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What happens To The Global Economy If Oil Collapses – Part 2

In the first part of this research article, we shared our ADL predictive modeling research from July 10th, 2019 where we suggested that Oil prices would begin to collapse to levels near, or below, $40 throughout November and December of 2019.  Our ADL modeling system suggests that oil prices may continue lower well into early 2020 where the price is expected to target $25 to $30 in February~April 2020.

We believe this type of global commodity price collapse, essentially collapse in oil revenues for many global nations could present a very real crisis in our future.  Most of the oil-producing nations rely on stable oil prices to supply much-needed revenues/income to support current and future operations and essential services. If oil prices collapse to levels below $40, this decrease would represent a -40%, or more, collapse in oil revenues for these nations.  If oil prices fall to levels below $30, this would represent a -55%, or more, decrease in expected revenues.

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We believe the ADL predictive modeling systems results, if accurate, represents a very real potential that the global capital markets and stock market may experience a major crisis event before the end of 2020.  This type of commodity collapse happened once before in history – nearly 10 years before the 1929 US stock market collapse and the slide in commodity prices continued in 1930 and beyond as an extended economic contraction pushed the US into an economic depression.

PRODUCER PRICE INDEX FOR ALL COMMODITIES FROM 1914 TO 1933

Take a look at these charts for comparison.  The first is a chart of the Producer Price Index for All Commodities from 1914 to 1933. Pay close attention to how commodity prices collapsed in 1921, approximately 9 to 10 years before the US stock market peak (1929) and commodities continue to slide lower.  This collapse in commodity prices relates to the consumer, agriculture, and industrial demand after WWI and setup a shift within the capital markets more focused on stock market speculation. The period between 1923 and 1929 resulted in a complete shift in the capital markets where farms, agriculture, and manufacturing levels decreased while urban areas, cities, and the stock market flourished – until it ended in 1929. (Source: https://eh.net/encyclopedia)

MONTHLY CRUDE OIL CHART

Now, take a look at this Monthly Crude Oil chart which highlights very similar types of price patterns over the span of about 10 years.  This strangely similar chart, in combination with the strangely similar set of circumstances related to farm, agriculture, and manufacturing as well as the shift of capital towards speculation in the US/Global stock market may be setting up another type of 1929 stock market peak event.

ASSETS IN MONEY MARKET ACCOUNTS

The shift in the capital markets is very clearly seen in the following chart – the Assets in Money Market Accounts chart.  One can clearly see that after the credit crisis in 2008-09, investors were not willing to participate in the Money Markets at levels prior to 2008.  In fact, for the entire period of 2009 through 2017, global investors stayed away from Money Markets and only recently began pouring capital back into the markets near late 2017 – when confidence increased.

Yet, this chart also shows a very clear “shift” in capital engagement which is very similar to what happened in the late 1920s.  At a time when manufacturing, agriculture and farm foreclosures were haunting the markets, investors poured capital in the stock market and speculative investments because these instruments were ripe with opportunity. The rally in the US stock market in the late 1920s became an opportunity that no one could resist.  Is the same thing happening right now in the US stock market?  Has a capital shift taken place that has global investors bumbling their way into the US stock market while trying to avoid/ignore obvious risks in local markets, manufacturing, and the global economy?

We believe the evidence is very clear for any investor willing to pull off the “bubble goggles” and take a good hard look at where we really are in the economic cycle.  Unless something dramatic changes in relation to global economic growth, credit market expectations and consumer economic participation, it seems obvious that we are inching our way towards a global stock market peak just like we did in 1929.

Even if a trade deal between the US and China were to happen today and eliminate all trade tariffs, would this change anything or would this simply pour fuel onto the “capital shift” fire that is already taking place with speculation reaching frothy levels?

Skilled technical traders should pay very close attention to Oil Prices and global economic factors while this “zombie-land melt-up” continues.  We believe this is not a healthy rally in the US stock market currently and is more similar to what happened in the last 1920s than anything we’ve seen over the past 80+ years.

In Part III of this research article, we’ll highlight some of the recent economic news that helps to further identify the complexity that makes up the current global stock market  “zombie-land”.

If you want to earn 34%-50% a year return on your trading account with very few ETF trades then join me at the Wealth Building Newsletter today!

Chris Vermeulen
www.TheTechnicalTraders.com

What happens To The Global Economy If Oil Collapses Below $40 – Part I

Currently, commodity prices are the cheapest they’ve been in over 40 years compared to equity prices.  US Equities have continued to rise over the past 7+ years due to a number of external processes.  QE1, 2, 3, and Fed Debt Purchases Share Buy-Backs and creative credit facilities.  Only recently have investors really started to pile into the US stock market (see charts below). Global investors were very cautious throughout the rally from 2011 to 2016.  In fact, the amount of capital invested within the US money market accounts was relatively flat throughout that entire time.

It was only after the 2016 US presidential election that investors really began to have confidence in the global economy and started piling into the US stock market and money market accounts.  This was also after the time that Oil began to collapse (2014~16) as well as the deflation of Emerging Markets rallies.  With all this new money having entered the global markets and equities being extremely overbought currently, what would happen is Oil collapsed below $40 and the global economic outlook soured headed into the 2020 US presidential election?

On July 10, 2019, we authored a research article using our ADL predictive modeling for Oil.  At that time, we predicted Oil would fall in August, recover in September and October, then collapse to near $42 (or lower) in November and December.  You can read our followup to this article here.

Currently, Oil has followed our ADL predictive modeling relatively closely over the past few months.  Although the attack in Saudi Arabia sent prices skyrocketing in mid-September, Crude price has generally stayed within our expected ranges and has recently settled near $55.  If you notice the two GREEN BARS on the chart, above, September and October price expectations suggested price settling near $54 and 59 throughout those two months.  Now, with November upon us, the ADL predictive modeling system is suggesting Oil prices will collapse from levels near $58 to levels near $40 – a massive 31% price collapse.  In reality, the price could fall below on a deeper price decline event.

This Crude Oil chart highlights what we believe may happen in Oil over the next few weeks and months – where price may collapse below $40.  Yet, we started asking another question..  What happens to the global economy if Oil prices collapse below $40 before the end of 2019?  What happens to the nations that depend on exported Oil income and to central bank functions within the economy?

When we start to understand the correlation between the price of Oil and the expectations throughout the global market, we must immediately focus on the income expectations of nations that rely on oil as the main source of income.  If our ADL predictions are correct, Oil will begin to plunge to levels near $40 (possibly below $40) over the next 3~4 months.  How will foreign nations react to this loss of income and who are the most dependent nations on Oil revenues.

Oil-producing nations vary in scale across the world, yet the United States, Saudi Arabia and Russia are the largest producers.  Nations that are the most dependent on Oil revenues are some of the smaller, less mature economies of the world.  Should the supply of oil stay relatively consistent across the globe while an extended economic contraction continues, we must begin to question the sustainability of various nations in terms of oil revenues.

For many of these nations, the income from Oil exports make up more than 15% of their annual GDP – in some cases, with Brunei, Kuwait, Libya, the Republic of Congo, Saudi Arabia and Singapore, oil revenues make up more than 30% of GDP.  How would a dramatic decrease in oil prices act as an economic destabilization event for these nations? Could they survive the event?

If the price of oil were to fall to $40 from current levels (near $67), this would represent a 40%+ price decline.  Oil revenues for all nations would likely collapse by similar amounts.  Nations that are most dependent on oil revenues would be hardest hit and this decrease in national revenue would likely increase strains on future operations, debt/credit as well as potentially create massive social unrest and strife.

If our ADL predictive modeling system is accurate and oil prices collapse to near $40, the economic, social and future strains this creates for many nations become even more severe – at a time when an economic contraction is taking place.  This type of commodity price collapse could lead the world into a chaotic economic mess if it is prolonged.

In Part II of this article, we’ll explore the ramifications of this potential oil price collapse across the global stock market and other factors that may be setting up to drive a period of uncertainty and volatility within the global markets.

Opportunities are all around us.  Using the right tools to identify the true technical cycles, price cycles, and trading setup can help to eliminate risks and hone into more profitable trades.  It is almost impossible to time market tops and bottoms accurately, yet, as you can see from our work above, we have tools that can help us see into the future and help to predict when major price peaks and valleys should form.  Using a tool like this to help you determine when the real opportunity exists and when to time your trades will only improve your market insights and trading results….

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

Welcome To The Zombie-Land Of Investing – Part 1

This current market environment is very reminiscent of the 2006-08 market environment where price rotated into weakness on technicals and continued to establish new all-time price highs in the process – creating what we are calling a “zombie-land melt-up”.  This very dangerous price action is indicative of money chasing a falling trend.  Where technicals and fundamentals are suggesting that price is actually weakening quite substantial, yet the process of price exploration is continually biased towards the upside as investors continue to pile onto the back of the beast expecting a further melt-up.

Let’s take a look at what happened to the ES and Gold in 2006 and 2007. But, wait before you continue reading make sure to opt-in to our free market trend signals newsletter.

SP500 WEEKLY INDEX CHART IN 2006-2007

First, we’ll start with the ES (S&P 500 E-mini futures contract).  Pay attention to the MAGENTA arcs we’ve drawn on this chart that highlight the continued new highs reached throughout 2006 and 2007.  Pay attention to the price rotation and volatility that started to happen near the absolute peak in July and October 2007 – just before the massive price collapse began.  Notice how the technical indicators had been suggesting that price was weakening quite extensively since the beginning of 2007 and more aggressively after July 2007.  Pay very close attention to the last peak on this chart and how a very deep price correction setup a new price high in a very tight FLAG formation just before the breakdown event.

PRICE OF GOLD WEEKLY CHART IN 2006-2007

This Gold chart from the same time period highlights how Gold anticipated the market weakness by rallying up to a level near $750 in May 2016 – then retraced nearly $200 before forming a lengthy price bottom/base.  Gold, acting as a safe-haven for investors, rallied almost 94% in the 24 months prior to this peak in 2006.  It rallied another 256% (at the ultimate peak) from the low point established in June 2006.  The process of this rally was an extended base/bottom in Gold between the base/bottom in 2006 and the renewed uptrend that started just before the end of 2007 (just before the markets started crashing).

COMPARE SP500 INDEX 2006-07 TO 2018-19

We believe the current uptrend in the US stock market is acting in a very similar price formation to what we’ve highlighted in the 2006-07 market “zombie-land melt-up”.  We believe that investors are piling into the US stock market when price weakness is clearly being illustrated by the technical and fundamental data.  We believe a capital shift has continued to pile money into the US stock market as foreign investors pile onto the backs of other investors seeking safety and security within a stronger US economy.

CONCLUDING THOUGHTS:

We believe the current Zombie-land market is anticipating a price roll-over event (reversion) and that technical and fundamental data supports this analysis.  We believe the credit/debt expansion of the past 8+ years has fueled a massive bubble that may result in a deep price correction if given the right circumstances and events.  We believe this upside price move in the US markets, which are setting up near the exact same time-frame as the 2008 price collapse, maybe a very stern warning for traders and investors – BE PREPARED.

In Part II of this research post, we’ll highlight the similarities setting up in the current market “Zombie-land” and what happened in 2006~2008.  The expansion of the credit market over the past 8+ years has been extensive throughout the globe.  The biggest difference this time is that risk may come from foreign markets vs. from within the US.

Keep reading our research because our proprietary tools have been nailing all of these price targets and move many months in advance.

I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-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 Bar!

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

Where is the top for natural gas

We wrote a very telling research article on October 24th, 2019.  We never published it because we had other articles scheduled to be published over the next few weeks in the queue and because our subscribers get our trade alerts before the general public. At this point, we are sharing that past article as well as some current research for Natural Gas that should be very interesting to you.

Pay very close attention to the original October 24th article, below, and our prediction that the $2.75 to $2.85 level would be a likely target for the upside price rally from the basing level below $2.30.  Currently, Natural Gas is trading at $2.87 – reaching our initial target level.

If our research is correct, strong demand and limited supply globally may push Natural Gas well above the $3.20 to $3.40 level after a very brief pause happens near $3.00.  In fact, Natural Gas may be getting ready to rally past 2018 highs ($4.93) if the situation presents itself for such an incredible price rally.  What would it take for a rally like that to happen?  Much stronger demand for natural gas because of an early, extreme winter and extended global demand.

Price reacts to supply/demand imbalances.  In this case, if the demand far exceeds the supply capacities headed into the end of 2019, we could easily see Natural Gas rally above $4.00 very quickly.  Could it rally even higher and take out the $5.00 level?  Absolutely it could if the proper dynamics continue related to supply and demand globally.

CURRENT DAILY NATURAL GAS CHART

Remember to read the link from October 5th.  We’ve been warning of this move for more than 60+ days and have authored multiple research posts attempting to keep our followers aware of this setup.  This trade setup was telegraphed for us many months ago.  All you had to do was follow our research and stay aware of the trends as this momentum base setup in October near $2.25.

Natural Gas moved higher by nearly 2% on October 24th as our researchers predicted nearly a month ago.  This incredible momentum base below $2.30 seems to be a very strong support level for Natural Gas.  We believe this next rally may be bigger than the last rally which reached a high near 2.70.  Our Fibonacci price modeling system is suggesting a target price of $2.95 to confirm a new upside price trend.  This means the price would have to rally more than +26.5% from current levels to confirm a potentially much bigger upside price move.  Can you imagine seeing Natural Gas climb to above $4.50 again – like last year?

Near the end of October 2018, Natural Gas began an upside price move that really excited investors.  The first upside price leg began in mid-September, near $2.75 and rallied to a level near $3.35 – a +21.6% upside price move.  After a brief 12 to 15 day pause, another price rally began in early November 2018 near $3.23 and continued very aggressively over the next 11+ days to rally up to $4.93 – a +57% rally.

We issued a natural gas trade using UGAZ to members and this week we locked in 38.7% profit on a portion of our position and there is still a lot of upside potential left.

Is the same type of price advance could be setting up for an early November price rally from the $2.30 level to somewhere above $3.50?  This would result in a +50% price rally from recent lows without using any leverage which would be just amazing.

October 5, 2019: NATURAL GAS RELOADS FOR ANOTHER PRICE RALLY

PREVIOUS NATURAL GAS FORECAST DAILY CHART

Our proprietary Fibonacci price modeling system is suggesting the $2.95 price level is critical for any further upside price action to continue above $3.00.  The price must cross above the $2.95 level on a strong closing price basis before we could consider any higher price levels to become valid.  Our researchers believe that suggests the $2.75 to $2.85 level becomes a very real upside price target for skilled traders to pull some profits and protect any open long positions.

PREVIOUS NATURAL GAS FORECAST WEEKLY CHART

This Weekly Natural Gas chart highlights our Fibonacci price modeling system’s results and the Bullish Trigger Level near $2.95 (The GREEN LINE).  Pay very close attention to how quickly Natural Gas moved higher in November 2018.  If another move happens like that in 2019, we could be setting up for a big gap higher followed by about 10 to 15+ days of incredible upside price action.

Currently, the price of Natural Gas has crossed the Daily Fibonacci price modeling system’s Bullish Price Trigger level near $2.29.  This suggests that we are now in a confirmed bullish trend as long as the price stays above the $2.26 level on a closing price basis.  We would expect a continued moderate price rally from these levels to move price away from the momentum base level over time – before any breakout upside price move may begin.

This could become one of the best trades, besides Silver and Gold, headed into the end of 2019.  Get ready for some big volatility in Natural Gas as winter weather takes over much of North America.

November will be the month of breakouts and breakdowns and should spark some trades. I feel the safe havens like bonds and metals will be turning a corner and starting to firm up and head higher but they may not start a big rally for several weeks or months.

October was a boring month for most major asset classes completing their consolidation phase. Natural gas was the big mover in October and subscribers and I took full advantage of the bottom and breakout for a 15-22% gain and its till on fire and trading higher by another 3% this week already.

If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF’s the be sure to join my premium trade alert service called the Wealth Building Newsletter.

Happy Trading
Chris Vermeulen
www.TheTechnicalTraders.com

Nat Gas, Crude Oil, Fed Rate Cut


If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF’s the be sure to join my premium trade alert service called the Wealth Building Newsletter.

Happy Trading
Chris Vermeulen
www.TheTechnicalTraders.com

Warning: Credit Delinquencies To Skyrocket In Q4

Farm delinquencies skyrocket +24% year over year as global trade issues and the ability to service credit continues to be a problem.  This is a tell-tale sign that the US Fed decreased the Prime Rate recently as a result of broader credit issues related to higher interest rates for corporate and other borrowers.  The last thing the Fed wants is another collapse on the lending markets similar to 2008-09.

(source: zerohedge.com)

Low growth continues to plague the global economy as this extended run in the US stock market continues to mature.  There are many questions all traders are asking – will it continue higher or have we reached a new peak in price activity?  Many economists believe we are ending an expansion period related to the revaluation of the global markets after the 2008-09 credit market collapse.  The typical price cycle of approximately 6~7 years has extended beyond traditional bounds and many analysts are wondering how it may end?

If an economic cycle has truly come to an end, we should expect to see some change in economic activity levels, consumer confidence and mortgage/housing activities.  The end of an economic cycle is usually aligned with some moderate level of economic contraction and a slowing of economic activity.  The one thing that may continue throughout this end of the mature economic cycle is the “capital shift” where capital rushes away from risk and into the US stock market as long as the reversion event stays at bay. (source: zerohedge.com)

Consumer Confidence levels have fallen recently to new lows.  This is a very clear sign that consumers expect the economy to contract a bit based on continued trade-related issues and the overall maturity of the economic cycle.

Most of the “rest of the world” has continued to binge on credit/debt since the 2008-09 credit crisis.  This is a very clear sign that the US Fed and global central banks have pumped trillions of dollars out into the consumer, corporate and global markets over the past 8+ years.  The question for all of us is when and if this debt becomes a liability – when does this credit become un-serviceable?

China and Asia were some of the biggest consumers of US credit/debt since 2008-09.  This graph highlights the incredible 10,667% increase in debt in China since the 2008-09 levels – from approx 300 million to 3.2 billion in 8-9 short years.  It appears the global economic rally was really the “binge on credit” rally.

US Mortgage debt has climbed to near all-time highs recently as well.  This is a sign that the US housing market has rallied to levels that are very close to the peak levels in 2007-08 – just before the crash.  It may also be a sign that cracks may soon start to appear in the housing markets across the US as delinquencies and foreclosures may continue to skyrocket.  People need to be able to service this debt/liability effectively in order to maintain their assets.

We believe the path of least resistance in the US stock market is higher – at least until price breaks below the current price trend channel.  The continued capital shift where foreign investors continue to pour capital into the US stock market will likely continue until some event shakes the confidence of these foreign investors.

You can see from our Monthly chart of the ES, below, we have highlighted the longer-term economic maturity trend which typically lasts about 6~7 years.  The rotation in 2015-16 was very mild as the US Fed continued a type of quantitative easing process by buying bonds and keeping interest rates historically low.  Because the US stock market actually failed to experience any real price rotation near this 2015~2016 cycle date – we believe the current cycle highs are extremely extended and related to the credit binge that has taken place over the past 8+ years.

Our cycle research suggests we may have already past a cycle peak event and may be operating on borrowed time right now.  This suggests that any further upside price activity in the US stock market may be a function of the overall strength of the US stock market compared to the weakening economic activity throughout the world.  In other words, the capital shift process is still feeding large amounts of capital into the US stock market as foreign investors flee risk and uncertainty.  If and when this ends, the US stock market will likely begin a price reversion process that may result in a very deep price correction.

This last Monthly ES chart provides a closer look at the technical indicator data that we believe highlights the overall weakness that is building up in the US stock market.  Even though we’ve recently pushed to new all-time highs, our technical indicators are suggesting that price is actually weakening in the upside price trend and could break lower at any moment.

The Direction Movement index, Momentum, and MACD of Momentum are all highlighting a weakening price trend that appears to be setting up for a broader downside price move eventually.  Traders need to be very aware of the risks in this extended upside price trend and to prepare for the potential of a new credit crisis event related to the current credit levels that are far more extended than in 2008-09.  If something breaks in the credit markets now, there appears to be nearly 5x to 10x the amount of credit extended throughout the global than there was 8 short years ago.

November will be the month of breakouts and breakdowns and should spark some trades. I feel the safe havens like bonds and metals will be turning a corner and starting to firm up and head higher but they may not start a big rally for several weeks or months.

October was a boring month for most major asset classes completing their consolidation phase. Natural gas was the big mover in October and subscribers and I took full advantage of the bottom and breakout for a 15-22% gain and its till on fire and trading higher by another 3% this week already.

If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF’s the be sure to join my premium trade alert service called the Wealth Building Newsletter.

Happy Trading
Chris Vermeulen
www.TheTechnicalTraders.com

Metals Beginning Another Rally Attempt?

Recently, the US stock market rallied to new all-time highs which prompted an almost immediate celebration.  A day later, the US stock markets reacted by setting up multiple top rotation patterns.  The next day, a moderate price rally set up after the US Fed decreased rates by 25 basis points.  The next day, the markets sold off dramatically with heavier volume – prompting the metals and the VIX to rally.

We’ve been warning for weeks that the US markets were setting up into a Pennant/Flag formation within a tightening range biased to the upside.  See our index trend analysis signals here. We believe the move in precious metals today may be indicative of a breakout/breakdown move in the markets – near the apex of the pennant formation on the Gold chart, below.

We believe this Pennant/flag formation on the Daily Gold chart aligns with the longer-term pennant formation that setup in the US stock market.  We believe the breakout move in metals may be a very strong indication that the US stock market may begin a reversion price move, a deeper downside price rotation, that may result in a spike in the VIX and metals while the US, and potentially global, stock markets react to weakness that may drive a price correction over the next few weeks.  This type of price correction may be just like the correction that happened near the end of 2018.

As we’ve been warning over the past few weeks, we believe the US and global stock markets are setting up in a very fragile price pattern.  One that may result in a moderately deep price correction that may surprise investors over the next few weeks and months.  Be prepared for some very large volatility and an increased risk of a potentially very deep price correction over the next 60 to 120+ days.

If gold continues as we suspect, a rally to the $1600 to $1650 level may be seen very quickly.  Ultimately, this rally may continue to levels above $1700 to $1750 before the end of 2019.  The speed of the rally in metals will relate to the amount of fear generated by any weakness in the global markets and the speed and severity of potential price collapse.

Silver, which should lag behind Gold initially, may see one of the biggest rallies drive prices well above $22 to $23 on the initial upside move – we may just have to wait for it to accelerate as Gold will likely lead this rally.

At this point, price is the true indicator.  Technical analysis, price patterns, price theory, and other resources allow us to better understand what is likely to happen in the future.  Any price failure after the US stock market reached these nominal new highs will prompt an attempt to retest recent price lows.  This means the US stock market may attempt to retest the June 2019 lows or the December 2018 lows on deep price correction.

Read some of our past research posts to understand why this setup is so important for all traders to understand.  Failure at this level could be a critical top formation that pushes the markets into a new trend.

October 29, 2019: LONG-TERM PREDICTIVE SOFTWARE SUGGESTS VOLATILITY MAY SURGE

October 20. 2019: BLACK MONDAY 1987 VS 2019 – PART II

September 22, 2019: THE EQUITIES WEDGE AT THE EDGE – FRONT AND CENTER

CONCLUDING THOUGHTS:

October was the month of most major asset classes completing their consolidation phase. Natural gas was the big mover in October and subscribers and I took full advantage of the consolidation and breakout for a 15-24% gain and its till on fire and ready to rocket higher.

November will be the month of breakouts and breakdowns and should spark some trades. I feel the safe havens like bonds and metals will be turning a corner and starting to firm up and head higher but they may not start a big rally for several weeks or months.

If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF’s the be sure to join my premium trade alert service called the Wealth Building Newsletter.

Happy Trading
Chris Vermeulen
www.TheTechnicalTraders.com

Long-Term Predictive Software Suggests Volatility May Surge

Over the past few weeks and months, a number of key economic data has continued to rally the US major indexes towards new highs, hopes of a US/China trade deal, a continued shift of capital in the US markets for protection and safety, and moderately strong US economic indicators and an earning season that appears to be moderately strong for Q3 of 2019.  The interesting facet of this move higher is that it is happening while trading volume has diminished dramatically in the SPY.  The futures contracts, the ES, YM, and NQ, continue to show relatively strong volume activity though.

Additionally, the overnight Repo markets have risen to the attention of many skilled analysts.  The concern is that the continued US Fed support of the overnight Repo facility may be a band-aid attempt to support a gaping credit crisis that is brewing just outside of view.  We’ve been doing quite a bit of research over the past few weeks regarding this Repo market support by the US Fed and we believe there is more to it than many believe.  We believe certain institutional banking firms may be at extreme risks related to derivative investments, shadow banking activities and/or global commodity/stock/currency/asset risk exposure.  The only answer we have for the extended Repo facility at increasing levels is that the institutional banking system is starting to “fray around the edges”.  Thus, we believe some larger credit risk problems may be just around the corner.

Our longer-term analysis continues to suggest that “all is fine – until it is not”.  Our belief that a capital shift that has been taking place over the past 5+ years where foreign capital continues to pour into the US markets is driving US stock market prices higher.  There is evidence that the capital shift into the US has slowed over the past 5+ months, yet one would not notice this by looking at these longer-term charts.  The point we are trying to make today is that price peaks near current highs have, historically, been met with strong resistance and collapsed by 8 to 15% on average.

SP500 INDEX – 2 MONTH LONG TERM CHART

This ES 2 Month chart highlights the resistance channel initiated near the 2003 lows (the lower YELLOW price channel line) and how that level has continued to act as moderate price resistance throughout most of 2017, 2018 and 2019.  We believe that price, at current levels, must either rally above this level and be capable of sustaining higher price levels (which would be supported by stronger forward guidance, earnings, economic data and/or investments), or will attempt to rotate lower from these current highs because price is simply unable to support/sustain higher price levels given the current global economic data.

When we attempt to rationalize the potential for price given the Repo issues, the current global economic data/news, the uncertainty of a US Presidential election cycle only 12 months away, the BREXIT deal hanging out in the near future and recent currency rotations, we believe is transitional shift is taking place in the markets in preparation for some type of surge in volatility associated with a very strong potential for extended price rotation.

NASDAQ 2 WEEK CHART – ADAPTIVE DYNAMIC LEARNING (ADL)

Our Adaptive Dynamic Learning (ADL) price modeling system on this NQ 2-Week chart highlights what the ADL system suggests as a moderate price rotation setting up over the next 2 to 8+ weeks.  This data originates on August 5, 2019, and the alignment of the future predicted price levels (the DASHES) on this chart shows how accurate the ADL future price predictions have been over the past 3+ months.  Currently, the ADL predictive modeling system is suggesting a price reversion is about to take place in the NQ where price may fall 10 to 15% over the next 2 to 6+ weeks.  Then, the price will attempt to set up a momentum base and begin to move higher near the end of 2019 or early into 2020.

DOW 2 WEEK CHART – ADAPTIVE DYNAMIC LEARNING (ADL)

This YM 2-Week chart showing the same type of ADL predicted price levels suggests the YM may also see some type of price reversion, yet the size of this reversion is much smaller than the NQ.  The ADL predictive modeling system is suggesting the YM may rotate to levels near 26,000 or lower before finding immediate support and attempting a renewed rally back to levels near 27,000.

CONCLUDING THOUGHTS:

What this suggests is that the NASDAQ and S&P500 may become much more volatile than the Dow Jones index over the next 2 to 6+ weeks.  Volatility may surge on a reversion move in the ES and NQ over the next few months while the YM remains rather calm comparatively.  Skilled traders must understand that subtle risks are starting to show throughout the global markets.  Foreign markets are starting to show signs of extended contraction – China and Asia in particular.  The situation in Europe and with the Euro are open to interpretation.  Our opinion is that risk levels have already exceeded a comfort level in this arena.

Should some event take place where the global banking system and/or Repo market continue to attempt to take up the slack – traders will become even more concerned that “something is broken” and could pull massive amounts of capital out of the markets fairly quickly.  If this happens when volume and volatility are very low, we have a situation where simple price exploration could present a real problem (think FLASH CRASH).

Skilled traders need to stay very cautious near these new highs.  We may see a surge in volatility over the next few weeks unless the markets are able to settle the concerns raised by analysts and others.  Headed into the end of 2019, into a contentious US presidential election cycle and with obvious signs that something may be breaking in the global banking system, now is the time to protect and prepare for the unknown.  We can’t make this any clearer – consider this a warning alert from www.TheTechnicalTraders.com.

Nominal New Highs Reached, Skilled Traders Should Still Be Cautious

The US Stock market rallied on Friday, October 25, on TESLA earnings crushing expectations as well as news that any positive US trade deal outcomes could see almost immediate removal of future tariffs that are scheduled to be implemented near the end of October.  This was enough for the markets to rally from the start of trading and continue to push higher until near Noon in NY.  After new highs were reached, the markets contracted a bit headed into the close.

Gold shot up early this morning before the news related to the US trade deal hit.  Our opinion is that this is a natural advancement in precious metals that is not new related or muted by some external factors.  Precious metals have been setting up a sideways FLAG formation for over 2 months and we believe the apex/breakout move is near.

Oil was somewhat flat to close out the week and closed trading near $56.63.  The past three days we have seen oil rise from the $53 level to the current price levels, but we believe oil is still fundamentally oversupplied and that price will continue to weaken over time.

The real question before all of us right now is will this new nominal high represent a new breakout bullish price trend heading into a US Presidential Election cycle, or is this more price rotation within a defined price range?

If you consider all the shifting aspects of the US political and economic landscape as well as the current geopolitical and economic factors, we believe any real breakout move will come as we get closer to November 2020 – not now.  We believe this is still price rotation and we believe the NQ is the likely cause of this new nominal price high on Friday.  Tesla crushed earnings and that set a positive tone for Friday’s trading.

TRANSPORTATION INDEX DAILY CHART

The TRAN, Transportation Index, is still trading near current resistance and has not shown any true new price high yet.  It will be interesting to see how the markets open up early next week and what news may drive a new price trend by then.

MID-CAP SECTOR DAILY CHART

The Mid-Cap has failed to rally to recent price highs which suggest this is not a broad market rally.  We would want to see more defined price advancement across all sectors and above recent price highs to call this a broad market rally/breakout

Pay attention to the new that originates this weekend.  We don’t believe a deal will be reached with regards to trade as quickly as some others may believe and we still believe the next 12+ months of the US Presidential election cycle will be full of surprises.  We may start to get more clarity of a true price trend after the New Year (2020).  Until then, we’re staying cautious of these price rotations and picking our trades.

I urge you visit my Wealth Building Newsletter and if you like what I offer, join me with the 1-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 during the next financial crisis. Join Now and Get a Free 1oz Silver 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

The Divergence of Gold And Bitcoin – Which Represents A True Safe-Haven?

Recently, Mark Zuckerberg appeared before the US Congress to discuss his new Libra project and to attempt to calm concerns related to his new global alternate currency project.  It appears this project is putting global political leaders in a particularly powerful position of either accepting the Libra project as a viable future solution and implementing new laws and regulations in support of it or to shelve the idea while they consider the local and global risks associated with a project that creates a new class of global currency. (Source: https://www.bloomberg.com)

We believe the risks associated with a massive corporate and international backed Crypto/Alternate currency are far too great, at this time, for the US government to attempt to consider with only 12+ months to go before the US Presidential elections.  This is almost like opening Pandora’s Box in terms of total global risks and outcomes.  It becomes almost impossible for the US government, Federal Reserve or any other global central bank to be able to protect its citizens from the risks associated with any type of technology collapse, fraud, hacking or any other unknown risks associated with such an idea.

The concept of a “Safe-Haven” may come into question over the next 10+ months as investors continue to question what may happen in the global markets, global political events and asset valuations related to Cryptos, Precious Metals, and foreign currencies.  Our researchers believe mature economy currencies will quickly become new currency Safe-Havens for global investors over the next 10+ months as banking, credit and economic risks continue to shake out weaker markets.

Cryptos may see some support as price rotates over the next 10+ months prior to the US Presidential elections, yet we believe the real global asset markets (stocks, currencies, debt/credit, and bonds) will take center stage as the world transitions through a very tumultuous period prior to the November 2020 US elections.  Even for a period of time shortly after the US elections, global assets will continue to reposition as future economic and regional asset value expectations shift.

There is a very real potential that global investors continue to seek safety and liquidity in the global major markets, economies and global currencies.  Additionally, Precious Metals continue to show very little signs of weakening over the past 12+ months.

In fact, Precious Metals have continued to stay much stronger than many other investments over the past few years.  Gold is up +17.60% from October 2017.  Palladium is up 78.81% since October 2017. Silver is up 4.9% over that same period of time.  Once the next upside price leg begins in Precious Metals, we may see a massive price increase in Gold and Silver.  Supply issues continue to push Palladium prices higher as well.

Imagine being able to trade the precious metals sector easily with little downside risk and only being involved during the rallies and not the selloffs, all while generating 2x the return that GDXJ has return in 2019. Take a look at this trading strategy here.

Gold is setting up in a manner that is very similar to what happened in April 2019 – a sideways momentum base pattern that eventually broke to the upside in early June 2019.  Once that move higher began to take place, the continued move to the upside was very quick and extensive.  We believe the next upside move in Gold and Silver will be very similar – a moderately slow rotation out of the momentum base, then a fast acceleration to the upside as global investors realize the shift to safety has begun again.

We believe Cryptos may be left on the sidelines as investors prefer more traditional assets as a measure of safety as global concerns continue to weigh on investor’s minds headed into a very contentious US presidential election.  Currencies, Metals, Mature global market assets and true value stocks may become the investment of choice until we see some real clarity for the future from the global markets, global central banks, and global political leaders.

I urge you visit my Wealth Building Newsletter and if you like what I offer, join me with the 1-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 during the next financial crisis. Join Now and Get a Free 1oz Silver 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