The gold market has been pushing out its normal level of frustration and anxiety for the past several weeks.
So the question becomes, is the gold market pausing to move higher, and of course the Bulls would argue this, or is it forming the head and shoulders top that many technicians are looking for? Of course, this would be a bearish sign for gold if this technical formation is completed.
We've just finished a short video that shows you what we're looking at right now in gold and how I think it is going to be resolved. The video is a little over 2 minutes. It's quick and to the point while supplying you with what you need to take your place in or out of this market.
Just Click Here to Watch today's video "Where is Gold Headed and How Can You Prepare?"
You may also wish to attend our gold webinar which we are holding on the 2nd of December at 4 PM EST. The webinar is free of charge, but you need to register in order to attend. This is no hype, but we have limited space and it will be on a first come first served basis. The important thing is that you register as soon as possible.
Here is the link to register for the webinar
While you do need to register to attend our gold webinar, in order to watch today's short video no registration is required nor is there any charge.
We hope to see you at this week's Gold webinar so don't forget to register.
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Tuesday, November 30, 2010
Monday, November 29, 2010
Gold/Silver – Controlling Your Trades, Money & Emotions
Last week we had typical pre-holiday light volume trading going into US Thanksgiving. The previous week I warned every one to trade with extreme caution because of the light volume and the fact that the market is on the verge of a sizable drop for both stocks and commodities. Any price action could not be taken seriously because of the light volume. We will not know until later this coming week what the big money wants to do… Buy or Sell, also what the manipulators will do… Seems like there are a lot of wild cards out there with Europe issues and both unemployment and payroll numbers out on Friday morning.
Below are a few charts showing my intermediate term outlook for gold and silver.
Gold & Silver Futures – Daily Chart
You can see both metal are showing a possible reversal head and shoulders pattern. While they have yet to confirm and close below the neck line we must be aware of this pattern and the risk/potential it provides us with. Both metals are still in an uptrend but showing signs of weakness.
US Dollar Index – Weekly Chart
This chart is not really that helpful for trading stocks, commodities or options right now but I wanted to post it because it allows me to show you how I analyze the market and my trades.
As you can see, the past 3 weeks have been in a strong uptrend reaching the first resistance level. The point of this chart is to show you that if you step out to the next longer time frame you can get a solid feeling of where an investment will find major support and resistance levels. Any investment not matter if it’s a stock, commodity or currency, if the price is trading in the middle of a large range like this chart you should not be taking large positions because it almost becomes a 50/50 bet on the market which is not a good winning strategy unless you are very experienced at managing your trades and money.
If you are going to trade then you want to focus on the underlying trend and you do that by looking at the next larger time frame. For example: if you focus on trading the daily chart, then you must step back each week and review the weekly chart to be sure you are trading with the underlying trend which is up for the dollar right now.
Weekend Trading Ideas:
Tuesday morning we saw the SP500 gap lower and continue to sell off. Traders started panicking out of their long positions and we could see it using the intraday market internals charts, which I cover each morning in the pre-market trading videos. Me being a contrarian (buying into market fear, selling into market strength) I used that high level of fear in the market along with the expected light volume holiday week ahead as an excuse to book profits near the lows on SP500 using the SDS bear fund allowing us to profit from the falling market. I feel we are going to have some crazy moves on the markets going into year end and it should be a lot of fun if done correctly.
Trading in general is a very difficult task especially if you are doing it for a living and planning on using your monthly income to pay bills, salaries etc… We all know the stress which comes with trading and if do not have a solid trading strategy, rules and cannot properly manage yourself (emotions) then you are most likely running into problems like over trading, getting shaken out of trades easily, and taking bigger risks than your account can handle. Each of these cause more traders to blow up their accounts and big up on trading.
I am giving away my book on how you can control your trades, money and emotions. This short and to the point guide is full of my trading techniques, tips and thoughts which will help you get a handle of your emotions turning the market noise into music.
Make sure to Download the book and sign up for Chris Vermeulen's Daily ETF Trading Newsletter
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Below are a few charts showing my intermediate term outlook for gold and silver.
Gold & Silver Futures – Daily Chart
You can see both metal are showing a possible reversal head and shoulders pattern. While they have yet to confirm and close below the neck line we must be aware of this pattern and the risk/potential it provides us with. Both metals are still in an uptrend but showing signs of weakness.
US Dollar Index – Weekly Chart
This chart is not really that helpful for trading stocks, commodities or options right now but I wanted to post it because it allows me to show you how I analyze the market and my trades.
As you can see, the past 3 weeks have been in a strong uptrend reaching the first resistance level. The point of this chart is to show you that if you step out to the next longer time frame you can get a solid feeling of where an investment will find major support and resistance levels. Any investment not matter if it’s a stock, commodity or currency, if the price is trading in the middle of a large range like this chart you should not be taking large positions because it almost becomes a 50/50 bet on the market which is not a good winning strategy unless you are very experienced at managing your trades and money.
If you are going to trade then you want to focus on the underlying trend and you do that by looking at the next larger time frame. For example: if you focus on trading the daily chart, then you must step back each week and review the weekly chart to be sure you are trading with the underlying trend which is up for the dollar right now.
Weekend Trading Ideas:
Tuesday morning we saw the SP500 gap lower and continue to sell off. Traders started panicking out of their long positions and we could see it using the intraday market internals charts, which I cover each morning in the pre-market trading videos. Me being a contrarian (buying into market fear, selling into market strength) I used that high level of fear in the market along with the expected light volume holiday week ahead as an excuse to book profits near the lows on SP500 using the SDS bear fund allowing us to profit from the falling market. I feel we are going to have some crazy moves on the markets going into year end and it should be a lot of fun if done correctly.
Trading in general is a very difficult task especially if you are doing it for a living and planning on using your monthly income to pay bills, salaries etc… We all know the stress which comes with trading and if do not have a solid trading strategy, rules and cannot properly manage yourself (emotions) then you are most likely running into problems like over trading, getting shaken out of trades easily, and taking bigger risks than your account can handle. Each of these cause more traders to blow up their accounts and big up on trading.
I am giving away my book on how you can control your trades, money and emotions. This short and to the point guide is full of my trading techniques, tips and thoughts which will help you get a handle of your emotions turning the market noise into music.
Make sure to Download the book and sign up for Chris Vermeulen's Daily ETF Trading Newsletter
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Saturday, November 27, 2010
Oil N' Gold: Gold Weekly Technical Outlook For Saturday Nov. 27th
In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). There is no confirmation of topping yet. However, note that 1424.3 record high was close to two important projection target, 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 and 100% projection of 253 to 1033.9 from 681 at 1462. Reversal should be imminent. Break of mentioned 1315.8/1329 will signal that 1424.3 is an important top and gold should have started a sizeable medium term correction that should dip back into 1044.5/1227.5 support zone at least.
In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 is almost met and a sizeable correction should be around the corner. Though, even in case of deep fall, 55 months EMA (now at 931 level) should present strong support to contain downside and bring another up trend.
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Thursday, November 25, 2010
The S&P 500, Gold, Crude Oil, and the Banks
As you probably already know option trading has become a growing branch of the trading world. The reasons for this rapid growth are numerous but include the ability to control risk, take advantage of the inevitable decay of the time premium portion of an option’s price, and to exploit the predictable and stereotypic changes in the factors controlling option pricing that occur on a regular basis. Nobody knows the in's and out's of options trading better the J.W. Jones. Here is his latest article that will get you ready for Monday's trading session......
Stocks were back on sale Tuesday when the S&P 500 suffered more than a 1.40% decline by the closing bell. Some market prognosticators pointed their fingers at the dollar, other pointed at the Korean situation, and still others had their eyes fixed on Ireland and the Eurozone as potential causes for the sharp selloff. The S&P 500 is currently oversold on the short term chart and either a bounce or period of consolidation is likely. At this point, chasing stocks in either direction will only satisfy the desires of the smart money, who will likely blow these anticipatory traders into trading fodder in coming weeks.
Right now, patience is a must. The day before Thanksgiving is synonymous for light volume as are most days preceding a holiday. Thanksgiving leads us into the holiday season which typically is characterized by low volume until after the New Year. As most traders know, when volume is light the market typically has a positive bias. I would not be shocked to see U.S. stocks trading higher Wednesday and/or Friday.
While the short term charts are oversold, the longer term charts continue to have a technical bias to the upside assuming the 50 period moving average does not get violated. Time will be the final arbiter as to whether this correction is relatively mild before stocks continue higher, or if this is the beginning of a larger correction.
Gold (GLD Daily)
At this point in time, gold is forming a possible head and shoulders pattern on the daily chart. While it is too early to determine if the pattern will play out, if the expected price action confirms the head and shoulders top then the measured move would indicate price levels around the GLD 120-122 area will likely be revisited. Currently gold and the GLD trading ETF are not offering a great risk/reward entry from a long or short perspective, and even if it were I would simply watch the action unfold until we get confirmation that the head and shoulders pattern is going to either be confirmed or fail. Caution is warranted and risk remains high.
Oil (USO Weekly)
USO has been in a consolidating pattern for well over a year and it continues to build this monster base between the 32 – 42 price levels. When this base is finally broken, a major move in oil will likely be underway. I am expecting that price will get close or test the bottom of the range for an outstanding low risk long entry using the bottom of the base as a backstop for risk definition. It is hard to say where price is heading in the short term, but from a fundamental perspective oil has some positive bias with increasing demand coming from emerging markets and a slowdown in future supply.
The Banks (XLF Daily)
Recently the XLF ETF (the financials) had a breakout of a long-term consolidation pattern which has failed. With that failure, the broader markets have sold off from recent highs. If the XLF and KRE continue to be under pressure, it is unlikely that the broader market as a whole will continue higher. It is critical for traders to follow the financial sector because the broad markets will go nowhere without their participation.
Like it or not, our financial complex has to be healthy in order for our economy to improve with any lasting effect. If banks are not lending, then it is safe to say the economy is not expanding at a fast pace. If the banks are not profitable or are not consistently growing their revenues, this would again be a negative indicator regarding economic growth.
There are a lot of analysts who are showing concerns over future profitability amid countless issues which include mortgage defaults, over exposure to commercial real estate and development loans, and potential prosecution in lieu of the way the large money-center banks handled foreclosures. Additionally, companies like PIMCO and other investment firms are attempting to return the mortgages they bought back to the banks through legal action which could lead to further losses. While the outlook is certainly not great, I would not expect any powerful rallies if financials are not following along.
Conclusion
With the shortened holiday week, I will not be offering an option trading setup. I am simply watching the price action and sitting in cash. When volume is this light, the markets generally have an upward bias and with the large selling volume we witnessed on Tuesday, a bounce is likely overdue. Until the S&P 500 gives up the 50 period moving average, we remain in a technically constructive pullback which could potentially lead to higher prices. If we get a daily close on the S&P below the 50 period moving average, all bets are off.
In closing, I hope this find you well and I wish all of you and your families a safe and Happy Thanksgiving!
If you would like to receive J.W. Jones' Free Options Strategy Guide & Trade Ideas join this free newsletter at Options Trading Signals.Com
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Stocks were back on sale Tuesday when the S&P 500 suffered more than a 1.40% decline by the closing bell. Some market prognosticators pointed their fingers at the dollar, other pointed at the Korean situation, and still others had their eyes fixed on Ireland and the Eurozone as potential causes for the sharp selloff. The S&P 500 is currently oversold on the short term chart and either a bounce or period of consolidation is likely. At this point, chasing stocks in either direction will only satisfy the desires of the smart money, who will likely blow these anticipatory traders into trading fodder in coming weeks.
Right now, patience is a must. The day before Thanksgiving is synonymous for light volume as are most days preceding a holiday. Thanksgiving leads us into the holiday season which typically is characterized by low volume until after the New Year. As most traders know, when volume is light the market typically has a positive bias. I would not be shocked to see U.S. stocks trading higher Wednesday and/or Friday.
While the short term charts are oversold, the longer term charts continue to have a technical bias to the upside assuming the 50 period moving average does not get violated. Time will be the final arbiter as to whether this correction is relatively mild before stocks continue higher, or if this is the beginning of a larger correction.
Gold (GLD Daily)
At this point in time, gold is forming a possible head and shoulders pattern on the daily chart. While it is too early to determine if the pattern will play out, if the expected price action confirms the head and shoulders top then the measured move would indicate price levels around the GLD 120-122 area will likely be revisited. Currently gold and the GLD trading ETF are not offering a great risk/reward entry from a long or short perspective, and even if it were I would simply watch the action unfold until we get confirmation that the head and shoulders pattern is going to either be confirmed or fail. Caution is warranted and risk remains high.
Oil (USO Weekly)
USO has been in a consolidating pattern for well over a year and it continues to build this monster base between the 32 – 42 price levels. When this base is finally broken, a major move in oil will likely be underway. I am expecting that price will get close or test the bottom of the range for an outstanding low risk long entry using the bottom of the base as a backstop for risk definition. It is hard to say where price is heading in the short term, but from a fundamental perspective oil has some positive bias with increasing demand coming from emerging markets and a slowdown in future supply.
The Banks (XLF Daily)
Recently the XLF ETF (the financials) had a breakout of a long-term consolidation pattern which has failed. With that failure, the broader markets have sold off from recent highs. If the XLF and KRE continue to be under pressure, it is unlikely that the broader market as a whole will continue higher. It is critical for traders to follow the financial sector because the broad markets will go nowhere without their participation.
Like it or not, our financial complex has to be healthy in order for our economy to improve with any lasting effect. If banks are not lending, then it is safe to say the economy is not expanding at a fast pace. If the banks are not profitable or are not consistently growing their revenues, this would again be a negative indicator regarding economic growth.
There are a lot of analysts who are showing concerns over future profitability amid countless issues which include mortgage defaults, over exposure to commercial real estate and development loans, and potential prosecution in lieu of the way the large money-center banks handled foreclosures. Additionally, companies like PIMCO and other investment firms are attempting to return the mortgages they bought back to the banks through legal action which could lead to further losses. While the outlook is certainly not great, I would not expect any powerful rallies if financials are not following along.
Conclusion
With the shortened holiday week, I will not be offering an option trading setup. I am simply watching the price action and sitting in cash. When volume is this light, the markets generally have an upward bias and with the large selling volume we witnessed on Tuesday, a bounce is likely overdue. Until the S&P 500 gives up the 50 period moving average, we remain in a technically constructive pullback which could potentially lead to higher prices. If we get a daily close on the S&P below the 50 period moving average, all bets are off.
In closing, I hope this find you well and I wish all of you and your families a safe and Happy Thanksgiving!
If you would like to receive J.W. Jones' Free Options Strategy Guide & Trade Ideas join this free newsletter at Options Trading Signals.Com
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Wednesday, November 24, 2010
New Video - It's more important to the market than Ireland, Greece, Portugal, and Spain Combined
The trials and tribulations of these four countries (that have run up huge deficits) have been well known for quite some time. What is more important in my opinion is not the size of the debt, which is staggering, but rather what is going on with market perception.
Market perception trumps everything else out there. Market perception trumps market fundamentals every time. Market perception is the one card that the government cannot control. It is the card that can potentially give the individual trader an edge.
So what is market perception? Well, have you ever noticed that when some big world event happens, or a new "hot" IPO hits the markets, traders expect that market to go in the talked about direction and typically it does. What doesn't get talked about is how the market then corrects itself and the technicals really come into play.
The only real way to avoid the trap is through the use of technical analysis, or in the case of MarketClub, our "Trade Triangle" technology. This technology doesn't read the newspapers, doesn't watch cable news, and is independent of everything else except the market itself.
What is the most important thing to most investors? I would have to say it is the bottom line. If you're not making money in the market, then you're doing something wrong. Maybe you're paying more attention to the talking heads on cable, or to the nightly news, but you're not really paying attention to market perception.
I was lucky enough when I began my career to learn about technical analysis very early on. I said to myself, when it can be this easy there must be something more that I'm missing. It was then that I made the mistake of looking at all these other so called tools like fundamentals, earnings reports, etc. You name it, I looked at it.
One day I finally got smart and realized that I had already found the "true gold" in trading by using technical analysis.
I was just watching some talking head author on TV and they were saying that technical analysis is so 1920's and old technology. Of course, the person who was saying that was looking to sell copies of their book.
I said to myself, boy oh boy, not to look at technical analysis, which is like the DNA of the market, is a huge mistake. I can see people going out and buying this author's book and being led down the wrong path. I will not name the book as readers of this gobbledygook are going to spin their wheels only to find that it really doesn't work.
Let's keep things simple. That is the secret to successful trading.
At MarketClub we tend to look at the market in a very simple fashion. Let me explain; the market can only do three things: it can go up, it can go down, and it can go sideways. In life there are very few things that you can simplify as easily as that.
So using MarketClub's "Trade Triangles" you are able to determine when the market is going up, in which case you want to be long, and when the market's going down, in which case we want to be short or out of the market.
Now of course we do filter the "Trade Triangles" of MarketClub to help avoid trading losses. With any kind of trading or investing program the risk of loss is always there. The key to success is how you manage those losses. Are the losses small enough as to not bite into your capital in a major way?
Again, when you're looking at market fundamentals or other ways to trade, they really don't tell you when to get out. Obvious examples of this would be the Enron scandal or the recent GM debacle that took unwary investors to the poor house.
But it's hard to fake a market saying everything is great, when the market is heading south. So what is an investor to think? I believe you have to trust your eyes and the direction of the market. After all, that's what makes up your bottom line.
In today's video we're going to be looking at one or two markets and how the "Trade Triangles" are positioned right now. We are not predicting what's going to happen in the future. We are simply going to look at the purity of the "Trade Triangles" and how they can help investors with the most important market element of all, market perception.
As always our videos are free to view and there are no registration requirements.
So watch and enjoy "It's more important to the market than Ireland, Greece, Portugal, and Spain Combined"
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Sunday, November 21, 2010
Has The Gold & Silver Play Gone To Greed?
The past few months it seems the gold and silver play has been getting a little crowed with everyone wanting to own gold. While I am a firm believer that these precious metals are a great hedge/investment long term, I can’t help but notice the price action and volume for both metals which looks to me like they are getting exhausted.
Silver – Daily Chart
The silver chart below shows an extremely high volume reversal candle in early November which typically leads to lower prices and some times a major change in the trend. That being said silver remains in an uptrend with the possibility of a bullish pennant forming. On the other hand there is a possible head and shoulders pattern forming. I will be looking for light volume sideways chop keeping a close eye for a possible neckline breakdown or a momentum thrust to the upside for a possible trade.
Gold – Daily Chart
Gold is forming a bullish and bearish pattern also giving us a mixed signal. I am currently neutral on gold and not really looking to take part until we get some type of clear price action.
US Dollar – 60 Minute Chart
The dollar has shown some strength recently. The US dollar play has been to take the short side, and a couple weeks ago we saw the dollar breakdown from yet another consolidation. It seems like everyone shorted the dollar yet again. That could have been a key pivot low for the dollar. On the weekly chart that bounce was off a major support trend line helping add some fuel to the rally I would think.
The chart below shows the recent rally and breakout to the upside. Currently the dollar is pulling back to test the breakout level (support). It will be interesting to see how this week unfolds. If the dollar bounces then we just may see metals break below their necklines to make another heavy volume drop.
Weekly Precious Metals Update:
In short, I have mixed feelings for gold and silver. Yes I think they are good long term plays, but after the run they have had it is also very possible a much deeper correction is about to take place and we may not see new highs for another year. That is a long time to have money sitting in an investment when it can be put to work in other investments. I know the herd (general public) is all head over heals in love with gold and silver which is one of the reasons why I think we are nearing a top if we didn’t already see it a couple weeks ago.
Don’t get me wrong I’m not saying to sell and go short metals....not yet anyways. They are both still in an up trend but some interesting things are unfolding which could cause big action in the coming weeks.
For now please join my trading newsletter and get my ETF trading signals, daily analysis and educational material at The Gold and Oil Guy.com
Chris Vermeulen
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Silver – Daily Chart
The silver chart below shows an extremely high volume reversal candle in early November which typically leads to lower prices and some times a major change in the trend. That being said silver remains in an uptrend with the possibility of a bullish pennant forming. On the other hand there is a possible head and shoulders pattern forming. I will be looking for light volume sideways chop keeping a close eye for a possible neckline breakdown or a momentum thrust to the upside for a possible trade.
Gold – Daily Chart
Gold is forming a bullish and bearish pattern also giving us a mixed signal. I am currently neutral on gold and not really looking to take part until we get some type of clear price action.
US Dollar – 60 Minute Chart
The dollar has shown some strength recently. The US dollar play has been to take the short side, and a couple weeks ago we saw the dollar breakdown from yet another consolidation. It seems like everyone shorted the dollar yet again. That could have been a key pivot low for the dollar. On the weekly chart that bounce was off a major support trend line helping add some fuel to the rally I would think.
The chart below shows the recent rally and breakout to the upside. Currently the dollar is pulling back to test the breakout level (support). It will be interesting to see how this week unfolds. If the dollar bounces then we just may see metals break below their necklines to make another heavy volume drop.
Weekly Precious Metals Update:
In short, I have mixed feelings for gold and silver. Yes I think they are good long term plays, but after the run they have had it is also very possible a much deeper correction is about to take place and we may not see new highs for another year. That is a long time to have money sitting in an investment when it can be put to work in other investments. I know the herd (general public) is all head over heals in love with gold and silver which is one of the reasons why I think we are nearing a top if we didn’t already see it a couple weeks ago.
Don’t get me wrong I’m not saying to sell and go short metals....not yet anyways. They are both still in an up trend but some interesting things are unfolding which could cause big action in the coming weeks.
For now please join my trading newsletter and get my ETF trading signals, daily analysis and educational material at The Gold and Oil Guy.com
Chris Vermeulen
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Saturday, November 20, 2010
Gold Weekly Technical Outlook For Saturday Nov. 20th
In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). Such rally is still expected to continue towards 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before completion. Though, we're aware of long term projection target of 100% projection of 253 to 1033.9 from 681 at 1462 and we'd anticipate strong resistance from there to bring medium term correction finally. On the downside, however, break of 1315.8 support will be an early alert of medium term reversal and will turn focus back to 1155.6 support for confirmation.
In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253. The anticipated correction didn't happen and gold will now likely climb further to 100% projection of 253 to 1033.9 from 681 at 1462 before making a top.
Comex Gold Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts
Just click here for your FREE trend analysis of gold ETF GLD
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S&P 500, Treasuries, Gold, & Dollar are At Key Price Levels
There is a lot going on in the news as of late, and the expiration of the Bush tax cuts looms large on the minds of many, particularly small business owners. So the real question becomes, what should traders be watching or paying attention to before the light volume Thanksgiving week? The answer is simple, watch the tape! The market will provide plenty of clues and it will eventually tip its hand, experienced traders will wait for this process to unfold.
Here is the charts that illustrates these key levels > "S&P 500, Treasuries, Gold, & Dollar are At Key Price Levels"
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Thursday, November 18, 2010
Bonds, U.S. Dollar, SP500 & Gold Have Changed Direction – Are You Ready?
There have been some major trend changes recently and it looks as though more investments are about to follow. The real question though is… Are You Ready To Take Advantage Of It?
It has been an exciting ride to say the least with the equities and metals bull market and the plummeting dollar. But it looks as though their time is up, or at least for a few weeks. Traders and investors will slowly pull money off the table to lock in gains or cut losses and re-evaluate the overall market condition before stepping back up to the plate and taking another swing.
Below are a few charts showing some possible money making trade ideas in the weeks ahead.
TBT 20+ Treasury Note Inverse Fund
This fund moves inverse to the price of the 20 year T.N’s also known as bonds. Looking at the chart you can see the recent reversal which took place. We had a great entry point shortly after this reversal took place using my low risk setup strategy.
Falling bond prices are considered to have a negative impact on equities because it implies that interest rates may start rising which means more investors will pull money out of stocks and put that money into a safe interest earning investment. You will typically see bonds change direction before equities. That being said the chart below is an inverse fund, so when this bond fund goes up, it means actually indicates bond yields are falling. I will admit these inverse funds really throw my brain for a loop at time… I prefer the good old days, buying long and selling short....so simple and clean....
UUP – US Dollar Index Fund
This fund moves with the dollar and allows equities traders to take advantage of currency trading. This chart below shows a possible trend reversal for the dollar. If the dollar continues to rally then it’s also a good sign that interest rates could be rising in the near future and it also means more downward pressure on equities.
SDS – Inverse SP500 Index Fund
These bear funds make it possible for traders and investors to profit from a falling market using a regular buy and sell strategy. They can also be traded in retirement accounts making them a golden investment for those willing to play a falling market.
This chart moves the same as the SP500 index only flipped. As the SP500 falls this fund rallies.
The strategy we just used to play the recent rally is the same strategy we will use during a bear market, but instead of trading the SPY, we are trading this fund.
It is important to note that while bull market rallies tend to drag out; bear markets typically have faster movements. Fear is much more powerful than greed which is why the stock market drops quicker than it goes up.
GLD – Gold Exchange Traded Fund
Gold also looks to be topping and could actually be starting to form a Head & Shoulders reversal pattern.
Mid-Week Trend Trading Conclusion:
In short, understanding inter-market analysis is crucial for traders/investors to know. Not understanding how they affect one other can be very costly in the long run. Remember that volatility and volume rise together at the end of a trend. You can view the recent volatility index (VIX) to see its price action also. Volatility changes also make for great low risk options trades if options are your thing. Focus on trading with the trend, bounces in a down trend are typically muted or trade sideways making is very difficult to make money buying in a falling stock market.
Get Chris Vermeulen's Daily Pre-Market Trading Analysis Videos, Intraday Updates & Trade Alerts at The Gold And Oil Guy.com
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It has been an exciting ride to say the least with the equities and metals bull market and the plummeting dollar. But it looks as though their time is up, or at least for a few weeks. Traders and investors will slowly pull money off the table to lock in gains or cut losses and re-evaluate the overall market condition before stepping back up to the plate and taking another swing.
Below are a few charts showing some possible money making trade ideas in the weeks ahead.
TBT 20+ Treasury Note Inverse Fund
This fund moves inverse to the price of the 20 year T.N’s also known as bonds. Looking at the chart you can see the recent reversal which took place. We had a great entry point shortly after this reversal took place using my low risk setup strategy.
Falling bond prices are considered to have a negative impact on equities because it implies that interest rates may start rising which means more investors will pull money out of stocks and put that money into a safe interest earning investment. You will typically see bonds change direction before equities. That being said the chart below is an inverse fund, so when this bond fund goes up, it means actually indicates bond yields are falling. I will admit these inverse funds really throw my brain for a loop at time… I prefer the good old days, buying long and selling short....so simple and clean....
UUP – US Dollar Index Fund
This fund moves with the dollar and allows equities traders to take advantage of currency trading. This chart below shows a possible trend reversal for the dollar. If the dollar continues to rally then it’s also a good sign that interest rates could be rising in the near future and it also means more downward pressure on equities.
SDS – Inverse SP500 Index Fund
These bear funds make it possible for traders and investors to profit from a falling market using a regular buy and sell strategy. They can also be traded in retirement accounts making them a golden investment for those willing to play a falling market.
This chart moves the same as the SP500 index only flipped. As the SP500 falls this fund rallies.
The strategy we just used to play the recent rally is the same strategy we will use during a bear market, but instead of trading the SPY, we are trading this fund.
It is important to note that while bull market rallies tend to drag out; bear markets typically have faster movements. Fear is much more powerful than greed which is why the stock market drops quicker than it goes up.
GLD – Gold Exchange Traded Fund
Gold also looks to be topping and could actually be starting to form a Head & Shoulders reversal pattern.
Mid-Week Trend Trading Conclusion:
In short, understanding inter-market analysis is crucial for traders/investors to know. Not understanding how they affect one other can be very costly in the long run. Remember that volatility and volume rise together at the end of a trend. You can view the recent volatility index (VIX) to see its price action also. Volatility changes also make for great low risk options trades if options are your thing. Focus on trading with the trend, bounces in a down trend are typically muted or trade sideways making is very difficult to make money buying in a falling stock market.
Get Chris Vermeulen's Daily Pre-Market Trading Analysis Videos, Intraday Updates & Trade Alerts at The Gold And Oil Guy.com
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Tuesday, November 16, 2010
Adam Hewison: Try it … You’ll like it
Dear Gold ETF Trader readers,
I noticed that a lot of folks who are posting questions on our blog are not yet members of MarketClub. Since many of the Trader’s Blog posts revolve around our premium service, I feel as if you’re missing out on the full benefit of the information that is posted.
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Here’s the link that you need to get started.
Every success using MarketClub,
Adam Hewison
President of INO.com
Co-founder of MarketClub
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