Market Meltdown and Metal Missiles - SPX, Gold, Silver and Oil

By: Chris Vermeulen | Wed, Jun 30, 2010
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What a nutty week for the equities market! The bleeding has not led up with almost 2 weeks of straight selling. Also we are seeing oil break down with a rather large bear flag and if that happens, which it looks like it will... then hold on tight or cash out of the market!

There has been nothing but negative news for the past month and its not looking like there is much light at the end of the tunnel for a long time still... The only places which people feel some safety is in gold and silver. That being said the market is way over sold here and we could get a bounce lasting a couple days soon. But that bounce will be sold and pulled back down as it looks like a new bear market is starting.

Here are few charts of how I am seeing things in general.


Gold ETF GLD - Daily Chart

Gold has formed a large cup & handle pattern. It has held up well during the recent weakness. But zooming into the intraday charts I do have some concerns about a sharp sell off in the very near future. We recently bought gold at $1226 and sold out between $1255-1260 a couple days later because it's not just screaming at me as a great buy. I am not a gold bug, I'm a trader who finds low risk opportunities, gets in and out with maximum profits and minimal draw downs spending most of my time in cash. They way I see things is that there is always another trade just around the corner.

Gold


Silver ETF SLV - Weekly Chart

This is a weekly chart and goes all the way back to 2008 showing a very large cup & Handle. We could technically still see silver trade sideways for several months before it reaches the apex and is forced to breakout in either direction. The up side potential for a cup and handle pattern is 100- 300% of the height of the cup. So this means $1450 gold and $29 silver using the minimum potential. Now you can see why so many people are buying precious metals... they want a big move... All that excitement and greed could catch up to them if we see a complete market melt down again which will pull EVERYTHING down with it including gold and silver. This is one of the reasons why I cashed out this week near the high.

Silver


Crude Oil Fund - Weekly Chart

Oil formed a triple top over the past 10 months and has started to head south. We have seen selling volume drop during the test of resistance which is not a good thing. A heavy sell off from resistance as everyone bailed out of the investment sent oil tumbling and just this week oil started to break down from its bear flag. We are looking at USO to possibly drop to the $25-27 area and oil to drop to the $60-62 level over the coming 2-3 months.

Oil


SP500 ETF SPY - Weekly Chart

The SP500 along with several other indexes have formed a head & shoulders patter and appear to be in the process of breaking down through the necklines. If this unfolds then we are looking at much lower prices for stocks. It is important to buy some protection on the down side or get into cash until the dust settles as we can always buy back in, but we cannot get back lost money as easily.

SPY


Mid-Week ETF Trading Conclusion:

In short, I really hate to be negative on the market and economic outlook. I know if the market crashes again the majority of individuals who have worked hard, saved money and invested using mutual funds will lose most of their money in a fraction of the time it took to create the wealth, and that is a uncomfortable thought. Nothing worse than just getting to retire then seeing half of your money vanish.

Anyways, the good news is that we can avoid these market crashes and actually take advantage of them using inverse ETFs which go up 2 or 3 times faster than what the market is declining. These powerful trading tools if used correctly can make us a fortune while others are losing their shirts.

Currently I am in cash and have taken a couple scalp short trades taking advantage of the market falling on Tuesday and again today. These trades only last about 10 minutes but generate some fast profits. You can see the short I did yesterday which explains what I saw and when I put on the trade: http://www.futurestradingsignals.com/trading-education/es-mini-scalp-trade-video/

On another note, Tomorrow is Canada Day and I am Canadian so... I will be done around 10:30am ET once the jobs numbers come out and the market trades for an hour in case there is a nice short or long trade for some quick money - eh!

If you would like to get my trading alerts please check out my websites at www.TheGoldAndOilGuy.com or 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
- Dorman Trading
- 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/