The Key to Success is Having Discipline and Following MarketClub’s Trade Triangles

We have been on the right side of the markets for quite some time now.  It is in times like these when technical analysis really shines.  It doesn’t matter if you have a strong upward trend in gold or a downward spiraling trend in stocks, technical analysis works.

We feel we have a target rich area for trading opportunities right now.  Some of the best money can be made during periods just like this.  A key to being successful in markets that are having large moves is to be disciplined and follow MarketClub’s Trade Triangles.

DOLLAR INDEX

Monthly Trade Triangles for Long Term Trends                = Positive
Weekly Trade Triangles for Intermediate Term Trends    = Negative
Daily Trade Triangles for Short Term Trends                     = Negative
Combined Strength of Trend Score                                    = – 60

Our comments today remain pretty much the same as they were yesterday, as there has been very little directional change in this market.  The 73.50 level continues to act as support for the dollar index. This market has remained in a fairly well defined trading range for the last several months. With a Chart Analysis Score of -60 we would want to approach this market using our Donchian Trading Channels as well as our Williams %R indicator.  The index remains below its 200 day moving average, while our longer-term Trade Triangle remains positive.

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As always, we rely on our market proven Trade Triangle technology for catching the big moves.

Adam Hewison: Welcome to the Bear Market

From Forex Market Club contributor Adam Hewison.....

Ladies and gentlemen, the market action yesterday was real. Please be aware that we have started on a bear market. As we have pointed out in our previous updates, we were looking for a move to the downside. That has now happened with all our indicators firmly in negative mode.

Most folks who are not in their 60s do not remember the bear markets of the 70s and 80s which caused a tremendous amount of pain for investors. It seems as though we just kicked the can down the road for the last time. The markets are bringing common sense back and they will find a solution for the economy.

President Obama came on the TV today to reassure everyone that it was not his fault that the stock market was down, it had to do with Europe, the tsunami in Japan. Mr. President we are and have been in a global economy for years. It’s too bad that Ben Bernanke and you don’t understand that.

Folks who saw their 401(k) and IRA retirement accounts decimated in 2008 are having a déjà vu moment. In the last 10 days the S&P 500 has lost over $1 trillion and we expect it will lose more. A simple solution to get America running again is to cut corporate taxes to 25%. Money will pour in, corporations will start hiring again and start building business. Corporations are the ones that create business and pay taxes in this country. It’s not the government that pays taxes.

So, President Obama will you please help give businesses the environment to thrive in, less regulation, less taxation? This is the only way for the country to get out of this recession.
The key element which is overriding everything right now is the current market psyche....Scared.

Last night every TV and cable show’s lead story was the market crash. If the market closes lower today, everybody will be frantic and worried about their investments over the weekend which means we’ll probably see a continuation early next week to the downside.

The equity markets are getting close to a 61.8% Fibonacci retracement level of 1148 for the S&P 500 index. We expect that this level will be reached. We would expect to see some profit taking at that area and a modest retracement back to the upside. That is not to say we are bullish, it just means we going to see some profit taking coming into this market.

I would like to thank everybody for their positive feedback! We are thankful we can help you muddle through this extremely volatile time in the markets.

So let’s go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.

S&P 500

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 100
Watch Video for update.

SILVER (SPOT)

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 55
Watch Video for update.

GOLD (SPOT)

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 90
Watch Video for update.

CRUDE OIL (SEPTEMBER)

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 100
Watch Video for update.

DOLLAR INDEX

Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 65
Watch Video for update.

REUTERS/JEFFERIES CRB COMMODITY INDEX

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 100

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SP500, Financials and Tech Stocks Playing off of our June 19th Article

A couple weeks back on June 19th Chris Vermeulen posted an analysis on how the stock market was bottoming and that we needed a couple key sectors to participate before we would get a solid bounce. You can quickly review the charts at  "Is This Market Flashing a Buy Signal or Another Market Collapse"

Today’s report plays directly off the June 19th analysis showing you the price movement from then on.

SP500 – SPY ETF Daily Chart
As you can see during early June the market became volatile with a broadening formation. This type of price action is an early warning that a trend reversal is near. It was only two days later when we saw stocks make a new high, which is the first ingredient for a trend reversal to take place. But once a higher high was made sellers quickly jumped back into the market pulling price back down. Keep in mind the higher high which was made was another early sign that a trend reversal was likely to happen.

During this time I was watching the charts like a hawk keeping a close eye on the time and sales window which I have filtered to show me only orders with a market value of $3million dollar or larger. This helps me keep a close eye on what the big money players are doing… Following their coat tails if done correctly will help keep you out of the market at times and also gets you in before the masses jump on the wagon.

The two key sectors I talked about on June 19th were the Financials and Tech. Both these sectors must move up if we are to get a decent bounce/rally in the market.

Financial Sector Daily Chart:
By zooming out on the daily chart we can see in terms of both price and volume that the financial sector was at a major support level. Also it had just fallen sharply for more than a week making it oversold and ready for a bounce.

Only a couple days later financial stocks rocketed 11% higher as expected and the broad market (SP500) posted some decent gains for us also.

Let’s take a look at the financial sector:
The tech sector was in the same boat as the financials above… Tech stocks jumped an average 6%.

Weekend Trading Conclusion:
In short, I feel the market has shown us some decent upward momentum and everything is now at the point where a pause is likely. I expect some type of pause or pullback in the coming week and then the market has a major decision to make. Will it continue and start a new leg higher or roll over and die… That’s the next key question/action about to take shape and I will help guide you through these times each day with my pre-market morning video analysis.

Get Chris Vermeulens Daily Pre-Market Trend Trading Videos, intraday updates and weekly market reports for at a big discount for at The Gold and Oil Guy.com

What the U.S. Dollar and the Euro Mean to the S&P 500

The buzz around the blogosphere and in the media is that Quantitative Easing II is scheduled to end in around 3 weeks. Already pundits are asking about Quantitative Easing III as a matter of when, not if. In reality a QE III Lite version is already in the cards as the Federal Reserve has stated they will be buying Treasuries and Mortgage Backed Securities (MBS) with maturing issues. The Fed also plans on reinvesting the interest earned from the existing portfolio (Roughly $15 billion/monthly).

When it comes to the application of financial principles, doing the opposite of what everyone else does generally leads to an extreme variation in the overall results. While the results are not always better, they are at the very least significantly different from what most lemmings within the group experience. In every aspect of my financial life I try to do the opposite of what the herd is doing. It takes experience and a significant level of discipline, but buying from the herd when they are selling and being willing to sell into a crowd when they are buying is a great way to trade. It sounds easy, but for most people it is not, myself included.

Right now financial markets are uncertain. I would be remiss if I did not point out the recent strength in the U.S. Dollar Index and the potential higher low that it has carved out on the daily and weekly charts. The weekly chart of the U.S. Dollar Index is shown below:

The current pattern on the U.S. Dollar Weekly chart is bullish. We could see the U.S. Dollar Index trade significantly higher from here as it has been under severe selling pressure for an extended period of time. While I believe technical analysis is just one context through which to view financial markets, it is uncanny how often market cycles and headline events line up. Is it merely a coincidence that the U.S. Dollar is potentially bottoming around the same time the Federal Reserve is ending the QE II asset purchase program?

Regardless of what camp economists are in, we presently live in a strange time for financial markets and capitalism in general. One of the more interesting charts to study is the Euro currency, which in contrast to the U.S. Dollar Index appears to have a more bearish pattern. Could it be that the U.S. Dollar is setting up to rally because of the perceived weakness of the Eurozone? The daily chart of the Euro ETF is shown below:

The Dollar may be firming up here based on the Euro’s weakness and it may have absolutely nothing to do with QE II ending. I always refer to price action and never question Mr. Market’s directional bias. If the U.S. Dollar begins to work higher what impact will it have on equities?

A stronger U.S. Dollar would certainly put pressure on risk assets, specifically equity and commodity prices. As it turns out, we are at an interesting juncture in financial markets at this point in time.

The 4 year stock market cycle is nearing an end, a presidential election will take place in less than 18 months, the U.S. government has a massive debt crisis developing, and the European debt crisis continues to mature in what will likely be a microcosm of what we will face here in the United States. The Middle East remains tense at the very least and the recent OPEC announcement to maintain supply levels has helped support oil prices.

Higher oil prices have obviously slowed down the U.S. economy as the consumer is strapped with higher costs on nearly everything, specifically food and energy. In addition, the unemployment numbers are seemingly not improving and housing appears to be rolling over . . . again.

Almost everywhere we look the news is bleak. Mr. Market has shrugged off bad news time and time again since the March 2009 lows. The long term shorts remain frustrated to say the least and those who were actively shorting along the way have likely been stopped out multiple times. Everywhere I look market commentary is bearish and pundits are talking about additional weakness as they point to a rallying Dollar and multiple economic headwinds facing domestic markets.

Traders and investors should be focused on a few specific price levels on the S&P 500. With the Dollar rallying, the S&P 500 index has remained under extreme selling pressure for multiple weeks. The S&P 500 (SPX) is likely going to test its 200 period moving average. From there I am expecting a bounce higher, although the bounce may be nothing more than a Dead Cat Bounce.

As always, time and price will be the final arbiter but if the Dollar continues to trade higher we could see the S&P 500 lose its 200 period moving average and eventually test a major support level which needs to hold up for the bulls. If the March 16, 2011 pivot lows are taken out to the downside, the next leg of the secular bear market may be under way. The daily chart of the SPX illustrated below shows the key price levels and the potential price action that may lead up to a key test of the March 2011 pivot lows:

Very rarely does the first mouse get the cheese, so I would anticipate a bounce off of the 200 period moving average which currently coincides with the March pivot lows. With not only the pivot lows but the 200 period moving average offering support a breakdown lower will be a large tell about the health and future price action of the S&P 500.

Right now I am just going to focus on how the S&P 500 handles the key support zone illustrated above. The forthcoming price action will tell traders everything we need to know about the health of financial markets. I have no idea if we are about to enter a double dip recession nor do I know whether price action will even test the March pivot lows.

What I do know is that price action in coming days around key support areas is going to be critical. I am convinced that Mr. Market will tell us whether the bullish party will continue or come to an end in the next few weeks/months. A breakdown of the March pivot lows in the future will likely initiate the launch sequence for the next secular bear market. I would keep the S&P 500 1,250 price level on the radar going forward. Risk remains high.

If you would like to receive J.W. Jones emails several times per week on SP 500, Volatility Index, Gold, and Silver intermediate direction and option trade alerts… take a look at Options Trading Signals.com today for a 24 hour 66% off coupon, and/or sign up for his occasional free updates.

Debt Issues in the Eurozone Pushing Prices of the U.S. Dollar Index Higher

The U.S. Dollar Index pushed above recent highs on Monday but is experiencing selling pressure today. The selling pressure is being largely dismissed by the S&P 500 but other risk assets such as gold, silver, and oil are benefitting. Members of our service at Options Trading Signals.com understand that I have been focusing on the U.S. Dollar for weeks.

Right now risk assets are trading primarily in the opposite direction of the Dollar. Obviously there are exceptions to the rule, but a strong Dollar has meant lower equity and oil prices specifically. Gold and silver have been holding up well as fearful investors are using gold and silver as safe havens against the potential for a European debt default or a Euro currency crisis.
The U.S. Dollar may have put in a key pivot low on the daily chart back in the early part of May. In addition, the key 200 period moving average is overhead and the U.S. Dollar may be poised to test the key price level in the future. The daily chart of the U.S. Dollar can be seen below:

While the Dollar could roll over and probe lower, the fact that it has put in a higher low and broken out above recent highs is bullish. Similar to the S&P 500, the next few daily closes are going to be critical as it relates to risk assets. I will be monitoring the U.S. Dollar’s price action quite closely as a clue where equities may be headed.

New Video.....Where is This Market Headed Today!

Adam's back with a video update on todays market action.

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U.S. Dollar Trend Continues Lower.....Time to be Careful Though

The dollar continues to get sold at a tremendous rate and the Fed is devaluing the currency as quickly as they can trying and save the world one dollar at a time…

The trend is strongly down but it’s starting to near a point where we should start to keep a closer eye on it for signs of a reversal to the upside. When the dollar makes a move higher and starts a rally it will put downward pressure on stocks and commodities. We must be prepared to move our protective stops ups and possibly take advantage of falling prices in the near future. Until then remain long equities and commodities.


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