Holiday Squeeze on the Dollar, Gold & Stocks

The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me.

Market Internal Indicators – 10 minute, 7 day chart
This is a simple chart to read if you understand how to trade these market internal indicators (NYSE volume ratio, NYSE Advance/Decline line, and Total Put/Call ratio).

It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions.

The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can’t stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed.

Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…

Rising Dollar & Gold – I Don’t Get It?
That is the question everyone seems to be asking this week. I think what we are seeing is straight forward. Traders/investors are selling Euros because of the issues overseas and are buying the dollar along with gold and silver.

Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don’t see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.

Mid-Week Gold, Dollar & Stock Trading Conclusion:
In short, the equities market is now in a down trend and overbought here. It’s prime for a short position but with the holiday, light volume Friday, and most likely a follow through buying session on Monday I think its best to sit in cash without the stress of wondering what will happen on Monday. Just enjoy the holiday.

Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up.

To receive Chris Vermeulen's Real Time ETF Trading Alerts visit The Gold and Oil Guy.Com




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Stock Market Commentary For Thursday Morning

The S&P 500 was higher due to short covering overnight as it consolidates some of this week's decline. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near.

However, closes below the 20 day moving average crossing at 1106.61 are needed to confirm that a short term top has been posted. If March extends this year's rally, the 62% retracement level of the 2007-2008 decline crossing at 1155.15 is the next upside target.

Thursday's pivot point, our line in the sand is 1127.55

First resistance is Tuesday's high crossing at 1128.20
Second resistance is the 62% retracement level of the 2007-2008 decline crossing at 1155.15

First support is the 10 day moving average crossing at 1114.21
Second support is the 20 day moving average crossing at 1106.61

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The NASDAQ 100 was higher overnight and appears poised to extend the rally into the end of this year. Stochastics and the RSI are overbought but are neutral signaling that sideways to higher prices are possible near term.

If March extends this year's rally, the 75% retracement level of the 2007-2008 decline on the weekly continuation chart crossing at 1947.00 is the next upside target. Closes below the 20 day moving average crossing at 1819.20 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 1882.00
Second resistance is the 75% retracement level of the 2007-2008 decline on the weekly continuation chart crossing at 1947.00

First support is the 10 day moving average crossing at 1848.17
Second support is the 20 day moving average crossing at 1819.20

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Market Bulls Find Themselves Up Against Strong Resistance

The S&P 500 closed unchanged on Wednesday due to a short covering rally, which erased early session losses. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If March extends this month's rally, the 62% retracement level of the 2007-2008 decline crossing at 1155.15 is the next upside target. Closes below the 20 day moving average crossing at 1105.46 are needed to confirm that a short term top has been posted.

First resistance is Tuesday's high crossing at 1128.20
Second resistance is the 62% retracement level of the 2007-2008 decline crossing at 1155.15

First support is the 10 day moving average crossing at 1112.17
Second support is the 20 day moving average crossing at 1105.46

How To Find Winning Trades In Any Market

The March NASDAQ 100 closed higher on Wednesday as it consolidated some of Tuesday's decline. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but are neutral hinting that a additional gains are possible near term.

If March extends this month's rally, the 75% retracement level of the 2007-2008 decline on the weekly continuation chart crossing at 1947.00 is the next upside target. Closes below the 20 day moving average crossing at 1814.58 would confirm that a short term top has been posted.

First resistance is Monday's high crossing at 1881.50
Second resistance is the 75% retracement level of the 2007-2008 decline crossing at 1947.00

First support is the 10 day moving average crossing at 1840.02
Second support is the 20 day moving average crossing at 1814.58

Today’s Stock Market Club Trading Triangles

The Dow closed lower due to light profit taking on Wednesday as it consolidated some of the rally off last week's low. A short covering rally tempered early session losses and the high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If the Dow extends this year's rally, the 62% retracement level of the 2007-2008 decline crossing at 11249 is the next upside target. Closes below the 20 day moving average crossing at 10431 would confirm that a short term top has been posted.

First resistance is Tuesday's high crossing at 10580
Second resistance is the 62% retracement level of the 2007-2008 decline crossing at 11249

First support is the 10 day moving average crossing at 10,456
Second support is the 20 day moving average crossing at 10,431

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