Archive

Posts Tagged ‘spy’

4 Financial Resolutions for 2013

January 2nd, 2013

This is the time of year for making New Year’s resolutions. And I have four that are guaranteed to make your portfolio bigger, fatter and wider a year from Read more…

Uncategorized

Why This Earnings Season Could Be A Game Changer (C, KO, IBM, INDEXSP:.INX, SPY)

October 18th, 2012

Mike Burnick: Earnings season always adds an extra dose of volatility to the markets. But as third-quarter profit reports begin coming in fast and furious this week there is a lot more riding on results than usual. Read more…

Earnings, ETF, Markets

European Default Inevitable — Sell Your Gold?

October 7th, 2011

In the prequel to this article (European Default Inevitable — Sell Your Gold?), I discussed the fact that safe-haven-seeking investors could be in for a surprise when they run to buy gold after a Greek default and find huge sellers in Read more…

ETF, Mutual Fund, Uncategorized

The Stocks & Commodity Technical trading Outlook Part I

June 13th, 2011

The coming summer should be exciting for traders! While summer trading generally tends to be slow, this one could be different. A large number of other professional traders I talk with are all feeling the tension building in the market. We all think some big movements are just around the corner and the big question is which way are things going to move?

Depending on your trading style you may be viewing the recent market action as the beginning stages of a bear market (major sell off). A bear market is not necessarily impossible as the U.S. Economy is showing the beginning signs of weakness. The fact that stocks have moved lower for almost 6 weeks straight is a recent reminder that we may not be out of the woods just yet. The recent price action and negative sentiment has been harsh enough to make 99% of traders bearish.

In contrast, some traders may be seeing this market as an oversold dip preparing for a bounce/rally in the bull market which we have been in since 2009. Some traders may see this as a buying opportunity because you are a contrarian. Most contrarians generally want to do the opposite of the masses (herd) who are merely trading purely out of emotional sentiment.

I myself have mixed thoughts on the market at this point in time. I’m not a big picture (long trend forecasting) kind of guy but my trading partner David Banister is great at it. Rather I am a shorter term trader catching extreme sentiment shifts in the market with trades lasting 3-60 days in length. So looking forward 2-5 days I feel as though stocks and commodities are going to bottom and start to head higher for a 2-6% bounce. At that point we need to regroup and analyze how the market got there… Was the buying coming from the herd, institutions, or was it just a short covering rally? Additionally, where are the key resistance levels and did we break through any?

During extreme sentiment shifts in the market we tend to see investments fall out of sync with each other for a few days. I feel the attention will be on stocks and we get a bounce this week. I am expecting commodities to trade relatively flat during the same time period.

OK let’s take a quick look at the charts…

Dollar Index 4 Hour Candles
I feel as though the US Dollar is trying to bottom. It is very possible that we test the May low at which point I would expect another strong bounce and possible multi-month rally. So if the dollar drops to the May lows then we should see higher stocks and commodities, but once the dollar firms up and heads higher it will be game over for risk assets.

Crude Oil Chart – Daily
Oil took a swan dive in early May and has yet to show any signs of moving higher. Actually crude oil is looking more and more bearish as time goes by.

Silver 4 Hour Chart
Silver has formed much of the same pattern that oil has. On a technical basis its pointing to sharply lower prices still. The fact that silver bullion went from an investment to a speculative trading instrument within the past 8 months makes me think it could test the $25 area. The one thing to remember here is that silver is still overall in a bull market. This is a 50/50 guess in my opinion as it nears the apex of this pennant pattern.

Gold 4 Hour Chart
Gold has held up much better than other metals and commodities and I feel that is because it’s still seen at the REAL safe haven. But reviewing the chart Im starting to see bearish price action beginning to take place.

SP500 Futures – 10 Minute Chart Going Back 8 Days
Last week the SP500 continued to show signs of weakness. Any bounce in the market was on light volume and that is because the sellers took a break and let all the small traders buy the market back up. But once the market moved up enough then sellers jumped back in and unloaded their shares.
Last Thursday I sent out an update to members pointing out that lower prices were to be expected. I came to this conclusion because of many data points. Looking at the chart you can see sellers are clearly in control. The SP500 bounces high enough that it reached a key resistance levels going back 5 days. Also the 200 period moving average was at that level. To top that off my sentiment reading for the herd mentality was at a point which sellers like to start dumping their shares again.

Weekly Market Trading Conclusion:
In short, I am getting more bullish for a bounce as the market falls. But once we are into day 3 or 4 of a bounce we must be ready to take profits and/or look for a possible short setup.

Get my free weekly reports here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
The Stocks & Commodity Technical trading Outlook Part I




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

3 Ways to Protect Yourself from a Stock Market Sell-Off

June 7th, 2011

3 Ways to Protect Yourself from a Stock Market Sell-Off

The S&P 500 Index has been up nearly 92% since March 6, 2009. This impressive run has many market participants cheering for the rally to continue indefinitely. But as exciting as it may be to reference that 92% return, it is not very important, except for investors who bought into the market on March 6, 2009. Most investors were invested in the market before that day and many had ridden the entire wave down from the October 2007 highs. To date, these investors have recovered a significant portion of their losses, but are still far from whole.

Optimism regarding the global economic recovery has waned recently, as statistics in a variety of areas have worsened, helping to push stock markets lower. Unemployment has increased to 9.1%. Housing data is consistently bad, as the inventory of unsold homes and pending foreclosures fails to diminish. Home prices in some parts of the country are back to levels last seen in the year 2000, causing many Americans to feel less wealthy overall.

The Federal Reserve has stated it will let “QE2,” the practice of buying U.S. Treasury bonds to add liquidity to the money supply and credit markets, end in June and has no plans for QE3. QE1 and QE2 have been critically important in helping the economy recover. Meanwhile China's economy, one of the key drivers in the global economic recovery and the second largest economy in the world, has been slowing down. We are quite dependant on China, not just as a trading partner, but also as a lender, through their purchases of U.S. Treasury bonds. Simply put, China's money has helped fuel our recovery.

We can hold on to optimism, but the pragmatic view is that we may have already seen the peak in this economic recovery and in the stock market. The S&P 500 topped most recently on April 29, 2010 with a high close of 1,363.61 and has pulled back 3.7% since then to the June 6, 2011 close of 1,286.17. This brings the index back to levels first attained in January and February, conceding much of the year-to-date gains.

Without a catalyst to improve the economy and send markets higher, it is prudent for investors to position for a correction, and a potentially sustained one at that. Market participants are not gun-shy these days, so additional poor economic data could send more money to the sidelines to sit out a sell-off and wait for measurable improvements in the economy.

Does this mean you should sell your stock market holdings? Maybe, but not necessarily… What this does mean is you need to protect your gains and preserve capital in case a more protracted retracement does occur.

Consider these three exchange-traded funds (ETFs):

ETF, Uncategorized

Market Sentiment and Volume Reach Extreme Panic Levels

June 2nd, 2011

It was a crazy session as the stock market slid over 2% on heavy volume. This type of price action means fear has taken control of masses and they are unloading (selling their stocks) in anticipation of much lower prices.
Trading off extreme levels of fear can be very rewarding if done right. That’s because fear is the most powerful reaction we as humans have and it’s somewhat predictable. Fear can make people do crazy and or stupid things and it’s these extreme reaction which investors do in the market that lead to great trading opportunities. Buying into fear and selling into greed is what I focus on.

Gold and Silver Showing Greed and Fear
For example, if we take a look at the 4 hour chart of gold and silver you will see how investments which have a large amount of speculation like Silver move the opposite to what other related investments like gold are doing.

The first chart which is gold, shows how today’s fear had investors moving into this shiny safe haven. Silver on the other hand has been the investment of choice for every Tom, Dick and Harry trying to play the popular headline investment. So on a day like today when prices start to slide in the stock market these speculative holders of silver get scared and dump (sell) their position in stocks and silver. The problem with silver is that the market is still small and its does not take many people hitting the sell button to send it 5% lower which is what took place today. This is one sign which is telling me traders are getting scared of a market selloff.

Evidence #2 Showing Signs Of Fear
These data points below clearly show sellers were in control today. I like to look at the NYSE because it holds all the big brand name stocks which the masses like to buy when they feel lucky. So when I see this many traders selling and so few buying I know the masses are dumping shares and going to a cash.

The NASDAQ had 10 shares being sold to every one share being bought which is half the fear level of what the NYSE and that makes good sense. The NASDAQ has many smaller companies which the masses just don’t know about or own so there was not as much selling taking place on that exchange. So brand name stocks getting dumped all at once is another sign of extreme fear hitting the market.

Evidence #3 Showing Signs Of Fear
This chart below provides the momentum of the market. I think of it as the rubber band effect. If the market selling momentum is strong enough then it pulls this indicator down to a level which it cannot go much further before it gives way and moves back a neutral or positive extreme level. This little hidden gem of an indicator can help time entry and exit points with ease once you understand it. Currently its telling us that a pause or bounce is likely to happen tomorrow.

Evidence #4 Showing Signs of Fear and an Oversold Market Condition
Take a look at the 10 minute SPY (SP500) chart below. Simple visual analysis shows that today’s strong selling which has brought the market down into a support zone should provide a pause or a bounce very soon. The question is how big will the bounce or rally be?

Given all the confirming is looking ready for a bounce and I feel we could be nearing not a bounce but an intermediate bottom and higher prices going forward. But if we break strongly below this support level then all bets are off and much lower prices should occur.

Mid-Week Trading Conclusion:
In short, today’s sharp move lower has put the market in a short term oversold condition. Meaning, a bounce is very likely to take place within the next 1-3 sessions. With the masses selling all their positions in stocks and commodities it generally takes 1-3 days after a day like this for the selling pressure to dissipate and for value buyers to step back into the market providing support.

I think both stocks and commodities will strengthen in the next few days and we will see if the market can get some traction and start a new rally. But until everyone has sold out of the market giving their shares to the big money (smart money) at a sharp discount I feel we have a rough road ahead.

Get these trading reports free each week here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
Market Sentiment and Volume Reach Extreme Panic Levels




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

Market Sentiment and Volume Reach Extreme Panic Levels

June 2nd, 2011

It was a crazy session as the stock market slid over 2% on heavy volume. This type of price action means fear has taken control of masses and they are unloading (selling their stocks) in anticipation of much lower prices.
Trading off extreme levels of fear can be very rewarding if done right. That’s because fear is the most powerful reaction we as humans have and it’s somewhat predictable. Fear can make people do crazy and or stupid things and it’s these extreme reaction which investors do in the market that lead to great trading opportunities. Buying into fear and selling into greed is what I focus on.

Gold and Silver Showing Greed and Fear
For example, if we take a look at the 4 hour chart of gold and silver you will see how investments which have a large amount of speculation like Silver move the opposite to what other related investments like gold are doing.

The first chart which is gold, shows how today’s fear had investors moving into this shiny safe haven. Silver on the other hand has been the investment of choice for every Tom, Dick and Harry trying to play the popular headline investment. So on a day like today when prices start to slide in the stock market these speculative holders of silver get scared and dump (sell) their position in stocks and silver. The problem with silver is that the market is still small and its does not take many people hitting the sell button to send it 5% lower which is what took place today. This is one sign which is telling me traders are getting scared of a market selloff.

Evidence #2 Showing Signs Of Fear
These data points below clearly show sellers were in control today. I like to look at the NYSE because it holds all the big brand name stocks which the masses like to buy when they feel lucky. So when I see this many traders selling and so few buying I know the masses are dumping shares and going to a cash.

The NASDAQ had 10 shares being sold to every one share being bought which is half the fear level of what the NYSE and that makes good sense. The NASDAQ has many smaller companies which the masses just don’t know about or own so there was not as much selling taking place on that exchange. So brand name stocks getting dumped all at once is another sign of extreme fear hitting the market.

Evidence #3 Showing Signs Of Fear
This chart below provides the momentum of the market. I think of it as the rubber band effect. If the market selling momentum is strong enough then it pulls this indicator down to a level which it cannot go much further before it gives way and moves back a neutral or positive extreme level. This little hidden gem of an indicator can help time entry and exit points with ease once you understand it. Currently its telling us that a pause or bounce is likely to happen tomorrow.

Evidence #4 Showing Signs of Fear and an Oversold Market Condition
Take a look at the 10 minute SPY (SP500) chart below. Simple visual analysis shows that today’s strong selling which has brought the market down into a support zone should provide a pause or a bounce very soon. The question is how big will the bounce or rally be?

Given all the confirming is looking ready for a bounce and I feel we could be nearing not a bounce but an intermediate bottom and higher prices going forward. But if we break strongly below this support level then all bets are off and much lower prices should occur.

Mid-Week Trading Conclusion:
In short, today’s sharp move lower has put the market in a short term oversold condition. Meaning, a bounce is very likely to take place within the next 1-3 sessions. With the masses selling all their positions in stocks and commodities it generally takes 1-3 days after a day like this for the selling pressure to dissipate and for value buyers to step back into the market providing support.

I think both stocks and commodities will strengthen in the next few days and we will see if the market can get some traction and start a new rally. But until everyone has sold out of the market giving their shares to the big money (smart money) at a sharp discount I feel we have a rough road ahead.

Get these trading reports free each week here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
Market Sentiment and Volume Reach Extreme Panic Levels




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF

Stepping Inside the Recent Intraday Bullish Volume Flow into Stocks

May 26th, 2011

If you’re an intraday trader of stock market index futures or ETFs, you probably noticed visible surges of buy/bullish volume into these funds today and Wednesday.

Let’s zoom-in on this bullish volume action and put it in context of the critical higher timeframe support level at 1,300 in the S&P 500.

First, the SPY ETF Intraday:

The chart above is the 4-min (to show more bars than the typical 5-min) view of the intraday SPY (S&P 500 ETF) from Wednesday the 25th to Thursday May 26th.

I’ve highlighted periods of unusual surges in bullish/buy volume which has corresponded in all cases with sharp impulse rallies in the fund price.

This picture is similar in the other index ETFs – DIA (Dow Jones), QQQ (NASDAQ) and IWM (Russell 2000) – but is more evident in the SPY chart.

What the bullish volume action suggests is that large-scale funds are either scaling into positions or are removing hedges, or bears are taking profits/scaling out as the market pushes into the critical support level near 1,300 (in the S&P 500).

As long as this bullish activity continues, it suggests stock prices will rally higher off this inflection pivot.

Why might 1,300 be a very important “Make or Break” level for the market?

Let’s take a look at the basic Weekly Chart of the S&P 500:

The rising 20 week EMA rests currently at 1,309.65 – two insignificant points under the recent weekly low at 1,311.

When you combine the bullish surge in volume this week with the major inflection point of the 20w EMA – combined with the psychological “Round Number” at 1,300 – we have odds shifting back to the bullish camp in the evolving market structure.

Of course, a firm breakdown under 1,300 will send many of these buyers scrambling for the “sell/exit” button, but that hasn’t happened yet.

Instead, we’re seeing buyers put risk back on the table, as evidenced by the buy-volume inflows intraday as price tests this dual-confluence, critical inflection point in the index.

Based on these two simple facts, the market is back in the domain of the bulls unless proven otherwise with a breakdown under 1,300.

In other words, it’s once again the bulls’ game to lose.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

Read more here:
Stepping Inside the Recent Intraday Bullish Volume Flow into Stocks

ETF, Uncategorized

Stepping Inside the Recent Intraday Bullish Volume Flow into Stocks

May 26th, 2011

If you’re an intraday trader of stock market index futures or ETFs, you probably noticed visible surges of buy/bullish volume into these funds today and Wednesday.

Let’s zoom-in on this bullish volume action and put it in context of the critical higher timeframe support level at 1,300 in the S&P 500.

First, the SPY ETF Intraday:

The chart above is the 4-min (to show more bars than the typical 5-min) view of the intraday SPY (S&P 500 ETF) from Wednesday the 25th to Thursday May 26th.

I’ve highlighted periods of unusual surges in bullish/buy volume which has corresponded in all cases with sharp impulse rallies in the fund price.

This picture is similar in the other index ETFs – DIA (Dow Jones), QQQ (NASDAQ) and IWM (Russell 2000) – but is more evident in the SPY chart.

What the bullish volume action suggests is that large-scale funds are either scaling into positions or are removing hedges, or bears are taking profits/scaling out as the market pushes into the critical support level near 1,300 (in the S&P 500).

As long as this bullish activity continues, it suggests stock prices will rally higher off this inflection pivot.

Why might 1,300 be a very important “Make or Break” level for the market?

Let’s take a look at the basic Weekly Chart of the S&P 500:

The rising 20 week EMA rests currently at 1,309.65 – two insignificant points under the recent weekly low at 1,311.

When you combine the bullish surge in volume this week with the major inflection point of the 20w EMA – combined with the psychological “Round Number” at 1,300 – we have odds shifting back to the bullish camp in the evolving market structure.

Of course, a firm breakdown under 1,300 will send many of these buyers scrambling for the “sell/exit” button, but that hasn’t happened yet.

Instead, we’re seeing buyers put risk back on the table, as evidenced by the buy-volume inflows intraday as price tests this dual-confluence, critical inflection point in the index.

Based on these two simple facts, the market is back in the domain of the bulls unless proven otherwise with a breakdown under 1,300.

In other words, it’s once again the bulls’ game to lose.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

Read more here:
Stepping Inside the Recent Intraday Bullish Volume Flow into Stocks

ETF, Uncategorized

Market Sentiment Reaching Extreme Levels for Gold & SP500

May 12th, 2011

This week we are seeing fear across the board from traders and investors as they dump their long positions is stocks and commodities. Just in the past two trading sessions alone we have seen extreme overbought conditions and extreme oversold conditions which generally mean another big move is brewing…

Fear (panic selling) has very distinct characteristics when looking at the intraday charts and we are seeing those price and volume patterns forming now. When waves of buying and panic selling start to take place back to back, I start to prepare for a trading setup which should form within a couple of trading sessions.

Keep in mind that fear is a much more powerful force in the market and once extreme levels are reached, we typically tend to see continued selling for 1-3 more days afterwards. This is the reason I tend to scale into oversold market conditions as I can potentially enter at lower prices within the next couple of sessions to build a position with a reduced cost basis.

SPY 10 Minute Chart of My Market Sentiment Readings
Panic selling, coupled with oversold NYSE market conditions and fearful options traders makes for an extreme reading in stock prices.

GLD 10 Minute Chart of My Market Sentiment Readings
Sentiment readings many times carry over into the precious metals sector and can be used as a gauge also for tightening stops, adding to long positions etc..

Mid-Week Market Trading Update:
In short, I feel the market is at a major tipping point along with the US Dollar. It is just a matter of time before we get another low risk setup and take a position for the next move in either direction.

Get My Weekly Reports Free Here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Read more here:
Market Sentiment Reaching Extreme Levels for Gold & SP500




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, OPTIONS

How to Use the Weiss Sovereign Debt Ratings to Protect Your Wealth and Profit

May 11th, 2011

A country’s overall financial health impacts a lot more than its government bonds. It can also help determine the flow of money into that nation’s stocks and currency. So you can use the Weiss Sovereign Debt Ratings to help guide your investment decisions. Just register — ratings are free!

China is a prime example. Some readers have questioned why we give it an A rating despite its politics. But the fact is, politics have not interfered with China’s success for over two decades, and until it does, we see no reason to downgrade it.

Also look at the difference between Sweden (B+) and the U.S. (C). Sweden grew at a 7.3 percent year-over-year rate in the fourth quarter, the fastest since at least 1970. The U.S., on the other hand, has been growing much more slowly — 2.3 percent in the most recent quarter. Meanwhile, Sweden’s central bank hasn’t taken the rise in inflation lying down the way the U.S. Fed has. Instead, it has raised interest rates six times since last July.

Result? The Swedish krona jumped 36 percent in value over the past 12 months while the U.S. Dollar Index tanked 18 percent. That’s a huge divergence — and you didn’t even need a highly leveraged currency trading account to profit from it.

You could have simply bought the CurrencyShares Swedish Krona Trust (FXS) and the PowerShares DB US Dollar Index Bearish Fund (UDN). Total combined profit, including slight variance on the ETFs versus the underlying currencies? 56 percent in a year!

What if you wanted to buy stocks instead of currencies, using the Weiss sovereign ratings as a guide? That can work too! Malaysia is rated A-, for instance. If you had bought the iShares MSCI Malaysia Index Fund (EWM) roughly a year ago, you’d have a profit of 27 percent. That beats the pants off the 12.5 percent return of the SPDR S&P 500 Trust (SPY).

So does the 27 percent return of the iShares MSCI Switzerland Index Fund (EWL) and the 53 percent return of the iShares MSCI Thailand Investment Market Index Fund (THD). (Switzerland is rated A-, while Thailand merits an A.)

Naturally, the Weiss Sovereign Debt Ratings are not a sure-fire guarantee of success. Other factors can affect the value of global currencies, bonds, and stocks. But as these examples demonstrate, they are a valuable addition to your toolbox — and mine!

You can also check out my Safe Money Report to get more information. 

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike

Commodities, ETF, Mutual Fund, OPTIONS, Uncategorized

Where will Silver, Oil and the SP500 Bottom?

May 9th, 2011

The price action in precious metals and oil this past week has been breathtaking. The last time we have seen this much volatility in commodity prices was amidst the financial crisis in 2008 and the early part of 2009. Does this mean we are at the brink and risk assets are going to decline precipitously? Obviously that question cannot be answered with any certainty, but the underlying price action in the S&P 500 has been relatively strong compared to gold, silver, and oil.

Talking heads everywhere are predicting the commodity bubble has burst and pointing fingers at excessive speculation in silver and oil. Margin requirement changes in silver futures have been fingered as the primary catalyst for the nasty sell off. Silver had gotten way ahead of itself in terms of price and parabolic moves higher are usually followed by parabolic moves lower. For silver buyers on Friday, April 29 a painful lesson has been learned as their investment has declined more than 30% in 5 days.

It doesn’t take a genius to realize that we are going to bounce higher at some point. With a sell off of this magnitude it would not be shocking to see at least a 50% retracement of the entire move in coming weeks. It is also possible that this is a buying opportunity for precious metals and oil. It is too early to be certain, but a bounce next week is likely as silver went from being severely overbought to severely oversold on the daily chart in one week. The chart below illustrates the 50% retracement and the RSI reading for silver futures:

In the month of April OptionsTradingSignals members were able to capitalize on rising silver prices to close a trade that produced an 18% return in less than 5 days using a double calendar spread in order to produce outsized profits based on maximum risk. Members regularly receive trade alerts focusing on gold and silver using ETF’s GLD & SLV which have extremely liquid options.

While silver prices have been absolutely crushed, gold prices have held up a bit better. In fact, in this selloff gold has been less volatile in terms of intraday percentage price movement and has not suffered from near the losses that we have witnessed in silver. The gold futures chart below illustrates key price levels:

Members of the OTS service received a trade alert on April 6th for a calendar spread that was converted to a vertical spread. When the vertical spread was closed on April 26th the members realized a gain close to 56% based on the maximum risk of the trade.

Recently we have received some poor economic data which has put a drag on equities the past few weeks. This morning we are seeing a strong bounce in the S&P 500 futures and if we have another light volume Friday prices tend to drift higher throughout the trading day. The S&P 500 futures spiked to around 1,370 on the news of Osama Bin Laden’s death and then sold off from that point. The chart below illustrates the S&P 500 futures rally and subsequent sell off highlighting current key price levels:

Members of OptionsTradingSignals received a trade alert on April 12th to put on a call vertical spread to capitalize on rising prices. On April 21st partial profits were taken and eventually stop orders closed out the position on May 4th locking in a total gain of around 32% for the trade based on maximum risk.

Oil prices have sold off sharply, albeit not as sharp as the downside move in silver recently from a percentage standpoint, but a significant amount of the risk premium has come out of oil prices. I continue to believe that oil prices over the long term have only one direction to go based on tightening supply / demand going forward and lower production levels in the future. Similar to silver, a .500 retracement of the entire recent move is rather likely in coming weeks. The daily chart below illustrates key price levels in oil futures:

I continue to believe that oil prices are going to work higher over the longer term for a variety of reasons, but a drop in gasoline prices would not hurt U.S. Consumers and the domestic economy. Higher oil and gasoline prices weigh on the U.S. Economy heavily so this sudden decline in price is beneficial to most Americans which could juice consumption if prices stay lower for a longer period of time.

Overall, price action in the commodity space has been extremely volatile the past week with silver and oil really getting hammered lower. Gold and the S&P 500 held up a bit better and it would not be shocking to see the S&P 500 put on a rally from here if oil prices stabilize. However, if the U.S. Dollar continues its recent rally it will force the commodity space as well as equities lower. The daily chart of the U.S. Dollar Index futures is shown below:

In closing, I am expecting a bounce in coming days and a .382 or .500 retracement of the entire move in gold, silver, and oil would make sense so I would not be too aggressive shorting. However, I would not necessarily be an aggressive buyer either. It is going to take time for market participants to digest the recent moves. In weeks ahead it will be more apparent what price action is likely to do and I would be shocked if we did not see a few low risk, high probability trades setting up.

Speaking of low risk, high probability trades, the month of April was the best performance for the OptionsTradingSignals service so far year to date. Seven total trades were opened and six trades have been closed with sizable profits. Recent returns included an 18% return in SLV, a 56% return on a GLD trade, 32% return on an SPY call vertical spread, a 12% return on a RUT Calendar spread, and a 37% return on an AMZN calendar spread. The total cumulative return in April was 155%.

Assuming a trader had a $10,000 account and risked a maximum of $1,000 per trade, the gross gains would have been well over $1,400 in April alone. The overall service is up over 15% year to date handily beating the S&P 500 return while assuming less risk. Take advantage of the special offer going on now where new members get 3 months for the price of one!

Get JW Jones’ Weekly Reports Free Here: http://www.optionstradingsignals.com/profitable-options-solutions.php

By: JW Jones
Co-Author: Chris Vermeulen

Read more here:
Where will Silver, Oil and the SP500 Bottom?




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF, OPTIONS

Where will Silver, Oil and the SP500 Bottom?

May 9th, 2011

The price action in precious metals and oil this past week has been breathtaking. The last time we have seen this much volatility in commodity prices was amidst the financial crisis in 2008 and the early part of 2009. Does this mean we are at the brink and risk assets are going to decline precipitously? Obviously that question cannot be answered with any certainty, but the underlying price action in the S&P 500 has been relatively strong compared to gold, silver, and oil.

Talking heads everywhere are predicting the commodity bubble has burst and pointing fingers at excessive speculation in silver and oil. Margin requirement changes in silver futures have been fingered as the primary catalyst for the nasty sell off. Silver had gotten way ahead of itself in terms of price and parabolic moves higher are usually followed by parabolic moves lower. For silver buyers on Friday, April 29 a painful lesson has been learned as their investment has declined more than 30% in 5 days.

It doesn’t take a genius to realize that we are going to bounce higher at some point. With a sell off of this magnitude it would not be shocking to see at least a 50% retracement of the entire move in coming weeks. It is also possible that this is a buying opportunity for precious metals and oil. It is too early to be certain, but a bounce next week is likely as silver went from being severely overbought to severely oversold on the daily chart in one week. The chart below illustrates the 50% retracement and the RSI reading for silver futures:

In the month of April OptionsTradingSignals members were able to capitalize on rising silver prices to close a trade that produced an 18% return in less than 5 days using a double calendar spread in order to produce outsized profits based on maximum risk. Members regularly receive trade alerts focusing on gold and silver using ETF’s GLD & SLV which have extremely liquid options.

While silver prices have been absolutely crushed, gold prices have held up a bit better. In fact, in this selloff gold has been less volatile in terms of intraday percentage price movement and has not suffered from near the losses that we have witnessed in silver. The gold futures chart below illustrates key price levels:

Members of the OTS service received a trade alert on April 6th for a calendar spread that was converted to a vertical spread. When the vertical spread was closed on April 26th the members realized a gain close to 56% based on the maximum risk of the trade.

Recently we have received some poor economic data which has put a drag on equities the past few weeks. This morning we are seeing a strong bounce in the S&P 500 futures and if we have another light volume Friday prices tend to drift higher throughout the trading day. The S&P 500 futures spiked to around 1,370 on the news of Osama Bin Laden’s death and then sold off from that point. The chart below illustrates the S&P 500 futures rally and subsequent sell off highlighting current key price levels:

Members of OptionsTradingSignals received a trade alert on April 12th to put on a call vertical spread to capitalize on rising prices. On April 21st partial profits were taken and eventually stop orders closed out the position on May 4th locking in a total gain of around 32% for the trade based on maximum risk.

Oil prices have sold off sharply, albeit not as sharp as the downside move in silver recently from a percentage standpoint, but a significant amount of the risk premium has come out of oil prices. I continue to believe that oil prices over the long term have only one direction to go based on tightening supply / demand going forward and lower production levels in the future. Similar to silver, a .500 retracement of the entire recent move is rather likely in coming weeks. The daily chart below illustrates key price levels in oil futures:

I continue to believe that oil prices are going to work higher over the longer term for a variety of reasons, but a drop in gasoline prices would not hurt U.S. Consumers and the domestic economy. Higher oil and gasoline prices weigh on the U.S. Economy heavily so this sudden decline in price is beneficial to most Americans which could juice consumption if prices stay lower for a longer period of time.

Overall, price action in the commodity space has been extremely volatile the past week with silver and oil really getting hammered lower. Gold and the S&P 500 held up a bit better and it would not be shocking to see the S&P 500 put on a rally from here if oil prices stabilize. However, if the U.S. Dollar continues its recent rally it will force the commodity space as well as equities lower. The daily chart of the U.S. Dollar Index futures is shown below:

In closing, I am expecting a bounce in coming days and a .382 or .500 retracement of the entire move in gold, silver, and oil would make sense so I would not be too aggressive shorting. However, I would not necessarily be an aggressive buyer either. It is going to take time for market participants to digest the recent moves. In weeks ahead it will be more apparent what price action is likely to do and I would be shocked if we did not see a few low risk, high probability trades setting up.

Speaking of low risk, high probability trades, the month of April was the best performance for the OptionsTradingSignals service so far year to date. Seven total trades were opened and six trades have been closed with sizable profits. Recent returns included an 18% return in SLV, a 56% return on a GLD trade, 32% return on an SPY call vertical spread, a 12% return on a RUT Calendar spread, and a 37% return on an AMZN calendar spread. The total cumulative return in April was 155%.

Assuming a trader had a $10,000 account and risked a maximum of $1,000 per trade, the gross gains would have been well over $1,400 in April alone. The overall service is up over 15% year to date handily beating the S&P 500 return while assuming less risk. Take advantage of the special offer going on now where new members get 3 months for the price of one!

Get JW Jones’ Weekly Reports Free Here: http://www.optionstradingsignals.com/profitable-options-solutions.php

By: JW Jones
Co-Author: Chris Vermeulen

Read more here:
Where will Silver, Oil and the SP500 Bottom?




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF, OPTIONS

Take Advantage Of Dips In Precious Metals and Miners

May 6th, 2011

Federal Reserve Chairman Ben Bernanke will continue devaluing the dollar (UUP) by keeping interest rates at all-time lows and continue quantitative easing as we have not seen a major improvement in unemployment and housing. We are also entering an election year in which central banks do not want to rile the equity markets. Just because the S&P (SPY) has been soaring does not mean the economy is improving. Easy money policies will continue for an extended period of time to fight against current economic weakness. This is an environment in which gold (UGL) and silver (AGQ) will benefit. We are currently seeing a massive inflationary environment globally that has caused political unrest in North Africa and the Middle East, and rising costs in key emerging economies such as China and South Korea.

We must be prepared for these current short-term corrections in precious metals because it will provide additional buying opportunities in gold (GLD), silver (SLV) bullion and mining stocks (GDX). The market will try to make you be complacent when you should be fearful, and make you scared when you should be enthusiastic.

I have mentioned that silver was 70% above the 200-day moving average, surpassing overhead resistance, reaching record levels on the oscillators and surpassing my late January technical targets. Silver has moved much faster and higher than I originally projected. I initially thought the move would last through May, but the speculative buying and short covering has caused silver to reach my target a few weeks ahead of schedule. Whenever these conditions occur, caution is merited as the odds of a shakeout have significantly increased. A healthy correction is necessary to maintain the long-term steady uptrend and provide secondary buypoints.

Major institutions raises cash and began selling into a rising market as the speculative fever reached a climax the last two weeks of April. When the consensus gets greedy, I get fearful. Since late January when my indicators turned bullish on precious metals and mining stocks, we have seen record investment demand in silver and gold bullion combined with short covering. Tremendous record volume in the silver market indicated a short-term buying hysteria. These frenzies in the precious metals markets are often followed by quick and violent corrections which we are currently witnessing to shakeout the Johnny Come Lately traders who get overaggressive in these rising markets. Investors were building up very aggressive and speculative positions. The conditions in silver have been setting up for a painful pullback.

A healthy correction is currently necessary to sustain the long-term steady uptrend in hard assets. Most investors do not realize that precious metals are in a long-term secular uptrend but there will be volatility with ebbs and flows. Silver is an extremely turbulent market which exceeds technical targets and momentum oscillators regularly. Silver blows very hot and very cold exceeding to the upside and the downside.

This is a chart I sent my readers April 22, 2011.

I needed to be careful about this move in silver in late April surpassing my late January target of $40 and the US dollar bearish sentiment which was reaching an extreme in late April. Silver exceeded upper trend channels and saw record volume, showing signs of a shakeout. I was very concerned that silver was overheating as the herd tried to force its way into this trade.

Whenever I have seen these parabolic moves, they have not ended well as the profit-taking begins and the investors who have overleveraged themselves get margin calls. I am not surprised at all about this painful shakeout.

Precious metals investors may be repositioning from bullion into mining stocks. This consolidation may be the catalyst to help the miners catch up with the performance of gold and silver bullion. Mining stocks have not yet seen the speculative levels that bullion has seen. The general public is now realizing that inflation and precious metal prices will be high for some time to come as Bernanke has no plans of exiting, but are reluctant to enter bullion at these pricey levels. Miners, especially junior explorers (GDXJ) are providing a discount to bullion. Inflation will continue for years to come yet this correction in the junior miners (GDXJ) indicates the public is still unaware of the basic fundamental and growth potential of this sector over then next decade especially when gold and silver find support.

This has been no surprise to my readers. I have said that there is no exit plan from the Fed. There is a concerted effort to devalue the US currency to pay back soaring debts. The US is broke and it can’t afford raising interest rates. Savers are getting swindled by leaders in Washington, which has used public taxpayer money to bail out corporations and banks. Americans are getting squeezed by soaring prices of basic goods, while their hard-earned savings are depreciating.

I have urged caution around initiating positions in gold or silver bullion as the trade was very crowded and at the end stages of its short-term move from late January through May. Remember, gold has a historic cycle to provide a sale every six months.

As gold and silver sell off, don’t forget the long-term uptrend will stay intact. Will you be ready for the next turning point in precious metals as the herd sells out during the panic?

I believe junior mining stocks (GDXJ) will catch up. Some people are concerned that some of the mining stocks that haven’t moved yet should be sold while they’re reaching long-term support and basing. I don’t believe so as they all provide leverage to falling currencies and rising demand from emerging economies. As these mining stocks sell off, I begin to look at the long-term fundamentals which have not changed. Perceptions from the herd change but the fundamentals in gold miners (GDX) do not. One must take advantage of sell-offs in gold and silver miners; they are opportunities to get on board the secular bull market in precious metals. I believe it is the best way to protect one’s assets during these times of growing record deficits and currency devaluations.

Read more here:
Take Advantage Of Dips In Precious Metals and Miners

Commodities

Is the Gold/Silver Ratio at a Tipping Point?

May 5th, 2011

Ron RowlandGold and silver are flying higher this year — and so are the exchange traded funds (ETFs) that track them. Can the trends continue? More important, how can you best profit from them? Today we’ll explore those questions.

As you will see, the various precious metals ETFs don’t necessarily move together. Anyone who forgets this fact is taking unnecessary risk and possibly missing some potential gains.

First let’s see where we’ve been …

The most popular ETF proxies for gold and silver bullion are SPDR Gold (GLD) and iShares Silver (SLV). Over the four years ending 12/31/2010, GLD jumped 113 percent and SLV surged 118 percent.

GLD and SLV made a huge run in the last four years!

Both ETFs more than doubled during this period. And they were as volatile as ever, falling hard in the late 2008 financial crisis. Nonetheless, the long-term trends were definitely bullish for both. The gains were of similar magnitude, though SLV did a bit better.

Gold and silver have also done well this year. But this time I see something different. In the first four months of 2011, GLD was up a healthy 9.8 percent. SLV? Its gain in the same period was a staggering 55.3 percent!

In other words, this year the silver ETF is outperforming the gold ETF by more than five to one! Does that make sense?

Certainly it’s no surprise to see precious metals in a bull market right now …

U.S. government debt is spiraling out of control, the Federal Reserve is printing dollars like crazy, and demand from the emerging markets is causing a run on all kinds of natural resources. Inflation talk is everywhere! Yet it’s unusual to see silver performing so much better than gold.

To track the historical relationship between the two metals, let’s take a look at …

The Gold/Silver Ratio

When SLV was launched in April 2006, the gold/silver ratio was about 47:1. You needed 47 ounces of silver to buy one ounce of gold. It stayed in fairly close range between 45:1 and 57:1 for the next two years.

Silver is getting more expensive compared to gold!

In October 2008, when the banking system was on the edge of collapse, the gold/silver ratio shot up to 83:1. Why? Because investors were willing to pay a premium to own gold rather than silver. Gold was perceived as the more valuable commodity as it was less vulnerable to falling industrial demand and is often considered a global currency.

Over the next two years the gold/silver ratio never went below 58:1, but then it began dropping steadily as silver rallied. Now it’s down near 33:1, which is close to being a historical extreme. The ratio has dropped from 83:1 all the way to 33:1 in just two-and-a-half years. That’s a significant change over a relatively short time.

All prices — stocks, bonds, commodities, whatever — are ultimately determined by the balance of supply and demand. Financial markets exist because they are a good way to find that balance. A change on either side of the equation will affect the price.

Silver has many industrial uses in addition to its long-standing monetary role as the “poor man’s gold.” Worldwide supplies haven’t grown much and demand for silver is healthy.

Still, the current rally looks more than a little overdone. The availability of SLV and similar ETFs makes it easy for speculators to pile into this relatively small market. The result is a price spike.

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Last weekend Barron’s reported that per-share SLV trading volume actually overtook the venerable SPDR S&P 500 ETF (SPY). Whatever you think about stocks or silver, this is simply ridiculous!

Silver is a niche market. The S&P 500 is, by definition, THE market. No matter how you measure it, trading volume for these two instruments shouldn’t even be close.

This tells me that the SLV rally is getting absurdly speculative. Can it continue? Of course. I’ve found over the years that momentum can carry an ETF far higher (or lower) than most people think possible. Picking a top in a market like silver is tough.

I also can’t help thinking back to 1979-80. Billionaire brothers Nelson Bunker Hunt and William Herbert Hunt tried to corner the silver market, driving prices from $11 an ounce up to nearly $50. In January 1980, the exchange tightened margin rules.

Silver crashed hard in 1980, thanks to the Hunt brothers.

Silver crashed hard in 1980, thanks to the Hunt brothers.

The Hunt brothers were unable to make their margin calls. Panic ensued and silver prices plunged. Investors who showed up late for the party were wiped out.

Even though the exchange is again tightening margin rules for silver, I’m not predicting a repeat of 1980. I don’t think anyone has today’s silver market cornered. I do believe, however, that at this point the risk in SLV, or anything else silver-related, is very high — unacceptably high.

Would it make sense to go short in silver? There’s an ETF for that: ProShares UltraShort Silver (ZSL). Be very careful: ZSL is a pretty risky trade, too. The 2x daily leverage makes an already-volatile market even crazier.

When silver crashes this time (and it will, sooner or later), look for the media to blame ETFs like SLV and ZSL. They’ll be wrong, of course; the 1980 fiasco proved that silver can soar and crash even without ETFs in the mix.

Bottom line: If you want to own a precious metals ETF right now, I think those that follow gold are likely to be a much better value than silver ETFs. Gold is by no means a low-risk market. But compared to silver, it’s an island of stability.

Best wishes,

Ron

Read more here:
Is the Gold/Silver Ratio at a Tipping Point?

Commodities, ETF, Mutual Fund, Uncategorized

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