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Chris Vermeulen
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Chris Vermeulen the founder of AlgoTrades.net 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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  • Post-Election Trading Made Simple

    Over the past two months shares of gold (NYSE:GLD) and Apple (NASD:AAPL) have had a sizable bite taken out of their share price. Active traders along with the longer term investors have had a wild ride this fall watching these investments slide to multi month lows. The big question is when will gold and apple shares bounce?

    Here we are again with another election behind us and Barack Obama in the White House again. Many think this means four years of the same thing… Printing, Inflation and higher stock prices.

    Is this good or bad for Americans or the world for that matter? I doubt it, but who really knows and who cares because there is nothing anyone can do about it now. So buckle up your seat belt and focus on trading and investing with major trend both within the United States and abroad using exchange traded funds.

    Currently the broad stock market and commodities are in a full blown bull market so the focus should be to buy the dips until proven wrong. Below are some charts showing the important breakout levels for Apple, metals, oil and key indexes like the Russell 2000.

    Be aware that during pullbacks which last more than a month which is the market has done, some of the biggest drops in price happen just before prices bottom… Scaling into positions is the key to minimal draw downs.

    Apple Inc. - AAPL Stock Chart:

    Shares of Apple clearly show the down channel which must be broken before investors start buying again. This stock seems to have big potential for $650 to be reached quickly. If Apple shares rise so will the overall stock market… Follow my live charts free here: http://stockcharts.com/public/1992897

    (click to enlarge)

    Gold Spot - GLD Exchange Traded Fund:

    During August and September investors flooded the gold market in anticipation of QE3. Since then gold has been drifting lower with profit taking and because of some slowly strengthening economic numbers in the USA. Gold looks ready for a run to the $1800 but may stabilize here for a few weeks first.

    (click to enlarge)

    Silver Spot - SLV Exchange Traded Fund:

    The price of silver moves similar to that of its big yellow sister (Gold). While the charts look the same silver is highly volatile and can super charge your portfolio when metals rally.

    (click to enlarge)

    Crude Oil Spot - USO Fund:

    Crude oil has been correcting for a couple months also and still has a lot of work to do before a new uptrend to be triggered. Currently oil is trading in the middle of is trading range but once the price breaks above $93 per barrel a good investment fund would be USO.

    (click to enlarge)

    Russell 2000 Small Cap Index - IWM

    Small cap stocks typically lead the broad market in both directions. They are the first to rally and the first to rollover and sell off. The major indexes like the DOW, SP500 and NYSE have not formed clean chart patterns which is why my focus is on the Russell 2000. Small cap stocks are now showing a rising relative strength compared to the SP500 large cap stocks and this is very bullish for stocks in general. The best way to trade this index is through the exchange traded funds IWM and TNA.

    (click to enlarge)

    Post-Election Trading Breakout Summary:

    In short, history shows that equities tend to rally after an election. For a detailed outlook of how to trade stocks and indexes during the election cycles be sure to read my report "The Election Cycle - What to Expect in Stocks & Bond Prices"

    Chris Vermeulen
    www.TheGoldAndOilGuy.com

    Nov 07 9:56 AM | Link | Comment!
  • The Election Cycle – What To Expect In Stocks & Bond Prices

    By: Chris Vermeulen - www.TheGoldAndOilGuy.com

    It is that time in the presidential cycle that gets everyone emotional and concerned with the future outlook of the United States. While everyone has their opinion on whom they think is best for America, I promised myself a long time ago to keep my thoughts to myself for two key reasons. ONE: only 50% of Americans will agree with me J, and TWO: I am Canadian so I do not experience what Americans go through on a daily basis.

    My thinking is if Obama wins then we will see Quantitative Easing continue. And with the recent positive economic numbers on Friday it should give some confidence to investors that things are SLOWLY stabilizing (Bullish for Stocks). But, if Romney wins then we could see Quantitative Easing be cut or eliminated which is obviously bad for equities.

    So, let's just jump into the charts of what I feel will unfold in the next few days and months.

    Using the season chart of the four year election cycle we can see what the Dow Jones Index has done in past election periods. Obviously every market environment is drastically different in each situation but overall we see stronger stock price. This is naturally a very emotional time for investors but once the election is finished most individuals become more confident simply because there is a leader that has four years to make things better and there is nothing they can do about it now and the campaigning and debating is over.

    (click to enlarge)

    DIA - Dow Jones Industrial Average - Daily Chart:

    Looking at the chart of Dow DIA Index fund you can see a 5-6 month cycle in the market which has a positive skew. Just so you understand what a positive skew is I will explain.

    Positive Skew is when the market is trending up making a series of higher highs and higher lows. Because there are naturally more buyers during a bull market each cycle upswing lasts longer then when the cycle down downswing. So you get longer rallies which sends your secondary indicators (stochastics, volatility, put/call ratios, advance decline line etc…) in the overbought levels for extended periods of time. Those trying to pick a top continually get their head handed to them. The focus must be on buying the pullbacks. Keep in mind volatility is higher which meaning risk per trade is higher. Overall in the long run you stand a much higher chance of making money trading with the trend than trying counter trend trades (picking a top).

    So as you can see below it looks like the stock market will be trying to put in the bottom over the next week or two which falls in line with our election cycle. It is very important to know that during intermediate cycle lows is where some of the biggest drops take place. These sharp drops are what is needed to cleanse the market one last time to shake as many traders with tight stops out of the market before it reverses and starts the next rally. I would like to see a 1-3 day market sell off as that would be the signature bottoming pattern I like to buy.

    Keep in mind that any index or high beta stock can be traded using this same cycle. Symbols like AAPL, SPY, IWM and QQQ.

    (click to enlarge)

    Bond Prices - Moving Against the Norm…

    Bond investors are some of the most conservative people in the market. They do not like to take risks so they dump their money into bonds to make a tiny profit in exchange for low risk (volatility). The nature of these investors put more money into bonds as we enter the election because they are nervous about not knowing who will be in control of the country.

    After the election finished some money flows out of bonds and into stocks because there is now a president and direction for the country. Generally come the new year investors move to bonds as the safe haven as they try to figure out what their game plan is for new year.

    So looking forward to this week and the next 2 months I would not be surprised to see bond prices rise or trade sideways while stocks move higher. This analysis is based on Obama winning. If Romney wins then I feel bonds will rally much more and stocks could sell off.

    (click to enlarge)

    TLT Bond Exchange Traded Fund - Daily Chart:

    Here is a chart of 20+ year bonds showing a possible reversal to the upside that could trigger as soon as next week. This chart is forward looking 1 - 2 weeks. Overall the trend remains down but if Romney wins I feel bonds breakout above the red resistance levels and trigger a new uptrend. You can follow my stock charts and ETF charts live every day here: http://stockcharts.com/public/1992897

    (click to enlarge)

    Election Year Trading Cycle Conclusion:

    Next week is going to be very interesting to watch unfold. I generally do not like to trade or invest before news of this magnitude so trade smaller sizes if you do as price action could be wild.

    Get my Daily Trading Analysis & Trade Setups at: www.TheGoldAndOilGuy.com

    Chris Vermeulen

    Nov 04 2:13 PM | Link | Comment!
  • AAPL Looks Ready Bounce & The Next Best Trade Ideas

    AAPL shares have been in free fall mode all October spooking investors with a $120 drop from the all-time high in September. As well all know, though it's hard to follow without a proven trading strategy to keep us focused but the key is that you must buy when others are selling and then sell when everyone is buying.

    Apple shares really have helped in holding the overall stock market up in the past but recently it has been a big drag on the broad market. Taking a look at the chart below you can see my analysis and thoughts of this giant.

    The red horizontal line shows the key level where high volume traded in the past. For the market to reset (flush out investors/traders) it must shake as many longs out before it can start rising again. By the price breaking below that level which also happens to be a Century Number $600, most of the stops were placed down around this level. The volume spike of 40,000,000 shares clearly shows it triggered stops once that $600 level was broken. We want stops run because it give more power to the next rally/bounce.

    (click to enlarge)

    NASDAQ Index:

    The NASDAQ has formed a similar chart pattern and is heavily weighted with AAPL shares. Trading NQ futures, QQQ, QLD or the XLK exchange traded fund as a much more affordable way to play a bounce/rally in the coming weeks.

    (click to enlarge)

    Russell 2000 Index:

    I really like the Russell 2000 index because small cap stocks can rally hard and fast outperforming the large caps like AAPL, SP500, NASDAQ and DOW. This index is looking ripe for a bounce in the coming days which could trigger the next major rally to new highs. You can plan this index through TF futures contract, IWM, TNA, UWM exchange traded funds.

    (click to enlarge)

    Trading Conclusion:

    While this setup looks very promising because the election is almost over and the Santa Clause rally is just around the corner. Know that some of the biggest drops in the market happens during times when the market is running the stops. It is a natural tendency to take big positions which things look great, but that is not how you do it… Take calculated position sizes knowing indexes could fall another 2-3% before putting in a real washout bottom.

    Get My Trade Alerts at: www.TheGoldAndOilGuy.com

    Chris Vermeulen

    Nov 01 8:39 AM | Link | 2 Comments
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