Archive for July, 2010
This Weeks Gold, Crude Oil and SP500 Trading Patterns
It was an interesting options expiration week for equities that’s for sure. We saw some very choppy price action with large waves of buying and selling as the bulls and bears fought for control.
Both Gold and Oil closed lower for the week which is not a good sign considering the US Dollar dropped like a rock along with them. Below are a few of my charts
GLD – Gold ETF Price Action
Gold continues to pull back from the June highs. It looks as though it could form an ABC retrace pattern if the July 7th low is broken. If $1085 is broken we should see gold drop to $1065-75 level. On the GLD etf that would be around the $112.50 – $113.50 level. That should shake out the majority of weak positions and start to rally towards the $1250/60 level.
Crude Oil – USO Oil Fund
This is a weekly chart of oil which clearly shows how selling volume has risen and the trend since 2009 has gone up, sideways and is now heading back down. The bear flag forming on this weekly chart looks about ready for another leg down. Once that occurs we could see a test of the 2009 lows.
Using some “inter market” analysis crude oil tends to move in the opposite direction of the US Dollar. From a quick glance at the dollar chart is looks about ready to bounce which will send oil sharply lower. It will be interesting to see how this unfolds over the next 2-3 weeks.
SP500 – SPY Index Fund
Friday we saw some the SP500 sell off on heavy volume after testing its 50 and 200 day moving averages which are key levels for trading and investors to take profits or add to their short positions in hope for another multi day sell off.
That being said, there is still a good change of higher prices and for all we know this could be the start of another multi month rally. While I am more inclined for us to play the down side this week I will not have a problem taking a long position if we start to see the market internals and breadth improve alone with bullish price action. I monitor the 60, 30 and 10 minute charts which allow me to get a feel for the overall short term trend and strength.
Weekend Trading Conclusion:
Overall it looks like we could have a couple more days of weakness for stocks and commodities. The US Dollar is very much oversold and as of this writing it looks like its starting a small bounce. A rising dollar tends to put downward pressure on gold and oil along with the large multi national companies.
Equities sold off Friday with a slow grind down from 9:30 -4pm never putting in any type of bounce when looking at the 60 minute chart. The SP500 and other indexes are way over sold after Friday and I am expecting some follow through Monday as investors review the charts over the weekend and see what happened on Friday. That should cause another wave of selling in the morning as traders panic out of positions.
It’s going to be an exciting week for sure!
If you would like to receive Chris Vermeulen’s trading analysis and trade alerts be sure to checkout The Gold And Oil Guy .Com.
Successful Investing and Trading Boils Down to Predictability
Successful investing and trading boils down to predictability. There are many markets that are predictable for short and long periods of time, but it’s difficult to know how long such predictability will last.
Many would say that BP plc (BP)’s continued decline in the weeks and months after the oil spill was predictable, but then again, many were wrong with their immediate and “confident” doomsday predictions, so far, as they predicted the stock would continue sliding into single digits…totally missing the near 40% bounce off the lows in recent days.
The same kind of “confident” predictions were made about Greece and the euro sliding into oblivion and yet both have bounce substantially as it looks like the doomsday predictors were wrong…so far.
We don’t even need to go into these panic/disaster situations, a perfect example of how difficult predictability is Intel Corporation (INTC)’s blow out earnings the other night and how the stock was up big-time afterhours which led overnight futures to surge with many pundits calling for a major technology, not to mention overall stock market, rally to take place…no dice…never happened….INTC opened up huge then gradually down trended all day, their superior earnings seemingly already priced in.
Long story short: “confident” financial market prediction is for suckers.
There are far too many variables floating around for the news, let alone investors and traders, to ever be able to grasp and analyze everything well enough to make any kind of supremely confident predictions.
But that’s exactly why penny stocks should be considered as a predictable market. Let me explain…
This overly simplistic, hugely manipulated, much despised market niche is everything the rest of the financial markets are not: easily predictable.
Unlike forex, ETFs, futures, there are no hugely intelligent people working around the clock, considering every single potential profit angle and using complex algorithms to test out the reliability of various data sets and chart patterns.
Penny Stocks are only traded , promoted, manipulated and invested in by the dumbest, most greedy people in the world.
Sometimes Penny stock companies are either fraudulent or incompetent or both with short and longterm statistics proving that more than 99% of them utterly fail in every conceivable way.
In short, the players and the companies are predictable which is why I specialize in this underappreciated (thankfully) niche and why it’s not just possible/probable for me to earn index and everyone else crushing returns, it’s possible/probable for me to be able to teach you too….this ain’t rocket science folks.
Please do learn from this short video lesson series I’ve put together.
Watch Successful Investing and Trading Boils Down to Predictability