Gold and Oil Thoughts and What is Next

By: Chris Vermeulen | Mon, Aug 22, 2011
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The past few weeks have been fast moving with fearful investors clearly in control. As we all know fear is the most powerful force in the financial market and when the hedge funds and the masses get spooked they all dart in one direction like a school of fish. Watching the charts and volume levels it's clear that money was/is flowing out of stocks and into precious metals as the risk off safe play. This was explained in last week's report on how the GLD etf can be used as a fear/sentiment indicator (read here).

To make a long story short, I feel as though Euro-Land is going through something similar to what we (the USA) went through in late 2008 and first quarter of 2009. Keeping my analysis simple and to the point it's very likely that Euro-Land will resolve their financial issues and their stock markets will bottom in the next month or so... If their market bottoms, so will the US market, which will be perfect timing as the market is currently oversold, sentiment is now turning bearish and we have had a sizable pullback in line with normal bull market corrections.

My thinking looking forward 2-6 weeks is that stocks rally, financials rocket higher, bond prices fall, gold falls and oil rises as it will be a risk off trading environment again. Of course all this would happen after Euro-Land resolves some of their key financial issues. I'm being very optimistic here but we could be nearing a major low that could kick start another massive 1 year rally.

Stepping away from that longer term outlook let's take a peek at the shorter term trends for oil, gold and stocks.


Crude Oil 60 Minute Chart (1 month view)

The recent price action for crude oil remains bearish/neutral in my opinion. We saw a drift higher into resistance with declining volume then a sharp pullback on heavy volume. This tells me oil remains in a down trend. It may be forming a base which would act as a launch pad in the coming weeks for higher prices but only time will tell and I will update as price unfolds.

Crude Oil 60 Minute Chart


Gold 4 Hour Chart (One Month View)

Gold has been performing very well for our entry point but the recent price action is starting to look toppy. Gold and many commodities regularly form this pattern of three wave pushes to new highs just before a sizable correction takes place. I am bullish on gold long term and for a few more weeks, but I do feel as though there will be a multi month correction in the price of gold (Read More) soon so be sure to tighten your protective stops as price moves higher.

Gold 4 Hour Chart


SPY ETF Weekly Chart (Two Year View)

The stock market has been hit hard and a lot of damage has also been done to the charts on a technical stand point. The amount of damage and fear that has happening generally takes some time to stabilize and heal before another move takes place. Until Euro-Land resolves some of their major issues the US market will be held hostage and under pressure. So I anticipate several weeks of volatility and wild daily price swings similar to what we saw in July of 2010. This type of trading environment can work very well for options traders (Read More).

SPY ETF Weekly Chart


Weekly Trading Conclusion:

In short, the market price action is favoring very short term traders (day traders). We are seeing complete price swings which can normally be swing traded happen in just hours... Until we get another extreme setup or stabilization (less big headline news) in the market we will be more of a spectator than a trader to preserve capital.

 


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