Seeking Alpha

Chris Vermeulen's  Instablog

Chris Vermeulen
Send Message
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
View Chris Vermeulen's Instablogs on:
  • Energy Stocks & Oil Special Trend Analysis Report

    Crude oil has been trading ways for the past year between the 2011 high and low. The trading range through 2012 has been contracting with a series of lower highs and higher lows. This pennant formation because it is taking place after an uptrend is a bullish pattern with $110 and possibly even $140+ per barrel in the next 6-18 months.

    If you look at the weekly investing chart of crude oil the key support and resistance levels area clearly marked. A breakout of the white pennant will trigger a move to the next support or resistance level. And judging from the positive economic numbers not only form the USA but globally the odds are increased for the $110+ price target to be reached sooner than later.

    Crude Oil Price Chart - Weekly Investing

    (click to enlarge)

    Crude Oil Price Chart - Daily short term Analysis & Target

    If we zoom into the daily chart and analyze price and volume you will notice the $100 per barrel level is potentially only 2-3 days way… But keep in mind whole numbers (decade & Century Numbers) naturally act as support and resistance levels. So when the $100 century price is reached there will be a wave of sellers with fat thumbs who will slam the price back down to the $96 and possibly back down to the $92 level before oil continues higher. Can be followed with USO, UCO, SCO

    (click to enlarge)

    Utility Stocks - XLU - Weekly Investing Chart

    The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self… Keep in mind you can view my actual watchlist of stock and ETFs I trade in real-time with my analysis free:

    (click to enlarge)

    Energy Sector Weekly Investing Chart

    Energy stocks which can be followed using the XLE exchange traded fund (NYSEMKT:ETF) typically leads the price of oil. Looking at energy stocks we can see that they are outperforming the price of crude oil and on the verge of breaking out of a large Cup & Handle pattern. If so then $90 is the next stop but prices may go much higher in the long run.

    (click to enlarge)

    Energy Stocks and Crude Oil Conclusion:

    In short, crude oil is stuck in a large trading range much like gold and silver which I just wrote about here:

    Once a breakout takes place on either the white or yellow lines on the first crude oil weekly chart we should see oil, energy and utility stocks start making some big moves. Depending on the direction of the breakout (Up or Down) it must be played in that direction to generate substantial profits obviously.

    Get my daily analysis, updates and trade alerts here:

    Chris Vermeulen

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 28 9:23 AM | Link | Comment!
  • Precious Metals & Miners Making Waves And New Trends

    The precious metals sector has been dormant since both gold and silver topped in 2011. But the long term bull market remains intact. As long as we do not have the price of gold close below the lower yellow box on the monthly chart then technical speaking precious metals should continue much higher.

    Large consolidation periods (yellow boxes) provide investors with great insight for investments looking forward 6-18 months upon a breakout in either direction (up or down). The issue with investing during these times is the passage of time. One can hold a position for months and sometimes years having their investments fluctuate adding extra stress to their life when they really do not need to.

    Once a breakout takes place a powerful rally or decline will start putting an investors' money to work within days of committing to that particular investment compared to money invested waiting months for the breakout and new capital gains to occur.

    Gold Price Chart - Monthly

    (click to enlarge)

    Gold Price Chart - Daily

    The chart of gold (NYSEARCA:GLD) continues to form a large bull flag pattern with a potential 3 or 5 wave correction. If price reverses this week and breaks above the upper resistance trend line then it will be a 3 (NYSE:ABC) wave correction which is very bullish. But there is potential for a full 5 wave correction which is still bullish, but it just means we have another month or two before metals bottom.

    (click to enlarge)

    Gold Miner Stocks - GDX ETF Chart - Daily

    Gold miners do not have the sexiest looking chart. It was formed a strong looking bull flag but has continues to correct and is not nearing a key support level. This level could act as a triple bottom (bullish) or if price breaks below then it would be breaking then neckline of a massive head and shoulders pattern which points to 50% decline. I remain bullish with the longer term gold trend until proven wrong. Gold Miner ETFs are GDX & GDXJ

    (click to enlarge)

    Silver Price Chart - Daily

    Silver (NYSEARCA:SLV) remains in a long term bull market much like the monthly chart of gold shown earlier in this report. Silver continues to work its way through a large bull flag pattern with a positive outlook at this time.

    (click to enlarge)

    Silver Miner Stocks - SIL ETF - Daily Chart

    Reviewing the precious metals sector it seems that silver miners have the sexiest looking chart. All price patterns are showing strength and are in proportion to one other. If this chart plays out to what technical analysis is pointing to then we could see the precious metals sector put in a bottom and rally within the next week or two. And if this is the case then silver miner stocks should provide the most opportunity going forward. ETFs for silver miners are SIL & SIVR.

    (click to enlarge)

    Precious Metals Trading Conclusion:

    In short, what you need to focus on is the yellow consolidation box on the monthly gold chart. A breaking in either direction will trigger a massive move that should last 6-18 months. Until then long term investors can simply sit back and watch the sector while they put their money to work in other active sectors.

    From a short term traders point of view, that f mine. I am looking for a signs of a bottom on the daily chart to get my money working earlier to play the bounce/rally that takes place and actively managing the position until a breakout occurs. The charts overall are not that clear as to when a breakout will take place. Metals could start to rally next week or in a few months and all we can do is wait for a reversal to the upside before we get active.

    Knowing the big picture trends and patterns at play along with major support and resistance levels (breakout levels) is crucial for success and piece of mind.

    Get my analysis, daily updates and trade alerts each day at

    Chris Vermeulen

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIL over the next 72 hours.

    Jan 27 8:19 PM | Link | Comment!
  • Signs That A Correction Maybe Near In The SPX, RUT & DJIA

    The great market prognosticators have by now came out with their 2013 predictions about financial markets. It seems to me to be a fool's game to try to predict what financial markets are going to do in the future.

    I want to be clear in stating that I do not know what is going to happen in the future. I do not know where the SPX Index (NYSEARCA:SPY) is going to trade tomorrow let alone 6 months from now. Most market pundits simply will not admit to this fact.

    These same market pundits seemingly are unable to be honest about their own fallibility. In their own mind they believe it undermines their credibility or will hurt their forward sales for some book or strategy they are going to unveil. I for one do not prescribe to that notion, I believe in telling the truth.

    The truth is that these so-called market experts do not know anymore than you or I about price action in the distant future. However, what I do know is that forward price action remains a mystery until its unveiled in the present.

    Instead of wasting time discussing potential price action in the future, why not focus on a few pieces of information that have occurred that are known facts right now. I think the chart below points out that in the intermediate time frame, equity indexes are reaching extreme overbought conditions.
    (click to enlarge)

    As can be seen above, the number of stocks trading above their 50 period moving averages is reaching close to the highest levels in the past 5 years. Many times when these price levels have been reached we witness a correction at the very least and any short-term gains are usually given back in short order. This is not to say that prices are going to sell-off tomorrow or in the next few weeks, however it is a warning that a correction is likely lurking in the not-so-distant future.

    To help confirm this notion, a quick look at the Volatility Index ($VIX) demonstrates just how much complacency there is in the short-term spot VIX price which is currently trading below 5 year lows. For novice readers when the VIX moves lower the outcome is typically bullish for the S&P 500 Index and when the VIX moves higher the reaction is typically bearish in terms of the S&P 500 Index. Can be played with VXX or TVIX

    (click to enlarge)

    As can be seen above, the VIX is trading near the bottom of its recent range. This helps confirm the strength we have seen the past few weeks, however a reversal seems likely in the near future. Should the VIX pick up considerably it would have a negative impact on the S&P 500 Index. Furthermore, if we go out several months in time the Volatility Index Term Structure steepens wildly.

    What this means is that traders and money managers have bid up forward VIX contracts in an attempt to hedge against a variety of perceived risk. I would also point out that at the moment February monthly options contracts are cheap relative to their historical volatility levels. However, the VIX could rally violently higher should the appropriate chain of events take place in the months ahead.

    There are several catalysts in the short-term which will have a major impact on price action for the broader indexes. This coming week we will have earnings from major companies such as IBM, AAPL, and GOOG which all have the potential to move the tape significantly in either direction.

    The other more obvious short-term inflection point is the dreaded U.S. debt ceiling debacle which is likely to begin permeating the financial media as the deadline for action draws near. In recent history both houses of Congress and the Executive Branch have struggled to achieve compromise until the 11th hour. The fiscal cliff was one issue, but the debt ceiling issue has the potential to have a major impact on financial markets.

    Just to put into context what happened back in 2011 when Congress could not reach a compromise regarding a debt ceiling increase, the S&P 500 Index had the following reaction as shown below.

    (click to enlarge)

    Obviously there are significant unknowns regarding how the debt ceiling process will unfold in 2013. However, what is known is that should the politicians wait until the 11th hour equity indexes could force their hands yet again.

    Additionally the threat of credit rating agencies downgrading U.S. government debt is a major concern. The outcome of this decision alone has the potential to devastate investment portfolios should the government have a partial shutdown as a result of a failure to reach an agreement regarding the debt ceiling.

    What is important to understand is that the longer-term price action in the future is impossible to know at this point. We have major earnings reports which are about to be released over the next few weeks which presents significant risks to the broader indexes in both directions. Furthermore we have a major macro event that is facing us and will have to be addressed in the next 5 - 8 weeks.

    The outcome of these events as this point is entirely unknown. I would also point out that in 2011 prior to the debt ceiling debacle we saw equity prices rally higher in late June of 2011 while the VIX traded down near recent lows at that time. After a period of consolidation equity indexes remained patient and gave the politicians time.

    Eventually the price action in risk assets forced both political parties and the President to come together. As shown in the chart above, the S&P 500 lost nearly 19% in less than 4 weeks of trading sessions. Even the most skeptical politician was forced into submission by Wall Street and the financial media.

    Will history rhyme with the recent past? Will we see a compromise in advance of the dreaded shutdown date? Will the debt ceiling outcome create a major paradigm shift in U.S. financial markets and U.S. politics?

    Unfortunately, there is no one that can tell us with any certainty what is about to happen in the next 5 - 8 weeks, let alone later this year. After all of the forthcoming analysis and discussion in the weeks ahead, price action will continue to remain a mystery until the debt ceiling situation is behind us. Until then, caution is warranted in both price directions. Trade safe.

    Risk-FREE 30-Day Trial

    only $1 for the first 30 days!

    Chris Vermeulen & JW Jones

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 23 10:20 AM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.