Are Stocks & Commodities About To Start Another Rally?

Over the past couple months everyone seems to have been preparing for a sharp market correction. Crazy part is that the SP500 dropped about 10% from the high and that is a typical bull market correction. The thing is… the stock market has a way of slowly unfolding making it look and feel minor, then before you know it, the correction is over and it’s back to an uptrend. That is kind of how this one unfolded.

The good news is that we caught the low risk portion of the correction locking in a 4.5% drop, and we are now in a long trade and in the money by 2.5% with very little down side risk at this point. Time will tell if this up trend is sustainable or not…

Now, let’s take a look at the charts…

Dollar 60 minute intraday chart
As you can see below the dollar looks to have started a breakdown today. If there is continued selling pressure in the next couple days then expect to stocks and commodities to move higher as the US Dollar drops. It is important to know that when a bullish pattern fails we typically see a very strong reaction in the opposite direction (down) catching the majority off guard and they rush to the door.

SPY Broad Market ETF – Daily Chart
A couple weeks ago we watched the market go into a free fall creating a washout bottom. From there we saw prices bounce back and retake my key moving averages. This gave us a bullish bias and dips should be looked at as buying opportunities. I will admit that stocks still have a long way to go before the masses are convinced. I feel we need to see the February and March highs get taken out first. Once they get taken out there should be strong buying as short covering (protective stops from traders who are short) causes a surge in buying pressure sending stocks sharply higher yet again.

My trading buddy David Banister at Active Trading Partners is starting to see small cap stocks come back to life. Money is starting to flow into these lucrative areas of the market and he is on top of things… This week’s trade is up 20% in less than 24 hours which is very exciting.

Gold Daily Chart
Gold has been moving up this year but the current price action is not really getting me excited to buy just yet. Recently we have seen strong selling volume and very light buying volume. My bias still favors higher prices but there is still a good chance we get another dip in the coming sessions.

Mid-Week Trading Conclusion:
In short, I feel as though the dollar will trigger the next wave of buying in stocks and commodities for the next week or two… We should see the dollar make a clean moving in either direction shortly and that will help guide my analysis, positions and setups. I hope this analysis helps you to see the market from a different perspective.

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SP500 Internals, Dollar & Gold Pre-Week Analysis

From Chris Vermuelen.....The Gold and Oil Guy

After a fierce equities rally on Friday, which I figured would happen, just not that strong; I have to wonder if there is some event or major decision in the works we don’t know about?

Friday’s rally could be something simpler like window dressing by the funds. This is when the funds buy up all the top performing stocks for month end reporting. They do this so that their investors think they are on the ball and know what they are doing. Window dressing will end Monday and from there we could see some profit taking (selling) start. But for all we know Obama could be extending the tax cuts for everyone or cutting payroll taxes etc…

It would only take one of these events to trigger a sharp up move in the market and that could be what Friday’s move was anticipating. That being said volume has remained light and during low volume session the market has a tendency to move higher. Sell offs in the market require strong volume to pull the market down, so until volume picks up there could still be higher prices just around the corner.

Let’s take a look at some charts…

SPY – SP500 60 Minute Intraday Chart
Last week we saw the market reverse to the down side with a strong end of say sell off. That set the tone for some follow through selling and for any bounces to be sold into. That being said, the market always has a way of surprising traders and it did just that on Friday gapping above Thursday’s reversal high causing shorts to cover and the typical end of week light volume drift to help hold prices up.

NYSE Market Internals – 15 Minute Chart
I like to follow some market internals to help understand if investors are becoming fearful or greedy. It also helps me gauge if the market is over bought or oversold on any given day.

These three charts below show some interesting data.
Top Chart – This indicator shows me if the majority of shares traded are bought or sold. When the red line spikes up and trades above 5 then I know the majority of traders are buying over covering their shorts. I call this panic buying because traders are buying in fear that the market will continue higher and they will miss the train. When everyone is buying you know a pullback is most likely to occur.

Middle Chart – This is the NYSE advance/decline line. When this indicator is below -1500 then the market is over sold and bottom pickers/value buyers will step in and nibble at stocks. But when this indicator is trading over 1500 then you know the market is overbought and there should be some profit taking starting any time soon.

Bottom Chart – This is the put/call ratio and this tells us how many people are buying calls vs put options. When this indicator is below 0.80 level more traders are bullish and buying leverage. My theory is if they are buying leverage for higher prices, then they have already bought all their stocks and now want to add some leverage for more profits. When I see the majority of traders bullish then I an sure to tighten my stops (if long) as top my be forming.

Putting the charts together – When each of these charts are trading in the red zone know I must be cautious for any long positions because the market just may be starting to top. Or a short term correction may occur.

UUP – US Dollar Daily Chart
The US dollar has been under some serious pressure with all the talk about quantitative easing (printing money). Obviously the more the Fed’s print the less value the dollar will have. The chart below shows a green gap window which I think once it is filled should put the dollar in a oversold condition for a short term swing trade bounce before heading back down. A bounce in the dollar will put pressure on equities, gold and oil.

GLD – Gold Daily Chart
Gold continues to grind its way up. This move is looking very long in the teeth and pullback will most likely be sharp.

Weekend Trading Conclusion:
In short, equities and gold continue to grind their way higher while the US dollar continues its grind lower. When I say the market is grinding I am implying the market is over extended and a reversal any day should occur.

Financial stocks like Goldman (GS) which typically leads the market has been strongly underperforming over the past week. Insiders were selling GS very strongly which is strange and makes me wonder what’s up there? With the financial stocks underperforming it sure looks like a market reversal is just around the corner.

If Friday’s rally was simply window dressing by the funds then it should end on Monday and with any luck we will see a sharp reversal to the down side early this week.

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 3-5 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis as it allows me toe get more into across to you quicker and is more educational, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of traders and they will receive direct personal responses regarding trade ideas and analysis going forward.

Let the volatility and volume return!

Chris Vermeulen
The Gold and Oil Guy .com

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SP500 Pierces, Bonds Rally, Dollars Fall Out the Window

From Chris Vermeulen at The Gold And Oil Guy.Com.......

It’s been a wild ride the past few days OptionsX, Obama and FOMC comments. Seems like everyone is waiting to see what the market is going to do going forward at this pivotal point…

Since the market topped in April and has since been trading sideways in this rather large range, everyone has small positions at work but waiting for a decisive move before fully committing to one side. There could be a few opportunities in the coming days using bonds, the dollar and the SP500 if all goes well which I explain below.

Lets take a look at the charts.....

SP500 – SPY ETF, Daily Chart
There has been a lot of talk about a sharp rally if the SP500 could break the 1130 level or the neckline everyone is talking about. Well this week Obama was on TV and the market rallied into that, then again after. I don’t really thing investors or traders were buying things up as he said the same boring stuff he always says without anything new. I feel there could have been another force at work, which we can discus another time .

Anyways, the market pierced those resistance levels and I’m sure a ton of traders have switch their view on the market from bearish to bullish. While I prefer to trade with the trend I can’t help but feel this market is still range bound, which is why I am still bearish at these shakeout levels. The SP500 did break resistance BUT the following candle did not close above the breakout candles high to confirm the move.

That said, the market is now trading back down at support and the next couple of days I’m sure will shed some like on the direction.

20 Year Bonds – TLT Fund, Daily Chart
We have seen the bond price pullback in a bull flag formation. It touched support before bouncing to break short term resistance as it looks to have started another rally. The chart below overlays both the candlesticks of the bond price and the SP500 which is the white line. You will notice they have an inverse relationship. If bond prices continue to rally then lower SP500 could start to rollover.

US Dollar – UUP Fund, Daily Chart
The dollar has fallen sharply the past 10 trading session and it looks to be oversold for a couple reasons. The past couple days the price has dropped straight down and gapped lower. This recent drop has reached a gap window which will act as support and could provide a tradable bounce in the coming days depending how things unfold.

In short, the SP500 is flirting with resistance and has yet to confirm the breakout. Bond prices look to be headed higher which will makes me think equities could start to sell off any day now… It’s also important to note that the big banks GS and JPM shares have been under pressure and they tend to lead the broad market. Another point to add is the fact the oil has not rallied even though the dollar dropped like a rock? What happens if the dollar bounces? Could oil finally start its next leg down?

Gold and silver continue their steady grind up. The price action reminds me of the 2009 Nov –Dec move. Once that train de-rails its going to have a sharp correction…

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 3-5 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis as it allows me toe get more into across to you quicker and is more educational, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of traders and they will receive direct personal responses regarding trade ideas and analysis going forward.

Let the volatility and volume return!

Chris Vermeulen....The Gold And Oil Guy.Com

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SP 500 Fakeout & Market Trend

From Chris Vermeulen, The Gold and Oil Guy....

I think it’s safe to say that everyone knows the markets are manipulated… but during options expiry week we tend to see prices move beyond key resistance and support levels during times of light volume which triggers/shakes traders out of their positions.

Trading during low volume sessions Pre/Post holidays for swing traders or between 11:30am – 3:00pm ET for day traders tends have increased volatility and false breakouts. This happens because the market markets for individual stocks can slowly walk the prices up and down beyond short term support and resistance levels simply because there is a lack of participation in the market.

SP500 4 Hour Candlestick Chart
That being said, the chart below of the SPY (SP500 ETF) shows that last Thursday, (the day before Friday options expiry) the put call ratio was showing extreme bullishness. I also mentioned that we should expect a pop of 0.5 -2% in the next 24 hours as big guys will try to shake everyone out of their short positions (put options).

The put/call ratio indicator at the bottom of this chart is a contrarian indicator. When it shows that everyone has jumped to the bullish side, the big money knows its about time to change the direction so they can cash in at premium price levels.

SP500 60 Minute OptionsX Chart of the Week
If you look at the volume at the bottom of the chart you will see there are times where this virtually zero volume trades. The yellow high lighted section shows the overnight price surge which is very easy for the big guys to push higher as everyone sleeps.

Here is what they are doing. The light volume makes it easy to manipulate so they push it higher until key resistance is broken, then everyone who was short and had a protective stop in place will have their order executed. As the price rises, more and more stops get triggered. Also, with the rising number of traders becoming bullish from the previous session have buy orders to go long if key resistance is broken. This causes a virtually automated rally to unfold, but once the orders/buying dries up, the big guys start selling their positions at premium prices, pushing the price all the way back down to where the market closed the previous day.

In short, the big guys shook the majority of traders out of their positions Thursday night and pocketed a ridiculous amount of money. Crazy part is 99% of the public don’t even know this type of thing is happening while they sleep.

SP500 OptionsX Intraday Price Action
I thought I would show this chart as it shows the selling pressure in the market. What I find interesting about this chart is the fact there was more selling volume during options expiry week, but the prices continued to move higher.

From watching the market internals I saw the majority of traders go from bearish to bullish by the end of the week, and this really gave the big guys a huge advantage in my opinion. Each session selling volume took control with the big guys unloading bu the low volume afternoons naturally brought prices up again as more and more traders became bullish each session. This happened all week and Thursday night it looks as though they let the price rise allowing the key resistance level to be broken which caused a surge of buying which they could selling into. So what’s next…

SP500 / Broad Market Trading Conclusion:
In short, the market looks toppy and if all goes well, last weeks overnight shakeout just may have been a top. This week will start off slow and most likely with light volume until Wednesday. During light volume times, keep trading positions smaller than normal and remember there is a neutral/upward bias associated with light volume.

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 2-4 investments at a time, I’ll only be covering only one. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis per customer’s request, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of newsletter traders and they will receive direct personal responses regarding trade ideas and analysis going forward. Let the volatility and volume return!

Chris Vermeulen

Get More Free Reports and Trade Ideas Here for Free: FREE SIGN UP



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