The Gold And Oil Guy

How to Spot & Time Stock Market Tops

Chris Vermeulen — Mon, 13 May 2013 23:53:00 GMT

Since the middle of April everyone and including their grandmother seems to have been building a short position in the equities market and we know picking tops or bottoms fighting the major underlying trend is risky business but most individuals cannot resist.

The rush one gets trying to pick a major top or bottom is flat out exciting and that is what makes it so darn addicting and irresistible. If you have ever nailed a market top or bottom then you know just how much money can be made. That one big win naturally draws you back to keep doing it much like how a casino works. The chemicals released in the brain during these extremely exciting times are strong enough that even the most focused traders fall victim to breaking rules and trying these type of bets/trades.

So if are going to try to pick a top you better be sure the charts and odds are leaning in your favor as much as possible before starting to build a position.

Below are a few charts with my analysis and thoughts overlaid showing you some of the things I look at when thinking about a counter trend trade like picking a top within a bull market.

Utility Stocks vs SP500 Index Daily Performance Chart:

The SPY and XLU performance chart below clearly shows how the majority of traders move out of the slow moving defensive stocks (utilities – XLU) and starts to put their money into more risky stocks. This helps boost the broad market. I see the same thing in bonds and gold this month which is a sign that a market top is nearing.

That being said when a market tops it is generally a process which takes time. Most traders think tops area one day event but most of the times it takes weeks to unfold as the upward momentum slows and the big smart money players slowly hand off their long positions to the greedy emotion drove traders.

Look at the chart below and notice the first red box during September and October. As you can see it took nearly 6 weeks for that top to form before actually falling off. That same thing could easily happen again this time, though I do feel it will be more violent this time around.

SPY ETF Trading Chart Shows Instability and Resistance:

Using simple trend line analysis we see the equities market is trading at resistance and sideways or lower prices are more likely in the next week or two.

Stocks Trading Above 150 Day Moving Average Chart:

This chart because it’s based on a very long term moving average (150sma) is a slow mover and does not work well for timing traded. But with that said it does clearly warn you when stocks are getting a little overpriced and sellers could start at any time.

General rule is not to invest money on the long side when this chart is above the 75% level. Rather wait for a pullback below it.

Stocks Trading Above 20 Day Moving Average Chart:

This chart is based on the 20 day moving average which moves quickly. Because it reacts quicker to recent price action it can be a great help in timing an entry point for a market top or bottom. It does not pin point the day/top it does give you a one or two week window of when price should start to correct.

How to Spot and Time Stock Market Tops Conclusion:

As we all know or will soon find out, trading is one of the toughest businesses or and one of the most expensive hobbies that one will try to master. Hence the 95-99% failure rate of individuals who try to understand how the market functions, position management, how to control their own emotions and to create/follow a winning strategy.

With over 8000 public traded stocks, exchange traded funds, options, bonds, commodities, futures, forex, currencies etc… to pick from its easy to get overwhelmed and just start doing more or less random trades without a proven, documented rule based strategy. This type of trading results in frustration, loss of money and the eventual closure of a trading account. During this process most individuals will also lose friends, family and in many cased self-confidence.

So the next time you think about betting against the trend to pick a top or a bottom you better make darn sure you have waited well beyond the first day you feel like the market is topping out. Stocks trading over the 150 and 20 day moving averages should be in the upper reversal zones and money should be flowing out of bonds and other safe haven/defensive stocks to fuel the last rally/surge higher in the broad market.

Also I would like to note that I do follow the index futures and volume very closely on both the intraday and daily charts. This is where the big money does a lot of trading. Knowing when futures contracts are being sold or bought with heavy volume is very important data in helping time tops and bottoms more accurately. And the more experience you have in trading also plays a large part in your success in trading tops and bottoms.

Download my FREE eBook on Controlling Your Trades, Money & Emotions: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Top 3 Trading Indicators for Profitable & Simple Trading

Chris Vermeulen — Thu, 09 May 2013 17:23:00 GMT

Many investors and traders make the same mistakes assuming that one needs a complex trading system to consistently profit from the stock market. On the contrary, some of the top performing strategies are the ones with the least amount of moving parts and are simple. Because their simplicity they can be easily and consistently followed.

The methodologies we use for timing the market, picking stocks and option trades are very simple because we focus mainly on price, volume and momentum. These three indicators are the key to success. When these are used together you are able time your entries and exits during key turning points, clearly define risk and reward levels while maintaining a clear unbiased state of mind which allows one to trade almost emotionless.

As my Trading System Mastery coach (Brian McAboy) taught me, if you do not have a detailed trading plan which a five year old could trade, then you do not have a solid strategy and will have unnecessary losses and emotional stress.

So here are a couple tips to keep things simple and emotionless:

Our recent trade in Infoblox Inc. (BLOX):
This stock was flashing several signals (price, volume and momentum) that a bounce or rally was likely going to happen within a few weeks. This is a good example of a swing trade based purely on our main indicators.

Our Broad Market Outlook:

Current stock market prices are starting to warn us that a market correction is near. You can read more about this in detail in our last report “Stocks Preparing for a Pullback, Buy Bas News, Sell the Good”.

We all know the market works with the saying:
“If the market doesn’t shake you out, it will wait you out”.

How does this work? Simple really, during down trends and just before a market bottom we tend to see capitulation spikes in selling. These scare the last of the long positions out of the market and suck in the greedy shorts after the move has already been made.

During an uptrend which is what we are in now the market makes spike highs designed to scare out the shorts and get greedy long traders to buy more. Once again after the move has already been made and likely near the market top.

If you are the type of trader who always tries to pick tops and bottoms against the current trend then you may like to know this little tip… The largest percent moves typically happen during the last 75% of the trend. What does this mean? It means when you take your position against the trend trying to pick the dead top or bottom you are most likely going to get be caught on the wrong side of the market in a big way.

Most traders I know based on recent emails have been short the market for 1-3 weeks and many keep emailing me that they are adding more shorts each day because they feel the market is going to top. So me being a contrarian by nature in terms of what the masses are doing, if everyone is still holding on to their shorts we likely have not seen the top just yet. Another 1-2% jump from here should be enough to shake them out though…

If you like this article join my free newsletter to receive more timely trading insight at: www.TheGoldAndOilGuy.com

Chris Vermeulen

How to Trade Gold, Silver & Precious Metal Miners

Chris Vermeulen — Mon, 06 May 2013 17:14:00 GMT

How to trade Gold and other precious metals related investments is not that complex. But you must be willing to wait for price to provide low risk entry points before getting involved. Precious metals are like any other investment in respect to trading and investing in them. There are times when you should be long, times to be in cash and times to be short (benefit from falling prices).

Since 2011 when gold and silver started another major bull market correction the best position has been to move to cash or sell/write options against your positions to protect your investment until the next trend resumes.

If you take a look at the chart below of gold you will notice that in 2008 we had a similar breakdown in price which purged the market of investors who where long gold. And if you compare the last two breakdowns they look very much the same. If price holds true then much higher prices are likely to unfold at the end of 2013.

The key here is for the price to move and hold above the major resistance line. If it can do that then we are looking at a possible breakout to $2600 – $3500 gold. With that being said gold and silver may just be starting a bear market. Depending what the price of gold does when my resistance level is touched, my outlook may change from bullish to bearish.

Also with last weeks economic numbers getting better in the USA I do have concerns that gold may be starting a bear market but we will not know for several more months yet.

How to Trade Gold Daily Technical Chart:

Major technical damage has been done to the chart of gold. This can be seen as bullish or bearish price action but until price and volume pattern unfolds which puts the odds on the bullish or bearish side I remain neutral.

How to Trade Silver Daily Technical Chart:

Silver is in the same position as gold. The question is if this is a shakeout or breakdown…

How to Trade Gold Mining Stocks Monthly Chart:

Gold mining stocks broke down a couple months ago and continue to sell off. If precious metals continue to move lower then mining stocks will continue their journey down. The chart below made in February and it has in most part played out as expected. While I do not try to pick bottoms (catch falling knives) I do like to watch for them so I am prepared for a new position when the time and chart become bullish.

How to Trade Gold, Silver and Mining Stocks Conclusion:

In short, precious metals continue to be in a down trend. While they look to be trying to bottom it is important to remember that the largest moves take place in the last 10% of a trend. So we may be close to a bottom but there could be sharply lower prices yet.

The time will come when another major buy or short signal forms and when it does we will be getting involved. The exciting part is that it could be just around the corner. If you want to keep current and take advantage of the next major move be sure to join me free newsletter here: http://www.GoldAndOilGuy.com/

Chris Vermeulen

Gold Traders and Investors Get Ready To Rumble!

Chris Vermeulen — Tue, 30 Apr 2013 13:17:00 GMT

On April 12^th I wrote a blog post titled Precious Metals Melt-Down, and How To Manage It. I talked about how gold, silver and gold mining stocks have been flying under the media radar for over a year and that they were not catching the attention of traders, investors and the public anymore. I also said it would take some sharp price action (breakdown or rally) for it to be front and center again on TV, Radio and Newspapers.

But since gold has plummeted 17.5% dropping from $1600 down to $1320 per ounce with silver and gold stocks falling also they are now headline news once again. This move has caused some serious damage to the charts when looking at it from a technical analysis point of view. Below are some basic analysis points that show a new swing trading entry point.

The Technical Traders Chart Analysis:

Broken Support – Once a support level has been broken it becomes resistance. Gold is trading under a major resistance level.

Momentum Bursts - Since the April 15^th low, gold has been setting up for another short selling entry point. Remember the market tends to move in bursts of three, seven or ten days then price reverses direction or pauses. It has now been 10 days.

Moving Average Resistance – Gold has worked its way up to the 20 day moving average which can act as resistance.

Bearish Inside Bars – This type of chart pattern points to lower prices. When there is a big down day followed by 3, 7 or 10 up days inside the price action of the down bar we can typically expect another sharp drop which tests the recent lows as shown with the arrow on the chart.

Gold Short Selling Conclusion:

In short, gold is setting up for a low risk entry point that should allow us to profit from lower gold prices. Using an inverse ETF like DZZ or even the gold mining stock inverse ETF DUST could be played. These funds go up in value as the price of gold falls.

While I expect gold to pullback, I do not think it will make another leg lower. Instead, a test of the recent low or pierce of the low by a few bucks then reverse and start building a bullish basing pattern before going higher.

Get My Book Free and Learn How To Manage Your Trades, Money & Emotions: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

Friday's Precious Metals Melt-Down.... How to Manage It!

Chris Vermeulen — Fri, 12 Apr 2013 15:25:00 GMT

WOW Friday Precious Metals Meltdown is an understatement…. I love seeing all this fear in the market and panic selling volume jump through the roof. This is or is the "start" of the washout bottom in metals I have been talking about for a few months. Critical support levels have been broken on gold, silver and miner stocks today. This is running the stops juicing up the sell side volume.

This size of a move WILL trigger a wave of margin calls come the end of the session and it could start another strong wave of selling into the closing bell. While I like this prices for both gold and silver, I know this could be just the start of more selling. I sound like a broken record but I am not trying to catch a falling knife unless it looks like a perfect setup. I still feel we could get another 1-3 days of selling or chop down here before things go higher so I will just watch the gold and bugs get stepped on again.

Remember this chart I posted a while back… it’s not coming true:

WATCH VIDEO ABOUT TODAY'S SILVER & GOLD SELLOFF: http://youtu.be/7dnM33V8dIo

Last day of the week is the most important for long term trends and investors. Today is going to be wild and may trigger a massive wave of selling which could be really good for those who know how to take advantage of it with me at: http://www.TheGoldAndOilGuy.com

Chris Vermeulen

The Long and Winding Gold- (Bull Cycle about to Begin)

Chris Vermeulen — Fri, 05 Apr 2013 12:45:00 GMT

The dramatic 2-3 day take down in Gold Spot pricing action smells and looks like capitulation to us at The Market Trend Forecast. We have been calling this entire 19-20 month consolidation period as a Primary wave 4 correction pattern, though complicated for sure. It has had multiple false rallies and buy and sell signals the entire time. With that said, the pattern is set up for final 5^th wave decline which we are seeing now at the beginning of April.

Traditionally, Gold tends to meander or be weak in April anyways on a seasonal basis. This sets Gold up to rally in May into July with another soft patch, followed by a fall rally. However, our technical analysis is predicated on our Elliott Wave analysis, which says this entire 20 month correction is a “Double Three” correction pattern. Essentially its two ABC patterns with an “X” Wave rally in the middle to really confuse everyone.

The X wave took Gold to 1800 last fall before dumping all the Bulls off and eventually working its way down to the 1540’s levels we see today. This last leg down is a 5 wave decline and you know you’re at the bottom of wave 5 when everyone throws in the towel, the Gold stocks trade at multi year lows and relative valuation extremes. We also have insiders buying 7 to 1 over sellers according to Ink Research in the Gold stock sector. Stocks are valued at $923 per ounce equivalent even though Gold is trading north of $1,500 per ounce still.

We say bring it on and are actively accumulating selected Gold stocks with production profiles and growth metrics that are attractive.

See the Gold Elliott Wave analysis chart we sent to our paying subscribers a few days ago to forewarn of one more leg down. The next rally should be a doozy and have very few people on board. We would simply caution that a drop below $1523 spot pricing could lead to a blast down to the 1440-1460 areas, but its unlikely in our current views.

Join us for regular updates at www.TheMarketTrendForecast.com

Chris Vermeulen & David Banister

Gold vs. S&P 500 – Where is the Value?

Chris Vermeulen — Thu, 28 Mar 2013 19:00:00 GMT

This past week we received the final 4^th Quarter GDP number which came in at 0.39%. The total 4^th Quarter growth was terrible, plain and simple. Based on the performance in the equity markets that we have seen thus far in the 1^st Quarter of 2013 investors would expect strong GDP growth. However, the only thing spurring stock market growth is the constant humming of Ben Bernanke’s printing press.

The real economy and the stock market are no longer strongly correlated. Essentially, they are meaningless. How do you evaluate risk when Treasury linked interest rates are artificially being held down by the Federal Reserve? How do you evaluate earnings growth estimates when most government based statistics are manipulated or “smoothed” to perfection?

My final argument to anyone who is a true believer that the stock market is representative of the economy is a very simple premise. If the stock market is the economy, how does the stock market evaluate small business earnings growth when most small businesses are not publicly traded? It is a simple question, but I have yet to find a sell side analyst that can work around it with facts.

To back up this information, here is a chart courtesy of www.zerohedge.com that demonstrates the S&P 500’s price action compared to economic data and overall macro risk.

The chart above clearly depicts the divergence between the macroeconomic data and the performance of the S&P 500 Index. Yet the sell side continues to scream that stocks are cheap, earnings are going to ramp up later this year on insane S&P 500 earnings growth expectations, and the consumer is going to remain strong even though payroll taxes have increased and the “wealthy” are paying more in taxes.

Even amid those concerns, no one knows for sure what the impact that Obamacare and the various new taxes associated with it will have on the business community. Again, the only thing driving growth is directly linked to the Federal Reserve’s balance sheet expansion. The chart below is courtesy of the Federal Reserve’s website.

On August 8, 2007 the Federal Reserve’s total assets were $869 billion dollars. As can clearly be seen today, according to the Federal Reserve the central bank’s total balance sheet has grown to over $3.2 trillion dollars. The increase is on the verge of rising exponentially. With QE, QE2, QE3, Operation Twist, Extended Operation Twist, and now with QE 4 in Perpetuity this trend is certainly unlikely to shift.

At this point in time the Federal Reserve is printing roughly $85 billion dollars each month to purchase Treasury securities with a focus on the long end of the maturity curve. As primary dealers of Treasury securities process these flows the money eventually finds its way into riskier assets that offer higher rates of returns through balance sheet machinations at large money center banks.

It has proven that the flow of the Federal Reserve’s printed monies are more important than the total money stock for a variety of reasons and inflation according to the government’s data is under control ex food and energy.

However, how are people supposed to survive without food and energy in today’s world? The last time I went to fill up my gas tank or to purchase food prices have gone up significantly. According to the 1990 version of consumer price reporting, real consumer inflation is running around 6% currently and shadowstats.com has the following comparison.

Unfortunately the 1980 based inflation numbers are even uglier, which based on Shadowstats’ data chart would place consumer inflation at nearly 10%. The calculations being used by Shadowstats.com are based on the government’s OLD ways of calculating inflation. The calculations were adjusted over time and today the data is completely manipulated by not including items that typically experience the largest levels of inflation.

Normally I talk about price action, probability based option trading, and technical information. However, before investors consider buying stocks near the all-time NOMINAL (non-inflation adjusted) highs, why not simply consider the backdrop of the total economic situation.

Central banks around the world are printing money at an alarming rate and their balance sheets are growing to levels not seen in human history. Interest rates are being manipulated to levels that are historically at record lows or near record lows based on real inflation data.

Macroeconomic indicators are issuing a cautionary tone with significant divergences showing up in many areas. Earnings expectations for the S&P 500 in the 3^rd and 4^th Quarter of 2013 are extreme and borderline ridiculous.

So before jumping headlong into equities based on some sell side analysts recommendation or even worse, a financial advisor who is more interested in his/her commission than they are about producing gains consider the following comparisons.

S&P 500 Index (SPX) Price Chart – 1 Year Price History

Gold Futures Spot Price Chart – 1 Year Price History

Clearly paper gold represented by gold futures is no substitute for physical ownership, but when one considers the fundamental backdrop for gold versus the S&P 500 Index, it should be clear which asset is offering the most value at current price levels. It does not require any inserted trendlines or oscillators, it should be clear which asset is expensive and which asset is cheap based on the real long-term economic fundamentals.

I will give you a hint regarding which asset is offering the most value. It can’t be printed, it has represented the store of value since the advent of modern civilization, and it is senior to all paper currencies.

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This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

The Stock Market Trend & Hot Sector ETF’s

Chris Vermeulen — Thu, 14 Mar 2013 01:29:00 GMT

Trading with the trend should be your main focus for long term success no matter what type of trader you are (Options Trader, Stock Trader, or ETF Trader) although it’s not as easy as it sounds.

The good news is that there is a simple trading model that removes 95% of trading analysis and greatly reduces trading related emotions because the key technical analysis rules based on one of the world’s best chart technicians (John Murphy) technical analysis methods have been applied to the chart automatically. The key is to identify the trend of the market. Once that is known you can focus on trading strategies that take advantage of the current trend.

Over the past few years I have been creating this indicator/chart layout tool which converts my chart reading experience, tips and tricks into a simple system removing analysis paralysis which cause most individuals to second guess what they see and don’t pull the trigger. Using too many indicators or read/listening several other traders commentaries with different views than you causes this paralysis.

My simple red light, green light model clearly shows a viewer the current trend and expected price range (high and low) looking forward a couple days. I uses a series of data points like volatility, volume, cycles, momentum, chart patterns and logic rules. It even shows extreme pivot points helping you find low risk entry prices for both bull and bear market conditions.

Recent trends and signals for the SP500 Index Daily Chart:

Trading With the Trend – The Sweet Spots

Knowing the direction of the market is simple using the chart system above but trading with the trend is not that simple because of natural human behavior. Instead traders fall victim to trying to pick a top or bottom because they think the price is overbought or oversold and they want to catch the next big trend change.

We all know the saying “the market climbs a wall of worry”. Well, the biggest worry most traders have is buying long in a bull market because stocks and price always look overbought and ready to top each week… This leads to people trying to get fancy picking a top only to get their head handed to them a few days or weeks later depending on how stubborn they are to exit a losing position.

The key to long term success is to buy during broad market (SP500) corrections once sentiment, cycles and momentum are starting to flash extreme oversold conditions. These show up as green arrows on the trend chart. At that point most sectors and high beta stocks like IBM, GOOG etc… should be at a key entry points with most of the downside risk removed already. Remember ¾ stocks follow the broad market so it only makes sense to follow it also.

What about a runaway stock market? This is when the stock market does not pullback but just keep grinding its way higher and higher… The only thing you can do is sit in cash, or look for a stock or sector that is having a small pause or pullback and get long with a small position until you get that broad market pullback and major by signal to add more.

Below are a few sectors showing a minor pause/pullback within this bull market.

Mid-Week Trend Conclusion:

Overall, the broad market remains in an uptrend. While I would like to see the SP500 pullback and give us another major buy signal like it did in December and February I do mind that much if prices keep running higher as it just give us more cushion and potential profits for when the trend does eventually roll over and flip signals. I hope you found this report interesting. It’s just scratching the surface of this topic but it’s a start.

Know the stock market trends by joining my free newsletter: www.GoldAndOilGuy.com

Chris Vermeulen

Gold, Oil & the SPX Trends and Setups

Chris Vermeulen — Sun, 03 Mar 2013 20:39:00 GMT

Over the past year my long term trends and outlooks have not changed for gold, oil or the SP500. Though there has been a lot of sideways price action to keep everyone one their toes and focused on the short term charts.

As we all know if the market does not shake you out, it will wait you out, and sometimes it will do both. So stepping back to review the bigger picture each weeks is crucial in keeping a level trading/investing strategy in motion.

The key to investing success is to always trade with the long term trend and stick with it until price and volume clearly signals a reversal/down trend. Doing this means you truly never catch the market top nor do you catch market bottoms. But the important thing is that you do catch the low risk trending stage of an investment (stage 2 – Bull Market, Stage 4 Bear Market).

Lets take a look at the charts and see where prices stand in the grand scheme of things…

Gold Weekly Futures Trading Chart:

Last week to talk about about how precious metals are nearing a major tipping point and to be aware of those levels because the next move is likely to be huge and you do not want to miss it.

Overall gold and silver remain in a secular bull market and has gone through many similar pauses to what we are watching unfold over the past year. As mentioned above the gold market looks to be trying to not only shake investors out but to wait them out also with this 18 month volatile sideways trend.

A lot of gold bugs, gold and stock investors of mining stocks are starting to give up which can been seen in the price and selling volume for these investments recently. I am a contrarian in nature so when I see the masses running for the door I start to become interested in what everyone is unloading at bargain prices.

Gold is now entering an oversold panic selling phase which happens to be at major long term support. This bodes well for a strong bounce or start of a new bull market leg higher for this shiny metal. If gold breaks below $1500 – 1530 levels it could trigger a bear market for precious metals but until then I’m bullish at this price. I think we could see another spike lower in gold to test the $1500- $1530 level this week but after that it could be off to the races to new highs.

Crude Oil Weekly Trading Chart:

Oil had a huge bull market from 2009 until 2011 but since then has been trading sideways in a narrowing bullish range. I expect some big moves this year for oil and technical analysis puts the odds on higher prices. If we do get a breakout and rally then $130 will likely be reached. But if price breaks down then a sharp drop to $50 per barrel looks likely.

Utility & Energy Stocks – XLU – XLE – Weekly Investing Chart

The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self… If the overall financial market starts to peak then these sectors should hold up well because they are services, dividend and a commodity play wrapped in one.

SP500 Trend Daily Chart:

The SP500 continues to be in an uptrend which I am trading with until price and volume tell me otherwise. But there are some early warning signs that another correction or a full blown bear market may be just around the corner.

Again, sticking with the uptrend is key, but knowing what to look for and prepare for is important so that when the trend does change your transition from long positions to short positions is a simple measured move in your portfolios.

Weekend Trend Conclusion:

In short, I remain bullish on stocks and commodity related stocks until I see a trend change in the SP500.

Energy sector is doing well and looks bullish for the next month. As for gold and gold miners, I feel they are entering a low risk entry point to start building a new long position. Risk is low compared to potential reward.

When the price of a commodity or index trade near the apex of a narrowing range or major long term support/resistance level volatility typically increases as fear and greed become heightened which creates larger daily price swings. So be prepared for some turbulence in the coming weeks while the market shakes things up.

If you like my work then be sure to get on my free mailing list to get these each week on various investments for investment ideas at www.GoldAndOilGuy.com

Chris Vermeulen

Gold, Silver and Miners Remain Junk Grade Investments

Chris Vermeulen — Thu, 28 Feb 2013 01:46:00 GMT

Since silver and gold topped in 2011 investors have been struggling with these positions hoping this cyclical bull market for metals continues. The simple truth is no one knows for sure if prices will continue and make new highs and those who say its a for sure thing we all know deep down is full of bull crap.

All investments move in cycles, waves or trends which ever you want to call it. The market has 4 simple yet distinct stages each require a completely different skill set and trading tactics to navigate.

Stage 1 – After a period of decline a stock consolidates at a contracted price range as buyers step into the market and fight for control over the exhausted sellers. Price action is neutral as sellers exit their positions and buyers begin to accumulate the stock.

Stage 2 – Upon gaining control of price movement, buyers overwhelm sellers and a stock enters a period of higher highs and higher lows. A bull market begins and the path of least resistance is higher. Traders should aggressively trade the long side, taking advantage of any pullback or dips in the stock’s price.

Stage 3 – After a prolonged increase in share price the buyers now become exhausted and the sellers again move in. This period of consolidation and distribution produces neutral price action and precedes a decline in the stock’s price.

Stage 4 – When the lows of Stage 3 are breached a stock enters a decline as sellers overwhelm buyers. A pattern of lower highs and lower lows emerges as a stock enters a bear market. A well-positioned trader would be aggressively trading the short side and taking advantage of the often quick declines in the stock’s price. More times than not all of stage 2 gains are given back in a short period of time. I do show some of my trade setups using these exact stages free here: https://stockcharts.com/public/1992897

Now that you know the stages and what it looks like its time to review the gold, silver and miners charts.

Gold Chart – Weekly

Gold has been in a bull market for several years but is starting to show its age in terms of the size of the price patterns, volume levels and extreme bullish sentiment. Back in 2011 a week before price topped we exited precious metals because the short term charts and volume levels were warning of a sharp drop. Since then I have not done many trades in either gold or silver because I do not like shorting in bull markets. Waiting for a bullish setup/price pattern before getting involved is my focus.

Gold has pulled back with a bullish 5 wave correction the last 5 months and at key support. While the long term charts are pointing to higher gold prices you must be aware that if gold and silver start to breakdown things will likely get ugly quickly. To be honest I do not care which way it goes, I just want it to either rally from support here and make new highs or breakdown and crash. Both will be very profitable if traded properly.

Silver Chart – Weekly

Silver has a very similar chart to that of its big sister (yellow gold). This shiny metal has the energy of a 3 year old making it a very volatile investment. I have touched on the topic of gold and silver being so called safe havens and if you have been reading my work for a while you know that any investment that can move 18-45% in value within 1 month is NOT a safe haven.

While it has done well in the past decade and boosted a lot of retirement accounts the day will come with these things collapse and most people holding them will give back most if not all the gains they had simply because people get attached to large positions and most do not know when to just exit a position.

Gold Miners Chart – Monthly

This chart gives me cold sweats because I know how many people own gold mining stocks and I know how fast these things can move. If the price closed below the green support line the bottom could fall out and be very painful for those who get paralyzed by denial and do nothing but watch their accounts lose value week after week.

Precious Metals Investing Conclusion:

In short, this report is to show you the very basics of how investments move in stages. It is also to show a warning that precious metals are technically very close to a major breakdown which the big money players are watching closely. This thinly traded sector can move extremely fast when everyone rushes for the door.

Do not get me wrong, I am not saying a crash is about to happen, actually it’s the opposite. All I am doing is planning the idea in your subconscious so that if prices continue to move lower you will remember that these price levels and take action with your investments. Remember, you can always buy the investment back at any time again if the outlook changes in a week, month or year.

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Chris Vermeulen

Gold and Silver Nearing MAJOR Long Term Support

Chris Vermeulen — Thu, 21 Feb 2013 11:11:00 GMT

Gold and silver along with their related miners have been under a lot of selling pressure the last few months. Prices have fallen far enough to make most traders and investors start to panic and close out their long term positions which is a bullish signal in my opinion.

My trading tactic for both swing trading and day trading thrive on entering and exiting positions when panic trading hits an investment. General rule of thumb is to buy when others are extremely fearful and cannot hold on to a losing position any longer. When they are selling I am usually slowly accumulating a long position.

Looking at the charts below of gold and silver you can see the strong selling over the past two weeks. When you get drops this sharp investors tend to focus on their account statements watching the value drop at an accelerated rate to the point where they ignore the charts and just liquidate everything they have to preserve their capital. A few weeks ago I posted my outlook on precious metals which seems to be unfolding as expected: http://www.thegoldandoilguy.com/articles/precious-metals-miners-making-waves-and-new-trends/

Gold Bullion Weekly Chart:

The price and outlook of gold has not really changed much in the past year. It remains in a major bull market and has been taking a breather, nothing more. Stepping back and reviewing the weekly chart it’s clear that gold is nearing long term support. With panic selling hitting the gold market and long term support only $20 – $30 dollars away this investment starts to look really tasty.

But if price breaks below the $1540 level and closed down there on a weekly basis then all bets are off as this would trigger a wave of selling that would make the recent selling look insignificant. And the uptrend in gold would now be over.

Silver Bullion Weekly Chart:

Silver price is in the same boat as its big sister (Yellow Gold). Only difference is that silver has larger price swings of 2-3x more than gold. This is what attracts more traders and investors but unfortunately the masses do not know how to manage leveraged investments like this and end up losing their shirts.

A breakdown below the $26.11 price would likely trigger a sharp drop back down to the $17.50 level so be careful…

Gold Mining Stocks – Monthly Chart:

If you wanna see a scary chart then look at what could happen or is happening to gold miner stocks. This very could be happening as we speak and why I have been pounding the table for months no to get long gold, silver or miners until we see complete panic selling or a bullish basing pattern form on the charts. We have not seen either of these things take place although panic selling is slowly ramping up this week.

There will be some very frustrated gold bugs if they take another 33% hair cut in value… You can view some of my trading charts, setups and analysis free at my stockcharts.com list. Be sure to vote for me chartlist each day so I know its of value: https://stockcharts.com/public/1992897

Precious Metals Trend and Trading Conclusion:

In short, the precious metal sector remains in a cyclical bull market. That being said and looking at the daily charts the prices have been consolidating and are in a down trend currently. Until we see some type of bottoming pattern or price action form it is best to sit on the side lines and watch the emotional traders get caught up and do the wrong thing.

The next two weeks will be crucial for gold, silver and miner stocks. If metals cannot find support and close below the key support levels things could get really ugly fast. If you would like to receive my daily analysis and know what I am trading then check out my newsletter at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Energy Stocks & Oil Special Trend Analysis Report

Chris Vermeulen — Mon, 28 Jan 2013 14:18:00 GMT

Crude oil has been trading ways for the past year between the 2011 high and low. The trading range through 2012 has been contracting with a series of lower highs and higher lows. This pennant formation because it is taking place after an uptrend is a bullish pattern with $110 and possibly even $140+ per barrel in the next 6-18 months.

If you look at the weekly investing chart of crude oil the key support and resistance levels area clearly marked. A breakout of the white pennant will trigger a move to the next support or resistance level. And judging from the positive economic numbers not only form the USA but globally the odds are increased for the $110+ price target to be reached sooner than later.

Crude Oil Price Chart – Weekly Investing

Crude Oil Price Chart – Daily short term Analysis & Target

If we zoom into the daily chart and analyze price and volume you will notice the $100 per barrel level is potentially only 2-3 days way… But keep in mind whole numbers (decade & Century Numbers) naturally act as support and resistance levels. So when the $100 century price is reached there will be a wave of sellers with fat thumbs who will slam the price back down to the $96 and possibly back down to the $92 level before oil continues higher.

Utility Stocks – XLU – Weekly Investing Chart

The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self… Keep in mind you can view my actual watchlist of stock and ETFs I trade in real-time with my analysis free: https://stockcharts.com/public/1992897

Energy Sector Weekly Investing Chart

Energy stocks which can be followed using the XLE exchange traded fund (ETF) typically leads the price of oil. Looking at energy stocks we can see that they are outperforming the price of crude oil and on the verge of breaking out of a large Cup & Handle pattern. If so then $90 is the next stop but prices may go much higher in the long run.

Energy Stocks and Crude Oil Conclusion:

In short, crude oil is stuck in a large trading range much like gold and silver which I just wrote about here: http://www.thegoldandoilguy.com/articles/precious-metals-miners-making-waves-and-new-trends/

Once a breakout takes place on either the white or yellow lines on the first crude oil weekly chart we should see oil, energy and utility stocks start making some big moves. Depending on the direction of the breakout (Up or Down) it must be played in that direction to generate substantial profits obviously.

Get my daily analysis, updates and trade alerts here: www.TheGoldAndOilGuy.com

Chris Vermeulen

Precious Metals & Miners Making Waves and New Trends

Chris Vermeulen — Mon, 28 Jan 2013 01:11:00 GMT

The precious metals sector has been dormant since both gold and silver topped in 2011. But the long term bull market remains intact. As long as we do not have the price of gold close below the lower yellow box on the monthly chart then technical speaking precious metals should continue much higher.

Large consolidation periods (yellow boxes) provide investors with great insight for investments looking forward 6-18 months upon a breakout in either direction (up or down). The issue with investing during these times is the passage of time. One can hold a position for months and sometimes years having their investments fluctuate adding extra stress to their life when they really do not need to.

Once a breakout takes place a powerful rally or decline will start putting an investors’ money to work within days of committing to that particular investment compared to money invested waiting months for the breakout and new capital gains to occur.

Gold Price Chart – Monthly

Gold Price Chart – Daily

The chart of gold continues to form a large bull flag pattern with a potential 3 or 5 wave correction. If price reverses this week and breaks above the upper resistance trend line then it will be a 3 (ABC) wave correction which is very bullish. But there is potential for a full 5 wave correction which is still bullish, but it just means we have another month or two before metals bottom.

Gold Miner Stocks – GDX ETF Chart – Daily

Gold miners do not have the sexiest looking chart. It was formed a strong looking bull flag but has continues to correct and is not nearing a key support level. This level could act as a triple bottom (bullish) or if price breaks below then it would be breaking then neckline of a massive head and shoulders pattern which points to 50% decline. I remain bullish with the longer term gold trend until proven wrong.

Silver Price Chart – Daily

Silver remains in a long term bull market much like the monthly chart of gold shown earlier in this report. Silver continues to work its way through a large bull flag pattern with a positive outlook at this time.

Silver Miner Stocks – SIL ETF – Daily Chart

Reviewing the precious metals sector it seems that silver miners have the sexiest looking chart. All price patterns are showing strength and are in proportion to one other. If this chart plays out to what technical analysis is pointing to then we could see the precious metals sector put in a bottom and rally within the next week or two. And if this is the case then silver miner stocks should provide the most opportunity going forward.

Precious Metals Trading Conclusion:

In short, what you need to focus on is the yellow consolidation box on the monthly gold chart. A breaking in either direction will trigger a massive move that should last 6-18 months. Until then long term investors can simply sit back and watch the sector while they put their money to work in other active sectors.

From a short term traders point of view, that f mine. I am looking for a signs of a bottom on the daily chart to get my money working earlier to play the bounce/rally that takes place and actively managing the position until a breakout occurs. The charts overall are not that clear as to when a breakout will take place. Metals could start to rally next week or in a few months and all we can do is wait for a reversal to the upside before we get active.

Knowing the big picture trends and patterns at play along with major support and resistance levels (breakout levels) is crucial for success and piece of mind.

Get my analysis, daily updates and trade alerts each day at www.TheGoldAndOilGuy.com

Chris Vermeulen

Signs that a Correction Maybe Near in the SPX, RUT & DJIA

Chris Vermeulen — Wed, 23 Jan 2013 15:13:00 GMT

The great market prognosticators have by now came out with their 2013 predictions about financial markets. It seems to me to be a fool’s game to try to predict what financial markets are going to do in the future.

I want to be clear in stating that I do not know what is going to happen in the future. I do not know where the S&P 500 Index is going to trade tomorrow let alone 6 months from now. Most market pundits simply will not admit to this fact.

These same market pundits seemingly are unable to be honest about their own fallibility. In their own mind they believe it undermines their credibility or will hurt their forward sales for some book or strategy they are going to unveil. I for one do not prescribe to that notion, I believe in telling the truth.

The truth is that these so-called market experts do not know anymore than you or I about price action in the distant future. However, what I do know is that forward price action remains a mystery until its unveiled in the present.

Instead of wasting time discussing potential price action in the future, why not focus on a few pieces of information that have occurred that are known facts right now. I think the chart below points out that in the intermediate time frame, equity indexes are reaching extreme overbought conditions.

As can be seen above, the number of stocks trading above their 50 period moving averages is reaching close to the highest levels in the past 5 years. Many times when these price levels have been reached we witness a correction at the very least and any short-term gains are usually given back in short order. This is not to say that prices are going to sell-off tomorrow or in the next few weeks, however it is a warning that a correction is likely lurking in the not-so-distant future.

To help confirm this notion, a quick look at the Volatility Index (VIX) demonstrates just how much complacency there is in the short-term spot VIX price which is currently trading below 5 year lows. For novice readers when the VIX moves lower the outcome is typically bullish for the S&P 500 Index and when the VIX moves higher the reaction is typically bearish in terms of the S&P 500 Index.

As can be seen above, the VIX is trading near the bottom of its recent range. This helps confirm the strength we have seen the past few weeks, however a reversal seems likely in the near future. Should the VIX pick up considerably it would have a negative impact on the S&P 500 Index. Furthermore, if we go out several months in time the Volatility Index Term Structure steepens wildly.

What this means is that traders and money managers have bid up forward VIX contracts in an attempt to hedge against a variety of perceived risk. I would also point out that at the moment February monthly options contracts are cheap relative to their historical volatility levels. However, the VIX could rally violently higher should the appropriate chain of events take place in the months ahead.

There are several catalysts in the short-term which will have a major impact on price action for the broader indexes. This coming week we will have earnings from major companies such as IBM, AAPL, and GOOG which all have the potential to move the tape significantly in either direction.

The other more obvious short-term inflection point is the dreaded U.S. debt ceiling debacle which is likely to begin permeating the financial media as the deadline for action draws near. In recent history both houses of Congress and the Executive Branch have struggled to achieve compromise until the 11th hour. The fiscal cliff was one issue, but the debt ceiling issue has the potential to have a major impact on financial markets.

Just to put into context what happened back in 2011 when Congress could not reach a compromise regarding a debt ceiling increase, the S&P 500 Index had the following reaction as shown below.

Obviously there are significant unknowns regarding how the debt ceiling process will unfold in 2013. However, what is known is that should the politicians wait until the 11th hour equity indexes could force their hands yet again.

Additionally the threat of credit rating agencies downgrading U.S. government debt is a major concern. The outcome of this decision alone has the potential to devastate investment portfolios should the government have a partial shutdown as a result of a failure to reach an agreement regarding the debt ceiling.

What is important to understand is that the longer-term price action in the future is impossible to know at this point. We have major earnings reports which are about to be released over the next few weeks which presents significant risks to the broader indexes in both directions. Furthermore we have a major macro event that is facing us and will have to be addressed in the next 5 – 8 weeks.

The outcome of these events as this point is entirely unknown. I would also point out that in 2011 prior to the debt ceiling debacle we saw equity prices rally higher in late June of 2011 while the VIX traded down near recent lows at that time. After a period of consolidation equity indexes remained patient and gave the politicians time.

Eventually the price action in risk assets forced both political parties and the President to come together. As shown in the chart above, the S&P 500 lost nearly 19% in less than 4 weeks of trading sessions. Even the most skeptical politician was forced into submission by Wall Street and the financial media.

Will history rhyme with the recent past? Will we see a compromise in advance of the dreaded shutdown date? Will the debt ceiling outcome create a major paradigm shift in U.S. financial markets and U.S. politics?

Unfortunately, there is no one that can tell us with any certainty what is about to happen in the next 5 – 8 weeks, let alone later this year. After all of the forthcoming analysis and discussion in the weeks ahead, price action will continue to remain a mystery until the debt ceiling situation is behind us. Until then, caution is warranted in both price directions. Trade safe.

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Gold, Miners and SP500 Trends & Trading Signals

Chris Vermeulen — Mon, 14 Jan 2013 04:07:00 GMT

Gold and gold miner stocks have underperformed in 2012 disappointing most traders. That being said it has traded in a large sideways range since September 2011 and remains stuck in this range as of this week. Investments trading sideways are not my preferred investment of choice because some commodities and stocks for that matter can trade sideways for years before making another bull market rally.

That being said in the last six months gold has started to show life that a new bull market may be starting. 2013 is starting to look as though gold, silver and precious metals miners could lead the market higher if they can break out of their basing patterns. Until we get more bullish price action I am not planning to get long.

Take a look at the gold ETF and Gold Miner charts:

These daily charts show the trend (up/down) along with short term extreme overbought/oversold trading days. The key to long term success is to trade with the trend 90% of the time. Only years of experience will you know when it’s ok to break the rules and even then the odds are stacked against you.

Gold Weekly Chart:

Gold Daily Chart:

Gold Miners Daily Chart:

SP500 Stock Market Analysis:

The last five years I have been fine tuning my SP500 index trading with the use of cycles, sentiment, volume, momentum and the volatility index. Until just recently some of the data I use for generating these extreme overbought/oversold conditions were only available after the market closed. This made the high volatile trading sessions difficult to truly know if an extreme level was reached during the trading session. The exciting news is that a new data feed and a top notch programmer is allowing me to turning this once manual calculation of 17 data points taking me an average of 25 minutes to figure out into a system that generates signals in real time complete with profit taking signals, tend direction and a protective stop which self-adjusts depending on the market volatility and cycle stages.

Two other benefits are that during extremely high volatility levels and mixed cycles the system does not generate any signals. This allows us to avoid the large daily swings in price that typically shake even the most seasoned traders out of the market for repeated losing trades. Also during potential trend changes when cycles and volatility become choppy trading signals are not generated helping to avoid the volatility that takes place during reversals points when the bulls and bears are pushing each other around.

Below is a very basic version of the trend and signals for the SP500 index as it does not show profit taking, trend reversal stops or protective stops for individual swing trades yet, but it’s coming soon.

Crude Oil Weekly Chart:

Crude oil has been making a move higher in the past four weeks but it’s now testing resistance and the chart shows a high volume doji candle. This is pointing to a pause or pullback in price should take place.

Natural Gas Weekly Chart:

Natural gas futures have been under pressure the past couple months but it may have put in a bottom last week. The daily and 60 minute charts show strong buyers stepping in here.

Weekend Trading Conclusion:

In short, gold and silver remain in a sideways/down trend on the daily chart. The weekly long term outlook is very bullish and once I start to see real buyers enter the market in terms of volume and price patterns I will start to accumulate a long position.

The stock market overall remains in an uptrend. We are waiting for a pause ro pullback before getting long the index. But that being said there are other sectors and commodities starting to look ripe for big moves. They are not there yet but getting closer each day.

Keep in mind that stocks, commodities and trading in general go in waves. There are times when you are busy with trades popping up left right and center and there are times when setups just do not happen. On my free stock charts watch list in November and December I posted 16 stocks and ETF setups and only one stock went south which happened to be a short trade (count trend trade). You can view my watch list here for more info: https://stockcharts.com/public/1992897

Crude oil is giving mixed signals and I am avoiding it until the daily chart gives us a bullish setup.

Natural gas weekly chart looks bullish but the current price is now trading at resistance. It must break this level before a full reversal can be confirmed.

If you would like to keep up to date on market trends and trade ideas be sure to join my newsletter at www.TheGoldAndOilGuy.com

Chris Vermeulen