

Chris Vermeulen
www.TheTechnicalTraders.com

Normally, after tensions between Iran/Iraq and the US flare-up, Oil and Gold rally quite extensively but reversed sharply lower by the end of the session.

Yes, Gold is 1% higher today and was up over $35 overnight, but Crude Oil has actually moved lower today which is a fairly strong indication that disruptions in oil supply from the Middle East are not as concerning as they were 10+ years ago. Traders and investors don’t believe this isolated targeted missile attack will result in any extended aggression between the US and Iran.

When past conflicts in the Middle East happened, Oil would typically rally and Gold would spike higher as well.  Consider this a reflex action to uncertain oil supply issues and concerns that global market uncertainty could crash the markets.  Gold seems like an easy expectation related to this type of uncertainty as it continues to act as a hedge against many risks like missiles/war, financial uncertainties etc…

In my pre-market video report to subscribers today (Monday, Jan 6th) I pointed out how the price of crude oil was testing a critical resistance area form the last time there were missiles fired. Today’s reversal is not a huge surprise and in fact, it looks like an exhaustion top.

Oil, on the other hand, has experienced one of the longer price declines in recent history, from the peak price near $147 near July 2008 to levels currently near $63.  But we saw a low price for oil below $30 (near February 2016).

CRUDE OIL DAILY CHART

I believe a technical resistance channel may be pushing Oil prices lower today as the price has continued to rotate lower after moving into this extended Resistance Channel.  It may be that global traders don’t believe this conflict with Iran will result in any type of massive oil supply disruption or risk for the global markets right away.  The Resistance Channel, between $63 and $65.50, has continued to act as a price ceiling over the past 7+ months.

CRUDE OIL WEEKLY CHART

Our proprietary Fibonacci Price Modeling system is highlighting similar levels near $64 and $50.  This price modeling system maps and tracks price rotation using a proprietary adaptive Fibonacci price theory model.  These levels, highlighted on this chart, represent immediate price target levels for any upside move (CYAN, already reached) and any downside move (BLUE, suggesting a move back towards $50 may be in the works).

If Oil is not capable of breaking above this Resistance Channel, then Fibonacci Price Theory would suggest price must turn lower and attempt to establish a new LOW PRICE level that is below recent low price levels.

If this Resistance Channel continues to act as a solid price ceiling, Crude Oil may turn lower over the first few quarters of 2020 and attempt to target levels near or below $50 fairly soon.  Skilled traders should prepare for this type of move and identify opportunities for profits in the near future.

In fact, I also gave subscribers a head up that GDXJ and TLT were going to gap higher and likely be under pressure all session. Also, I showed how the SP500 was going to gap lower deep into oversold territory and likely rally strongly just like last Friday, all of these things happened perfectly today.

Pre-market GDXJ, SPY, TLT warning of price gaps into extreme territories beyond the small colored lines: Red (overbought level), and Green (oversold level)

PRE-MARKET CHART ANALYSIS

END OF DAY MARKET MOVEMENTS

My point is my team and I have a good pulse on the major markets and can profit during times when most others can’t which is why you should join my Wealth Trading Newsletter for index, metals, and energy trade alerts. Visit our website to learn how you can see what this research is telling us.

I am going to give away and ship out silver and gold rounds to anyone who buys a 1-year, or 2-year subscription to my Wealth Trading Newsletter. You can upgrade to this longer-term subscription or if you are new, join one of these two plans listed below, and you will receive:

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Chris Vermeulen
www.TheTechnicalTraders.com

After the news of the drone attack on the Saudi Arabia oil refinery, traders knew this week would be full of bigger price moves, reversals and some real opportunity for profits.  We were also well aware of the risks of engaging in these market moves prior to fully understanding the dynamics of this event.  We heard from many of our friends in the industry about open positions that were not properly scaled to deal with risk – and we know some of our friends took a hit early today.

The real questions before skilled technical traders are:

What will happen with Oil and where will price find the first level of resistance?

What will happen to the US and foreign major markets related to this supply disruption?

How will future economic expectations react to this disruption?

How can I profit from these moves? First,  opt-in to our Free Trade Ideas Newsletter Here!

 

We can answer the first question fairly easily – where is the first level of resistance?  The shorter-term resistance resides at $64.41 ($64.50 to $66).  The longer-term resistance resides at $71.35 ($71.50 to $72.50).  This means the price of oil should run into some moderate resistance near $65.  If it breaks past that level, then the next level of resistance is near $72.

The second question is a bit more complicated to answer.  We believe the US markets will continue to benefit from the capital shift that has continued to take place over the past 4+ years and from deep US oil supply capabilities and reserve capabilities.  Foreign markets, particularly those that are dependent on oil imports, may experience a new impulse of economic weakness as oil costs rise.  Exporting countries will see new revenues to support ailing policies.  The answer is, the more mature economies will survive without much trouble – weaker, less mature, economies could experience some real pain from this move in Oil.

The third question is open to interpretation as foreign currencies continue to shift.  Initially, any country that is dependent on oil imports will experience some real future expectation economic pain.  Countries that are in a more stable position regarding Oil demands could still experience some pain as currencies shift valuations.  Overall, the length of this disruption and the possibility of any further supply disruption is really where these future expectations come unglued.  The opportunity for further disruptions or future changes in market dynamics is very real.  This is a very “fluid” process at the moment.

Profiting from these moves is really quite simple – patience, wait for the right setups, confine risks and make sure you already have your hard cash reserves and protection positions in precious metals.  These swings in the markets are going to get better and bigger as this continues to play out.  Skilled technical traders will have no shortage of great trade opportunities throughout the next 15+ months.

DAILY CRUDE OIL PRICE CHART

This Daily Oil chart highlights our proprietary Fibonacci price modeling system and the key upside price target (resistance) near $64.50.  Ultimately, this is the upper resistance level that is the first level of major resistance for this upside price move in Oil.  Rotation within these three Fibonacci target ranges has already started to happen.  This suggests price volatility is massive in oil and should continue in the near future.

 

DAILY XOI OIL STOCK INDEX CHART

This Daily XOI chart highlights the Daily Fibonacci price targets and clearly shows how quickly price has rallied after the weekend.  The XOI price is already above the three Fibonacci price targets, thus we must revert to previous price PEAKS as new resistance levels.  Currently, the 1300 level is a key resistance level which would closely align with our $64.50 level in Crude.

 

WEEKLY XOI OIL STOCK INDEX CHART

This XOI Weekly chart provides a longer-term picture of the upside targets in XOI.  The upper targets near 1425 and 1475 would translate into a $69 to $71 price target in Crude Oil.  Therefore, any breakout above $66~67 could easily rally up to $69 to $71 before reaching any key resistance levels.

CONCLUDING THOUGHTS:

If the XOI is unable to clear the $1302 level, then this upside move in Crude Oil may actually be over as fast as it started.  Failure to climb above $1302 in XOI would result in a complete “new price high” failure and would suggest a top is forming.

We love it when the markets move like this.  Quite honestly, these are the best conditions for skilled technical traders to find extremely profitable trade setups.  The most difficult part of trading in this type of market is protecting against risk and position sizing.  If you are ready to learn where new trade setups are forming like in gold miners, and metals and want to execute trades effectively within this volatile rotation then check out my ETF trading newsletter.

I urge you 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 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 Free 1oz Silver Round or Gold Bar!

I can tell you that huge moves are about to start unfolding not only in 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. 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.

Chris Vermeulen
www.TheTechnicalTraders.com

Reading the new today of the riots and protests in Hong Kong as well as the military action between Iran and Israel suggests to us that the metals markets are poised for a very big run this week and possibly much further into the future. This type of Chaos creates a level of uncertainty in the global markets that will prompt a massive surge in the precious metals markets as traders and investors continue to pour into precious metals as a means to hedge against fear and weakness in the global markets.  At this point, we believe a move in Gold could easily target $1640 or higher and Silver could target just under $21 over the next 5 to 10 days.  This type of move would represent a +7 to 10% rally in Gold and a +10 to 20% rally in Silver. Pay attention to how the ES, NQ, and YM react to trading as markets open on Sunday and Monday evening as well as the news events related to these issues.  Any escalation of tensions and fighting between parties throughout the world will likely shed shock waves throughout the global economy as well as prompt a contraction in price levels. We attempted to warn all of our followers that the August 19th breakdown super-cycle event would likely present a massive potential for a price correction to the downside.  These super-cycle events operate on a much broader scale and scope than most people realize.  A delay of 20 to 30 days for an event to begin is equal to a span of 10 seconds in the larger scope and perspective of these bigger events.  Pay attention as this move really begins to play out over the next 25+ days.

Weekly Gold Chart

This weekly gold chart has followed our expectations from April/May 2019 almost perfectly.  Our original target of just below $1600 has almost been reached.  Now, with the global chaos playing out in China, Hong Kong, and other locations, we believe Gold could rally well past the $1600 and possibly move as high as $1640 to $1675 before attempting to stall and rotate. What is interesting is that the price of gold is hitting new highs is most other currencies. This is something we will talk about in another article here shortly, so be sure to opt-in to our Free Market Forecast and Trade Ideas Newsletter

Weekly Silver Chart

Silver, which has continued to impress even the most passive traders. It has continued to outperform Gold over the past 30+ days.  Overall, our original target range of $18.75 – $21 is still valid, but we believe the true upside potential in silver is well past $34.  Right now, we believe Silver could rally well past $24 as the chaos in the foreign markets rattles global investors.

CONCLUDING THOUGHTS:

If you followed our research over the past few months, you would have already known about these setups and trades.  If not, now is the time to pay attention.  The markets are going to react to this foreign market chaos by attempting to find true price valuation levels related to the fear and future economic expectations of the entire market.  Get ready for some really big moves over the next 8+ weeks. As we’ve been suggesting for more than 12 months, 2019 and 2020 are going to be fantastic years for skilled technical traders or subscribers of our Weal Building Newsletter.  The potential for big trades (20% or more), like our recent UGLD 24% trade, will continue to set up in different sectors and global markets.  All we need to do is stay on top of the opportunities to find ways to profit from these moves. 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.

FREE GOLD OR SILVER WITH SUBSCRIPTION!

Chris Vermeulen – www.TheTechnicalTraders.com

In our continued effort to help skilled traders/investors understand the future risks associated with geopolitical market turmoil, the EU Elections next week and the continued US/China trade war, this Part III of our Sector Rotation article will highlight certain sectors that we believe may continue to perform over the next 12 to 24+ months and help traders/investors survive any extended price volatility/rotation over that same time. Read Part I, and Part II.

Currently, the US stock market has weathered a bit of a jolt in terms of price rotation.  After many stock indexes reached new all-time highs, the news of Iran Oil Sanctions, US/China trade talks failing and the political turmoil in DC as an incredible 2020 US Presidential election cycle heats up, investors are watching the markets for any signs of strength or weakness.  Meanwhile, the US Dollar continues to strengthen against other global currencies in an incredible show of “King Dollar” strength and dominance.  All of this plays into one of our favorite narratives that we started discussing over 30 months ago – the Global Capital Shift.

For those of you who remember our many articles about this global market phenomenon and the root causes of it, we’ll try to keep the following example/explanation of it fairly short.  For those of you that are new to our research, please allow us to try to explain the Capital Shift event and why it is important to understand.

The Capital Shift started after the 2008-09 global credit market collapse.  The US and many other nations created an easy money policy that was designed to spark investment and recovery across the globe.  This easy money, at first, supported failing companies and governments in order to maintain social order and structure.  After that process was completed, this capital went to work investing in under-valued global markets and assets.  As prices continued to rise and the easy money policies became rooted into the social structure, the hunt for greater returns rotated throughout the planet – diving into undervalued markets and opportunities, often with no regard for risk.

After 2014, things began to change in the US and throughout the planet.  The US entered a period of extended sideways trading that caused many investors to reconsider the “buy the dip” mentality.  In 2014-15, China initiated “capital controls” in an effort to prevent outflows of capital from a newly rich population and corporate structure.  Just before 2014, the Emerging Markets went through a period of pricing collapse which was associated with over-inflated expectations and $100+ oil.  All of that started changing in 2014~2016 as Oil prices collapsed – taking with it the expectations and promises of many Emerging Market investors and speculators.

This shifting of capital in search of “returns with a moderate degree of risk” is what we are calling the “Capital Shift Event”.  It is still taking place and it is our opinion that the US stock market will become the central focus of global capital investment over the next 4+ years.  We believe the strength of the US Dollar and the strength of the US Stock Market/US Economy will drive future capital investment into US and other US Associated major markets in an attempt to avoid risks associated with the foreign market and currency market valuations.  In other words, when the crap starts flying across the globe, cash will rush into the US and other safe-haven investments to protect real value.

 

Currently, the potential for another price decline in Crude Oil is rather strong with our research expecting a move back below $55 ppb over the next 4+ months.  We believe a further economic contraction across the globe with a very strong potential for increased price volatility will drive Oil prices back below $55 with a very strong potential for prices to settle near $46~48 before the downward trend is completed.

The potential for some type of price contraction over the next 12+ months will be related to how the global and localized economic concerns play out over the next 24+ months.  Yet, investors can prepare for these extended price rotations now by becoming aware of weakening price trends and the potential that certain sectors will likely be hit harder than others.  For example, the most recent price weakness in the US stock market appears to be focused in certain sectors:

Technology, Semiconductors, Scientific Instruments, Financials, Asset Management, Property Management, Banking (Generally all over the US), Consumer Goods – Electronics, Airlines, Mail Order Services, Industrial Goods, Aerospace/Defense, Farming and Farming Supply, Medical Laboratories, Medical Appliances, Oil & Gas and others.  This type of market contraction is fairly common in an early stage Commodity and Industrial economic slowdown.

 

The sectors that are improving over the past week are : Healthcare, Electric Utilities, Diversified Utilities, Gas Utilities, Consumer Personal Products, Consumer Confectioners, Cigarettes, Entertainment, Beverages and Soft Drinks, Meat Products, Specialty Eateries, REITS (almost all types), Credit Services, Telecom and Telecom/Communication Services.

All of these are protectionist rallies based on the US/China trade war and the market rotation away from Technology/manufacturing growth and into more consumer protectionist spending mode – where the consumer and larger firms focus on core items while expecting a mild recession within the economy.  All of this is very common at this time within the US Presidential Election cycle.  In fact, our researchers have shown that nearly 80% of the time when a major US presidential election is taking place, the US stock markets will decline within the 24 months prior to the election date.

The Monthly S&P heat map is not much different.  It is still showing weakness where we expect and strength in sectors that have been somewhat dormant over the past 4+ years.  The key to success for skilled traders is to be able to play this future price rotation very effectively as the different sectors continue to rotate headed into the 2020 US Presidential Elections and with all of the external foreign market factors taking place.

 

It is quite likely that the US Dollar will continue to push high, possibly well above $102, before finding any real resistance.  It is very likely that most of the US stock market will fair quite well over the next 24+ months – yet we do expect some extended price rotation over this time and we believe Technology, Financials, Real estate, and Industrial/Consumer related stock sectors could take a hit over the next 16 to 24 months.  These rotations are, again, common for this type of US Presidential Election cycle.  Skilled traders are already aware of this cycle and have begun to prepare for this event to unfold.  The unknowns of the current global market is China and the EU at present.

 

And with that last US Dollar chart, there you have it.  Our three-part article about how the Global Capital Shift is about to intensify and continue to drive a US Sector rotation that many traders have failed to consider.  The EU elections, the US/China trade wars, and the US Presidential Election event are all big factors in what we believe will drive in an increased level of uncertainty over the next 16~24 months.  Additionally, we are very concerned that China is very close to experiencing what we are calling a “broken backbone” over the next 12+ months.  We believe the pricing pressures in combination with a slowing economy and a consumer move into a protectionist stance could create a waterfall event in China/Asia.

Our advice for traders is to protect open long positions and to prepare for 16 to 36 months of “repositioning” of the global markets.  The US elections are certain to drive an incredible range of future expectations throughout the world.  Combine that with the EU elections, the BREXIT effort and the continued repositioning of US/China/Foreign market relations and we are setting up for a big shock-wave event in the near future.

Follow our research.  We’ve already mapped out the next 24 to 36 months of market price activity with our proprietary price modeling tools.  We believe we know what will happen over the next 24 to 36 months, we are just waiting for the price to confirm our analysis. Visit www.TheTechnicalTraders.com to learn more.

Chris Vermeulen
Technical Traders Ltd.