Update on SP 500 and Gold, Key Levels Indicated

By: Jeb Handwerger | Wed, Aug 11, 2010
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SPY - Friday closed Monday's Gap

This is an excerpt of a message that was sent out to my premium subscribers on August 8,2010.

The S&P 500 had an exciting and volatile week. It started the week gapping up and ended the week filling the gap as I predicted. On Monday, I told premium subscribers that the market closes gaps and does not like "vacuum" areas. On Friday that gap was closed due to the negative jobs report. The 200 day and the top of Monday"s gap acted as support and at the end of the day reversed higher.

The S&P 500 is overbought and there are some key levels we need to look at this week. If SPY breaks $113.25 on high volume, it would lead me to reverse my bearish bias. If it breaks down below the 200 day and breaks the bottom of Monday"s gap, which is $110.75, it will provide another short opportunity. I believe the odds are in favor of the latter, a breakdown, as there are signs of decreasing volume on this rally and overbought conditions as well.

My goal in this newsletter is to protect reader"s portfolios and provide highly rewarding trades while limiting downside risk. There are occasional periods, such as now, of very negative market signals like high volume sell offs, death crosses, the breakdown of leading stocks and a break of higher lows. This is the first time I have encountered these signals since 2008. I recommended getting out of the U.S. equity market then. I managed to protect my assets as well as the assets of my followers and I am, again, recommending that now. I cannot claim prophecy, but I have studied history and I do see the warning signs that all traders must be aware of. This tactic, though imperfect, protected me from the 2008 bear market when many people were wiped out. No method is foolproof, but it is crucial to have a trading plan and a clear set of rules.

Over time, you will see that discipline and persistence lead to exceptional performance. You can always buy back in when the conditions are more favorable, but when there is risk and negative signs you need to watch out. As time passes, it is clear that it is worth the risk of being "whipsawed" out of the market and being compelled to buy back in at higher prices rather than taking a substantial loss.

Last week our stop was triggered on the SPY short. I will update this week when key levels are broken to the upside or downside. Stay tuned.

Gold Reaching Resistance at 50 day Moving Average

GOLD SPDER Gold Trust Shares NYSE

My article from July 27th, which was published on major financial websites, stated my opinion at a time when many analysts soured on gold. You can check out my archive on Kitco.com or my blog at goldstocktrades.com for further review. I mentioned that gold has come to long term trend support, a 50% fibonacci retracement coupled with an oversold condition. Instead of selling, which many analysts were recommending, I upheld that it was at an important buy point.

Since that day, GLD has rallied sharply up to its 50 day moving average which is now acting as resistance. Clearing this may take some time. Be prepared for a temporary pullback. Gradually, over the next couple of weeks I do expect it to clear the 50 day moving average and the key resistance point which is $119.20. Momentum is on the bulls" side now as the MACD shows an important crossover from an oversold position. RSI has moved above 50 which is a sign of strength. I would like more volume to come in as the Fed will need to make some easing adjustments in the next week. These developments should be good for gold and silver.

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Jeb Handwerger

Author: Jeb Handwerger

Jeb Handwerger

Jeb Handwerger

I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love.

In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family.

Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

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