Safe Havens are Shining But are Equities About to Rocket Higher?

By: Chris Vermeulen | Sun, Jun 6, 2010
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It was another extremely volatile week sharp rallies followed by sharp sell offs. Fear is in no doubt controlling the market. The bulls and bears continue to battle it out. The charts below cover some important trends and market internals I pay attention to on a daily basis.


US Dollar Index - Daily Chart

The past two months the dollar as been in rally mode. The last 14 days we have seen a large bullish pennant form and this pattern typically marks the half way point for the current tend. The measured move for the USD is pointing to 93 over the next few months.

US Dollar Index


Gold Futures Prices - Daily Chart

Gold as we all know is seen as the major safe haven and the price per ounce has been steadily climbing. Friday we saw the major indexes sell down very hard but both the dollar and gold posted some solid gains. Gold does looks as though it needs some time to digest the recent move higher and this could take a week or two before anything exciting happens but I am on the lookout for low risk setups.

Gold


VIX - Volatility Index - 60 Minute Chart

This index measures the fear in the market. When fear is high and everyone is selling their positions we see the VIX jump in price. Over the past month we can see a possible Head & Shoulders pattern forming. If this pattern unfolds like it should then we will see the price of equities bottom in the coming week with the VIX dropping below the blue neckline. The old saying is "When the VIX is High is time to Buy, when the VIX is low its time to Go".

VIX


Put Call Ratio - 60 Minute Chart

In short, when the put/call ration is over 1.00 then there are more traders/investors buying Put Options than Call Options. Put options are when people are buying leverage to take advantage of lower prices. My thought/opinion about this is when more people are trading with leverage anticipating lower prices, I figure they have sold all their long positions and are now using leverage to profit from lower prices. Well if the majority of individuals have sold everything then in reality there should not be much left to be sold... So I feel this correction which started in April is almost finished.

Put/Call Ratio


NYSE Advance/Decline Line - 60 Minute Chart

This is one of my favorite charts to look at. While there are several indicators, market internals and technical analysis needed to clearly determine if the market is currently overbought or oversold, this chart is one that can help give you a good idea if you should be looking to buy, short or just stay in cash for the time being.

NYSE Adv/Dec


SP500 Futures Prices- 2 Hour Chart

The SP500 has been up and down like a yoyo with some very dramatic moves. Up 2+% day down 2+% the next... very sharp and powerful moves can be both every profitable or costly if not traded correctly. Last week we caught a nice 2% gain in less than 24 hours which was an exciting trade. It looked at though the market was about to breakout to the upside and possibly reach the 1150 level but early Friday morning there were rumors about some Euro bank having serious problems and that was just enough to cause a domino effect sending the market lower throughout the entire session closing on a very strong negative note for the day/week.

That being said the market internals are indicating that equities are oversold at these current prices and a bounce is due any time. With the panic selling on the NYSE Friday reaching 119 sell orders for every 1 buy order I think we will see some follow through next week with lower prices, then a rebound once investors finish selling everything they own at which point we will be looking to get involved again.


Weekly Trading Conclusion:

In short, money continues to flow into the safe havens (Gold & US Dollar). The major indices are showing extreme panic selling and look ready to in the next few days. There is a possibility that the market could break down and start another major leg lower which is a big concern to me. I will be glued to the market internals and support levels for the major commodities and equity sectors in hopes to catch the bottom or to avoid another melt down.

If you would like to receive my Daily Pre-Market Videos and Trading Alerts please checkout my website at: www.FuturesTradingSignals.com.

 


 

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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