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Fed May Trigger Wild Swing In Index and Metals

As our research team continues to pour over the charts and look for any signs of direction regarding tomorrow’s Fed news, we put together a couple the charts that may highlight some expectations and in at what the markets may do the rest of the week.

The expectations that the US Federal Reserve may maintain rates at current levels or potentially drop rates by a quarter percent leaves an open interpretation as to how the global markets will digest this news. Obviously, leaving rates unchanged would be the most benign action the Fed could take. Often though, the markets interpret this as a sign of weakness. Whereas a quarter percent decrease in the US fed rates would suggest that the Fed is preparing for future economic weakness in the US and potential global economy, yet investors may consider this as a very bullish reaction to the Fed.

Our belief is that the Fed will leave rates unchanged and possibly hint at adjusting rates lower later this year or early next year in preparation for the US presidential elections. The US economy is still moderately strong and the recent trade deal with Mexico as well as policy advancement in DC leads us to believe the Fed has no reason to adjust rates right now. Of course, a quarter percent decrease would allow the Fed to spur additional economic growth and potentially jump-start the waning housing market in the US.

This first chart of the YM, the Dow E-mini futures, highlights key price technical support and resistance that will likely come into play over the next 3 to 10 weeks. We ask you to pay special attention to the dual resistance levels above 26,500. These double resistance levels act as a double ceiling in regards to price advancement.  In other words, some type of strong price advance of 27,000 would have to take place in order for the price to move beyond these resistance areas.

Should the Fed surprised the market and the market interpreted this move as strongly bullish, there is a moderate chance that the YM could advance beyond 27,000 before the end of this week or early next week.  We believe the Fed news tomorrow will be interpreted as a protectionist stance and the market made move lower from current highs.  Any big rotation lower after the Fed announcement tomorrow could prompt a new downside trend to retest our pennant/flag formation base near 25,000. Either way, our automated technical analysis prediction software will keep or get on the right side of the market.

Additionally, after the Fed announcement tomorrow, it is very likely that the US dollar may, under some pricing pressure and that precious metals could rocket hire and continue their advance towards $1450.  Any market reaction to the downside in the US stock market and/or the US dollar would likely push precious metals well above recent highs.  It all depends on how the market reacts to the US Fed announcement tomorrow, June 19.

We believe we have positioned our gold trades appropriately for the Fed news tomorrow.  Either way, we believe gold, precious metals, and the miners will advance after the Fed news tomorrow.  A close above $1375 in gold will prompt a very quick rallied towards $1440.

We’ll continue to watch how the markets react to the Fed news tomorrow with the knowledge that precious metals and gold should advance either way as fear and greed drive the metals higher.  We’ll look for new trades near the end of next week after the Fed news shakes out the short term traders. There is nothing wrong with being on the right side of a profitable trade in precious metals and miners.

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Chris Vermeulen
www.TheTechnicalTraders.com

US Markets Rally Hard – Could Another Big Upside Leg Begin?

Closing out the first week in June 2019, the US stock market rallied hard from recent lows and prompted many traders/investors to rethink their future plans.  At the same time, Gold and Silver began a decent price rally of their own while Oil found support just above $50.  It certainly has been an interesting week for traders.  One that was full of incredible opportunity as many symbols rotated 6 to 12% or more over the past 10+ days.

The fact that Oil is finding support above $50 while Gold and Silver continue to rally suggests that fear may be entering the metals market while Oil may have found a temporary price bottom near $50 to $51.  Weakness in the US Dollar is also helping both Oil and Metals to push higher.  Our recent research suggests that the US Dollar will find support near $95 indicates the US Dollar may fall a bit further – pushing Oil and Metals a bit higher.

The strength in the US stock market near the end of the week suggests fear of any US collapse or future economic concerns appears to be abated.  It is very unlikely the US major indexes would rally as they have on any extreme fear of any major US calamity or economic concerns.  A slightly weakening US Dollar and moderately strong US economic data continues to suggest the US stock market may continue to be the repository of funds for foreign investors for many years to come – or until something dramatic changes in the US.

It is rather simple to understand the capital process that is at work in the global economy at the moment; until foreign market valuations and expectations appear to be opportunistic for future returns, the US Dollar and the US stock market are the most likely targets for foreign investment and safety.  Weakening currencies, weakening global economies and weakening commodity prices will push capital away from foreign markets and into safety.  Safety will be found in the US markets, precious metals and possibly Crypto currencies.  Anything that avoids deflationary risks and credit/debt risks.

This YM Weekly chart highlighting our Fibonacci price modeling system shows how dramatic the upside price reversal was by the end of last week.  The closing candles created an Engulfing Bullish candlestick pattern which is typically quite bullish.  The fact that price closed above the GREEN Fibonacci trigger level is further indication that a renewed price rally may begin soon.  Support near $24,000 appears to be quite strong and any further downside price risk must first break this level.  As long as support holds and price continues an upside bias, there is a very strong potential for a move to above $28,000 in the works.

This NQ chart highlights a similar price pattern and suggests the NQ needs to climb above $7600 before a true rally can begin.  Ultimately, the upside targets for this move are near $8500 or higher based on current price rotation.  Support near $6800 is critical – so price must stay above this level for any future rally to continue.

We authored a VIX/Volatility article just a few days ago that highlighted our believe that the VIX would trade lower, within a sideways price channel till near the end of July or August 2019 – then begin another VIX Spike move upward.  This coincides with the current research we are seeing where the US stock market will likely continue to push higher, very possibly setting new all-time highs again, before any real risk of any downside price collapse happens.

Follow our research and don’t miss these opportunities.  We’ve been warning our followers for months that 2019 and 2020 are going to be incredible years for skilled traders.  These recent 10 to 20% moves in Gold, Silver, Oil and many ETFs are just the beginning.  Our research team and trading team are ready to help you find and execute for better success.

Chris Vermeulen
www.TheTechnicalTraders.com