Stocks and Commodities Are Trading Predictably

By: Chris Vermeulen | Wed, Dec 16, 2009
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It's been a great week so far. Stocks and commodities are moving as expected from my weekend trading report. I like to see the market unfold in a calm collected manner.

The US dollar has made a nice move in the past couple weeks. Although it has broken out of its down channel I think there is a lot of short covering going on making this bounce more powerful than others. Also it is important to note that it is near resistance which could dampen things around the $77-77.5 level. If the dollar heads back down I expect gold to start making a move back up which it started to do Wednesday.

Below are my thoughts and charts about what I think is unfolding for both stocks and commodities.

DIA - Dow Jones Index Fund

The DIA fund has performed just the way I thought it would. Push to a new high then sell down. Generally I would expect this move down to test my support level or trade near that level, but because we are heading into the holiday season and volume is light the market has a natural tendency to drift higher. I'm sure this is why it's still trading near the high.

This new yearly high was enough to suck in breakout traders and only time will tell if they get follow through or get shaken out of this trade also. Oh, the joys of buying a breakout in an over bought market condition J

GLD - Gold Exchange Traded Fund

Gold broke down sharply from its trend channel and has settled into a support zone. Wednesday we saw a nice bounce but the question is, is this a rally or a sucker's bounce?

I've found the best setups and moves occur after an ABC retrace. The black lines on the chart show exactly that type of price action. These retraces shake out most short term traders before starting a new rally. There is a thin dotted blue line showing a possible resistance trend line which would need to be broken after the ABC retrace pattern has formed if we want a low risk setup with a sizable win/loss ratio.

SLV - Silver ETF Trading Fund

Silver is in the same boat as its big sister (Yellow Gold). We just need to wait for a high probability setup to present its self before putting any of our hard earned money to work.

USO - Crude Oil Fund

USO has provided some great short term gains for anyone who used my analysis from my Sunday night report. The quote and chart below covers my thoughts for USO.

Sunday night report:

"Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play."

UNG - Natural Gas Trading Fund

Natural gas is still very much a speculative play as everyone thinks they will make huge money from this commodity.

This means two things in my opinion:

  1. It's still headed lower
  2. After rallies the sellers jump back in.

UNG is trading near resistance and it could provide a great shorting opportunity in the coming days.

ETF Trading Conclusion:

Although it's been a quite week in the market, I have really enjoyed it. Not sure if it is related to everything unfolding in a controlled manner or the holiday season nearing, or maybe both?

November and December have been quiet for our ETFs but I know we are on the verge of either a large move up or down in the coming weeks. Let's watch the market and funds unfold and see if we can get another trade or two in before year end.

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Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
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- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/