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Chris Vermeulen
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Chris Vermeulen the founder of Algorithmic Trading Systems. This automated investing system is designed for individual investors and traders. He is also the editor of the TheGoldAndOilGuy newsletter which is designed for gold market traders providing quality ETF Trade Alerts,... More
My company:
AlgoTrades Algorithmic Trading Systems
My blog:
TheGoldAndOilGuy - Gold Market Traders
My book:
Technical Trading Mastery - 7 Steps To Win With Logic
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  • The Global Economy's Health Is Not That Complicated

    The Federal Reserve Bank has printed trillions of dollars to monetize US government debt just to keep the government afloat. Any significant rise in interest rates will probably decimate US government finances, the fragile housing market and in the bond market it will cause a financial catastrophe through interest rate derivatives.

    This is a solid reason why the Fed will not raise any rates in any foreseeable future.

    The power to create money out of thin air is great! Should we give it to politicians and secretive central bankers? Will this power be abused? Will those in charge yield to the temptation for "legalized counterfeiting?" Apparently the answer is YES.

    All that the Federal Reserve has done was to inflate equity markets. They never solved any of the original financial problems that lead to creating "The Credit Bubble of 2007″. There was as well no financial resolution by our elected political officials to resolve this serious problem so that it would never occur again in the near future. This process called "Quantitative Easing" created a shift of a tremendous amount of wealth from the middle class and the poor to the rich.

    Inflated stock prices, usually held by the wealthy, created a clear "redistribution of wealth" which will be paid for by future generations to come. The concept by the Fed was that centralizing the wealth would help in creating new jobs and increase capital expenditures in their businesses.

    The problem with this philosophy is that it never filtered down from the Billionaires into real economic growth within our economy. Instead, rather than experience expansion, we have been experiencing contraction which is resulting into an economic deflationary depression that will appear evident to all by the end of this year.

    The top 1% of Americans hold 35% of the nation's wealth. This inequality has continued to grow exponentially.

    There are several reason that I can refer to why the Fed will NOT raise rates anytime in the near future. There are interest rate cuts and devaluations going on all around the world at the moment. Japan and the Eurozone are both implementing Quantitative Easing. China is resorting to its alternatives to hold its financial system together and stave off a hard landing. Emerging market economies are being hammered by commodity price falls, while oil producers are being similarly hit by oil price falls. There is no Inflation in developed countries. The world is entering a deflationary slump. Why would the Fed ever even think about raising interest rates???

    The unwinding of QE will have many negative effects in a market that is already short of liquidity. So, the unwinding that must be delayed for quite some time will be welcomed by many. The unwinding of QE purchases and the normalization of bond prices would be extremely negative for the bond markets, so the tin can will be kicked down the road for quite some time still.

    The PBOC has significant room to lower required reserve ratios on banks to encourage lending. Even after a series of cuts, the RRR remains at 18.5 percent for major banks which is among the world's highest. Reducing the ratio by 10 percentage points would free up 13 trillion yuan ($2.1 trillion) of additional capacity for banks to lend. On the fiscal policy side, the country's $3.69 trillion of foreign-exchange reserves and relatively low national government debt levels mean it has the ammunition for fiscal stimulus. China is planning at least 1 trillion yuan ($161 billion) in long-term bonds to fund construction projects as the economy struggles. Most of the interest payments on the bonds will be subsidized by the central government. I believe that more projects of this type will be initiated in 2015. This is a major factor why the Federal Reserve will continue pumping liquidity in the financial system.

    I believe that the FOMC minutes suggest that it is very far from a rate hike, the US economy is more likely to see QE4 first!

    In short, there is no reason to believe that core inflation will rise to the 2% target any time soon and raising interest rates at the moment would jeopardize the US's fragile recovery.

    CPI Continues To Decline
    (click to enlarge)

    The FOMC members gave the following reasons for caution:

    • Wages aren't rising much
    • Prices aren't rising much either
    • The dollar is strengthening
    • Commodity prices are falling
    • Economic growth is still pretty weak
    • The labor market isn't as strong as the unemployment figures suggest

    In Conclusion:
    We continue to see the US and global economies struggle. The writing is on the wall that a collapse in equities is drawing near, but we have yet to see the broad stock markets break down. When they do, there will be a lot of money made by taking advantage of falling prices, which is what my focus will be with my trading capital and ETF trade alert newsletter: - SPECIAL OFFER

    Chris Vermeulen

    Aug 20 10:49 AM | Link | Comment!
  • Some Good News And Not So Good News…

    Since we started sharing the new and improved algorithmic trading systems (S10 and D30) a few weeks ago we have received a lot of great feedback and demand.

    We do have more good and some not so good news…

    The good news is that the system kick started the week once again with positive trading results within the first hour of the week. The index opened lower and it caused the market the flip and flop a little between and up and down trend. But once the intraday trend took hold the systems both reached their T1 (first target) less than an hour after the opening bell to lock in $400 profit. The systems are still long 1 contract and deep in the money as you can see below.


    Also, one of our improvements to the systems was our improved Risk Containment and Equity Protection features. This improvement will be explain in more detail in another email/video but in short this reduces the amount of potential gain we give back when the market rolls over and starts moving against our second contract. For example in the past we would see our positions up $800 - $1500 but when the trade was closed we only realized $150 - $400. The improved systems now lock in more profits $450 - $950 in these similar trade situations.

    Now for the Not So Good News. To be honest this news isn't all that bad but we want to be sure you know what is going on. In the past week the emails and phone calls have been rolling in faster than we can take them. The list of phone messages we need to listen to and call traders back is crazy long.

    The solution, I know many of you want to speak with us before subscribing and want to join before the 30 day pre-live trading special offer is gone forever so this is what you should do and expect:

    Emails are the best and quickest way for us to respond, but if you would like to speak with someone PLEASE leave a phone message and we will return your call within a day or two.

    These new and improved systems will be going live for users on Sept 1st (TEN DAYS). Fastest way to get setup is to subscribe now to reserve your seat and take advantage of the special offer, then visit our broker's page and click on a link to open a trading account and get it funded. We have direct broker support phone numbers to help you fast track the process: Open Account:

    Hope you had a great weekend!

    Talk soon

    Chris Vermeulen

    Tags: SPY, DIA, IWM, QQQ, futures, spx, sp500
    Aug 18 1:23 PM | Link | Comment!
  • Global Markets And Dow Jones Fire Warning Shot Across Investors Bow!

    Last week, the global equity markets were quite undecided. China's and Japan's equity prices have been moving higher. The Japanese Nikkei reached its highest level since 1996 on Tuesday, August 11th, but then pulled back at the end of the week. Hong Kong's Hang Seng made a new monthly low and the Australian Market fell to a new 6-month low.

    Europe was more decisive. Traders mostly sold stocks. The German DAX, London FTSE, and Zurich SMI all fell to monthly lows by mid-week and did not recover much by Friday August 14th's close. In Russia, it was much different. Moscow's MICEX index rallied to its highest mark in 3 months.

    In the US Markets, the selling was even more intense. On May 19th,2015, the DJIA topped out at 18,351. The DJIA has failed to make a new high since then and continues to sell off. The decline, so far, has been over 1,220 points which is its' greatest loss of the year. Last week, began very strong, with the DJIA up 245 points on Monday, August 10th; Tuesday was down 212 points, and by Wednesday, the DJIA had fallen all the way to 17,125, its' lowest level since February 2nd, 2015. We had a CONFIRMED BEARISH/SELL signal on August 4th, when the Dow Jones was at 17,596. Before I can take any BEARISH positions in the US Markets, this signal needs to be CONFIRMED by the SPX and the NDX-100 as BEARISH, which are currently NEUTRAL/TRENDLESS. (SPY, DIA, IWM, QQQ)

    The SPX landed at support levels and found its' footing, once again. We are getting closer to the cycle lows in September/October when the downward pressure will push it through its' support trend lines. We are still into a sideways direction. It is a little too early to tell if it will continue the sideways motion or decline in some downward momentum, next week. SPX is undergoing a consolidation in a downtrend trend using the 200- Day Moving Average as support. A daily close below 2076, which does not hold, should bring about the next challenge to the 2040 major support level. The current declining patterns are represented in those of the DJIA,, NYSE and the Dow Jones Transportation Indexes.

    (click to enlarge)

    The Dow Jones Transportation Index and the Dow Jones Industrial Average are leading the US Markets down during this topping process They are declining further than the other indexes, and the other indexes should be establishing their downtrends, in the near future. With the exception of a monumental one-day market crash, that happens once in a blue moon, bull markets that are topping undergo a drawn-out process that usually takes, at least, many months before bearish momentum finally takes over and a new downtrend emerges.

    (click to enlarge)

    Considering that US stocks have been in a 7-year bull market, it would be unreasonable to expect such bullish momentum to change overnight.

    Therefore, even though price momentum has been favoring the bulls lately, it is still my belief, that it is dangerous to be invested on the long side of these markets, as of November 25th, 2014.

    The stock market is undergoing a big trend change and most of the analysts are missing it, which is normal. They lack the access to "The Predictive Trend System Analytic's" of a Financial Forecasting Model. My clients have the access to this knowledge from our subscription service that we provide. This knowledge provides you, the client, with THE EDGE that other professional investment firm's lack.

    U.S. equity markets have been fueled by cheap dollars and cheaper interest rates. The combination of the stock market crash from 2008 - 2009, along with a declining U.S. Dollar, has been destroyed by the Federal Reserve Bank (NYSE:FRB), which has helped US Equities to become a bargain on the global market. This allowed foreign buyers to come in and purchase US Equities, at both a nominal value, based on the markets' decline, as well as, a relative value based on their home currency. Foreign investors have capitalized on the rise in the US equity market

    On November 25th, 2014 my **Global Sentiment Model signaled the "EXCESSIVE EXTREME OPTIMISM", which provided an exit point on all long US Market positions . Those traders and investors, that remained in long positions, who were not subscribers to our service, at that time, have just been channeling, without any new break outs into new highs.

    There is a huge disconnect between the popular sentiment, among the "talking heads" on the news, regarding how these events will affect the September 2015 meeting of the Federal Reserve Bank. The general consensus, that I feel currently exists, is that this could very well push any increase in interest rates, out into the year, 2016. The Federal Reserve Board of Governors has been decidedly dovish, regarding this aspect, and has continued its' quantitative financial engineering.


    High bullish readings in the sentiment stock index usually are signs of Market tops; low ones, market bottoms.


    Last Week

    2 Weeks Ago3 Weeks Ago
    AAII Index
    Source: American Association of Individual Investors,

    Our current sentiment and technical features are consistent with a major stock market top. This model uses the market sentiment composite which is a measure of investor sentiment. This metric tracks the mood of investors, which is then translated into a probability whether the markets will advance or decline, within the near term, as well as, an undisclosed period of time. It is a contrarian indicator that produces a bullish signal, when market sentiment is overwhelmingly negative, and a bearish signal when markets are overwhelmingly bullish.

    We have not disclosed these models' methodology, and its statistical data, as it is proprietary. We have also not disclosed the correlation coefficient that is used to measure the strength of the linear dependence and its' algorithms between the market sentiment composite and the 12-month forward return. A trading friend of mine developed this model thirty years ago. For the period of time that it has been implemented, which is now 25 years, it has been predicatively accurate, 100% of the time, prior to any major changes within the US Markets. The last signal that was generated was on November 25th, 2014, which registered "EXCESSIVE EXTREME OPTIMISM" and the broad market had been trading sideways since.

    Learn how to read the market and make the same trades we do:

    Chris Vermeulen

    Tags: SPY, DIA, IWM, QQQ
    Aug 17 2:53 PM | Link | Comment!
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