Thursday, March 28, 2013

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

This past week we received the final 4th Quarter GDP number which came in at 0.39%. The total 4th Quarter growth was terrible, plain and simple. Based on the performance in the equity markets that we have seen thus far in the 1st 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......Read More.


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Tuesday, March 26, 2013

A Look at the Eurozone's 5 Bailouts

Cyprus' bailout deal is the fifth agreed on so far in the 17 strong group of European Union countries that use the euro since the debt crisis began in late 2009.

Here's a look at the rescue programs:


GREECE - Greece has received two bailout packages from its eurozone partners and the International Monetary Fund. Its problems began in late 2009, when the government admitted that public debt was far higher than official statistics showed. That led it to accept a bailout package of 110 billion euros (worth $142 billion today) in May 2010. When it became clear that bailout was not enough _ because the economy kept weakening _ a second bailout was clinched in February 2012 for another 130 billion euros. That included a writedown on the value of Greek government bonds to lighten Athens' debt burden.

IRELAND - Ireland's banks suffered from their exposure to the U.S. mortgage market meltdown as well as to a collapse in the local housing sector. The government stepped in to guarantee creditors and deposits, but the move cost it dearly. As it rescued its banks, the costs grew and soon the government's borrowing rates on bond markets rose so high it was unable to finance itself independently. It secured a 67.5 billion euro package in November 2010.

PORTUGAL - After Ireland's rescue, investors turned their eyes to the next weakest country in the currency bloc. Portugal's economy was weak and public finances shaky. The government's borrowing rates in bond markets kept rising on fears it finances would prove unsustainable. By April 2011 talks on a bailout began. In May 2011, the country agreed to a package of 78 billion euros in rescue loans.

SPANISH BANKS - Spain was considered the next weakest link, which fueled fear among European investors because the country's economy is much larger than those of Greece, Ireland or Portugal. Giving it rescue loans would severely test the eurozone's financial capabilities. The main concern was that Spanish banks, which took huge losses on a collapsed real estate market, would force the Spanish government into rescue efforts it could not afford. The Spanish government agreed a deal in July 2012 with eurozone officials to get up to 100 billion euros in rescue loans directly for the banks. For a few weeks it seemed the Spanish government would also need rescue loans, but its borrowing rates in bond markets fell back down after the European Central Bank vowed to do "whatever it takes" to save the euro. It created a new program to buy a country's bonds if needed, drastically boosting confidence in the eurozone states' public finances.

CYPRUS - The ECB's move calmed markets in Europe for months, but Cyprus' financial problems continued to fester. The country's banks had taken huge losses from Greece's debt writedown and the government also needed saving after it was overwhelmed by the cost of supporting its banks. Cyprus first formally asked for a eurozone and IMF rescue package in June 2012. The talks continued for months as Cyprus negotiated for a better deal, possibly involving Russia. The issue came to a head in March, when Cyprus agreed to confiscate a part of deposits in exchange for 10 billion euros ($13 billion) in rescue loans. That was rejected by the Cypriot parliament and after days of more negotiations a new deal was crafted. Analysts estimate as much as 40 percent of deposits above the insured limit of 100,000 euros would be seized at the country's two largest and most troubled banks. Along with other, smaller measures, that would raise the money needed to qualify for the rescue loans. (AP:LONDON)

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Trading Tips from John D. Rockefeller

John D. Rockefeller was America's first billionaire. After the civil war Rockefeller had a good amount of money with which to invest. He (correctly) believed railroads would become the primary means to transport agricultural products and would open up the vast western lands to eastern markets, trends that didn't bode well for his own produce shipping. He began to look for other business ventures that could be profitable and found a fledgling sector poised to take off.....the oil industry.

However, where he and his partners entered was not in oil production, but its refining. The same railroads that would eclipse his shipping business would help launch his refining venture, as Cleveland enjoyed not the usual one rail line, but two. Transportation costs would be lower and thus his refinery products more competitive.

By the late 1860s, only five years after getting into the oil business, Rockefeller's refining company was the largest in the world. A major reason for his success was a business model that today we call vertical integration. Rockefeller knew that in order to keep costs down, he would have to control both the upstream and the downstream. For example, he even bought his own woodlands for lumber to make his own oil barrels, and built kilns on site to dry the lumber and save shipping weight on its way to (his own) cooperage. His attention to cost cutting was painstaking.

So, can we learn from Rockefeller and put the lessons he learned to work for us in our modern day trading?

Let's try.

Trading like Rockefeller.....

1. Lower your costs. Lower costs mean higher margins and much more resilience during bad times. Rockefeller famously reduced from 40 to 39 the number of drops of solder to close the lids of kerosene cans, saving the company hundreds of thousands of dollars in the long run. He'd also ask for financial statements down to three decimal places, the better to spot inefficiencies in his supply chain and fix them.As investors, follow in Rockefeller's footsteps by investing in companies with low costs, but also reduce the cost basis in the stocks you own.

2. Have you checked lately whether you're getting the best deal from your brokerage? Don't be afraid to take your business somewhere else. Every advantage counts in this fast moving world.

3. Also, are you making the most out of your portfolio? Could you do more with it? It's a good idea to invest a portion (and we do mean just a portion) of your portfolio in equities that can offer higher reward for higher risk. This is especially true if your portfolio is heavy in capital.

4. When the market is turning against you, move on. Had Rockefeller stuck to his grain shipping business, he'd likely not even made a ripple on the pages of financial history. When he spotted opportunity in the up and coming oil industry, he wasn't afraid to abandon what had been a good thing and to take the leap.For us, this advice means sometimes selling companies that are under performing. Knowing when it's time to cut our losses and to turn our capital toward more profitable ventures. The tricky part is knowing when to be patient and hold and when to recognize a true shift in the marketplace....and that comes from reading the signs from Mr. Market.

5. Vertical integration is a hallmark among many strong companies. Part of the reason Rockefeller could edge out his competitors was the fact that he controlled his own supply chain. He noticed very early on that if he did not control many aspects of his production, he would be at a disadvantage when it came to negotiations. And as he expanded his business, he purchased companies that could make the entire refinery process smoother, including pipelines, railroads, and even those woodlands we mentioned.Thus, if we want blue chip companies that will perform well for us over the long term, we should look for firms that are vertically integrated within their own sectors.

6. Patience is key. Rockefeller kept his discipline when he landed in a tough job market after school. As investors, we're looking for companies that can pay good dividends in the long run. However, we must be wary of overpaying for stocks. Being patient, letting the market come to us rather than chase it ourselves, will give us the best bang for our buck.


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Tuesday, March 19, 2013

Making money with Apple using any size account AAPL

If you missed John Carter's webinar last week you missed how he explained his favorite trade setups. In the last couple of days he has used these exact setups to make himself some killer profits trading Apple [AAPL] options. And the best part about these trades is that they can be profitable with any size account.

Watch John's latest two part video HERE

In this free two part video he explains his EXACT entry signal, and how he managed this trade. It's actually really simple and you've got to see this.

And John is holding another webinar Wednesday night at 8 p.m. eastern, in which he explains his trade setups for trading options in detail. So while you are there make sure to sign up for the webinar before all the slots are taken.

Click here to watch two part video and sign up for webinar

See you Wednesday night!
Ray C. Parrish
The Stock Market Club


Friday, March 15, 2013

Is it time to be sweet on Sugar SGG

Our friends at the MarketClub have posted that they are seeing a bullish uptrend arrow for sugar coming from their Trade Triangle technology. MarketClub contributor Jim Robinson says.......

"Sugar looks to be making a Head and Shoulder base and a breakout to the upside would be bullish. A Head and Shoulders pattern isn't a completed pattern until there is a neckline breakout. Waiting for the neckline breakout helps to confirm the pattern is good and will keep us from buying into what looks like a head and shoulders base, but then fails. The weekly MarketClub Trade Triangle is pointing up which is bullish. If sugar trades higher and makes a strong move through the neckline, that puts the odds with higher prices, making this a great chart to watch as big bull move is possibly on the way for sugar"

Here is Jim's chart and technical view of the Trade Triangles for May sugar using SF.K13.E

We are long sugar using ETN ticker SGG




Click here to check out the MarketClub Trade Triangles for yourself!

Thursday, March 14, 2013

The Stock Market Trend & Hot Sector ETF’s

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:

SPY1

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:

XLP
XLI XLU  XLF

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 at The Gold & Oil Guy.com

Chris Vermeulen


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Tuesday, March 12, 2013

How to Find High Probability Trades

The last time we shared a webinar hosted by John Carter he gave out a trade for attendees to take, if they felt like it, that netted John 86k. And he's hosting another webinar this week

No promises on trade recommendations as he only takes what the market gives him, but I really recommend you sign up for this event for Thursday at 8 p.m. est.

Click here for Webinar Sign up

Here is just an idea of what John will be covering......

*    His favorite options trading strategies,
*    How to find high probability trades,
*    How to manage options trades,
*    How to trade options to generate wealth or income from any account size and more.

If you have decided that it's time to start making real money trading, make time for this event.


John Carter's "How to Find High Probability Trades"

Monday, March 11, 2013

Silver Miners, Gold Miners and the Price Of Gold

Silver and silver mining stocks are front and center for investors and active traders. Because of silvers high volatility (large price swings) it naturally attracts a lot of attention.

First you have seasoned investors who are waiting for the right opportunity to get long or short for the next move. Then you have the active traders playing the day to day price swings. Finally you get the gamblers who are salivating over the potential to double their accounts and are riding the commodity on pure emotions (Fear & Greed). All these things compound the volatility for the investment making it headline news and what everyone wants to be involved in.

The focus of this report is show you where the price of gold, silver and miner stocks are currently trading and what to lookout for in the coming days/weeks. Below is a chart of gold but silver has a similar pattern and will follow or should I say lead the price of gold in percentage terms because of its volatility.

Gold Weekly Chart:

Gold has been testing its long term support level for three weeks. I expect we see price start to move quickly sooner than later but there is potential for it to tread water here until the second half of April. We all know the saying “Sell in May and Go Away” and as we get closer to that date we should start to see money flow into the “Safe Havens” being gold, silver, and miners. While this has not happened many times on the charts I am thinking beyond them and of what the masses are likely to flock to when stocks lose their luster.

Also if you have been following the price of the dollar index you know that its getting a little overbought and when it starts to correct the falling dollar should help send precious metals higher.

Gold3


Gold & Silver Miners VS Gold Bullion Performance:

The stock market has certain chart patterns that tell chart readers what the holders of that particular investment is feeling emotionally. Knowing how to read these extreme patterns can yield some big gains and works for most investments types (stocks, bonds, commodities and currencies).

Without getting into the boring technical details precious metal stocks are starting show signs of panic selling which typically happens before a major bottom is put in place. A bottom generally takes a week or two for some type of bottoming pattern or base building to form. This is the most volatile time to be trading these investments so trade with caution.

Gold1

Gold Miners Bullish Percent Index:

Bullish percent indexes are a great way to see how popular an investment is. If you do not know what a bullish percent chart is then you can look it up online and learn more. The way I read it is when it’s up over 75-80 it’s a popular investment and everyone is buying it. It also means it’s in a major uptrend. But you must be aware that when everyone is buying something once price starts to turn down you better be one of the first few out the door before everyone else runs for the door and price crashes.

It’s similar but reversed for investments that are below 20. Everyone is selling, no one wants to own it but once the selling momentum stops price should rebound and rally. Keep in mind this indicator is not great for timing, but confirms that what you are looking at is either oversold, neutral or overbought in the BIG picture.

Gold2

Weekend Precious Metals Trading Conclusion:

In short, I still like gold, silver, and their related mining stocks. I am watching them very closely for signs of a bottom and will be jumping on that train when the selling momentum looks to have stalled. Keep in mind that all these investments are still in a VERY STRONG DOWN TREND and trying to catch a falling knife is not what I do. Waiting for momentum to shift is my focus as there should be big upside if metals and stocks can find a bottom soon. If gold breaks down below key support as posted on the weekly chart then the uptrend may be over and it will be time to start looking for short positions.

You can get my free weekly reports and ideas here at The Gold & Oil Guy.com

Chris Vermeulen


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Wednesday, March 6, 2013

Final Stages of the Advance on SP 500....The Wave Pattern

Our trading partner David Banister has been projecting a potential rally pivot at 1552-1576 for many weeks now. The recent drop to 1485 although harrowing, was a normal fibonacci retracement of the last major rally leg to 1531 pivot highs. Banister believes that this 5 wave advance 1343 pivot lows is nearing an end based on mathematics and relationships to prior waves 1-3.

At 1569 the SP 500 would mark a perfect fibonacci relationships to waves 1-3 for this final 5th wave to the upside. In the big picture, we are still working higher off the 1010 pivot lows on the SP 500, and this rally takes 5 full waves to complete. He thinks we are near wave 3 highs, and wave 4 correction would be up next, followed by another thrust to highs if all goes well this year.

That all said, a multi-week correction and consolidation wave 4 pattern is likely once we pivot at 1552-1576. We should expect this correction to retrace anywhere from 80 -100 points on the SP 500, but one week at a time.

Click here to see his updated pattern views and sign up for free reports.





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Tuesday, March 5, 2013

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Monday, March 4, 2013

Gold, Crude Oil & the SPX Trends and Setups

Over the past year our 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. We are contrarians by nature so when we see the masses running for the door we 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 we're bullish at this price. We 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.

GoldWeekly 

Crude Oil Weekly Trading Chart:

Crude oil had a huge bull market from 2009 until 2011 but since then has been trading sideways in a narrowing bullish range. We 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.

OilWeekly

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.

XLURally
XLERally 

SP500 Trend Daily Chart:

The SP500 continues to be in an uptrend which we are trading with until price and volume tells us 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.

SPYTrend

Weekend Trend Conclusion:

In short, we 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, we 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.

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Friday, March 1, 2013

How to Trade POMO Manipulation

This week I talked about how the uptrend is to be the focus of trading positions until a down trend is actually confirmed via price and volume action. The SP500 was very close to reversing down this week but with the POMO’s (permanent open market operations) scheduled largest injection of money for February of over $5 billion dollars sent stocks soaring jamming stocks back up into its uptrend.

Take a look at the normal daily injections and then look at Feb 27th’s....

pomo2

SP500 Futures 10 Minute Chart Zoomed Back 48 Hours....

MarketPomoPush

SP500 Trend – Green, Orange, Red candles indicate trend direction....

PomomSavesUpTrend

Short Term Trading Conclusion:

Following the bigger underlying trend of the market along with the big money will keep you on the right side of the market more times than not. My trading strategy which is now programmed into my trading system clearly tells me the current market trend, entry signals, profit taking, stop adjustments and exit prices.

Creating a proven trading strategy which works in all market conditions and having it programmed to do 95% of the analysis for you keep my trading emotions in check, saves me time and money and keeps things simple which is the key for long term success. So keep your eye on the POMO’s injection schedule each month for days to focus on long day trades or entry points for swing trades.

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Chris Vermeulen
 

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