SPX’s Running Correction, Gold’s Setup, Oil Explodes!

February 14, 2012 by  
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The financial markets continue to climb the wall of worry on the back of more Fed Quantitative Easing. Those trying to pick a top in this choppy bull market may prove to be correct for a couple hours but over time the shorts continue to get clobbered.

Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.

The past few weeks the number of emails I receive on a daily basis about what individuals should do about short positions they took on their own has growing quickly. Usually when my inbox starts to fill up with traders holding heavy losses trying to pick a top I know something big is about to happen and its not going to be in the favor of the herd (everyone shorting). In the past couple week there have been some great entry points for the broad market whether its to buy the SP500, Dow, NASDAQ or Russell 2K. I focus on trading with the trend and entering on extreme sentiment readings as shown in the chart below.

Extreme Trend Trading Analysis

Below are my main market sentiment indicators for helping to time short term tops and bottoms. That being said I don’t pick short term tops in hopes to profit on the down side. Rather I wait for a extreme sentiment bottom to be put in place, then enter long with the up trend (Buy Low).

Once there is a 1-2% surge in price and sentiment indicators are showing a short term top I like to pull a little money off the table to lock in some profits while still holding a core position (Sell High). This is exactly what I/subscribers have done over the last couple weeks. This is a simple yet highly effective strategy and works just as well in a down trend except I focus on shorting extreme sentiment bounces. Subscribers know what these indicators are as I cover them each week in my daily pre-market trading videos as we prepare for the day ahead.

SPX Running Correction

Since early September the equities market has been on fire. In late September the market was extremely toppy looking and trading at key resistance levels from prior highs convincing a lot of traders to take a short position. But instead of a correction the market surged and has since continued to grind its way up week after week.

This rising choppy price action can be seen two ways: 1. As a rising wedge with a blow off top (Bearish) 2. Or as a Running Consolidation (Bullish)

The running consolidation happens when buyers are abundant picking up more shares on every little dip. Overall looking at the intraday price action you will see market shakeouts as it tries to buck traders out before it continues higher. This choppy looking market action if not read correctly looks extremely bearish to the novice trader and the fact the market is so overbought it easily convinces them to take short positions. This choppy action is just enough to wash the market of weak positions before starting another run up.

All that said, both a blow off rising wedge and a running correction are very bullish patterns for a period of time. Again I cannot state it enough, trade with the trend and the key moving averages.

Gold Shines On The Daily Chart

The gold story is straight forward really… Trend is up, quantitative easing is back in action and that is helping to list gold and silver prices. Key moving averages have turned back up and gold closed at a new high which shows strength.

Golden Rocket

With another round of quantitative easing just starting and gold making another new high last week there is a very good chance gold stocks will rocket higher in the coming 8 months. I have been following Millrock Resources Inc. because of the team involved with this company. A breakout to the upside here could post some exciting gains if you take a look at the chart and see where the majority of volume has traded over the years along with the bullish chart patterns (Cup & Handle/Rising Wedge) with strong confirming volume. From 84 cents to the $3.50 area there should not be many sellers other than traders slowing taking profits on the way up.

Crude Oil Breaks Out Of Cup

Crude oil has been dormant the past few weeks even though the US Dollar has plummeted. But last week’s news on more QE was enough to send oil higher. The surge took oil prices straight to the 2010 highs as expected and blew past my first target of $86.00 per barrel. I figure it will consolidate here for a while until we see if the dollar bottomed last week or is just testing the breakdown level.

Weekend Trading Conclusion:

In short, the market has played out exactly as we planned and all four of our positions are deep in the money. As we all know the market goes in waves in both price and for trade setups. The past couple weeks were great for getting into trades and now the market is running in our direction. It will take a few days for the market to stabilize (pullback or pause) before we could get anther round of trade setups. Keep position sizes small as the market remains overbought and a sharp correction could happen at any time. Until then, keep trading with the trend.

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Fiscal Discipline and Unintended Consequences

February 7, 2012 by  
Filed under Investment

It’s no secret Ron Paul is expected to chair the Monetary Policy Subcommittee starting next year, and that he intends to properly audit the Fed and US gold reserves as initial steps in attempting to return America to some degree of fiscal discipline. Because there can be little doubt an expanding bureaucracy has hit the limit in terms of what the system can take, which is why you will never see the Fed voluntarily abandon QE2. And this is especially true because of the deflation (of everything from currency to population) peak oil guarantees, not to mention other unintended consequences increasing fiscal restraint would bring. The bottom line here is the bureaucracy will continue to monetize the debt on an increasing basis until the system implodes on itself, which will be the result of uncontrollable rising interest rates and gold prices, which according to Mark Lundeen should be considerably higher.

Impossible? It could be argued it’s already happening, where this week for example, despite a generous POMO schedule this week bonds are falling anyway due to the reporting of uncontrollable price increases and increasing sovereign credit concerns that will surely not disappear anytime soon. So please, don’t be confused by all the propaganda, no matter what the bureaucracy leaders tell you, money printing and monetization practices will remain relentless, although we may get a taste of austerity not many will like as we move into next summer as Mr. Paul does his damdest to fix the world, which will of course prove dangerous to our fiat currency economies at the time. Crashing stock and bond markets in North America will certainly make ‘austerity’ a four letter word as process unfolds, however there is no guarantee another bloated fiat currency system would emerge on the other side of an unwinding, making ‘debt’ an actual four letter word people (creditors) will undoubtedly be paying closer attention to under such circumstances.

In the meantime however, prices have not been falling to support the bureaucracy’s phony inflation reports, so with the retail trade ‘all in’ (to stocks) as reflected in US index open interest put / call ratios, explained here last week, it’s time for a short-term correction. At least that’s what it better be, or the equity complex will be in real trouble a bit early from a cyclical perspective, where we are anticipating a terminal high in stocks during the first quarter of next year, as per the count and patterning presented in the charts below. First we have the long-term Super-Cycle Grid that shows although more room exists for gains, we are entering a cyclical (time-line) turning point.

The second chart zooms in on the lower degree waves to look for clues in the most probable count, etc., displayed below, which in my view would confirm the rising and high probability of an important top being put in place sometime in the first quarter of next year, or shortly afterwards. What we have unfolding here is a typical zigzag, which is a five-wave sequence separated by a corrective three-wave sequence, followed by another five-wave sequence, which you can see has yet to unfold. I have studied the count here for some time and see no other alternative; especially given the big picture where we are expecting a test of the 2009 lows eventually (the larger degree a – b – c sequence in red), so none will be provided.

And as you may know, I also expect the same patterning and timing from gold (and silver) running into next year based on historical precedent (the last big top was in February), where although the cycle might run longer this time because of the higher degree (Grand Super-Cycle?) of the present move, still, some degree of top can be expected at this time, and I can tell you why. Why then? Because our buddy, Ron Paul, will likely be successful in getting enough people who matter pushed over into the Fed audit / austerity camp by then, which will be bad news for the aggregate bubble economy. And again, even if he is ultimately not successful in this regard, he will be making enough noise when he is first appointed chair to get people taking him seriously, which at a minimum will push prudent traders into defensive postures, which means lightening up on equities, precious metals, and anything else associated with the inflation trade.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. We are not registered brokers or advisors. Certain statements included herein may constitute “forward-looking statements” with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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How You Trade the Big Trends in 2011

February 2, 2012 by  
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I hope everyone had a great holiday and new years!

It’s time to reset our profit counter to zero and start looking for new profitable trades along with managing our current open positions on our small cap stocks which we continue to hold with gains of 66%, 35% and 10%.

Last year was a tough one as the stock market chopped around in a very large range giving off buy and sell signals every week and some times every other day… If you understand how to trade optionsthen these conditions can make you a boat load of money.

Those who follow me or trade with me through my trading newsletter know how conservative I am when looking for low risk setups in both ETFs and stocks. And no doubt agree there were some extended periods of time when we did not have any trades because the volatility on a daily basis was making it the risk higher than what I wanted us to take, thus we waited for setups instead of chasing prices. We still locking in some solid gains with 8 winning trades, but feel we can better this year especially if we get less chop and more of a trending market.

It’s safe to say some people just do not like being in cash, hence the reason so many want stock picks and trades all the time. But to be flat out honest, I love being in cash or at least holding a good chunk in cash waiting for a high probability opportunity to pop up on my charts before committing my hard earned cash. It’s better to be wishing you were in a trade than to have all your money tied up in losing positions just because you wanted to be active… Because I give you only the trades I am making with my own money, I think that is the reason things are slower paced, unlike some other newsletters in this industry which fire off new trades each day or week just to keep those addicted (wanting stocks picks all the time) happy.

Anyways, 2011 should be a great year for trading, investing and education. Last years fast paced market I know either took your money and got you really frustrated, or you made money and was able to use the difficult conditions to fine tune your trading and money management stills like I did. 2011 feels like it’s going to start out similar to 2010 where we get a move up into mid January, but once earning season starts the market sells off on the good news for an 8-10% correction.

The good news is that after last years fast paced market and my constant refining of my strategy and money management rules, we should be able to catch the majority of the trends this year both up and down using stocks, regular ETFs and Inverse ETFs.

As much as I would like to forecast what I think will happen this year, I have decided to take the market one quarter at a time to keep everyone more in tune with what’s happening now and a glance forward up to 2-3 months.

Take a look my SP500 charts for the next 3-8 weeks below.

SP500 Index – Daily Chart On this chart you can see that the overall trend right now is still clearly up. But with this current situation I feel one should be on the sidelines waiting for the market tip its hand telling us its headed higher or lower. If it prices start to fall we will look to short the market in order to profit from the correction as long as the market provides an optimal opportunity.

Currently the market sentiment levels are at extreme highs, which is the same as last January and April’s highs. With extreme sentiment, light volume (lack of buyers) and earning season just about to start I cant help but think a nice correction is about to take place which will cleanse the market before the next big leg higher.

If all goes according to plan we should see an 8-10% correction. A pierce of the November low is what I am looking for as that would trigger a lot of protective stop orders and create panic selling in the market. It is panic selling which creates a market bottom. That being said we may not get that large of a correction which is why we must continue to monitor the market closely as my analysis will change with the market.

Jan 2010 SP500 Correction This time last year the market was in a very similar situation with market sentiment, light volume, and earning season just around the corner…

Its difficult to pick tops because they can stay overbought for an extended period of time, bottoms are a little different simply because fear is more powerful than greed and shows it’s self on the charts once you know what to look for and how to trade it. My point here that you should not jump the gun and start shorting just because you think one is around the corner. I prefer to wait for more of a clear signal that sellers are in control then ride the short term down trend and hope it blows up into the correction I think we are about to see.

During bottoms there are new low washouts, and the same goes for tops, we get several small new highs just before the price rolls over, and that has yet to happen.

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Pearl Exploration and Production Ltd

January 31, 2012 by  
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Folks, we’ve got a great one for you this month. Let me introduce you to one of the best investments to come across my desk in a while. It’s got all the elements necessary for a win-win situation, because the folks calling the shots have done it all and done it well before. The company is Pearl Exploration and Production Ltd. and I am very excited about how the future looks like for this company.

In this report we will draw many comparisons between Pearl and BlackRock Ventures (BVI) for reasons we’ll lay out in this article. First a little background on my experience with BVI: US investors in Black Rock Ventures benefitted from a variety of factors including the price of oil. Share prices rose steadily, so investors like me that bought at $4 and sold at $24 had a 600% gain on the share price. Now, this was compounded by a 31% increase in currency. So, after making 600%, add another 180% for a total gain of 780%. I fully expect the same factors to be working for PXX moving forward.

It is my opinion that the stock price of Pearl will follow the same pattern as BVI. To prove my point, we’re going to compare oil price, capital structure and currency gain. After that, you’ll have to make up your own mind. I know which way I’m going….

Among the many comparisons between BVI and PXX there is one thing that remains the same – and this is the most important aspect of what we’re talking about here. Heading up the team both at BlackRock and at Pearl are John Festival, President; Don Cook, CFO; the Pearl team ads Ed Sobel as Vice President of Exploration and Chris Hogue as Vice President of Operations. Remember the old Zapata George adage – we don’t buy companies, we buy management. We bought into this management once before – at BlackRock – and we’re going to buy the same management this time, just with a different name over the door. It’s not the company, friends, it’s the people.

Bear in mind that this sane, well seasoned and competent management team is not taking off in a new direction. They’re doing the same thing that they did at Koch, and the same thing that they did at BVI. Heavy oil is their area of expertise, and that’s what they’re doing at Pearl – nothing new, same old story and same expert team. Another Zapata George adage… “If it ain’t broke, don’t fix it!”

The mission as it stands for Pearl is basically the same as it was for BlackRock, utilizing a three prong approach. There’s a small property that will generate cash in the short term. There’s a long term big property with a very large reserve of oil that can only be achieved through strong secondary recovery methods such as steam, but that holds vast potential. The wild card is the middle “prong” so to speak, which has yet to be identified. There is the potential for Pearl to have a scenario such as Seal was for BlackRock. Through the utilization of this “we’re not going to go out of business” philosophy, the management has shown that they can, and will, make Pearl a success. So, with a long term goal in mind and some intermediate moves that will allow for prosperity, this could go very well. Now remember folks…none of this previous paragraph came from management. These are my projections, not theirs.

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Precious Metals, Oil & SP500 Trading At Key Resistance Levels

January 29, 2012 by  
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Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.

Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.

SLV – Silver Bullion ETF Trading

Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.

Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.

GLD – Gold Bullion ETF Trading

Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.

USO – Oil ETF Trading

The oil ETF broke down from its large multi month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.

SPY – SP500 ETF Trading

The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.

Weekend Equities and Commodities ETF Trading Report:

In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.

That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.

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Stock Market Leaders Are Now Lagging?

January 28, 2012 by  
Filed under Investment

Wednesday’s session closed mixed on the day. The DOW posted a third of a percent gain while the tech sector closed down almost nine tenths of a percent. While technology stocks have been leading the market higher in the recent months, today they took the back seat while the DOW took control.

Take a look at the intraday chart of the SPY price action compared to the tech sector. It’s clear the tech stocks where not in favor today. Some tech stocks that really took a beating today were FFIV, NTAP, APKT and AKAM.

On another note, we are entering earning season and I am wondering if we are going to see a “Sell the New” type of thing again.

The broad market is experiencing a 36 day down cycle which has played a very dominant roll in the market this year. It topped out 9 days ago so we should expect sideways chop or some selling over the next 9 trading session. Because the market is trending up, pullbacks should be shallow.

The market continues to grind its way higher on relatively light volume. I have been waiting several weeks now for the volume to come back into the market but its just not happening. The majority of shares being traded are from banks, funds and day traders as the average investor’s not taking part because of the uncertainty looming. The lack of volume (commitment) to the market from the masses is making the market internals swing from one extreme to another on virtually weekly basis making it more difficult to take advantage of short term extreme sentiment levels.

The current market environment has traders shifting gears to more of a momentum trading strategy to take advantage of trends and this is what I am going to start implementing again as the market expands.

Market Conclusion:

In short, the equities market is in an up trend but looks to be overbought. Also with the downward cycle I don’t think the market will expand here and take off. Rather it will most likely chop around and burn off time until some earnings are released and the cycle bottoms. Unless we get a really sharp reversal down which we have yet to see on the SP500 or DOW, nibbling on small long positions or staying in cash is what I am doing right now.

As for gold, silver, the dollar and oil… Well the dollar continues to lose value on a daily basis which in turn is boosting metals along with crude oil. All four of those investments are over extended but they are trending and not really looking like they want to reverse just yet.

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Gold Stocks, SP500 & the Dollar – What’s Next?

January 19, 2012 by  
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Investors around the globe are concerned with the economic outlook, not only with the United States but with virtually every country. This has caused not only investors but banks and countries to start buying gold & silver in order to be protected incase of a currency melt down in the coming years.

While the majority is concerned about the eroding economy, we have seen the opposite in the financial market. Gold and equities have risen… That being said the volume in the market remains light simply because the average investor is no longer putting money into the market for long term growth. Instead individuals are now focusing on saving and paying down debt.

That being said we all know light volume market conditions allow Wall Street powerhouses to bid the market up. Not to mention with quantitative easing taking place I’m sure that has also helped the market of late. While we don’t know for sure that QE is taking place as we speak, the sharp drop in the dollar and strong move up in gold are pricing this into the market.

Let’s take a look at some charts…

HUI – Gold Stock Index

This long term monthly chart of the HUI index provides valuable trading signals for both gold stocks and gold bullion. As you can see below this index is trading at a key resistance level after forming a bullish 3 year Cup & Handle pattern. The next 1-2 months for the precious metals sector will be interesting as it tries to break above key resistance. I would really like to see the HUI:GLD ratio break to the upside to confirm if the breakout occurs.

SPY – Daily Long Term Trend

The broad market looks to be forming a short term topping wedge. If this is to occurI expect it to take several weeks to play out. Looking at the chart if we use Fibonacci retracements along with trend line support we can get a feel for where this pullback should correct to.

That being said the broad market breadth and internals seem to be holding up indicating higher prices over the long run. While the short term price action is overbought and I expect a pullback to form, my analysis is pointing to higher prices as we go into year end.

UUP – US Dollar Daily Price Action

Although the majority of investors have a bearish outlook on the economy, we have seen a large price appreciation in equities and precious metals. This is largely due to the fact that the US dollar is quickly getting devalued. Simply put, as the dollar drops, it helps boost commodities and stock prices.

While a rising stock market is great to see, at some point the dollar will become so cheap that it will start to have a very negative affect on the US economy, commodities and stocks. Being from Canada it has always been more expensive to take holidays in the United States, and I remember paying $1.50-$1.70 for every $1 green back. But now the dollar is almost at par making holidays very affordable. The big question/concern is when will they ease off on the printing? At the rate which they are printing the greenback will be at par with peso… well not that extreme but you get the point Eh!

Weekend Market Conclusion:

As we all know the market has a way of making sure the majority of traders miss major turning points. The saying is, “If the market doesn’t shake you out, it will wear you out” and it seems we are getting the later…

The never ending grind higher in precious metals has not had any big shakeouts, rather its wearing out any short positions before rolling over to take a breather. As for the stock market, we are getting much of the same thing as the market grinds higher day after wearing out the shorts before rolling over.

That being said, there is more at work here than just regular market movements. With the light volume in the market we know there is price manipulation and QE (quantitative Easing) which is helping to boost prices and exaggerate market movements.

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Paper Covers Rock

January 18, 2012 by  
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Evidenced by Tuesday’s drubbing of gold and silver into COMEX (paper market) options expiry for the metals, which is an all too common occurrence that goes unchecked by regulators, it’s apparent the banking cartel’s resolve regarding suppressing metal’s prices is particularly strong at present, with the tell sign here being generous numbers of put owners got paid – paid big time. If cartel members were the writers of these put contracts, such an outcome would be expensive, so it must be concluded the writers were likely hair-brained hedge fund managers, possibly goaded into these positions by cartel members. Then, it was easy for cartel members to sell gold down Tuesday as lower volumes associated with summer doldrums left few obstacles to overcome.

And the really good part of it from their perspective is the demoralization of gold bugs gaming a trade back up to options related equilibrium pricing, somewhere north of $1200. Undoubtedly Tuesday’s price action did not compute to these types at all, meaning they will be slow to return to the market. This is where the title of this piece comes from, paper (COMEX) covers rock (physical gold); as the continued irony associated with precious metals prices, given physical supply constraints, gets more profound with each passing day. What’s more, irony also lies in the observation not only does the cartel routinely drive gold lower at options expiry when paper pricing (COMEX) put / call ratios are low, but now, apparently this will also happen when they are high as well; leaving the question, exactly when does a technicals / internals trader buy / own the stuff. (i.e. clearly Tuesday’s attack on gold and silver was designed to discourage.)

By the third week of August volumes should be picking up again however, as vacationers will be returning to prepare for September at that time, with this putting a different slant on things afterwards. That is to say, the bureaucracy’s price managers will not be able to push the markets around quite so easily anymore, so what happened in gold on Tuesday should not happen again. This of course does not mean gold and silver would escape liquidity issues if they develop going into the fall, which is what we expect considering stocks continue to follow the seasonal pattern closely. That being said, with seasonals for both gold and silver strong from now until year end, although prices might need to go lower, don’t expect an all out collapse. Remember, we are only correcting 1 of C and then it’s off to the races again.

That being said, let’s take this opportunity to check gold’s count and technicals for clues as to what we can expect, and attempt to match them with our expectations for the general equity complex, currencies, etc. First, I should make it clear my expectation for stocks is the seasonal pattern will continued to be followed closely, with this characterization provided by John Taylor (attached above) likely not far off the mark, as follows:

“Although it is more likely that the equity and credit markets will not begin their major decline until the last week of August, the odds favor an unimpressive month ahead which means that we are at the end of the exciting part of the rally of the past two months. By the end of next month, equities will be headed lower, credit spreads will widen sharply, and government bonds will begin a rally to new all time highs. Our completely technical cyclical work implies that there will be a return to dark times in September and October, with a sharp decline driven by liquidity and solvency issues likely to set the world back on a recessionary course.”

In returning to the near-term, and in checking the seasonal chart for the S&P 500 (SPX) attached above, stocks should cycle down next week (in fear of a bad Employment Report), but then recover into options expiry in the third week of August, which is consistent with John Taylor’s views, and my own. What does this mean for gold? If stocks do in fact trace out the aforementioned pattern, then the dollar ($) should get a lift next week, pause for weeks two and three in August, and then rally hard into October as equities are hit. And it just so happens this thinking is confirmed in the gold chart(s), where an interim low is close at hand, but where an ultimate low, the one fully correcting 1 of C, is not put in until the fall. (i.e. in October ahead of stocks.) (See Figure 1)

I see gold is climbing overnight, as expected, from the oversold condition pictured above. As per the count however, don’t be surprised if gold has one more minor degree wave lower next week if the $ bounces (and liquidity dries up temporarily), in order to complete the count. Then, gold should enjoy a stronger rally to trace out the Minor Degree b wave also indicted above, this being the move anticipated during August, consistent with the larger equity complex, currencies, etc. It will be informative to see what kind of volume we get out of this rally in August. If it does not break above the trend-line indicated on the chart below measuring the ratio between the DB Gold Double Long and DB Gold Double Short ETN’s, then the anticipated declines in precious metals prices into the fall could be worse than we are envisioning at this point. (See Figure 2)

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. As you will find, our recently reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented ‘key’ information concerning the markets we cover.

And if you are interested in finding out more about how our advisory service would have kept you on the right side of the equity and precious metals markets these past years, please take some time to review a publicly available and extensive archive located here, where you will find our track record speaks for itself.

Naturally if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. We are not registered brokers or advisors. Certain statements included herein may constitute “forward-looking statements” with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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Where the King of Natural Gas Forecasting Says Prices Are Headed

January 17, 2012 by  
Filed under Investment

First Energy analyst Martin King – whom I believe has called the natural gas market in North America better than anybody over the last two years – gave up on the likelihood of higher natural gas prices for the next 18 months in a report today, Aug 30.

“Let us reiterate: placing money in the natural gas investment space, aside from special one-time circumstances, is likely to be dead on arrival” he wrote this morning. He lowered his forecast for prices in the US for 2010 by 40 cents per million BTU, and in 2011 by a full dollar per million BTU (Mmbtu).

Back in February 2009, he was one of the very few calling for a spring rally in gas prices – but there was one. Throughout July and August 2009 he counselled investors that a big seasonal run was coming in natural gas prices and gas stocks – and he was right. (See my story on this here: http://oilandgas-investments.com/natural-gas/another-natural-gas-bull-sticks-his-neck-out-natgas-stock-for-4th-issue/)

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Today, King was even more negative on Canadian natural gas prices than in the US:

“Impacts for Canadian gas pricing are even more negative as we have also chosen to modestly widen the price spread between Nymex and Aeco prices over the same forecast horizon.” Canadian natural gas prices usually trade at a discount to the NYMEX price to account for the transportation costs to get western Canadian gas to New York. But lately that price spread has been getting wider. (See http://oilandgas-investments.com/natural-gas/what-the-us-canadian-gas-spread-means-for-your-energy-portfolio/)

In the US, the reason for the lower price forecast is simple: natural gas producers are still drilling, despite low prices.

In Canada, King’s reasoning for even lower prices than the US include one that I have been speaking about for months:

-increased pipeline capacity in the US that makes domestic gas very portable, and has opened up new markets (the Northeast US and California) for previously stranded Rocky Mountain gas in the US – the mainstream Canadian media have not reported on this – and the amount of Canadian gas that is being displaced by this – at all.

-increasing gas supply coming out of Western Canada, as the Montney, Horn River and gas saturated oil plays increase production. First Energy forecast an actual increase in Western Canadian gas production in 2011, which would be the first time since 2006.

-greater LNG import capacity in eastern Canada and the Northeast US.

King also spoke to a new pipeline taking Canadian gas down into the US at a time when the US market is having a hard time digesting all its own new home-grown supply.

In an entertaining 7 page report, he used the analogy of the supply side being a big dragon, and the only sword that could slay it is sustained low prices for 18-24 months.

“…we are now wielding a price sword to slay this supply dragon with the view that prices low enough for long enough, will tilt the balance of the market firmly to a structurally undersupplied situation.”

Interestingly, natural gas prices rallied today – crawling back over $3/mmcf in Canada and up 11 cents to $3.74 in the US. Also, this last week of August marked the low price point for natural gas in Canada and the US for all of 2009.

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What is next for the Dollar, SP500 and Gold

January 16, 2012 by  
Filed under Investment

The equities market reversed to the upside Wednesday posting a light volume broad based rally. Remember light volume tends to have a neutral to upward bias on stocks, But it was mainly the sharp drop in the dollar which spurred stocks and commodities higher.

Today’s bounce was not much of a surprise for several reasons… * Overall trend is up, one day sell offs are generally profit taking * Panic selling on the NYSE tipped us off that the market was oversold * I don’t think they will let the market fall before the November election * Intermediate cycle is turning up this week, 3 weeks of upward momentum…

US Dollar Index – 4 Hour Chart

The dollar put in a big bounce this week filling its gap window… Remember most gaps get filled with virtually every investment vehicle so when you see them remember this chart….

SPY ETF – Daily Chart

SP500 has been riding the key moving average up and Tuesday’s sell off tagged the 14MA along with extreme market internal readings telling intraday traders that a bounce is about to take place.

Gold Futures – Daily Chart

You can see gold has done much the same… A sharp profit/stop running sell off, which took the price back down to support. We took a long position to catch this bounce and hopefully a larger move going forward.

Market Sentiment Readings

Tuesday’s pullback was a great reminder of just how over extended the equities market was. These heavy volume sell offs are typical in a bull market. Without regular pauses in price, traders tend to place trailing stops moving them up each day. With traders chasing stocks higher bidding them up instead of waiting for a pullback we get a very large number to stop orders following the price up each day. Then, it’s only a matter of time before a key short term support level is broken at which point the flood gates open and everyone’s stops turn to market orders flooding the stock exchanges with sell orders causing a rapid decline and panic selling. This is exactly what happened on Tuesday which I show in the chart below.

Understanding how to read market internals provides great insight for short term traders looking to make quick high probability trades every week… Market internals are just part of the equation but very powerful on their own with proper money/position management. Both of these intraday extremes were bought on Tuesday in the advanced chatroom (FuturesTradingSignals.com).. We quickly booked profits and moved our stops up in order to protect our capital as the market surged higher.

Mid-Week Market Trend Analysis:

In short, the US Dollar is still in a down trend overall. The Fed’s I would think will continue to hold the market up into the election. It works well for them… they print money which devalues the dollar, and in return boosts stocks and commodities, plus they get trillions of dollars to spend… I’m sure its like kids in a candy store over there.

While everyone is trying to pick a top in this over extended market I think it is crucial to stick with the overall trend and to not fight the Fed. Using the key moving averages on the daily chart as shown in the charts above, continue to buy on dips until the market closes below the 20 day moving average at which point you should abandon ship.

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