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Trading blog Wednesday, December 31, 2014

12/31/2014

I would like to wish a HAPPY NEW YEAR to all the blog readers!

If the broad stock market continues to fall into early next week we may be seeing a good spot to go long.
Gold, silver and crude oil may also be setting up good buy spots on Friday or early next week.

I will post a more detailed update on Friday or during the weekend.

Trading Blog Monday, December 29, 2014

12/29/2014

CRUDE OIL TRADE ALERT and BRIEF MARKETS UPDATE (2:45 pm EST)

Today crude oil is breaking below our stop loss price of $53.60 and is making a new low below the low of Dec.16.
Even though a bottom to the current cycle is due and there is a strong chance that bottom could be in anytime by Jan.9, the target price could still be as low as $45 so I think it is prudent to sell our long positions here, stand aside and wait for a confirmed bottom. We entered this long position at $54.47 so we can get out now with a very small loss (about 1.5 %). Selling our long position in crude oil today.

The broad stock market may be topping out now and getting ready to take some sort of correction. If it falls steeply this week, we may see a bottom and a good point to buy sometime next week. If instead this market makes new highs into next week, a correction could start from a top then, and I will consider selling short. This is another holiday week (New Year's Day on Thursday) so the markets will likely be thinly traded. It is probably best to refrain from opening any new trade positions until the following week. On the sidelines of this market.

After rising close to $1200 last Friday, gold is falling today back to the $1180 area. There are still quite a few bearish signals in this market right now so prices could still push lower this week. This Friday or early next week could be a turning point for gold (and silver), so if we see a low then (that stays above $1140), I will consider going long again. On the sidelines of gold and silver for now.

Trading Blog Wednesday, December 24, 2014

12/24/2014

MARKETS UPDATE (7:45 pm EST)

Not surprisingly, this year's broad stock market "Santa Claus" rally is continuing into the Christmas holiday with the DOW breaking and closing above 18,000 for the first time ever. The S&P 500 is also making new all-time highs this week; however, the NASDAQ is not making a new high and appears reluctant to break above 4800. If the NASDAQ continues to stay below its Nov. 28 high of 4811, we may have a case of intermarket bearish divergence in these indices which could mean another downturn is imminent. This could happen anytime between now and Jan 5. If the NASDAQ does make a new high, the picture is more bullish, but we could still get a small correction from a top that should happen within the next two weeks. Unless directional momentum in the broad stock market suddenly turns bearish, the bottom of any correction now should probably be bought. If these markets continue to rally strongly into Jan.5, we may also have a good opportunity to go short for a strong correction. Markets are thinly traded during extended holiday periods so it is probably best that we are still on the sidelines of the broad stock market for now.

Yesterday gold prices dropped close to the $1160 support level intraday but then snapped back and closed the day near (but under) $1180. While gold could be finding a bottom here, there is still a good chance of it dropping lower. As I stated in my last blog, any serious break below $1140 would be a bearish development, but any correction that holds above $1140-$1145 could be a good spot to go long again, especially if it happens around Jan. 2-5. On the sidelines of gold and silver.

The U.S. Dollar Index has been pushing against resistance at the 90 level over the last two days, and directional momentum is still strongly bullish in this index. If the dollar can break convincingly above this level, it would send gold and silver prices lower. On the other hand, the dollar is very overbought and overdue for a correction. If a corrective pattern unfolds now and the dollar moves down, it would lift precious metal prices higher. We will continue to watch this index carefully to help us gauge the movements of gold and silver.

The Dec.16 low in crude oil at $53.64 is holding as crude appears to be forming a base just above $55. Some sort of bottom should be in by Jan.5 ($53.64 may be it) so I am staying with my long position for now with a tight stop loss below $53.60. Holding my long position in crude oil.

I would like to wish a very MERRY CHRISTMAS to all the blog readers !

Trading Blog Monday (night), December 22, 2014

12/22/2014

GOLD and SILVER TRADE ALERT (7:00 pm EST)

Today gold prices broke and closed just below our stop loss line of $1180, and it looks like the chances of the precious metals moving lower are increasing. Charts for the two gold and silver ETFs GLD and SLV both turned 100% bearish today, and the gold/silver mining company index XAU turned strongly bearish just two weeks ago.
This is strongly suggesting that gold and silver could move lower into Jan. 2. The next support level for gold is at $1160, and after that at $1140. Gold prices may reach those levels over the next week or two so I am going to bail out of my gold and silver long positions now. Silver has not yet broken our stop loss at $15.50 but it came close today, and because silver is more volatile than gold I think it is prudent to cover both metals now. Our entry points were close to our stop loss lines so we can unload these long positions now with a small 1.5% loss. If gold prices do move down and stabilize between (or at) $1140 and/or $1160 by Jan. 2, I will consider going long again. If gold breaks below $1140, it could plunge to the $900 - $1000 area. I don't think that will happen, but a drop to $1160 or $1140 over the next two weeks looks possible and may be a good setup to buy again. Placing trade orders tonight to sell my gold and silver long positions at market opening tomorrow (Dec.23 - Tuesday).

Trading Blog Sunday (night), December 21, 2014

12/21/2014

MARKETS UPDATE (11:30 pm EST)

It was very frustrating to miss out on last week's stock market rally, especially since I had been expecting a bounce (but from a lower target level that was not reached). Again, we had a case of technical analysis being distorted by actions from the Federal Reserve. Nervous investors now seem to hang on every word and subtle nuance in the Fed's statements and Janet Yellen's speeches to the point of ridiculousness. The Fed and Ms.Yellen are aware of this and are very cautious about what they say and how they say it (a much more difficult task for Ms.Yellen as she has to improvise at a live press conference). This is why I was so cautious about going long early last week even though the timing was right for a reversal. Had the Fed or Ms.Yellen conveyed just a slightly more hawkish tone in their Wednesday statements, markets could have broken down with the same ferocity with which they instead rallied.

Fortunately, timing and cycle studies can always tell us what is the best strategy to take moving forward, even after missing a good buy spot. The broad stock market could reverse again early next week, but since we are now approaching the holidays (Christmas and New Year's) it is also possible for this 'Santa Claus" rally to continue into Jan. 5 before losing any steam. What we want to watch for now are signs of intermarket bearish divergence, that is, we want to see if the DOW, S&P 500, and NASDAQ can all break through their early December highs. If all three do, the market will likely be bullish for the next two weeks with the DOW possibly reaching the 19,000 level. But if one or two of these indices makes a new high but the other one or two cannot, it may be a bearish warning (bearish divergence) and a downturn would be imminent. Markets are still quite volatile, so for now I will be making short-term trading decisions based on the patterns that unfold day by day over the next few weeks. Still on the sidelines of the broad stock market.

We now have long positions in both gold and silver (entered last Wednesday). Both metals appear to be basing just above our stop loss levels ($1180 in gold and $15.50 in silver) and still look poised to rally short-term. We will keep a close eye on these stop loss areas as markets are still volatile and there is still the possibility of the precious metals turning down. Holding our long positions in gold and silver.

The U.S. Dollar Index continues to be extremely overbought and it may be forming a top now as we are in the middle of a timing window for a reversal in currencies. Such a reversal would lift precious metal prices, but if the dollar makes a strong break above the 90 area, it could lead to gold and silver turning down. We will watch the dollar carefully now for its effect on precious metal prices.

Crude oil looks poised to rally short-term and we have long positions here as well (but with a close stop loss on the recent low of $53.60). If prices can rally to the $59 area I will consider taking profits on this trade (and possibly selling short) as overall momentum in this market continues to be bearish. Holding a long position in crude oil.

Trading Blog Thursday, December 18, 2014

12/18/2014

OIL TRADE ALERT and BRIEF COMMENT ON THE BROAD STOCK MARKET (3:25 pm EST)

As I discussed in yesterday's blog, crude oil prices may be making a significant bottom and at least a short-term rally could be setting up now. This market is very oversold and a short-term bull signal is now appearing in crude charts. We are also at the end of a timing window for a reversal in this market so I am going to go for a rally here and enter a long position today. This may turn out to be a short-term trade as we can't be certain a long-term cycle bottom is in yet, and any rally could turn down again to find a lower bottom in the target range of $45-$55. Our stop loss here will be Tuesday's low at $53.60 which is very close to the current price of $54.31 (3:00 pm EST) thus giving us a very good risk/reward ratio for the trade. Long-term traders may want to avoid this trade and wait until we are more certain of crude oil's long-term cycle bottom. Entering a long position today in crude oil for a possible short-term rally.

It appears that the broad stock market is ecstatic over the Fed's and Janet Yellen's comments yesterday which stated that they "can be patient" about the timing of the Fed's first rate hike next year. At the time of this writing, the DOW has gained over 300 points. It is obvious that this market is extremely volatile and thus difficult (and dangerous) to trade at the moment. Short-term bull signals are appearing in the DOW, S&P 500 and NASDAQ charts today, but they are being triggered by the volatile surge and may not be reliable buy indicators; and besides, it is a bit late to jump on the rally now. Have we missed our buy spot? Maybe, but it is still possible for these markets to turn down and reach our original target areas of 16,800-16,900 in the DOW and 1,950 in the S&P 500. I will comment more on this market tomorrow (or over the weekend). Still on the sidelines.

Trading Blog Wednesday, December 17, 2014

12/17/2014

GOLD and SILVER TRADE ALERT and MARKETS UPDATE (11:15 pm EST)

It seems I was a bit premature in my assessment of the effect of Janet Yellen's press conference this afternoon. Although the DOW dropped sharply during the first 45 minutes of her speaking (which began at 2:30 pm), the market fully recovered by 4 pm and closed the day with a 288 point gain. The Fed policy statement (released at 2 pm) was carefully worded and conveyed an overall "dovish" (or "easy money") tone (to calm a fearful stock market), but it also contained some "hawkish" elements (to avoid seeming fiscally irresponsible). The Fed modified its previous statement that used the term "considerable time" in referring to how long after October they will wait before raising short-term interest rates. They replaced it with the statement: "Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy." Being "patient" suggests not being in too much of a hurry to raise rates (dovish), but it also implies an underlying desire to do so (which is hawkish) and makes the Fed appear fiscally responsible. The Fed statement gave no reason for investors to think that rates will rise anytime before mid-2015. Apparently this is what the markets wanted to hear, and the broad stock market responded with a strong rally. Markets oscillated a bit during Ms.Yellen's subsequent press conference as her statements at times seemed a bit hawkish, but she managed to preserve her dovish reputation in the end and make Wall Street happy (at least for today).

Even though the DOW rose 288 points today, no technical buy signals appeared in the DOW, S&P 500 or NASDAQ charts so it is possible this surge could be a knee jerk reaction to the Fed meeting, and the broad stock market could start falling again. However, if Tuesday's lows hold (17,067 in the DOW and 1,972 in the S&P 500) we could now see a multi-week rally into early January and possibly new all-time highs. Directional momentum in all three indices is still mixed bullish and bearish so I am going to wait for a stronger bull signal before attempting to buy this potential rally. It is also worth noting that we didn't quite reach our target areas (16,800-16,900 in the DOW and 1,950 in the S&P 500) for a "full" correction. There is still time for a dip down to those levels by early next week which would be a more ideal entry point to go long. Staying on the sidelines for today.

Gold and silver prices reacted down a bit when the Fed statement was released today, but both remained above their current support areas ($1180 in gold and $15.50 in silver) and at the time of this writing (10:45 pm EST) are moving back up. There are several technical and timing factors right now pointing to a significant short-term (and possibly longer term) rally in both gold and silver, and because prices are hovering near their support levels it looks like a good time to go long with tight stop losses on both. I am therefore going to enter long positions in both metals tonight with buy orders for tomorrow's market opening. My stop loss for gold will be on a close below $1180 and for silver a close below $15.50. Because these are close stop loss points and markets are still quite volatile, there is a chance we could get "whipsawed" out of this trade. However, I would rather take a small whipsaw loss than risk a much larger loss (especially in silver) should these markets turn down. Entering long positions in gold and silver on December 18 (early morning).

Crude oil is approaching the end of a long-term (3 year) cycle that could be completed anytime between now and early 2015. Once the bottom to this cycle is in, crude could rally very significantly. Our strategy in trading crude oil now should be to go long (with tight stop losses) at turning points in this market that may represent the end of the current cycle. We are at one of those potential turning points now, and prices may have made a significant bottom on Tuesday at $53.60. As with the broad stock market, however, I want to see more technical signals that signify a bottom before I enter a long position in this market. Directional momentum is currently 100% bearish in crude charts (but it has been this bearish for almost three months now so a bullish shift could be imminent). Still out of this market but watching carefully now for technical signals that could indicate a bottom to the long-term cycle.

UPDATE ON FED MEETING (3:15 pm EST)

OK, the Fed meeting is over, the Fed statement has been released, and Janet Yellen is speaking now as I write
(3:15 pm EST). I will post a more detailed discussion of all this later this evening, but for now it appears that the Fed statement had a "dovish" tone which was cheered by the stock market at 2:00. The markets seem less enthusiastic, however, about Ms.Yellen's press conference as they have been dropping sharply since she began speaking at 2:30. Gold and silver also surged briefly earlier in the day but prices are now falling. Markets close in
45 minutes, and it would be a little premature to trade now before I have more time to assess the effect of the Fed meeting. I may give some trade alerts later tonight which would take effect tomorrow morning.

Trading Blog Tuesday (night), December 16, 2014

12/15/2014

LATE MARKET UPDATE BEFORE WEDNESDAY'S FED STATEMENT (11:30 pm EST)

The stock market and precious metals have been quite volatile this week, most likely in nervous anticipation of the December Federal Reserve meeting that took place today and continues into tomorrow afternoon. The Fed will release a statement with its economic projections at 2:00 PM tomorrow, and Fed Chairwoman Janet Yellen will hold a press conference at 2:30 PM. This meeting is being watched carefully by investors and financial analysts because it is the last one of the year, and many are expecting the Fed to make projections for the upcoming year, especially regarding short-term interest rates and when they will rise. All the markets that we trade on the site are potentially at major turning points right now, so reaction to the Fed's statement tomorrow could be a trigger for reversals but could also be a force to negate expected reversals and push markets deeper into their current trend. We therefore must be very careful trading here. Even though markets have arrived at some of the my target areas, I am waiting to see how they react to tomorrow's Fed statement and Janet Yellen's press conference before making any trade.

The DOW is now very close to 17,000, but there is support down to the 16,800-16,900 area as well so prices could still go lower before turning up. In my last blog I mentioned the possibility of the broad stock market continuing its downtrend (i.e. no reversal) and falling for at least another four weeks. If the Fed's comments tomorrow are strong on raising interest rates (perhaps sooner than mid-2015), it could make Wall Street nervous and accelerate the steep correction that is already in progress. But if the DOW finds support above 16,800 (and the S&P 500 holds above 1950), there is a good chance these markets will turn up before the end of the week. I am now looking to buy these support areas for a short but potentially steep rally back towards the market's recent all-time highs. On the sidelines for now.

Gold and silver are also falling into support areas and could reverse up now. Gold has broken below $1200 but there is also good support at $1180 and even $1160. Silver's strong support is the $15 - $15.50 area. Tomorrow's Fed statement may keep this market volatile for the rest of the week, but unless these support levels break, I am looking to go long on any short-term buy signal for at least a short-term (and possibly longer term) rally.
Still on the sidelines.

Crude oil prices dipped to $54 today and are entering our $45-$55 price range for a final cycle bottom in this market. Prices can obviously go lower, but this market is very oversold and the timing is ideal for a reversal this week. I will therefore be watching the rest of the week for a short-term buy signal here as well. We could be starting a new cycle now (or anytime over the next several weeks). Still out of this market.

Trading Blog Sunday (night), December 14, 2014

12/13/2014

BRIEF MARKETS UPDATE (11:15 pm EST)

The strength of last week's correction in the broad stock market is challenging the idea of a reversal now to the upside (suggested by our mid-December reversal zone) and is presenting the possibility of the market bypassing a reversal and instead falling steeply for at least 4 more weeks into the end of the current cycle. This seems to be the current pattern that is manifesting in crude oil charts, and, indeed, the steep fall in crude prices may be what is triggering a sell-off in the stock market. Despite these observations, cycle structures and timing signals still point to a reversal now so we will look for a bottom to buy next week, especially if prices can find support around the 17,000 area in the DOW and the 1950 area in the S&P 500. On the sidelines of the broad stock market.

As discussed in last Thursday's blog, it appears that gold and silver are turning bullish so our strategy now is to look to buy any corrective declines that stay above the $1140 area. Gold prices fell all last week and are now at the center of a reversal zone for the precious metals. If prices can find support around $1200 next week, it may be a good spot to go long. On the sidelines of gold and silver.

In Thursday's blog I also discussed how a current overabundance of crude oil supplies and likely price manipulation has been pushing crude prices down in a steady fashion that has distorted or flattened the normal rise and fall of prices that would be characteristic of an unmanipulated free market. It appears that crude prices are headed straight down to the bottom of the current cycle which could be anytime by late January or early February but could also be as early as next week. The price target for this bottom is in the $45 - $55 range. We will watch technical and timing signals carefully in this market for a cycle bottom that will likely be a good spot to buy. On the sidelines of crude oil.

Trading Blog Thursday (night), December 11, 2014

12/11/2014

MARKETS UPDATE (10:45 pm EST)

This week the broad stock market is definitely falling strongly into the center of our timing window (Dec.12-15) for a likely market reversal. This steep fall has triggered major bearish momentum signals in the charts of the DOW and S&P 500 which makes these two indices now mixed bullish and bearish (the NASDAQ remains mostly bullish). The DOW has fallen over 300 points so far, but the cycle pattern and technical signals are suggesting the possibility of more downside with the DOW possibly reaching the 17,300 area and the S&P 500 perhaps dipping to the 1980 level. This could happen tomorrow or early next week. These may be good entry points to go long as the cycle structures still indicate that this correction should be brief in duration and will reverse back up soon. Still on the sidelines.

On Tuesday gold and silver prices surged up with a major shift in several technical and cycle indicators that seem to be turning this market bullish. Directional momentum is now mixed bullish and bearish for both gold and silver.
It appears that both metals are now beginning new medium-term cycles and should be bullish for at least another month (probably longer) as long as gold remains above $1140 and silver stays above $14.50. It's even possible that the new long-term cycles in these metals are now starting, and if so, prices could be bullish for some time and would likely move to new all time highs over the next several years. The long-term cycle bottoms cannot be confirmed just yet, however, so for now we will focus on medium and short-term trading. Gold has been rising this week into a reversal zone and still has not exceeded strong resistance in the $1220 - $1250 area so some sort of correction seems imminent. However, because the precious metals seem to be turning bullish, I am more inclined to buy the bottom of any correction now instead of selling short any top. Both gold and silver are down today so a correction may already be starting. On the other hand, if prices surge higher tomorrow and into next week, we may have to wait a little longer for a corrective low. Still on the sidelines.

The U.S. Dollar Index this week aborted a technical breakout pattern it had been forming since early November and is now dropping steeply. This seems to be at least part of the reason for the gold and silver rally. While the bullish directional momentum in this index is still strong, there are signs of it weakening, and the current correction could become more severe. A further breakdown in the dollar would support the bullish view of gold and silver discussed above. A key area to watch in the dollar is 87- 87.5. A clear break below that area would be bearish and could lead to a breakdown of the dollar.

Two major factors influencing crude oil prices recently are a glut in supply (made worse by OPEC's recent decision to not scale back production) and the possibility of the U.S. and EU manipulating prices down to weaken Russia's economy in a new cold war over the Ukraine crisis. One clue that points to manipulation is the distortion of normal cycle patterns in oil price charts. We have been seeing this for several months now as normal sub-cycle structures (i.e. pronounced rising and falling of prices at regular intervals) have been absent in this market as crude prices continue down in a relatively straight sloping line. Because a major part of my trading strategy is based on cycle timing, this cycle distortion has been making the crude oil market difficult to trade as it obscures the normal lows and highs that would be ideal points to buy and sell. In a "normal" market, the timing of the current cycle in crude would point to a brief rally now to be followed by lower lows (possibly down to the $50 area), but this market does not seem to want to rally at all. The end of this week through early next week is a likely reversal time for crude so we could still see a rally that might give us a good spot to sell short. If crude doesn't start to rally by the end of next week, prices may just plunge straight into an early cycle bottom (which could be a good spot to buy). We will have to wait and see if this market can muster a rally over the next several days. Out of this market for now.

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