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The Ord Oracle - 7/8/2009

tim_ord — Wed, 08 Jul 2009 20:49:52 -0500

Welcome to “Weird Wally Wednesday” (in honor of Don Wolanchuk who first pointed this time frame out). Weird Wally Wednesday is the Wednesday before option expiration week and on this day and the next couple of days, the market has know to do unusually moves. Therefore expect the unexpected from today into the first day of option expiration week. From our experience is one of the most unreliable periods for success for short term trading. Moving on to the SPY, we have expected another hump on the Right Shoulder to make this pattern symmetric to the two hump left shoulder. There is no “Law” that says that the second hump of the Right Shoulder has to form but there are probabilities that is should. An ideal time for a bounce to start is now (the second chart in this report will show why). There is a gap between 7/1 to 7/2 near 91 on the SPY the there is a chance the market could rally back to that area and finish the Right Shoulder and complete second hump and complete the H&D. If and when the SPY rallies back to the gap level near 91 we would like to see the Volume drop at least 10% on the gap test to show that the gap has resistance. In other words, we would like to see the Volume drop to 191 million shares or less on the SPY on the test the gap level as that would add to the bearish picture. If the gap is tested on 10% lighter volume that would be the best time to add to short positions. Again there is no “Law” that the market will rally one more time to make the second hump of this Right Shoulder. The daily and weekly Momentum indicators have turned down and we expect this decline to last into August. This H&D has a downside target near 82 and a 50% retracement of the rally from the March low would give a target to the 81 level. We have another down side target near 74 that is also a possibility. We will see how the pull back unfolds in the weeks to come. We are short the SPX at 883.92.

The chart below is courtesy www.sentimentrader.com. We mentioned in the first paragraph there is a chance that the market could start a bounce now. This chart above is a host of short term indicators and when they become oversold at the same time then this chart will reach to an oversold area and the chances for a bounce increase. Since today is Weird Wally Wednesday and you should expect the unexpected then this would be a good time for a bounce to start. If the bounce does start, watch the gap level near 91 for a low volume test.

The chart below is courtesy of www.ETFinvestmentoutlook.com. You are probably getting tired of looking at this chart but this chart says it all. The GDX McClellan Summation index is moving down which implies most stocks in GDX is moving down and therefore the trend remains down for now. We are very bullish on the gold stocks for longer term and are expecting all gold stock sectors (GDX, XAU, HUI, XGD.TO) to hit new highs later this year or early next year. A few weeks ago the McClellan Summation index gave a sell signal by crossing the 20 EMA and remains on a sell signal to date. In general we expect the GDX to move lower. A possible area where support and a bottom may form is near the 30 range on GDX. We will see what happens if and when GDX gets there. We are expecting GDX to follow the SPX to the downside and both indexes to bottom together. A possible low may form in GDX around August and possibly as late as September. Physical Gold may hold up well and we will hold our position in GLD.

Dow, Gold, Silver, Oil & Nat Gas Charts

TheGoldAndOilGuy — Mon, 06 Jul 2009 13:30:54 -0500

The technical trader looks at the market much differently than most. While many investors are confused when looking at charts which have been marked up by a technician, more experienced traders look at these charts as a map. Short term financial charts are riddles/maps allowing us to put all the pieces together creating a conclusion on how to profit in the near future.

While there are hundreds of indicators, I focus on a handful which has proven to work extremely well together. The fewer the indicators the more simple trading becomes, allowing me to focus on money management and my trading psychology instead of the charts.

Indicators I focus on in order of importance for ETF trading only:

•    Price action (Candles Sticks)
•    Trend lines
•    Momentum (MACD)
•    Price performance (against the underlying commodity & its stocks)
•    Stochastic Indicator
•    Volume

Ok, let’s get to the charts. When I look at charts I can see these patterns naturally. The reason I draw on them is to show you what I am seeing. This is the best way for learning to become a technical trader. You should read some books on chart patterns and Japanese candle sticks but after that, it comes down to watching charts unfold in real-time.

Dow Jones Industrial Average – US Stock Market Index

This is a chart I put together which clearly shows that we are still in a bear market. Nothing on this chart is bullish for the intermediate term view (2-8 weeks). Short term we are near support and we could see a bounce Monday, but overall we are seeing bearish price action. The high volume selling and low volume rallies are warning the technical trader to protect his positions with hedges or stops.

Also you can see the stocks have formed a short term head & shoulders pattern which is pointing to much lower prices on the Dow (DJIA). This is a very reliable chart pattern which is why I am pointing it out to you.

GLD Fund – The Technical Trader Price Action Chart for Gold

Gold looks to be setting up for another move higher, if all goes well. Currently the price broke its blue downward trend line and now we are waiting for the momentum to turn up which will put the odds more in our favor. Gold stocks are performing well and with any luck the drop in the stock market will send buyers into gold. I continue to wait for a low risk setup before taking a position in gld (gold bullion).

SLV Fund – The Technical Trader Price Action Chart for Silver

Silver continued to slide lower last week and that is because it is not seen as much as a safe haven like it’s big sister GOLD. While informed traders know its value the average Joe does not think to buy silver, they focus on buying gold simply because of the lack of education on their end. Silver can provide massive gains but it does require more risk and skill for locking in gains because of it’ volatility. It does not always move with the price of gold.

Currently we are waiting for silver to reverse and generate a buy signal.

USO Fund – The Technical Trader Price Action Chart for Oil

Oil is sliding lower technically speaking. Support trend lines were broken a few weeks back taking us out of any energy trades. Last week I pointed out the testing of the $39 level at which point sellers stepped in and pointed out that oil was going to have some downward pressure in the near term. The following day oil dropped like a rock as expected.

I did not point out the head & shoulders pattern in oil. If you look at the Dow chart’s head & Shoulder and then back to his chart, you will see the pattern clearly. The neckline was broken on Thursday and that is telling me we could see $33 as the next major support level.

UNG Fund – The Technical Trader Price Action Chart for Natural Gas

Natural gas broke down last week on rising volume. This is telling me that the traders who bought early anticipating the reversal to the upside are bailing out to cutting their losses. This is the exact same thing which USO did before it reversed. I provided the charts last week on this if you want to read more about it.

Anyways this breakdown will flush out the majority of traders and once that is finished prices will reverse and head higher in my opinion. We could see prices drop substantially from here which you can see from my chart below. Traders, who are long, hold on tight!

The Technical Trader Conclusion:

From looking at the Dow chart, stocks are at a short term support level. We could see prices put in a small bounce and trend sideways for a week or two still. But overall it looks like stocks are headed lower. I do not predict price, but I like to point out which way the odds are headed and what to expect if prices follow through with current supply and demand levels. I am very cautious on my long trades at this point moving my stops higher to lock in gains incase the market tanks again this week.

Gold is finding support at the current level but until we get some upside momentum I do not want to take a position.

Silver is still under pressure but looks ready for some sideways price action at this level as it decides which way to go.

Oil appears to be starting a waterfall sell off. Because so many traders are watching and playing oil now, I figure this breakdown will send oil plummeting quickly. At this time I see the $33 level as my first down side target which is a measured move from the head & shoulders pattern and also a previous support level.

Natural gas looks to be starting another leg down. I continue to wait for buy signal for this commodity as I am not jumping on the short side at this time. I may take a short position if I get a nice short setup in the near future.

If you would like to receive my Free Weekly Trading Reports or my Trading Signals please visit my website at: www.GoldAndOilGuy.com

Chris Vermeulen

What’s up with Silver?

Bill Downey — Sun, 05 Jul 2009 22:03:33 -0500

For years silver bulls have been waiting for the fundamentals of silver to finally take hold of price and catapult it into stratosphere. Alas the fundamentals do not provide a good timing tool for price in the short and intermediate term. Silver is a great example of this.

After rising to 21 dollars in 2008, Silver had a tremendous setback during the market meltdown witnessed in almost all markets. When it finally bottomed in November of last year, silver traded as low as 8.60 per oz. The winter rally of 2009 retraced all the way back to the 16 dollar area having recently peaked at the beginning of June. The chart below is a 60 minute chart of July Silver.

Those who are familiar with my work know that price channels play a huge role in my analysis. Of particular note is the intersection of two channels (Red and White Channels). The white channel is a momentum channel, while the Red channel is the trend channel. Notice that price peaked right at the top of the intersecting channels providing a good opportunity to spot a trend change. The confirmation came when price broke thru the bottom white trend line. This signaled a loss of momentum which usually ends up in correction. We can see how the first price breakdown out of the white channel initially supported on the medium term (green line) moving average (June 5th timeframe). Of particular note is the price failure when it tried to move above the fast (yellow line) moving average and failed (June 11th). Notice how price came down and went right thru the medium term (green line) moving average (June 15th).

Look at the break in price and gap after failing that green moving average. This was the exact “sweet” spot of the move. The combination of dual channels and the use of good moving averages can provide the trader or speculator a basis in which he can measure strength or weakness within a market and where the potential pressure points/resistance might be.

Silver has now reached another important area on the price charts. This 60 minute view above provides a little deeper insight to the short term. Notice how price is now perched directly on the larger trend channel (red line) at around the $13.30 area. This is an important short term support area. The initial drop on June 30th was within a whisker of the trend line. The bounce back up during July first and second encountered resistance right at the fast (yellow) moving average and the subsequent drop of July second has price right on the trend line.

You might observe that price indeed does penetrate my channels. Look at the spikes on April 25th, on May 2nd, May 17th, June 3rd, June 5th and 8th. All of these spikes penetrated the channel. But the penetrations are brief and the re-entry back into these channels provides opportunity for speculation and catching the bottom and/or top of short term trends.

What next?

There are two potential things (besides go sideways) that silver can do right now. Each has opportunity to speculate. The first scenario would have silvers price hold the current red trend line at the 13.30ish area and embark on another leg of an uptrend from here. The way to play this one would be to watch for a penetration of the channel and a reverse rally back into the channel. Once in the channel place a stop about 15 cents below the penetration price in case silver falls out of bed. The moving averages will provide initial resistance and the barriers that silver will need to overcome to sustain the new uptrend.

Thus expect resistance in the coming month at the 13.87 – 14.06 area initially at the fast (yellow) moving average. Secondary resistance will be the 14.32 to 14.45 area where the medium term (green) moving average exists and finally the 14.67 to 15.03 area. This last area encompasses the slow moving (Red) average, the price gap on the chart, and the area in which the huge drop in June initially occurred from. Should silver hurdle these resistance areas, then the top of the red channel line would be the ultimate target above the 20 dollar area.

Depending on your style and risk/reward tolerance, there are a few ways to play this should this uptrend scenario unfold. For the more conservative player who seeks more confirmation, he/she could wait until silver vaults over the fast moving average (yellow trend line) at the 13.87 – 14.06 area before initiating a position. Use a stop below the channel line.

Should the rally unfold, one might move their stops up under the moving averages as each new resistance/moving average is overcome. At some particular point the rally will end and you will be stopped out with a nice profit.

The second scenario that can develop from this price point would be for silver to not hold the red channel line and breakdown to its next support area. This is the same 60 minute chart of July silver from the winter rally. This is also a good snapshot so you can see where my channels were first constructed.

In this timeframe we can see the February top and the subsequent sell off in silver during this spring. As you can see below, 11.80 – 12.00 was a major price support area from which the rally into June was launched from. This area is the biggest support area of 2009.

This price area should also be a consideration for silver bulls. Whether you’re a short term trader or an investor, these areas are price points that can be exploited. If you’re averaging in for the long term small purchases in this area are excellent targets.

The chart below is a three year chart of silver courtesy of Stockcharts.com. It is a telling picture of a market that is at a very important juncture in price.

For starters, look at the moving averages. The fast moving average (blue) and the slow moving average (Red) are converging right where price is. These moving averages are not your typical 50 and 200 day averages, but rather one’s I use based on a precious metals cycle.

There is also a trend line that connects the November and April lows (dotted line). Observe how price is sitting right on this trend line as well. Thus we have a confluence of support and price converging at this 13.40 price area in silver.

Recall the other support that I listed at the 11.40 – 12.00 area. I have drawn two red arrows on the chart. The arrow pointing to the right is drawn above the first resistance area from the November 2009 rally. The second red arrow that points to the left is the spot where silver last supported during the correction in April. This is where the 11.40 to 12.00 support area comes from and how I derived it. This leads me to conclude that this particular price area is the most important area on the chart. This is where silver needs to hold to maintain its upward trend.

Should the dotted support line break, then the odds strongly suggest that silver is heading for the 11.40 – 12.00 area where a major test of this rally will occur. I would allow about 15 cents of penetration from the channel. Here’s what to look for.

If the channel is penetrated, first look for it to try momentarily to get back above it. A subsequent failure and a move below 13.20 should be enough to confirm silver is heading towards 11.40 – 12.00 range.

Odds strongly favor that price range. RSI has broken down, so has my own trend indicator (green oscillator), and MACD looks like it’s in trouble also. I use these as coincident indicators. The bottom line is PRICE itself.

Conclusion:

Silver is either going to hold this 13.40 area, and begin another up leg, or a drop below the 13.20 area will heavily tilt the odds towards silver moving to the 11.40 – 12.00 area.

If your accumulating long term, set your next purchase when silver touches the 12 dollar area.

Should we get a cascade effect like last year when all markets collapsed, the potential for silver to visit below 10 dollars still exists. From a technical perspective, should silver break the 11.40 area I would look for a move somewhere to the 8-10 dollar area.

Impossible you say? Never say impossible in the world of commodities. For now, the silver price chart looks vulnerable if we crack below that 13.20ish area. The technicals are also looking bearish. Its technical’s have broken down further than gold due to the fact that silver is also and industrial metal and is reacting to the global recession as well.

For gold bulls, silver can be a great leading indicator for gold as well. Bulls take heed.

Finally, we get to the seasonal factors. The most likely timeframe for the metals to bottom is usually in late summer or fall. October seems to have spawned many bottoms. Thus far this year, the metals have pretty much followed the seasonal script pretty much to a tee. Therefore the odds favor that silver should move in a sideways to lower fashion over the summer. Should we hold the 11.40 area, then most likely a trading range between there and the spring highs would be in order. However, should we break the main channel on the daily chart in this report then the odds will increase that silver will not bottom until this fall or until we penetrate the 10 dollar area, whichever comes first.

During the summer then, we have a couple of key areas. 11.40 -12.00 and 13.20 -13.40 are the two support areas to keep in mind. As far as resistance goes, it’s the 13.87 – 14.06 area initially, followed by 14.32 to 14.45 and finally 14.67 to 15.03 area. Keep these areas in mind over the coming month as one of these areas will probably define both a top and/or
a bottom.

May you prosper
Bill Downey

Trading Commodity Update for GLD, SLV, USO & UNG

TheGoldAndOilGuy — Mon, 29 Jun 2009 07:23:17 -0500

Last week commodities moved higher as investors started buying into the recent pullback in prices. This is a healthy sign for the overall market. This is a quick update for gold, silver, oil and natural gas short term traders.

GLD Gold ETF Trading Chart

Gold has provided us with two great trades this year. Both trades lasted only a few weeks and we locked in profits on technical breakdowns. Many of you have been asking when we will get a short signal (make money in a down market). Well, I don’t like shorting a commodity that is in rally mode. KISS is my mentality and trading only with the major trend is what I focus on.

For those of you who want to short gold (DZZ Ticker) may do so at your own risk, I recommend waiting for an extended rally of 10+ percent in price before you start looking for a technical breakdown to short. The quicker prices rise, the higher chance that a technical breakdown will provide a quick shorting opportunity. Locking in profits within a few days is crucial. In a bull market pullbacks in price are generally quick and short lived.

SLV Silver ETF Trading Chart

Silver and gold generally move in the same direction. These precious metals are looking ripe for a low risk setup. What I am looking for is momentum to turn up along with a reversal candle pattern. We continue to wait.

USO Oil ETF Trading Chart

Oil has had a solid move the past 2 months. This chart is starting to look a little bearish and if what I am seeing is correct for the short term then we could see oil slide lower this week. But in the event prices rally we could get a buy signal within 5-10 days if all goes well.

UNG Natural Gas ETF Trading Chart

Natural Gas has been drifting sideways for over 2 months now. Everyone is excited to catch this reversal when prices start to head north again. Seems like most people are long UNG already from what I gather because of the fear of missing the next big rally.

To be honest I have that fear as well but I do not let it control my trading. As usual I follow my simple trading model and trade when risk is low and the odds are on my side. One thing that traders should remember is that UNG (Nat Gas) looks to be bottoming from a very big sell off. If in fact prices are reversing there will be plenty of opportunities to buy it still. Even though I am really excited for this trade, I continue to wait for my time. I would like to see the momentum breakout and start moving higher before I buy anything.

Commodity Trading Conclusion:

Looks as though money is starting to flow back into commodities. With any luck we could have some buy signals this week. GLD and UNG have the best looking charts for a buy signal currently.

As usual I wait for the trades to unfold and come to use. Keeping risk low, scaling out of trades to lock in profits where there is a technical breakdown and allowing our core position to run for larger gains is my focus. I don’t forecast prices I just analyze prices and prepare for what two scenarios will most likely occur within a couple days.

If you would like to receive my Free Weekly Trading Reports or my Trading Signals please visit my website: www.GoldAndOilGuy.com

Chris Vermeulen

S&P 500 Update

adam_hewison — Thu, 25 Jun 2009 10:40:36 -0500

This is just an update on using the internal forces of the market to time new positions. In this short video we look at the internal workings of the S&P 500 index.

We will be using in this example the free technical tools to help time a position. The number one tool we will be using is the Fibonacci retracement tool which just comes in beautifully in this example.

The second tool we are using is the Welles Wilder parabolic SAR. This tool is very useful for confirming entry and exit points when combined with our Fibonacci retracement tool.

The last tool is the MACD or as it is commonly called the MAC-D. This tool once again can help in timing the entry point using an intra-date chart.

Enjoy the video.

The video is free to watch and there is no need to register. I would love to get your feedback about this video on our blog.

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

Commodity Trading Report - 6/24/2009

TheGoldAndOilGuy — Thu, 25 Jun 2009 07:36:08 -0500

In the past, commodity trading was only available to trader with large accounts, high risk tolerance and a good understanding of how the futures market works. During the past 7 years with commodities making incredible moves and gaining attention from the media, several exchange traded funds (ETF’s) have been created allowing everyone to take advantage of the commodity market.

Gold was the first commodity back in 2002 which really made traders and investors want into the commodity market. Silver was followed shortly after in popularity, then crude oil and natural gas. While most commodities were on fire these are the ones that the media took a hold of and make them well known to everyone as prices soared month after month.

Commodities should have a place in everyone’s portfolio in my opinion. And a simple way of doing that is through the use of etf’s. Below I provide some of the most popular commodity funds known today. I have provided my simple analysis to each fund so you can see how commodity trading is like if you know what you are doing or have someone help you along the way.

I have provided two charts of each fund so that you can see the difference between trading a weekly chart and a daily chart. In short the weekly chart moves at 1/5th the speed of the daily. This is a great time frame for most investors if they want to actively manage their accounts catching market trends. The daily chart requires more analysis and trading because the chart provides several opportunities on a monthly basis. This is geared toward a much more active type of trader/investor.

USO Fund – Crude Oil Fund – Weekly Chart

As you can see from the weekly chart below this fund trends very nicely. I focus on price action, support & resistance levels, volume, trend lines and chart patterns to trade these funds.

Back in March there was a breakout to the upside, then a reversal bounce in April providing another excellent point to enter the oil market. Using my analysis I can locate low risk entry points for oil. This chart provided a trade which lasted several months. The exit point was signaled after there was a trend line break this week.

USO Fund – Crude Oil Fund – Daily Chart

The daily chart below shows a close up of the price action and how to take advantage of these funds. Trading the daily chart allow you to really fine tune trades so that you can squeeze out as much profit as possible. Profit taking is generally done on a daily chart trend line break and the core position will be exited on a longer term trend line break such as the weekly chart. This is shown on the chart below.

UNG Fund – Natural Gas Fund – Weekly Chart

Here are two charts of natural gas. This chart shows the longer time frame and overall interest in the commodity. Volume has picked up as traders anticipate a reversal to the upside.

UNG Fund – Natural Gas Fund – Daily Chart

This daily chart is a little tough on the eyes because of the recent volatility. But you can see the price broke out of is pennant pattern 8 days ago and is now testing support again. I expect this fund to move higher but there are several rules and price patterns which must confirm before any money would be put to work. Just because it looks like it’s going higher does not mean its going right now.

SLV Fund – Silver Fund – Weekly Chart

Silver made a nice breakout back in December. We can see that it had a controlled pullback for a couple months earlier this year. The recent rally is now pulling back and testing the support trend line. This has been a 6 month trade if you were trading the weekly chart.

SLV Fund – Silver Fund – Daily Chart

This is another good example of trading the daily chart because it shows all the noise and opportunities for the short term trader.

GLD Fund – Gold Fund – Weekly Chart

The gld gold fund is my favorite to trade out of them all. While is moves the slowest I find it the most accurate. Gold looks to be setting up for a nice breakout later this year if prices hold up and the US dollar continues to collapse.

GLD Fund – Gold Fund – Daily Chart

Short term traders like myself enjoy trading this fund. While gold looks like a buy at this level I do not risk any money until I have a low risk entry point which is calculated buy price action, momentum and volume. Waiting for the setup can be a painful process but not as painful as losing a lot of money on a trade which had a higher risk level.

Commodity Fund Trading Conclusion:

Trading with etfs and other funds really do make investing much easier for individual traders. Not only can we trade commodities but we can rotate from sector to sector or trade indexes if we feel the broad market is going to rally or sell off. There are always trading opportunities available some where. The key is finding a strategy that works with you’re personality type and staying disciplined enough to follow your trading plan.

If you would like to receive my Free Trading Reports or Trading Signals please visit my website: www.GoldAndOilGuy.com

Chris Vermeulen

Gold, Silver, Oil and Nat Gas Active Trading Report

TheGoldAndOilGuy — Thu, 18 Jun 2009 16:04:04 -0500

Gold has provided two excellent trades for us this year; both had less than 3% downside risk. With any luck we will have another trade soon. Gold has been forming a large reverse head and shoulder pattern since early March and currently trying to form the right shoulder. If this pattern completes and the price breaks the neck line at the $99 level we should see a nice rally towards the $120 - $130 level.

The stochastic indicator turned up in the lower reversal zone this week providing more power to Wednesday’s reversal candle. We could see the price bounce here, but until momentum turns back up I will be watching and waiting for a proper low risk setup.

Silver Trading Chart

Silver pulled back just as we expected it would. The stochastic indicator is starting to turn up and the price of silver is near support. I think we will see some sideways/bounce at this level. Again I am not jumping on the train yet. I prefer to wait for the downward momentum to shift to the upside before putting my hard earned money to work.

USO Oil Trading Chart

Oil has been on a crazy run since the breakout back in May. The oil price is currently at a pivot point and could go either way quickly. A break of this support trend line will trigger speculate traders to sell and that will sent oil tumbling quickly. Those of you long oil should be ready to jump if we see continued weakness. If you are a long term oil bull, then taking some profit at this level and still holding a core position could be a good idea. You can always buy back the shares you sell and if we see lower prices you will benefit even more.

UNG Natural Gas Trading Chart

UNG made a breakout this week from its pennant formation. Volume is telling us that this could very well be the start of a trend reversal (higher prices). This trade setup carried a high risk level which was 12% on Monday. I focus on trades with 3% or less so I was not buying on this breakout. Instead I am waiting for a consolidation which should provide us with a low risk setup in the near future.

Trading Conclusion:

This month commodities are under selling pressure along with most stocks. I continue to wait for the charts to generate low risk buy signals for these funds. On a side note we may get some trading signals for some other sectors which are becoming hot like the biotech and health care funds. I will keep you posted.

If you would like to receive my Free Weekly Trading Reports or my Trading Signals please visit my website at: www.GoldAndOilGuy.com

Chris Vermeulen

Did the S&P 500 Make a Top?

adam_hewison — Wed, 17 Jun 2009 08:50:04 -0500

With the S&P 500 falling to a fresh two-week low, the big question is this a correction, or the start of a major trend on the downside?

I have just finished a short video that details many of the key concerns that we have for this market. If you have not seen our videos before you may enjoy this one. This video does not require a plug-in.

The video is free to watch and there is no need to register. I would love to get your feedback about this video on our blog.

Click Here to Watch Video

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

The Ord Oracle - 06/16/2009

tim_ord — Wed, 17 Jun 2009 08:30:48 -0500

Over the last couple of weeks there have been several divergences showing up. Annual new highs new lows ($NYHL) made lower highs as well NYSE McClellan Oscillator made lower highs as Spy made higher highs. The NYSE McClellan Summation index did not confirm the breakout of June 1 when the SPY jumped above the 5/8 high which also was a negative divergence. The last two days down in the SPY did not show an increase which we would have like to seen to show energy had switched to down but not every turn in the market shows ideal technical behavior The market produced a gap down yesterday (94 on SPY) and that gap may act as resistance. We are short the SPX at 883.92.

We showed this chart last week and have updated it to tonight’s close which is the ratio between the Nasdaq Volume to the NYSE volume. When this ratio reaches this high intermediate term tops have formed in the past and we think it is telling the same story now. The second window from the bottom is the RSI. We have drawn blue trend lines on this chart. When the RSI falls below 50 it implies a top was seen. Today the RSI closed at 48.41 and has triggered a bearish sign. Bottom window is the 20 EMA of the Tick index. Normally the Spy follows the direction of the ticks. The ticks have been moving lower for the last month as the SPY moved modestly higher and did show the buying interests were leaving the market. Over the last few days this indicator hit new recent lows and suggests the buying interest is turning into selling interests and a bearish sign. Today’s push to new recent lows on the Ticks suggests the market has topped out. When the Ticks get below “0” then a bounce could occur. Today’s 20 day EMA of the tick closed at 124.50 and not below the “0” line yet. In general we expect the Market to work lower into July or August.

Below chart is courtesy of www.etfinvestmentoutlook.com. The McClellan Oscillator is an Advance/decline line indicator. Yesterday it hit a new recent low and is showing most stocks in GDX are declining. Also the McClellan Summation index had a bearish crossover yesterday and triggered a sell signal and implies a consolidation that may last several weeks. Previous sell signal by bearish crossovers of the McClellan Summation index with the 20 EMA appeared at the July 2008 top and the February 2009 high (see chart above). This pull back could last in July and maybe August. Physical Gold and the Gold ETF (GLD) may find support near 900 and 90 respectively and we will be holding our GLD positions that were bought at 89.

Long GLD at 89 on 4/24/09. Long KRY at 1.82 on 2/5/08. We are long PLM at 2.77 on 1/22/08. Holding CDE (average long at 2.77 (doubled our position on 9/12/08 at 1.46, Sold 5/13/09 at 1.55=6% gain). Bought NXG at 3.26 on 6/4/07. We doubled our positions in KGC on (7/30/04) at 5.26 and we now have an average price at 6.07. Long NXG average of 2.26. For examples in how "Ord-Volume" works, visit www.ord-oracle.com.

Precious Metal & Energy Trading Report

TheGoldAndOilGuy — Mon, 15 Jun 2009 08:50:06 -0500

We continued to see precious metals under pressure last week. The US dollar moved firmly higher on Friday which sent gold & silver plummeting lower. Oil continued to drift to new multi month highs while natural gas moved sideways.

Gold – GLD Fund – Daily Chart

The GLD fund has been drifting lower towards my support trend line the past two weeks. I figure we will have some action as we wait for a bounce off support or a break down through the blue support trend line. Looks like we are a few weeks away from any possible setup in gold/GLD.

Silver – SLV Fund – Daily Chart

The Silver SLV fund has been moving lower in a controlled manor. We could see prices pull back to the $13.50 level this week. It looks like we are weeks away from any possible setup is silver as too.

Energy Sector – Crude Oil & Nat Gas

I have put together three charts to show you what I think is very possible in the near term for Nat Gas prices. The USO (oil fund) and the UNG (Nat Gas fund) have similar price movements. In short these funds move with the price of their underlying commodity (oil or gas). Because these funds must purchase futures contracts which allows the fund to move with underlying commodity there are some issues with price performance. The funds are affected buy Contango (search “What is USO contango” for more info). In simple terms it means the price of the fund loses value over time and does not track the exact same price performance as the underlying commodity.

These funds must purchase futures contracts and because of the popularity of these two funds they are now large enough to move the commodity price when rotating from one future contract to the next on a regular basis. This helps boost the price of the commodity when the fund rolls over to the next futures contract.

That being said we are now seeing the same issues and price pattern we saw in USO happening in the Natural Gas Fund UNG. Check out the charts below.

USO Oil Fund – Before the Rally – January Chart

The USO fund started to become very popular back in January and volume surged to new highs. This was an early indicator that the trend was getting close to reversing. The increase in demand for this fund became so large that it was actually moving the price of oil as it rolled from one futures contract to the next.

UNG Nat Gas Fund – Current Price (Before the Rally)

By simple looking at this chart of gas and the USO oil chart above you will see the similarities. Demand for the commodity fund is incredibly high indicating a change in trend is getting close. This increase in UNG demand forces the fund to buy more Nat Gas futures contracts and the price of gas becomes much more volatile when the fund buys the new futures contract.

It is important to notice what USO (oil) did after this surge of volume and price pattern was broken. This is provided on the next chart of USO.

USO Oil Fund – The Rally – Current Chart

The price of USO dipped one last time breaking down from its pennant sending price sharply lower only to reverse the following week which was the start of this powerful rally we have been enjoying for several months now. I expect we will see something like this happen with the UNG fund as well.

Gold, Silver, Oil and Nat Gas Trading Conclusion:

Stepping back and taking a simple glance at these commodities we are able to tell if we should be taking action or sitting back and waiting for some low risk/high probability setups.

I do like each of these commodities and investment vehicles for short term trading. But I must resist buying them because I like them and stick with my plan to only enter a position when I have a low risk/high probability setup available.

It is easy to create a trading strategy/plan but following it is a completely different story. Once you can follow your strategy, then you’re ahead of 95% of other traders. I will admit, I’m really excited about this UNG setup which looks to be forming, but I am not jumping in and buying it yet. I follow my trading strategy/rules very closely and because of my strict rules and 3% risk style it’s some times painful waiting for an entry. But I have mastered the way I trade and my yearly goal is to have 10-25 trades yielding 2-10% profit each.

If you would like to receive my Free Trading Reports or my Trading Setups please visit my website at: www.GoldAndOilGuy.com

Chris