How to Know if This Rally Will Continue for Two More Months

Our trading partner Chris Vermeulen has our readers off to an amazing start for 2018. If this is any sign of what we have to come this year we are in store for one of our best years of trading possibly ever. 

Chris just sent over his latest article and it explains how our old reliable Transportation Index is guiding the way once again. Read "How to Know if This Rally Will Continue for Two More Months".

Our research has been “spot on” with regards to the markets for the first few weeks of 2018. We issued our first trade on Jan 2nd, plus two very detailed research reports near the end of 2017 and early 2018. We urge you to review these research posts as they tell you exactly what to expect for the first Quarter in 2018.

Continuing this research, we have focused our current effort on the Transportation Index, the US Majors, and the Metals Markets. The Transportation Index has seen an extensive rally (+19.85%) originating near November 2017. This incredible upside move correlates with renewed US Tax policies and Economic increases that are sure to drive the US Equity market higher throughout 2018.

In theory, the Transportation Index is a measure of economic activity as related to the transportation of goods from port to distribution centers and from distribution centers to retail centers. The recent jump in the Transportation Index foretells of strong economic activity within the US for at least the next 3 months.

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One could, and likely should watch the Transportation Index for any signs of weakness or contraction which would indicate an economic slowdown about to unfold. In order to better understand how the Transportation Index precedes the US Equity markets by 2-5 months, let’s compare the current price activity to that of 2007-08.

This first chart is the current Transportation Index and shows how strong the US economic recovery is in relation to the previous year (2017). As the US economy has continued to strengthen and open up new opportunities, the Transportation Index has related this strength by increasing by near +20% in only a few short months. This shows us that we should continue to expect a moderate to strong bullish bias for at least the first quarter of 2018 – unless something dramatic changes in relation to economic opportunities.

Current Transportation Index Chart

In comparison, this chart (below) is the Transportation Index in 2007-08 which reacted quite differently. The economic environment was vastly different at this time. The US Fed had raised rates consecutively over a two year period leading up to a massive debt/credit crisis. At the same time, the US had a Presidential Election cycle that saw massive uncertainty with regards to regulation, policies and economic opportunities. Delinquencies as related to debt had already started to climb and the markets reacted to the economic alarms ringing from all corners of the globe. The Transportation Index formed a classic “rollover top” formation in late 2007 and early 2008 well before the global markets really began to tank.

2007-08 Transportation Index Chart

Our analysis points to a very strong first quarter of 2018 within the US and for US Equities. We believe the economic indicators will continue to perform well and, at least for the next 3 months, will continue to drive strong equity growth. We do expect some volatility near the end of the first Quarter as well as continued 2-5% price volatility/rotation at times. There will be levels of contraction in the markets that are natural and healthy for this rally. So, be prepared for some rotation that could be deeper than what we have seen over the last 6 months.

In conclusion, equities are this point are overpriced, and overbought based on the short term analysis. We should be entering slightly weaker time for large cap stocks over the next couple weeks before it goes much higher. Because we are still in a full out bull market, Dips Should Be Bought and we will notify members of a new trade once we get another one of these setups.

In our next post, we are going to talk about two opportunities in precious metals forming for next week!

Read the analysis we presented before the end of 2017 regarding our predictive modeling systems and how we target our research to helping our members. If you believe our analysis is accurate and timely, then we urge you to subscribe here at The Technical Traders to support our work and to benefit from our signals. We believe 2018 – 2020 will be the years that strategic trades will outperform all other markets. Join us in our efforts to find and execute the best trading opportunities and profit from these fantastic setups.

Chris Vermeulen
Technical Traders Ltd.

Hidden Gems Shows A Foreboding Future

A quick look at any of the US majors will show most investors that the markets have recently been pushing upward towards new all time highs. These traditional market instruments can be misleading at times when relating the actual underlying technical and fundamental price activities. Today, we are going to explore some research using our custom index instruments that we use to gauge and relate more of the underlying market price action.

What if we told you to prepare for a potentially massive price swing over the next few months? What if we told you that the US and Global markets are setting up for what could be the “October Surprise of 2017” and very few analysts have identified this trigger yet? Michael Bloomberg recently stated “I cannot for the life of me understand why the market keeps going up”. Want to know why this perception continues and what the underlying factors of market price activity are really telling technicians?

At ATP we provide full time dedicated research and trading signal solution for professional and active traders. Our research team has dedicated thousands or hours into developing a series of specialized modeling systems and analysis tools to assist us in finding successful trading opportunities as well as key market fundamentals. In the recent past, we have accurately predicted multiple VIX Spikes, in some cases to the exact day, and market signals that have proven to be great successes for our clients. Today, we’re going to share with you something that you may choose to believe or not – but within 60 days, we believe you’ll be searching the internet to find this article again knowing ATP (Active Trading Partners) accurately predicted one of the biggest moves of the 21st century. Are you ready?

Let’s start with the SPY. From the visual analysis of the chart, below, it would be difficult for anyone to clearly see the fragility of the US or Global markets. This chart is showing a clearly bullish trend with the perception that continued higher highs should prevail.

Additionally, when we review the QQQ we see a similar picture. Although the volatility is typically greater in the NASDAQ vs. the S&P, the QQQ chart presents a similar picture. Strong upward price activity in addition to historically consistent price advances. What could go wrong with these pictures – right? The markets are stronger than ever and as we’ve all heard “it’s different this time”.

Most readers are probably saying “yea, we’ve heard it before and we know – buy the dips”.

Recently, we shared some research with you regarding longer term time/price cycles (3/7/10 year cycles) and prior to that, we’ve been warning of a Sept 28~29, 2017 VIX Spike that could be massive and a “game changer” in terms of trend. We’ve been warning our members that this setup in price is leading us to be very cautious regarding new trading signals as volatility should continue to wane prior to this VIX Spike and market trends may be muted and short lived. We’ve still made a few calls for our clients, but we’ve tried to be very cautious in terms of timing and objectives.

Right now, the timing could not be any better to share this message with you and to “make it public” that we are making this prediction. A number of factors are lining up that may create a massive price correction in the near future and we want to help you protect your investments and learn to profit from this move and other future moves. So, as you read this article, it really does not matter if you believe our analysis or not – the proof will become evident (or not) within less than 60 days based on our research. One way or another, we will be proven correct or incorrect by the markets.

Over the past 6+ years, capital has circled the globe over and over attempting to find suitable ROI. It is our belief that this capital has rooted into investment vehicles that are capable of producing relatively secure and consistent returns based on the global economy continuing without any type of adverse event. In other words, global capital is rather stable right now in terms of sourcing ROI and capital deployment throughout the globe. It would take a relatively massive event to disrupt this capital process at the moment.

Asia/China are pushing the upper bounds of a rather wide trading channel and price action is setting up like the SPY and QQQ charts, above. A clear upper boundary is evident as well as our custom vibrational/frequency analysis arcs that are warning us of a potential change in price trend. You can see from the Red Arrow we’ve drawn, any attempt to retest the channel lows would equate to an 8% decrease in current prices.

Still, there is more evidence that we are setting up for a potentially massive global price move. The metals markets are the “fear/greed” gauge of the planet (or at least they have been for hundreds of years). When the metals spike higher, fear is entering the markets and investors avoid share price risks. When the metals trail lower, greed is entering the markets and investors chase share price value.

Without going into too much detail, this custom metals chart should tell you all you need to know. Our analysis is that we are nearing the completion of Wave C within an initial Wave 1 (bottom formation) from the lows in Dec 2016. Our prediction is that the completion of Wave #5 will end somewhere above the $56 level on this chart (> 20%+ from current levels). The completion of this Wave #5 will lead to the creation of a quick corrective wave, followed by a larger and more aggressive upward expansion wave that could quickly take out the $75~95 levels. Quite possibly before the end of Q1 2018.

We’ve termed this move the “Rip your face off Metals Rally”. You can see from this metals chart that we have identified multiple cycle and vibrational/frequency cycles that are lining up between now and the end of 2017. It is critical to understand the in order for this move to happen, a great deal of fear needs to reenter the global markets. What would cause that to happen??

Now for the “Hidden Gem”....

We’ve presented some interesting and, we believe, accurate market technical analysis. We’ve also been presenting previous research regarding our VIX Spikes and other analysis that has been accurate and timely. Currently, our next VIX Spike projection is Sept 28~29, 2017. We believe this VIX Spike could be much larger than the last spike highs and could lead to, or correlate with, a disruptive market event. We have ideas of what that event might be like, but we don’t know exactly what will happen at this time or if the event will even become evident in early October 2017. All we do know is the following....

The Head-n-Shoulders pattern we first predicted back in June/July of this year has nearly completed and we have only about 10~14 trading days before the Neck Line will be retested. This is the Hidden Gem. This is our custom US Index that we use to filter out the noise of price activity and to more clearly identify underlying technical and price pattern formations. You saw from the earlier charts that the Head n Shoulders pattern was not clearly visible on the SPY or QQQ charts – but on THIS chart, you can’t miss it.

It is a little tough to see on this small chart but, one can see the correlation of our cycle analysis, the key dates of September 28~29 aligning perfectly with vibration/frequency cycles originating from the start of the “head” formation. We have only about 10~14 trading days before the Neck Line will likely be retested and, should it fail, we could see a massive price move to the downside.

What you should expect over the next 10~14 trading days is simple to understand.

Expect continued price volatility and expanded rotation in the US majors.

• Expect the VIX to stay below 10.00 for only a day or two longer before hinting at a bigger spike move (meaning moving above 10 or 11 as a primer)
• Expect the metals markets to form a potential bottom pattern and begin to inch higher as fear reenters the markets _ Expect certain sectors to show signs of weakness prior to this move (possibly technology, healthcare, bio-tech, financials, lending)
• Expect the US majors to appear to “dip” within a 2~4% range and expect the news cycles to continue the “buy the dip” mantra.

The real key to all of this is what happens AFTER October 1st and for the next 30~60 days after. This event will play out as a massive event or a non event. What we do know is that this event has been setting up for over 5 months and has played out almost exactly as we have predicted. Now, we are 10+ days away from a critical event horizon and we are alerting you well in advance that it is, possibly, going to be a bigger event.

Now, I urge all of you to visit our website to learn more about what we do and how we provide this type of advanced analysis and research for our clients. We also provide clear and timely trading signals to our clients to assist them in finding profitable trading opportunities based on our research. Our team of dedicated analysts and researchers do our best to bring you the best, most accurate and advanced research we can deliver. The fact that we called this Head-n-Shoulders formation back in June/July and called multiple VIX Spike events should be enough evidence to consider this call at least a strong possibility.

If you want to take full advantage of the markets to profit from these moves, then join us today here at the Active Trading Partners and become a member.

Bear Market Cycle Bottom Forming in Gold and Gold Stocks Right Now!

Today our trading partner David Banister takes a look at the Bullish Percent Index chart relative to Gold’s cycle and Gold Stocks.

Essentially it tells you what percentage of Gold sector stocks are at or above a moving average, which normally would be 50 days. When 70% or more are above a 50 day moving average, sectors can be peaking out. If you look at our chart at the bottom, we have labeled various incidents with A, B, C, and D.

A. The precious metal as we all know peaked in the fall of 2011 at $1923 per ounce, and the Bullish percent index was at 80%! Usually at 30% or so, they are bottoming out in most cases.

B. We saw a rare case in the summer of 2013 where the Bullish percent index for Gold stocks was at 0%, yes that is not a miss-print.

C. Gold bottomed at 1181 in late June 2013, and then rallied up to 1434 and we saw Gold stocks rally 40-80% in individual cases and the Bullish percent index rallied up to 55%.

D. If we fast forward to December 2013, we have Gold pulling back in the final 5th wave down from the Bull cycle highs in August 2011 at $1923. The Bullish percent index is back to 10% and heading towards 0 or close once again. At the same time, the Gold miners index ETF (GDX) is at 5 year lows and even lower than June-July 2013 lows.

These types of indicators are coming to a pivot point where Gold is testing the summer 1181 lows and may go a bit lower to the 1090 ranges. At the same time, we see bottoming 5th wave patterns combining with public sentiment, bullish percent indexes, and 5 year lows in Gold stocks. This is how bottom in Bear cycles form and you are witnessing the makings of a huge bottom between now and early February 2014 if we are right.

The time to buy Gold and Gold stocks is now during the next 4 - 5 weeks just as we were recommending stocks in late February 2009 with public articles that nobody paid attention to. This is the time to start accumulating quality gold miner and also the precious metals themselves as the bear cycle winds down and the spring comes back to Gold and Silver in 2014.

Click here to join us at Market Trend Forecast for regular updates on Gold, Silver, and The SP 500 Index.

Gold Stocks: Its Time To Be BRAVE!

By David Banister, Chief Strategist the Market Trend Forecast.........

I used to half joke with some of my investing friends that the best time to buy stocks is during or right after a crash. Think 1987, 2000-2002, 2008-09, and now perhaps Gold Miners?? Well, before we get too far ahead of ourselves, lets examine evidence of a “Crash”: I like to use crowd behavioral, empirical, and technical evidence in combination.

1. In a recent money managers poll, virtually nobody was bullish on Gold or Gold stocks, and over 80% of those polled were bullish on the SP 500 and US stocks.

2. The percentage of Dumb Money traders (non-reportable traders) in the futures markets with short positions on Gold is at all time highs, they tend to be very long at the highs and very short at the lows.

3. The insider buying ratio of Gold Mining stocks to sellers is running over 10 to 1, the highest since October 2008 when Gold bottomed out at $685 per ounce from $1030 highs. Quoting Ted Dixon, CEO of Ink Research, “such a high level of buying interest among officers and directors within their own businesses in the resource sector has correctly foreshadowed a recovery in share prices in the past: That high point of nearly five years ago came about six weeks before the Venture market bottomed on Dec. 5, 2008…While the excitement that surrounded mining stocks as recently as two years ago has waned, experienced value investors recognize that such periods of investor neglect often give rise to the best deals” Source: Theglobeandmail.com

4. The ratio of the HUI Gold Bugs Index to the SP 500 is at multi year lows and in near crash mode on the charts. The RSI Index (Relative strength) on the weekly charts is at 10 year lows at -13.71, which is off the charts low!!

5. Most trading message boards I view at Stocktwits and others are universally bearish on Gold and Gold stocks.

6. Gold is in a wave B or Wave 5 down re-testing the 1322 lows which we have discussed here for weeks as very likely if 1470 was not taken out on the upside… this is a normal sentiment pattern and re-test.

7. Gold has been in a 21 Fibonacci month correction pattern off a 34 Fibonacci month rally from 686-1923. In August of 2011 I penned articles from 1805 right up to 1900 warning of a massive wave 3 top forming. Everyone was bullish, now it’s the complete opposite.

8. Currency debasement continues around the world with negative real interest rates. This is bullish for Gold once this correction has run its course.

9. Hulbert Digest Gold Sentiment index is at an all time low (gold newsletters at -35 sentiment readings!!)

10. Gold -Silver put to call ratios are at all time highs

I could go on and on with headlines and such, but you get the idea. This is the same type of sentiment I wrote about on the stock market on Feb 25th 2009, here is that article... and nobody on the planet was bullish.

Below is a chart showing the Bullish % index for Gold Miners, as you can see the last time we were at 0% was late 2008 when Gold had bottomed out and insiders were also buying like crazy like now:



The GLD ETF chart also shows a likely re-test or slightly lower of the 1322 futures lows of April, when Insider buying hit 10 year record levels:



Obviously Gold could end up going a lot lower than we think, and the Gold Mining stocks could sink further yet. But for those with a 3-6 month horizon, we expect the 21-24 month Gold correction to complete by no later than October 2013. During the next several months the opportunities to buy some miners on the cheap will potentially make some investors a lot of money in the coming few years.


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Two Short Term Scenarios for the S&P 500 Index

For the first time since the last week of December of 2011, the S&P 500 Index closed lower on the weekly chart. Recently I have been discussing the overbought nature of stocks based on a variety of indicators. However, the real question that should be asked is whether last week was just a short term event or if we see sustained selling in coming weeks.

The issues occurring in Greece spooked the markets somewhat on Friday as Eurozone fears continue to permeate in the mindset of traders. The U.S. Dollar Index is the real driver regarding risk in the near and intermediate term future. If the Dollar is strong, market participants will likely reduce risk. However a weakening Dollar will be a risk-on type of trading event which could lead to an extended rally in equities, precious metals, and oil.

Friday marked an important day for the U.S. Dollar Index futures as for the first time in several weeks the Dollar held higher prices into a daily close. The U.S. Dollar appears to have carved out a daily swing low on the daily chart from Friday. Furthermore, the potential for a weekly swing low at the end of this week remains quite possible. The chart below illustrates how the 100 period simple moving average has offered short term support for the past few weeks.

U.S. Dollar Index Futures Daily Chart

I would also point out that the MACD is starting to converge which is a bullish signal and the full stochastics are also demonstrating a cross on the daily time frame. As long as the 100 period moving average holds price, a rally is likely in the U.S. Dollar Index in coming weeks.

Should that rally play out, it will likely push risk assets lower. My primary target for the S&P 500 would be around the 1,300 – 1,310 price range if the selloff transpires. It is important to note that  headlines coming out of Europe could derail this analysis in short order.

Assuming that a selloff in the S&P 500 occurs it will present a difficult trading environment for market participants. Market participants are going to be in a tough position around the 1,300 price level. A rally from 1,300 could  serve to test the 2011 highs. In contrast, a confirmed breakdown of the 1,300 price level could initiate a more significant selloff towards the 1,250 area.

Should price move towards the 1,300 price level the bulls and bears will be battling it out for intermediate control of price action. This is my preferred scenario for the short term time frame, but I would only give it about a 60% chance of success at this point in time. We simply need more time to see how price action behaves the first few session of the forthcoming week.

S&P 500 Index Bearish Scenario

The alternate scenario which has about a 40% chance of success would be a sharp rally higher which likely would be produced by news coming out of Greece and/or the Eurozone that pushes the Euro higher. Right now risk is high due to the sensitivity of price to headline risk. With that said, the bullish alternative scenario is shown below.

S&P 500 Index Bullish Scenario

At this point we just do not have enough price information to give us clarity regarding the most probable outcome. The price action in the Euro is going to drive price action for the S&P 500 and other risk assets in weeks ahead.

Anything is possible in the short term, but I have to give a slight edge to the bears simply based on the price action Friday and the fact that almost every indicator I follow is screaming that the equities market is severely overbought. The price action this week should be telling. Headline risk is excruciatingly high, trade safely in the coming week!

By: Chris Vermeulen – Get Chris' FREE Weekly ETF Reports & Analysis
Co-Author: JW Jones – Get J.W.s FREE Weekly Options Reports & Analysis