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Trading Blog Wednesday, January 30, 2013

1/30/2013

UPDATE ON GOLD, SILVER, AND THE SWISS FRANC (4:35 pm EST)

It looks like the Southeastern United States isn't the only place experiencing volatile weather right now. The financial landscape of the U.S. Dollar, the Swiss Franc, and the precious metals is also exhibiting erratic volatility at the moment that is making it very challenging for traders. After giving strong bearish signals over the last several days, the gold and silver markets suddenly shot up today and are already pushing against (but not yet exceeding) our stop loss points for our short positions. This may be a temporary bounce, but there is another factor here that concerns me and that is today's sudden upsurge in the Swiss Franc and drop in the U.S. Dollar accompanied by strong bullish (Swiss Franc) and bearish (U.S. Dollar) signals. We had been anticipating a deep correction in the Swiss Franc and the end of an important cycle, and after it suddenly plunged on Jan. 15 with a strong bearish change in momentum it was looking like that's where it was headed. Today's surge opens up the possibility that the correction will be delayed or diminished (less likely). We haven't yet taken any positions in the Swiss Franc, so our main concern here is the fact that this currency usually moves in the same direction as gold and silver and this may be a warning to abandon our short positions in the metals. Because our stops have not yet been broken in our gold and silver positions, I am going to wait for further developments in these markets over the next day or two before making any trade decisions.
So we remain short in gold and silver for today.

Trading Blog Tuesday, January 29, 2013

1/29/2013

BROAD STOCK MARKET UPDATE (5:20 pm EST)

With the DOW and S&P 500 continuing their bullish rise this week many traders and investors may be tempted to go long now so as not to be "left behind" on a major rally. Alternative Investor strongly advises caution here. Technical analysis as well as cycle studies and timing factors all point to a correction right now. The rise in the DOW has been especially steep and the market is looking overbought. Also note that the NASDAQ is not yet making new highs for the week and is much less bullish than the DOW and S&P 500 at the moment - a further sign suggesting caution. We will therefore continue to wait for a short-term correction and a better entry point into this market.

I would like to make the comment here that the methods I am using to analyze financial markets work best when the markets are freely and openly traded with no interference from the government or powerful individuals and groups that try to influence a market in one direction or another. Unfortunately, we probably have to accept the fact that market manipulation has become a lot more common in our current financial times and will thus cause some distortions in the natural rhythms and cycles of the economy. This is especially true of the broad stock market and the DOW in particular, as it is often thought of as the "pulse" of the economy. In my observations of the broad stock market over the last five or six years I've frequently seen behavior in the DOW (based on chart analysis patterns) that strongly suggests it is being artifically propped up. This tends to manifest as a lessening in the frequency and depth of downward corrections. Again, this type of manipulation is probably more common in the broad stock market than it is in other markets such as gold and silver (although these markets can be manipulated as well). My main point here is that even though market manipulation may distort technical, cycle and timing patterns (as in delaying or diminishing a correction) it usually does not obliterate them, and we can still make valid trading decisions with the data as we factor the distortions into the total equation.

Trading Blog Monday, January 28, 2013

1/28/2013

SILVER TRADE ALERT (3:45 pm EST): More strong sell indicators appeared today in both gold and silver so we are going to reinstate our short positions in silver and continue to hold on to our short sells in gold.
I had mentioned the possibility of shorting silver again on Friday's post, and although silver did drop some more today, we are still getting back in fairly close to where we bailed out a little over a week ago. This correction could easily break below the $30 level in silver and maybe even reach the $27- $28 area, so the short sell is considered worth going for here.

Trading Blog Friday, January 25, 2013

1/25/2013

BRIEF UPDATE ON GOLD AND THE BROAD STOCK MARKET (3:30 pm EST)

Well, it looks like the bears have won the standoff in the precious metals markets and the correction we'd been anticipating for the last few weeks appears to be kicking in. We now watch to see how low the correction will go - it could be considerable. This is good news for our gold short positions, and we may even reinstate our silver shorts next week (if a strong sell signal appears) as this correction in the metals could be extensive.

The broad stock market continues to look very bullish this week with the DOW rising over 270 points. Interestingly, the NASDAQ (especially NASDAQ futures) did not appear as bullish and technical analysis of the NASDAQ charts continues to show some bearish attributes which should make us a little cautious. Cycle and timing analysis also indicate a likely correction now, so we will continue to wait before going long in this market.

Trading Blog Wednesday, January 23, 2013

1/23/2013

MARKETS UPDATE (3:35 pm EST)

The standoff between bulls and bears continues (so far) this week in the precious metals markets. Gold continues to look a little more bearish than silver and so we are staying with our short positions in gold (we bailed out of our silver shorts last week). We are watching carefully for a further correction down in both these metals. In the event of a sudden and clear "breakout" (say, gold above the 1720-1730 area, silver above the 33-34 area) we may have to abandon our bearish stand.

The broad stock market is flashing more bullish signals this week but is also due for a correction, so we continue to wait for a better entry point to go long here.

Crude oil has risen only slightly since last week's terror attack on an Algerian gas plant, and the price is now pushing against a resistance level in my chart analysis. We are also in a time window for a likely reversal. We may attempt a short-term short sell here if we get a strong sell signal, but oil is looking somewhat bullish medium to long-term and we may just wait for a correction and then go long. Still on the sidelines here.

Trading Blog Friday, January 18, 2013

1/18/2013

MARKETS UPDATE (3:30 pm EST)

This was a very difficult week for trading as the markets gave lots of mixed signals and conflicting signs. I would like to point out here to blog readers that I carefully analyze the markets every day but usually only post a new blog entry when there is a significant change in the markets that would alter trading strategies. (Rest assured that I don't take vacations from this daily analysis as I am investing my own money in these trades!) I will always, however, comment on the markets at least once a week. The purpose of this blog and website is to present in a relatively simple and straightforward manner the results of my analyses, and I try to avoid rambling financial news chitchat (which you can find on other websites and blogs).

TRADE ALERT: It is looking like the correction we were expecting in the precious metals may be delayed some more as both gold and silver appeared more bullish this week. This market is very tricky right now and is hard to call because there are strong bullish and bearish factors influencing it. There is a possibility here of significant rallying before we see that correction. We are still within a time frame or window where a reversal is likely, but we move out of that window next week. Silver is looking a little more bullish than gold this week as it broke through some resistance and stop loss points while gold did not. Based on all this, I am going to take the strategy of bailing out of the silver short positions for now and holding on to the gold short positions until next week. If the correction does not kick in next week then we will bail out of the gold shorts as well. If the precious metals do start to turn down next week, then the gains in the gold shorts will compensate for some of the silver short losses. (Note that silver is usually more volatile than gold and presents more of a risk when trading - especially short term trading).

The major correction we have been anticipating in the Swiss Franc seems to be happening now. On Tuesday this currency plunged and broke several support areas and it could continue further over the next several weeks and possibly go much lower as a significant cycle here comes to an end. As mentioned in the last blog post, a downtrend here would support the case for a correction in the precious metals because these markets usually move in the same direction. We will wait for the bottom of this correction before going long in this currency.

The broad stock market continued to be fairly stable this week. The DOW rallied some, but the S&P 500 and NASDAQ were relatively flat. There was not much change in the balance of bullish vs. bearish factors in these markets so we will continue to remain on the sidelines until the directions are more clear.

The price of crude oil abruptly shot up on Thursday following the news of an attack by Islamist militants on a natural gas plant in Algeria. This caused the appearance of several bullish technical signals on the crude oil charts. This may be a bullish development, but if the political tension eases in coming days it could turn out to be just a temporary glitch in crude oil prices. We will remain on the sidelines here and wait for a stronger directional signal for oil.

Trading Blog Friday, January 11, 2013

1/11/2013

MARKETS UPDATE (3:35 pm EST)

The broad stock market was pretty quiet and stable this week, maintaining its gains after the resolution of the fiscal cliff crisis had kicked it into high gear the previous week. Some more bullish signs appeared in the markets this week, especially in the S&P 500. Nevertheless, the DOW, NASDAQ, and the S&P 500 are all approaching or touching resistance zones right now and timing factors indicate a possible short-term correction. We will therefore continue to stand aside these markets and wait for a clear signal and better entry point to establish a position (probably long).

Crude oil , like the broad stock market, looks like it may take a short-term but possibly significant correction here, and we may even attempt to sell this market short on a strong sell signal, possibly next week. For today, however, we remain on the sidelines.

Gold and silver rallied this week and made us a little nervous with our short positions, but both are strongly down today and the bearish factors influencing these two markets are still strong. We will continue to hold these short positions and will watch the precious metals carefully for a reversal after further downside movement.

The Swiss Franc also rallied strongly this week and is looking super bullish. Yet, there are still many factors that indicate a strong impending correction in this market so we will continue to wait for an entry point into this currency. A correction here would also support the argument for a reversal in gold and silver as these markets tend to move in the same direction (and opposite the U.S. Dollar).

Trading Blog Friday, January 4, 2013

1/4/2013

BROAD STOCK MARKET UPDATE (3:00 pm EST): Amazingly the House and Senate came to an agreement early in the week on a fiscal cliff deal and the DOW responded enthusiastically with a whopping 300+ point gain on Wednesday. From a technical analysis standpoint many resistance levels were broken, and our strongly bearish view of this market needs to be tempered now, at least for the short-term and maybe medium-term time frame. (The long-term view of the broad stock market - i.e. beyond 6 months - still presents a dire picture). The very strong bearish signals that appeared in the markets last week were completely negated this week on the news of the fiscal cliff agreement. Such a rapid switch from bearish to bullish obviously gives positive momentum to the markets, but it also hints of volatility on a deep level that may be foreshadowing a major impending downturn or correction. Note that even though much of the fiscal cliff crisis was averted this week (most notably by extending the Bush-era tax cuts for the vast majority of Americans), some major issues were put off (the debt ceiling, spending cuts) and another fiscal cliff crisis may be looming over us in a month or two. We are therefore maintaining caution with the broad stock market but will go long if strong buy signals indicate a substantial short-term or medium-term rally. Right now the signals are a bit mixed so we will continue to stay out of this market.

Trading Blog Thursday, January 3, 2013

1/3/2013

TRADE ALERT (8:40pm EST): I am posting a late trade in silver here as I did not have a chance to analyze all the markets before they closed today. We have been watching silver very carefully to sell it short (we have been maintaining a short position in gold for the last three weeks) and today the silver (and gold) charts were looking very bearish with several sell indicators appearing so we are going to place a short sell in silver at this time.

I will post an update on the broad stock market tomorrow around 3:00pm EST when the days trading is nearly over and I can better assess what has been a wild week in this market due to the "fiscal cliff" negotiations.

Trading Blog Tuesday, Jan. 1, 2013

1/1/2013

MARKETS UPDATE (2:45 pm EST)

Well, it seems like the resolution of the "fiscal cliff" crisis could be delayed some more - maybe into the end of this week as the House mulls over what the Senate passed last night. The broad stock market appears (at least temporarily) to be optimistic heading into the new year as evidenced by the strong 166 point rally in the DOW yesterday, but strong bearish technical signals also appeared yesterday in the DOW and S&P 500 indices and the overall picture of the stock market based on cycles and chart analysis is quite grim looking. I am tempted to short the broad stock market right now, but there may be a short-term rally here (perhaps into the end of the week) so we will continue to watch from the sidelines and be ready to sell short soon.

It is looking like gold and silver might also rally short-term right now, but there is a stronger bearish trend in place that will likely keep this market in a downward trend over the medium term. We will therefore continue to hold our short gold positions and still be looking to short silver soon. (Once a significant correction occurs in gold and silver, however, both metals will likely be looking very bullish.)

Crude oil is starting to look a little more more bullish than bearish in the medium to long-term time frame, but we will continue to stand aside this market until trade signals are more clear.

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