Thursday, September 29, 2011

Adam Hewison: Do You See the Trees In a Forest, Or Do You Just See the Forest?

There is a saying that goes like this “can’t see the forest for the trees” is a reference to people who get so involved with the details of an issue that they lose sight of the big picture.

If your involved in the markets, it is easy to fall into the trap of just looking at the minute or hourly charts, rather than considering the market as a whole.

When you can’t see the market for the minutia, it means that you are deeply involved in a situation, and you are perhaps focusing too much on the inner workings of the market, and not enough on the big trends.

With all of this talk of problems in Greece, defaults, contagion and a host of other problems in Europe, it is easy for traders to get distracted, and not see the forest for the trees.

The most important element in trading in my opinion, is the direction the major trend for that market. It doesn’t really matter what the news is, if the market is doing something else. As traders I believe we have to look at the forest in this case the big trends in the marketplace.

Let’s look at them now: S&P 500 index major trend down. Gold major trend up. Metals major trend down. Crude oil major trend down. Dollar index major trend up. CRB index major trend down.

So, there you have it, all the major trends in all the markets we are dealing with right now. Everything else is just individual trees, that don’t mean a heck of a lot in the big picture.
It takes a tremendous amount of energy to move a market and change a major trend. This kind of energy normally does not happen in one or two days. As they say in statistics, one data point does not make a trend.

Let's take a look at the SP 500 including our Trend Analysis and Trade Triangles.....

The S&P 500 index rallied based on the vote in Germany to bailout Greece. This is far from a done deal. As mentioned in yesterday’s post, we thought that rallies in this market would run into problems, which they have today. A close below the 1163 area would be negative. Last month, the S&P 500 closed at 1218.89 and last week it closed at 1136.43.

So while the market is higher for the week, it is sharply lower for the month and the quarter. The big picture for this market is down. At the moment this index is trapped in a trading range bound by 1120 on the downside and 1220 on the upside. We are looking for this market to break down and be on the defensive for the next several weeks. Intermediate and Long term traders should continue to be short this index.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = – 75

The U.S. stock indexes closed higher today in more volatile trading. The stock market got a boost from some upbeat U.S. economic data released earlier today, and on some ideas of an improvement in the EU debt crisis. If all three stock indexes drop and close below their August lows, that would be extremely bearish for the stock indexes and for most commodity markets.


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Wednesday, September 28, 2011

Chris Vermeulen: Gold & Silver on the Verge Of Another Drop

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

Over the past week precious metal investors have had a wakeup call from their big shiny nest eggs. Last week’s free fall in both gold and silver spot prices was enough to get investors into a panic. More on this in a minute though…

The fall was triggered by three key factors which caused the powerful move down. The first factor is based on pure technical analysis (price and volume patterns). Because the metals had such a strong run up this summer and prices had moved to far too fast, it is only natural so see price correct back to a normal price level. 

In general any investment that surges in one direction in a short period of time almost always falls back down shortly after. As I stated in my weekly report on August 31stgold is forming a topping pattern and all investors should take profits or tighten protective stops (exit orders)”.Three days later gold popped to the new high completing the pattern and was quickly sold off which continues to unfolding as we speak from $1920 down to $1532 in only a couple weeks.

The second factor which I think had the most power behind the drop were the margin requirements changes. This new rule literally overnight caused traders and investors holding to much of the metals in their account to liquidate (sell) their positions without having any say in the matter. That is when the most damage was done to the price of gold and silver.

The key factor was the US Dollar which rocketed higher and adding a lot of pressure to the metals. I also covered this in my Aug 31st report in detail. Overall, past few years we have seen both gold and silver move in opposite direction of the dollar. I don’t expect that to change much going forward. Back in August the US Dollar was coiling (building power) and it was only a matter of time before it would explode to the up side and rallied. This high probability move in the dollar was what triggered me to exit our long gold positions shortly after. I expected the dollar rally to last a month or more and that means we would see a lot of pressure on equities and metals going forward.

Now keep in mind, if Greece or other countries continue to get worse then we could see the dollar and gold move higher together as they are seen as the safe haven at this time. But with the nature of the two I am anticipating a rising dollar and sideways trading range for gold.

Ok, so back to precious metals investor sentiment…

Last Friday and all of this week I have been getting emails from traders and friends saying they are going to sell their gold and silver because they are concerned metals will continue to fall and because many of them are now losing money after chasing prices higher through the summer. The good news is that one of my best indicators for helping to time market tops and bottoms is to just read my emails and answer the phone. 


During market tops, generally the final month when prices are soaring to new highs every day/week is when everyone contacts me and says they just bought gold or are about to buy more gold cause it’s such a great investment. Once I start getting 2-5 of these messages a day alarms start going off in my head. This works the same with market bottoms. So with everyone now in a panic and selling their positions I feel we are darn close to one if we did not see it already.

Let’s take a look at the charts......

Silver Spot / Futures Price Chart

As you can see on the hard right edge silver is forming a very similar pattern which happened this past spring. I would like to note that this type of pattern is typical with extreme market selloffs as to how they generally bottom. I am anticipating silver trades in this range for a couple months and that we could see lower prices in the near term. But my upside target for silver in the coming few months is the $35-$36 level.


Gold Spot / Futures Price Chart

Gold is doing much the same as silver but I have noticed that when gold falls hard the second dip generally does not make a new low as often. If we do get a new low, all the better for buying on the dip but overall I feel gold should trade sideways for a couple months. My upside target for gold is the $1750-$1775 area.


US Dollar Index Price Chart

The Dollar index is looking ripe for another bounce and possibly another rally to new highs in the coming week. If this happens then we should see the SP500 short position (SDS) which we took Tuesday afternoon (Sept 27th) to continue rocketing another 5-8% in our favour again.

Mid-Week Trading Conclusion:

In short, I feel the US dollar is going to continue higher and that will put the most pressure on stocks, oil and silver. Depending how things evolve overseas gold could hold up and possibly rise with the dollar.
So far subscribers have pocketed over 40% gains this month using ETFs on the SP500, Dollar and Oil and are holding another winning trade in the SDS etf taking partial profits today. 

If you would like learn more about etf trading and receive my daily pre-market videos, intraday updates and detailed trade alerts which even the most novice trader can follow then join my free trading education newsletter and my premium trading service at The Gold and Oil Guy and take your emotions out of your trading!

Monday, September 26, 2011

J.W. Jones: Understanding The Key Support Levels For Gold


Gold bulls and inquiring minds are perplexed by last week’s mayhem in the precious metals markets. In addition to gold and silver, copper prices also went into free fall last week which is an ominous sign for the broader economy in general. We live in interesting times as geopolitical uncertainty, social acrimony, and financial collapse shape the world around us.

The situation in Europe continues to worsen and central banks and wealthy individuals are trying to find safe havens to protect their wealth. Most gold bugs believed that gold and silver would be the answer, but in this environment that hypothesis did not play out. In addition, the Federal Reserve came out with operation twist which market participants despised. Since the 3rd round of Quantitative Easing was not announced, risk assets such as the S&P 500, gold, and silver sold off sharply.

Many gold investors believed that gold is a “safety” trade. I would agree with them if the objective is to remain “safe” from ever rising inflation. In a “run for the exits” sell off caused by deflationary pressure and debt destruction, gold will generally show relative strength versus equities. However, I would remind readers that during the deflationary period back in 2008, gold held up far better than the S&P 500, but prices were volatile.

The gold futures chart from 2008 is shown below:

As can be seen from the chart above, gold futures were volatile throughout 2008 with the March high point representing a 19.83% gain for the year. The low point for gold futures in 2008 was in October and represented a loss of 21.07%. The total return for gold futures in 2008 was 1.94%. Clearly gold futures showed volatility throughout 2008, but gold clearly outperformed the S&P 500 during the same period of time.

The S&P 500 was lower by 37% in 2008, thus gold was clearly the safer asset during 2008 in terms of return. However, one asset class was safer still and had considerably less volatility . . . the U.S. Dollar. In 2008, the U.S. Dollar index futures closed the year with gains around 8.44% with far less volatility than gold or the S&P 500. I am pointing this out to readers because a similar situation is unfolding presently.
Moving forward to the present, the U.S. Dollar Index futures have put on an impressive rally that started back on August 30, 2011. Since August 30th, the Dollar Index futures are trading higher by around 7%. As it turns out, on August 31st I entered a long call ratio spread using the UUP ETF with members of my service and we were able to lock in a gain of around 30% recently.

The daily chart of the U.S. Dollar Index futures is shown below:


All of the calls for hyperinflation in 2011 and a massive crisis in the U.S. Dollar are not coming to fruition. In fact, the opposite is occurring as deflationary pressures are helping force the U.S. Dollar higher. I would point out that the majority of economists and analysts were all predicting hyperinflation for several years and so far they have been wrong. Gold nor any other asset can rally forever, but long term investors must understand that even during a raging bull market corrections and pullbacks are commonplace and healthy.

I want to point out that I sent out multiple articles warning about the possibility that gold prices could sell off or correct dramatically. In every instance, my email inbox was littered with hate mail and vitriolic remarks from gold bugs. Back on August 29th, I wrote the following in my article, What Could Lie Ahead for the S&P 500 and Gold:

“There is an ominous pattern starting to form on the gold daily chart which if it is carved out and triggered, it could produce the next leg of this selloff.”

The daily chart of gold is shown below:


“While it is far too early to determine if a head and shoulders pattern will be carved out or if lower prices take place, I am of the opinion that this selloff will offer an attractive entry point for longer term investors. At this point it is a bit too early to get involved, but if my analysis is accurate the next leg of the gold bull market will be potentially extreme.”

As it turns out, the head and shoulders pattern did not play out as I had hypothesized but a double top did emerge which ultimately produced similar price action. The extreme nature of the recent sell off backs up my analysis in that gold prices had gone parabolic and we needed to see regression back to the mean in terms of price.

We are seeing that process unfold now, but as I stated in the article above the completion of this sell off is going to offer an attractive entry point for long term gold investors. While I have routinely discussed pullbacks and corrections regarding gold, I continue to be a longer term bull.

Gold has sold off sharply in the past week, but the following chart illustrates some key support levels for the yellow metal:


While gold and silver sold off sharply, the S&P 500 was also under extreme pressure. My most recent article written on September 21 prior to the Federal Reserve announcement illustrated two outcomes based on what rhetoric came from the meeting. Unfortunately for equity investors my downside prognosis is holding sway. The follow is an excerpt from my article entitled The S&P 500 & the Dollar Ahead of the Fed Statement:

“The flip side of that argument would see the S&P 500 jamming into recent resistance around the 1,230 price level. If prices rolled over and momentum picked up, a test of the recent August lows would likely transpire and could produce a breakdown and a lower low.

When looking at recent price action, the S&P 500 Index has put in a series of higher lows which is a bullish signal, however the S&P 500 has a long road ahead to break out above the 2011 highs. If the S&P 500 carves out a lower high on the S&P 500 Index at 1,230, 1,250, or even 1,280 and subsequently takes out the August lows then the secular bear will be back. The weekly chart of the S&P 500 Index ($SPX) shown below illustrates key support levels:

For now I am just going to sit in cash and wait for Mr. Market to provide me with some better clues. The trading range is pretty wide going from around 1,100 to 1,280.”

My downside scenario played out last week, but I will be watching closely to see if the S&P 500 can push below the August lows. If the August lows are taken out, we could see support come in around the 1,085 price level. If that level breaks down then the 1,008 – 1,040 price range will be in play.

The daily chart of the S&P 500 Index is shown below with the key support levels illustrated:

In closing, last week was wild in terms of price action and volatility was nearly palpable. I am anticipating some additional volatility this coming week. Gold prices could bounce as price is sitting right at the key 50 period moving average. If gold works through the 50 period moving average additional downside will be likely.

Similar to gold, if the S&P 500 is able to push through the August lows additional sellers will step in as stops will be triggered on a breach of the S&P 1,100 price level. News flow and headline risk coming out of Europe will continue to impact price action. I would also point out to members that there is a standing chance that the U.S. government could shut down as budget issues continue to manifest within the confines of the U.S. Congress.

Risk remains extremely high.

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Sunday, September 25, 2011

Chris Vermeulen: Gold & Silver Pullback as Forecasted ..... Now for the Big Opportunity


A few weeks ago I wrote about how gold was starting to top and that everyone should expect a very sharp drop to the low $1600 area. How I came to this conclusion was though the use of inter-market analysis combining price patterns, gold futures volume, the dollar index and market sentiment. This allowed me to understand what the majority of other traders/investors were thinking and feeling. By knowing each of these market variables and crowd behavior I can accurately see into the future a few days with a high probability of success and most importantly with low downside risk.


At the time when I forecasted gold to reach the low $1600 area gold was still building the top pattern so I could not say how long a recovering would likely take nor did I know exactly when to re-enter a long position. But now that we have seen how gold arrived at my target price I can form a new forecast.

Spot Gold Price Forecast – Daily Chart:

The gold chart below clearly shows rising volatility along with my topping pattern of three surges to new highs. It was August 31st when I warned subscribers and my followers that gold was about to top and that everyone should be taking profits or at least tightening their stops to lock in gains. Only three days later gold topped and it has not stopped falling since.

On August 8th gold had a large opening gap to the upside. This means the price opened the next day much higher from where it closed the previous session. It’s important to note that gaps especially for gold almost always get filled within a couple months. Seeing this gave me a solid reason to think that gold should pullback to this level during the next big correction in price.

Also during the month of August gold had to pullbacks only to continue to make the third and final high. This told me that when the top is put in place was a very high probability that we see the price of gold drop below both of Augusts’ lows and that would trigger stop orders sending the market sharply lower.
Now that we are seeing the stops being flushed out of the market it means the majority of speculative traders have exited their positions. So speculative traders who caused the large surge in gold to take place are now out. Once all the speculative traders have exited which should take place in the coming weeks or two we can expect some type of bounce or rally. I will keep a close eye on the intraday charts for subscribers as we near a potentially major trade setup.




Where are we in this gold bull market?

Well I feel gold is more fairly priced between $1632- $1660 area. Currently gold is trading at $1660 but if things play out like I have seen in the past we just may get one more dip this week to the $1600 area before gold truly puts in a bottom. Because gold went from a new high all the way down to Friday’s panic selling washout instead of a controlled ABC correction I feel a bottom will be more of a one day event. This type of bottom carries more risk and is more difficult to time and trade. So scaling in with a small position at this level and adding on a drop to $1630 then $1600 could prove to be the safest way into a gold position.


Forward looking I see gold bottoming over the next week or two then a nice relief rally to the $1775 area. Depending on how gold arrives there will alter my next gold forecast so let’s wait and see how things unfold.

Spot Silver Price Forecast – Weekly Chart:

Silver I call the "un-Safe" haven because to me it’s not a safe haven in the way everyone’s believes it be. I hear and see everyone including friends and family selling all their stocks and putting their money into silver. To me buying large amounts of silver with your retirement money is just ridiculous. I m sure my statement here will trigger an inbox of silver perma bulls (silver bugs) to send me hate mail but that’s fine as my assistant filters my emails so I don’t have to keep being reminded how rude some humans can be over an simple opinion........

Investments that can lose 25% in value within 2 days or lose 40% of it’s value in 5 months should not be traded nor invested in with large portions of anyone’s life savings, especially if you are over the age of 50 and have not proven to be a constantly profitable trader. No one can stomach losing that much of their nest egg.

That being said I do feel silver is in a similar situation as gold. I do feel a bottom is near. Silver has formed an ABC correction and the price and volume patterns seem to be in line with a typical bottoming pattern. After Friday’s massive selloff I feel silver may slide a little lower yet before putting in a bottom.
One thing to keep in mind with silver is that it is very thinly traded; there are a lot of speculative traders involved which push and pull the price to extreme levels on a regular basis. So if the broad stock market continues to sell off sharply then I expect silver to follow suit.


Pre-Week Precious Metals Trend Analysis Trading Conclusion:


The price action we have seen this year for both gold and silver indicate were are just warming up for something really big to happen. It could be a massive parabolic rally to ridiculous new highs in 2012 or it could be a large unwinding of the safe havens as countries sort out their issues and the big money starts moving out of metals and into currencies and stocks.

Only time will tell and that is why I analyze the market multiple times per week to stay on top of both long term and short term trends. So if you want to keep up with current trends and trades for gold, silver, oil, bonds and the stocks market check out TGAOG at The Gold and Oil Guy.com


Thursday, September 22, 2011

David Banister: Gold Continues to Correct as Forecast in a 4th Wave Pattern


I got a bit of hate email over the last few weeks from the Gold Bugs who thought I didn’t know what I was talking about when I forecasted a multi-month consolidation and correction in Gold was imminent. I’ve written ad nauseum about crowd behavioral patterns as they related to both stock markets and precious metals. 

It should not come as a surprise that Gold is continuing to drop after a 34 Fibonacci month rally from $681 to $1910 per ounce. That rally came in five clear Elliott Waves and ended with a parabolic race to the top. I consistently warned my subscribers and readers of my articles about not being caught holding the bag and to take defensive measures.

My most recent update was to simply try to figure out whether the continuing correction in Gold would take the form of an ABC pattern or an ABCDE Triangle Pattern. It is becoming more clear that the official pattern is ABC. In English it means that the first leg down from 1910 to 1702 was the “A” Wave, the rally back up to 1920 was the “B” wave. 

The C wave is continuing underway and one of my longstanding targets is $1643, which is a Fibonacci fractal relationship to the prior lows and highs, and also conveniently fills in a “Gap” in the Gold chart in the 1650’s.

During these 4th wave consolidation periods, it reduces sentiment back down to normal levels and lets the economics of the move in Gold catch up with the price action that was extended. The first area to watch is the retest of $1702 spot pricing for a C wave low, but the evidence is for a further drop to $1643 before I would get too interested in trying to game Gold to the upside.

Here is the chart I sent out 9 days ago with Gold at $1837 forecasting a possible C wave continuing lower:

I’ve stayed away from either shorting Gold or going long gold while I watch and confirm the 4th wave pattern. It’s simply the smart way to go knowing that upside will be difficult to obtain and downside risks are high. It does now appear that I am eliminating the Triangle pattern and sticking with the ABC Correction with the C wave still working its way lower. If $1702 breaks, then you should expect to see 1620-1643 as next pivot low ranges.




If you’d like to stay ahead of the SP 500, Silver, and Gold trends, check out TMTF at Market Trend Forecast.Com and take advantage of our free occasional reports or a 33% 48 hour coupon to sign up for 5-7 updates a week.

Chris Vermeulen: Recent Market Trends Remain in Place ..... Get Positioned!


What a trading session Wednesday was with the FOMC meeting and the FED coming out leaving the Fed Funds Rate unchanged at 0.25% and saying the economy is looking weak and will not likely to get better any time soon. This wave of negative news triggered a selling spree across the board in stocks, metals, and oil. On the flip side all that money being pulled out of those investments was being dumped into bonds and the dollar currency.

So the question everyone is asking is why almost every asset class sold off after the Federal Reserve’s statement today? The next question is how do we position ourselves to profit?

Understanding how the market moves is not a simple task, if it was that easy everyone would be pulling money out of the market on a daily or monthly basis. With that being said, moves can be anticipated if enough indicators are pointing to the same outcome.

Gold, SP500 and Oil 10 Minute Charts Showing Todays 2:15 FED News
Over the past few weeks we have been seeing stocks, oil, and gold turn bearish with similar price and volume action. Having three major investment vehicles hinting towards a move in the same direction as each other increases the odds for that move to occur. With the Fed coming out with negative news and no quantitative easing on tap, a rally in the dollar was triggered because inflation (printing of money) is not in the picture for some time still.



Bonds and Dollar Index 10 Minute Charts Showing Today’s 2:15 FED News

Now if we look at the safe havens we can see the positive side to today’s news.

Bonds have been trading higher for some time and the key in trading is to trade with the trend. Though it’s easier said than done… In this morning’s pre-market analysis I talked about bond prices and how they are looking toppy but we need one more large surge higher before I will consider looking for a short trade setup. Today’s news sent bonds surging higher which I feel will happen for a few more days. Once the momentum stalls out of bonds, then I may be looking to short bonds using the TBT inverse bond fund.

The fact that there is no quantitative easing planned is bullish for the dollar. Stepping back a few weeks we have seen the dollar index rally very strongly. The move up was an impulse wave meaning a trend reversal from the multi-month down trend. Knowing that the dollar had shifted from a down trend to a strong uptrend prior to the Fed’s announcement today was our tip off to being long the dollar several days ago at a much lower price level.






Mid-Week Market Trend Conclusion:
In short, I feel the intermediate trend (5-20 days) remains firmly down for stocks and crude oil. Silver is more of a wild card because it is more of an industrial metal/speculative investment and it can move at times with gold or down with stocks.......

Looking at gold. I am bullish on gold long term but at this time I remain neutral until I see how the next couple trading sessions play out.

Bonds I remain neutral because they have moved a long way without any substantial pause or pullback and I feel one really positive headline news item could send bonds sharply lower.

The dollar index shifted from a strong down trend to a very strong up trend last month and I feel we could see another substantial rally unfold. I have an 80.00 – 81.00 price target on the dollar index at this time.
Consider joining me at The Gold and Oil Guy for ETF trade ideas on the SP500, crude oil, gold, and silver with great accuracy. Check it out at The Gold and Oil Guy.com

Tuesday, September 20, 2011

J.W. Jones: The SP 500 and the Dollar Ahead of the Fed Meeting


The Federal Reserve is holding a two day meeting Tuesday and Wednesday of this week. Market participants are expecting the Federal Reserve to prop up financial markets yet again with some grand new plan. The fact is the Federal Reserve is running out of bullets.

Interest rates cannot move much lower in terms of the Federal Funds rate, additional quantitative easing seems redundant since Treasury yields are close to all time lows, and finally a twisting of maturities will do little to alter the current economic conditions. The Federal Reserve is just repeating practices which have proven over a long term do little to create jobs or get the economy moving in the right direction. A stock market rally does not help a person looking for a job!

It is possible that even if the Federal Reserve proposes additional stimulus the market could sell off. I have been trading less in this environment and have been focusing on looking for trade setups that could work regardless of price action. For now I am sitting predominantly in cash waiting to see how price action reacts to the news flow tomorrow.

S&P 500
If I had to guess, I continue to believe that the S&P 500 will get back to test the key 1,250 – 1,280 price level. While this resistance level is apparent, Mr. Market will be able to tear up traders if price jams into that resistance zone. Mr. Market loves nothing more than to shake people out of positions. If price works higher I would expect the 1,250 – 1,280 price range to offer just enough risk / reward to get investors and traders involved in a choppy trading environment. The key upside levels on the S&P 500 are shown below on the daily chart of the S&P 500 Index ($SPX):



The flip side of that argument would see the S&P 500 jamming into recent resistance around the 1,230 price level. If prices rolled over and momentum picked up, a test of the recent August lows would likely transpire and could produce a breakdown and a lower low.

When looking at recent price action, the S&P 500 Index has put in a series of higher lows which is a bullish signal, however the S&P 500 has a long road ahead to break out above the 2011 highs. If the S&P 500 carves out a lower high on the S&P 500 Index at 1,230, 1,250, or even 1,280 and subsequently takes out the August lows then the secular bear will be back. The weekly chart of the S&P 500 Index ($SPX) shown below illustrates key support levels:



For now I am just going to sit in cash and wait for Mr. Market to provide me with some better clues. The trading range is pretty wide going from around 1,100 to 1,280. What I will be watching for is a strong move supported with volume that pushes price out of this range. As of the close today, price action was trading around the middle of this range but depending on how price action reacts to the news that comes out Wednesday it is possible that in coming days we could see a breakout in either direction.

Dow Jones Industrial Average
It will likely surprise long time readers that I am actually going to comment on the Dow. I will keep this brief, but I wanted to point it out to readers as I have not heard much mention of this pattern in the main stream financial media.

Over the weekend I was looking at some longer term charts and I accidentally stumbled across this head and shoulders pattern on a weekly chart of the Dow Jones Industrial Average. I rarely pay much attention to the Dow as I monitor the S&P 500 closely. However, I could not ignore what I was seeing. I also noted that a similar pattern also exists on the S&P 500.

I am generally not the kind of trader who tries to predict where price action will arrive in the distant future. However, I am not going to ignore clear chart patterns that I recognize regardless of the time frame I am looking at.

For those not familiar with a head and shoulders pattern, it is a very ominous signal. Head and shoulders patterns are generally topping formations that if triggered result in violent selloffs. On this chart the pattern is obvious and if the pattern were triggered the forthcoming price action would be decisively negative for domestic equities. The long term monthly chart of the Dow is shown below:



If the pattern is triggered on an undercut of the March 2009 lows, the head and shoulders formation would produce selling pressure that would target the 3,800 – 4,000 level on the Dow. Yes, you read that right! I want readers to recognize that this pattern is not a given and it could play out over a long period of time. The pattern would suggest that a test of the 2009 lows is possible, but I will leave the likelihood of that test up to Mr. Market.

I view this pattern as a potential warning signal for long term equity positions. Consequently, it is far too early to jump into a plethora of short positions or sell every equity position owned simply because of this pattern. While I do not know where price goes from here or if this pattern will ever trigger, I think market participants should be aware of its existence.

It would take the perfect concatenation of events to push prices down to the March 2009 lows, but unfortunately the condition of social mood paired with all of the risks facing financial markets is notable. The recent selloff in August came on the heels of a head and shoulders pattern that was triggered. We all know how August played out, but this pattern on the Dow Jones Industrial Average has a long way to go before it can even trigger. Time will tell, but readers should at the very least put this chart pattern on your radar!

U.S. Dollar Index
The U.S. Dollar Index has ripped higher by more than 5% since August 29th. The strength in the Dollar has likely been precipitated by fear based on the European sovereign debt and banking crisis. While the Dollar certainly has long term flaws, it may simply be the best of the worst.

If the situation in Europe begins to break down further based on any number of events it could likely push the U.S. Dollar Index considerably higher. My trading partner Chris Vermeulen has been riding this strong impulse wave with his subscribers Swing trading the UUP etf and thinks there is big potential still if  Euro Land fears continue to rise.

The daily chart of the Dollar Index futures is shown below:



Mid-Week Market Trend Conclusion
Wednesday will be filled with a variety of news and headlines. The Greek government is meeting and a news release regarding the conference will likely come out around the time domestic markets in the United States open. The news has the potential to move markets considerably.


In addition, the Federal Reserve is set to end its September meeting and market participants will be sitting on the edge of their seats waiting to hear from the Federal Reserve about any stimulus the central bank may provide.


Overall, the news and headlines on Wednesday will certainly impact the current conditions of financial markets. Right now I am pleased to be sitting primarily in cash. I have a few positions open, but for the most part the trades are not directional and are profitable based on time decay.

The one directional trade I have on presently is a remaining sliver of a position I have already taken profits from and stops are in place. While I have been risk averse the past few trading sessions, I am flush with cash and ready to accept new risk if high probability setups emerge.


However, the best trade can sometimes be no trade at all and I intend to remain patient. Risk is extremely high!
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Sunday, September 18, 2011

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Saturday, September 17, 2011

The Battle Continues Between the Bulls and the Bears

The battle between the Bulls and Bears continues in the equity markets. This past week the Bulls won with a very positive 5.35% return.

Out of the 6 markets that we track, only two closed with a positive gain for the week and they were the S&P 500 index and crude oil. We consider both of these moves counter trend rally’s. Both the silver and gold markets lost ground last week, with silver closing down 1.89% and gold dropping 2.36%.

The Dollar Index saw some profit taking and closed down .85% for the week.
The Reuters/Jefferies CRB Commodity Index also came under pressure and closed down 1.38% in line with the general trend.

Let’s go take a look at the markets and see how we can preserve and protect and grow your capital in 2011.

S&P 500 Change for the week: + 5.35%
Monthly Trade Triangles for Long Term Trends: = Negative
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Positive
Combined Strength of Trend Score: = + 70

Silver Change for the week: – 1.89%
Monthly Trade Triangles for Long Term Trends: = Positive
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 65

Gold Change for the week: – 2.36%
Monthly Trade Triangles for Long Term Trends: = Positive
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 65

Crude Oil Change for the week: + .91%
Monthly Trade Triangles for Long Term Trends: = Negative
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 55

Dollar Index Change for the week: – .85%
Monthly Trade Triangles for Long Term Trends: = Positive
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = + 75

CRB Index Change for the week: – 1.38%
Monthly Trade Triangles for Long Term Trends: = Negative
Weekly Trade Triangles for Intermediate Term Trends: = Positive
Daily Trade Triangles for Short Term Trends: = Negative
Combined Strength of Trend Score: = – 75

Don't miss our weekend video update.......


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Wednesday, September 14, 2011

You Heard it Here First....Gold Heading to $2,350 Per Ounce After 4th Wave Consolidation

If you have been following David Banister this year you know that he has been hitting the cover off the ball with his gold and markets calls. Where does he think gold is headed?


In my most recent few forecasts for subscribers and public articles I’ve discussed a major correction in Gold, and it dropped $208 within 3 days of that forecast several weeks ago as Gold traders will recall. Last week I wrote about further consolidation being required in what I’m seeing as a either 4th wave likely “Triangle Pattern” that will consolidate the 34 month run from $681 to $1910 into August of this year, or a 3 wave “A B C” pattern. We are right now in some form of C wave, it’s just a matter now of confirming if we are going to get a “D and E” wave to follow, or the C wave drops lower before we bottom.

A Triangle pattern serves to let the “economics of the security” catch up with the prior large movement upwards in price. In essence, the crowd behavior pushed the price of Gold a bit too high too fast, and this consolidation pattern lets the fundamentals catch up to price action. We had a parabolic move I discussed many weeks ago, and those always end badly to the downside. The $208 drop in three days is a typical reaction to a spike run like that. At the end of the day though, I had been forecasting what I call a “Wave 3” top and was looking for a multi week or multi month consolidation pattern before Gold could move higher.

Let’s examine what that triangle projection may look like. 

They take the form of 5 waves, or what we can call ABCDE in a pattern. The biggest drop is always the “A” wave, and that was 1910 to 1702 in 3 days or less. The next biggest drop is the “C” Wave, and that was 1920 to 1793, noting it was a Fibonacci 61.8% drop relative to the A wave. In other words, each successive wave down in the 5 wave triangle is smaller. This is due to the sentiment finally shifting and the trading patterns moving from people chasing the hot sector or stock or metal, to the long term investors accumulating the dips.

If we end up consolidating in a “Triangle”, then Gold should end up looking something like the below pattern I drew, with a target of $2,350 per ounce many months out:


The other pattern we are watching for at TMTF is the ABC Correction pattern. We had the A wave down to 1702, which corrected 50% of the move from 1480-1910 in 3 days. Rarely do you get a major move down like that and not get some type of “re-test” of that low, but because the fundamentals for Gold are strong and getting stronger, we are favoring the Triangle pattern still as most likely. With that said, there is a fat and juicy “Gap” sitting in the chart around 1660 on Gold and dropping down there is what a lot of traders are watching. If that were to fulfill, then we will see an ABC correction ending around $1643, and then Gold will begin another multi month rally to new highs:


At The Market Trend Forecast I teach people my crowd behavioral methodologies and give them reliable forecasts in advance so they can be prepared with their investments. Consider working with us and following the SP 500, Silver, and Gold by going to Market Trend Forecast.com You can take advantage of a 33% discount over the next 48 hours as well.


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Tuesday, September 13, 2011

Adam Hewison: The Big Picture and the SP 500

Let’s take a look at the big picture and what it means today. There are a number times when the markets trade erratically. When this happens, you get out of the market with some quick move either up or down against you. Then, the market immediately goes your way the next day and afterwards you say to yourself, “I should’ve stayed in!”

That’s why it’s important to look at the big picture, and the big trends. What looked like a possible reversal yesterday, did not change the big trends in the markets. It just doesn’t happen in one day.

So let’s look at the big trends in the various markets we cover. Equity markets, the big trend is down. Metal markets, the big trend is up. Crude oil, the big trend is down. The dollar index, the big trend is up. And lastly, the CRB index, the big trend is down. Providing you are trading in the direction of the major trend, you have the odds in your favor. Always remember to keep your trading logs and game plan up to date. They will help you become a better trader.

Now let's look at where the SP 500 is headed.....

The two important lows that were established on August 26th and again on September 6th, around the 1140 area, are shaping up to be an important battleground for traders. The Bulls need to have this area remain intact in order for the market to go higher. The Bears must break through this area to continue the market’s downward trend. Long term traders should continue to be short or be out of the market completely, and in a cash position. Intermediate term traders should be on the sidelines waiting for either a buy or sell signal based on our Trade Triangle technology.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 75

The S&P 500 index closed higher due to short covering on Tuesday as it rebounds off August's uptrend line crossing near 1145.63. The high range close sets the stage for a steady to higher opening when Wednesday's night session begins trading. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term.

Closes below the aforementioned uptrend line would confirm an end to the corrective rally off August's low while opening the door for a possible test of August's low crossing at 1093.50 later this fall. Closes above last Thursday's high crossing at 1197.70 would temper the near term bearish outlook.

First resistance is last Thursday's high crossing at 1197.70. Second resistance is the late August high crossing at 1223.00. First support is the reaction low crossing at 1113.20. Second support is August's low crossing at 1093.50.



An Alternative to Gold That You May Find Interesting

Ready to Bail? Gold Prices Hurt But Holding On

Ready to jump out of your GLD position? If the Market goes lower, Gold should break to the up side. If you are looking for momentum, GLD above 186 is a good sign. Let's also take a look at the gold miners.

Sunday, September 11, 2011

J.W. Jones: What The Social Mood is Saying About the S&P 500


Social mood is absolutely horrible right now. In my experience as a trader I do not recall a similar time frame in my life. Social mood has deteriorated to the point that it would not surprise me to see two grown men come to blows over a fantasy football draft. Oh wait, that happens every year!

In all seriousness, the world seems to be getting more dangerous every day. At this point I think even Mother Earth is socially frustrated as she wreaks havoc all over the world. Earthquakes, droughts, wild fires, famine, hurricanes and the list goes on and on. Politics are as divisive as any time in recent history and the rhetoric is just excruciating. So what does all of this negativity mean for financial markets?

It means that every article is under the microscope and anyone who opposes the view of the writer or speaker reacts with vitriolic commentary that many could conceivable call “hate mail.” People are hurting badly from both an economic and social perspective. You can bet that the current social malaise is going to impact financial markets and I would argue that it already has.

August was a poor month for most investors as the equity indices took a nosedive and sold off sharply. I warned members of my service incessantly to reduce risk ahead of the selloff and I sat in cash as markets were crushed. I received countless emails telling me I was essentially an idiot and Mr. Market was going to kick my backside. Initially they were right, but time proved my analysis prescient.

August was the single best month I have had for members at my service at Options Trading Signals.com. I only placed 3 trades in the entire month. Two SPY trades that were directionally biased to the long side and both produced outstanding profits. I also utilized a time decay strategy for a GLD position which worked out quite well. By the end of the month of August all 3 positions were closed and the gross gain based on maximum risk was over 100%. If a trader risked a maximum of $1,000 on each trade taken at the end of August the trader’s account would have grown to around $2,000.

One of the guys I trade with got his ETF newsletter subscribers in at the bottom for a quick 4.5% bounce then shorted a week later using the SDS inverse etf to catching another 6% on the way down… So as you can see there are many ways to play market volatility

So what is going to happen next? The funny thing is not a lot has changed since my most recent article I
posted back on August 28th. The following chart below still holds sway in terms of overhead resistance for the S&P 500:


In the same article I wrote the following statement:
“In the short to intermediate term, I believe we will see higher prices and a test of the key S&P       1,220 area or possibly a re-test of the key S&P 1,250 price level which corresponds with the     March 2011 pivot lows. Additional resistance would come in around the 1,260 – 1.270 area which marks the neckline of the recent head and shoulders pattern which triggered the selloff in the S&P 500.”

Unlike many financial writers, I am a trader first and a writer second. I put my money where my mouth was and took a trade that got long based on the analysis I provided readers and members of my service. The following price chart illustrates the resistance level that held the S&P 500′s first attempt to rally:


Those of you who do not believe that technical analysis works are wrong. While technical analysis should not be the only metric used to enter or exit positions, basic support and resistance levels can help traders take profits at appropriate times. In addition, laying out longer term support and resistance levels give traders the ability to place trades in a step or tiered system. Essentially, once a trader has identified support and resistance levels the trade can sell into resistance and add to his/her position near support. Technical analysis provides great exit and entry points for astute traders.

My viewpoint of the S&P 500 has not changed much since August 28th. I think we will continue to see choppy price action and a retest of the 1,220 level is likely, if not probable. If the SPX 1,220 price level gives way to higher prices a retest of the March pivot lows will be the next resistance point. The March pivot lows correspond directly with the SPX 1,250 price level and the 50 period moving average will be flirting nearby.

If prices continue to work higher the neckline of the head and shoulders pattern which produced the selloff in early August will be tested. The point that readers should take from this is that overhead resistance is extreme at this point. The following chart below illustrates the key resistance levels and the current rising channel on the daily chart.


While it may sound a bit confusing, higher prices in the near term will likely be bearish in the intermediate to longer term. In my previous article, I commented that I believed we had likely entered the next phase of the bear market and I still believe that. At this point in time I am just waiting for the price action to confirm my suspicions.

The first confirmation that the bear market will have returned would be a lower high on the daily and weekly time frame. The final confirmation would occur if prices rollover and breakdown below the August lows. If the August lows are taken out on a daily and/or weekly close an all-out rush to the exits is possible. Ultimately I believe that risk is increasing to the downside if prices keep working higher.
Right now I’m expecting higher prices unless the ascending trendline of the channel is penetrated on a daily or weekly close. Otherwise, the bullish churn higher will continue. The chart below illustrates the key support levels that if broken could lead to additional downside.


I am expecting to see a test of the 1,250 area before the end of September. It is entirely possible to see a test of the neckline as well which would help suck in retail investors who are scared they are going to miss the move back up. A rally that is contained around the SPX 1,250 – 1,275 price levels could result in a sharp sell off.

All eyes are on the key 1,220 price level to the upside and the August lows. A breakout in either direction could result in a big move. If I had to guess, the thrust higher will end in late September or the early part of October, but I would be remiss not to mention that one headline out of Europe could derail my entire thesis.

The two single largest threats to a stock market advance stem from Europe. The European sovereign debt crisis is one key issue that could alter the marketplace by its own merit. A more silent concern for U.S. equity markets is the impact the European situation will have on the U.S. Dollar.

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