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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
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AlgoTrades Algorithmic Trading Systems
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TheGoldAndOilGuy - Gold Market Traders
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Technical Trading Mastery - 7 Steps To Win With Logic
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  • Will You Survive The Next Bear Market?

    Since the beginning of January 2014 stocks have shown signs of institutional selling. This can be seen in the small capitalization stocks index the Russell 2000. This group of stocks generally leads the S&P 500.

    Most bull market tops in the S&P 500 shown below take 8-12 months to form before it starts to fall in value. So far the market has been under distribution selling meaning the large traders (institutions, hedge funds) is selling their positions to the average investor to be left holding the bag when things go south.

    The chart posted below shows some of my analysis of the SP500 index. This chart shows the 200 day moving average which is a great indicator of the major trend of the market. Green means bull market, red indicates bear market. SPY, DIA, IWM, QQQ

    Also you will see the red ATR (Average True Range) indicator at the bottom. This tells us if the average daily movement for the index is high or low. When this red area rises we know there is a large amount of money flowing in and out of the equities market. It takes large amounts of capital to do this and is why the sellers are most likely hedge funds and institutions rebalancing their portfolios for an upcoming trend change.

    (click to enlarge)

    If we step back and take a look at the bigger picture using the monthly chart of the S&P 500 we can foresee what is likely to happen in the next 12-36 months. The US stock market is losing momentum which can be seen by the relative strength indicator at the top of the chart.

    Also the support trend line give us a feel on how soon a breakdown in price may happen. It appears to be just months away…

    (click to enlarge)

    Taking things one large step further back, roughly 70 years you can see some patterns of that in the past. The question is not will there be a bear market, but how far will it correct?

    The cart below shows a very bullish outlook of a minor correction of 30% in the next 36 months. Also I do have analysis that shows that if we break below the 30% level we could have a 50-60% correction which could trigger a chain reaction of issues including the US bond bubble to burst.

    (click to enlarge)

    US Stock Market Conclusion:

    In short, the US stock market continues to grind higher but with several warning signs to investors who know how to spot them.

    There are three ways to play a bear market. The first is to do nothing, which is what most people do as they watch their life savings slowly evaporate right in front of them month after month.

    Second, is to liquidate a large portion of equities and sit safely in cash while others lose money.

    The third and last is to position yourself to profit from a falling market. It's known that stocks fall 4-7 times faster than they rise, which means you can potentially make 7 years' worth of profits in just 1-2 years if done correctly.

    These are ways to play a bear market, and I say play because you do need to be a little more active to enter and lock in profits in this market condition. This is something I can help you with through my trade alert newsletter.

    Happy Trading!

    Chris Vermeulen

    www.TheGoldAndOilGuy.com - Bear Market Offer - Save Now!

    Mar 27 12:11 PM | Link | Comment!
  • NEXT FINANCIAL CRISIS – Part III – OIL
    Protecting Yourself with Gold, OIL and Index ETF's

    Chris-VIn 2009 I shared my big picture analysis, investment forecast and strategy in a book called "NEW WORLD ORDER ECONOMICS - What you can do to protect yourself". In January 2009 I forecasted that the Dow Jones Industrial Average was going to make a bottom within a couple months which it did. I also predicted the price of gold to start another major rally, and for crude oil to bottom and rally for years, which were also correct.

    You can call it luck, skill or a mix of both… but the truth is that the markets cannot be predicted with 100% certainty. With that said, the US stock market, gold and oil look to be setting up for their NEXT BIG multiyear moves.


    THE OIL BEAR MARKET IS ABOUT TO END

    Crude oil and energy stocks are tricky to navigate in a situation like this where the equities market is nearing a bull market top.

    It is critical to remember that when the US stock market turns down and starts a bear market virtually all stocks and commodities will fall in value including oil and energy stocks. Investors need to understand that even though the price of crude oil is nearing a bottom it could and will likely stay low for a considerable amount of time "IF" the stock market turns down.

    Over the last 100 years we have seen nearly 30 bear markets. The average length of a bear market is 18 months and has an average decline of 30%.

    I do feel currency problems and a war breakout will be bullish for both oil and gold. So if we get a bear market in equities, and a war oil and oil should rally while stocks in general fall.

    But if we do not have those sever crisis' then if gold and oil break below their critical support level which is the red line on the charts and a bear market in stocks start you do not want to be long stocks or commodities.

    PRICE CHART OF OIL

    The chart below shows the line in the sand for the price of crude oil. If this level is broken with a monthly bar close below $43 per/barrel I think $30-$33 will be the next stop and the low for the oil market. It seems everyone is bullish on precious metals and have been buying like crazy.

    The points I made about gold which I talked about in PART II should be reread because if the support levels are broken oil will fall 40%, and gold another 35% from their current prices.

    (click to enlarge)

    Below are some ETFs that takes advantage of rising oil prices. While there are other funds that cover oil stocks I feel they may not perform well during the equities bear market. Investing in physical oil is the best play at this stage of the game but when the equities bear market looks to be nearing an end, energy stocks will be the best place to invest. USO, UCO, OIL, UWTI, DBO, SCO, USL, DTO,DNO

    (click to enlarge)

    PART 3 CONCLUSION:

    In short, I feel crude oil will has or will find a bottom within the next couple months. Long term the value is great, but we must be aware that if equities start a bear market it will be best close all equity positions and wait for the bear market to subside. When the time is right investing in crude oil and energy stocks which pay high dividends will generate life changing gains and an income stream. Patience is the key.

    I hope you enjoyed this three part series which covers how to invest in indexes, gold and oil.

    Join My Free Newsletter and Receive More Trading and Investment Ideas: www.GoldAndOilGuy.com

    Chris Vermeulen

    Mar 23 11:06 AM | Link | Comment!
  • THE NEXT FINANCIAL CRISIS – Part I
    Protecting Yourself with Gold, Oil and Index ETF's

    Chris-VIn 2009 I shared my big picture analysis, investment forecast and strategy in a book called "NEW WORLD ORDER ECONMICS - What you can do to protect yourself". In January 2009 I forecasted that the Dow Jones Industrial Average was going to make a bottom within a couple months which it did. I also predicted the price of gold to start another major rally, and for crude oil to bottom and rally for years, which were also correct.

    You can call it luck, skill or a mix of both… but the truth is that the markets cannot be predicted with 100% certainty. With that said, the US stock market, gold and oil look to be setting up for their NEXT BIG multiyear moves.


    US EQUITIES BULL MARKET IS ABOUT TO END

    2014 was a tough year for small cap stocks. The Russell 2000 index which is a great barometer of what speculative money is doing as a whole. History has shown that small capitalization stocks are the first group to show weakness after a multi-year bull market.

    For all of 2014 this group of stocks has been struggling to hold up. Each time it nears a previous high, sellers come out of the woodwork and unload shares in large volume. This was the first tell-tale sign that institutions are starting to rotate their positions out of these high beta stocks.

    Later that year in October 2014 the S&P 500 fell 10% in just a few weeks. The speed of the selloff and the heavy volume that accompanied it are yet another warning sign that the underlying strength of the stock market is weakening. This broad market selloff included the large capitalization stocks which means the end is nearing.

    If we turn our focus to the Dow Jones Industrial Average and look at the chart below you will see my prediction for 2015/2016.

    I should be clear on what to expect during market tops because they differ than market bottoms. Most bottoms that occur are powered by fear. A

    nd fear has a price pattern on the chart that is much different than what we see during market tops when optimism is high.

    Bottoms tend to be more violent with large range bars and the process happens in half of the time than what a bull market top requires.

    Bull market tops take longer to form and for price to actually breakdown and confirm it's headed lower. My thinking is that a market top may have already started. The underlying metrics are eroding and the heavy volume selloff in Oct 2014 was the first major signal that big money is selling.

    I do feel the market as a whole can and will make some minor new highs, but will have strong bouts of selling shortly after. Late 2015 and going into 2016 is when the US stock market will likely start to get volatile and we will see the first MAJOR drop in value. It will be similar to the first breakdown bar that took place Jan 2008. A 15-20% drop that breaks the Oct 2014 low is going to be the straw that breaks the camel's back.

    Once we get the initial break in price the market should pause or bounce for a few months as investors are still overly bullish at these BARGAIN prices "they think" and buy more shares. In reality it's the worst thing an investor can do at this stage of the stock market life cycle.

    Once the bear market starts investors should expect 12-24 months of lower and sideways price action.

    So How Do We Take Advantage Of This?

    There are two ways to play the next bear market. First is to simply move your money out of stocks. This means sell long positions, pull money out of mutual funds etc… and just hold your money in cash. Cash is king and by doing this you will retain your current level of wealth and be ready to invest when the time comes later in 2016/2017.

    The second option is to do the same as above but to put a portion of your money to work in a way that will allow you to profit from a falling stock market. That is to invest in ETFs specifically inverse funds.

    Inverse funds rise in value as the stock market price falls. For example if the Dow Jones Industrial Average drops 35% over the next 24 months, your investment would rise 35%, 70% or even 105% depending on the type of fund purchased.

    (click to enlarge)

    Below are some ETFs that can be used to take advantage of the next bear market. SH, SDS,TZA,SPXU,RWM, QID, FAZ

    index-etfs

    PART 1 CONCLUSION:

    In this article we talked about how the US stock market is showing signs of a major top being put in place later this year. And in the next article PART 2 I will who you what to expect long term for crude oil and how to play this multi-year cycle.

    In the meantime, be sure to join my Free Newsletter so that you receive PART 2 & 3 over the next week plus updates as these investments take place: www.GoldAndOilGuy.com

    Chris Vermeulen

    Tags: TZA, FAZ, SH, SDS, index trading
    Mar 18 9:52 AM | Link | Comment!
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