Gold Miners Index May Be Warning Us...

By: Chris Vermeulen | Thu, Feb 10, 2011
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The past couple weeks I have been keeping a close eye the price of gold and the gold miners index. I check to see if its pointing to higher or lower prices in the near future using inter-market analysis, price and volume, along with technical analysis. At this time the charts are still pointing to lower prices in the coming days or weeks.


Taking a look at the daily chart of Gold

As you can see it has formed a bear flag with declining volume and the price has drifted up into a resistance level. This combination typically leads to lower prices.

With international fears floating around and the fact that inflation has started does make me a little weary of shorting gold but one thing I have learned over the years is that trading on fundamentals and news clips seen on TV is not a reason to pass on a setup if one forms in the coming days. The only thing that pays in the stock market is when the price action goes in your favor. This is why I focus on price, volume and momentum while avoiding what others are saying elsewhere. Trading is a numbers game and I put my money on the table when the odds are clearly favoring one direction. Unfortunately I am trading trades against what the masses think and feel is the right thing to do.

Gold Futures Chart 1

Gold Miner stocks are forming much of the same pattern as gold bullion but today (Wednesday) the chart actually put in a possible reversal candle. If this is correct then we should see gold and most likely silver follow suit tomorrow by moving lower and possibly even start a correction.

GDX 2


Gold Swing Trading Conclusion:

In short, gold stocks sold off strong today while both gold and silver closed only slightly lower. When this happens near a resistance zone, with a bearish price and volume patterns I start to look for a shorting opportunity. It has yet to happen and I'm not going to jump the gun, but I am waiting for the right opportunity to take advantage of these trading instruments.

 


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Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
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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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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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