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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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Technical Trading Mastery - 7 Steps To Win With Logic
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  • Do Equities Just Correct Or Collapse In 2015?

    The question on everybody's mind for 2015 is when will the stock market start to correct in value and will it turn into a 50+% collapse?

    Over the last 15 years investors has been through a lot in terms of market volatility. From the 2000 tech bubble bear market and the 2008 financial crisis bear market investors are far from having their investment psyche scars healing and is for good reason. Many sustained 50+% loss in their portfolio value more than once and are not willing to do it for a third time.

    A large group of investors exited the stock market and has never returned. Unfortunately those who exited have missed the seven-year bull market rally to all-time highs. Those who remain in the market are in constant fear that a new bear market will emerge.

    The stock market has a tendency to move in a 6 to 8 years cycle. With the current bull market now lasting seven years and was several indicators signaling weakness within the equities market it makes logic sense that a bear market is about to emerge.

    The stock market cycle and technical indicators are not the only causes the trigger a bear market. A rising Fed funds rate can cause weakness in the equities market and if you know what to look for you can escape the next bear market and profit from falling prices.

    Question: if you could put your money in a guaranteed investment not to lose any principle and receive a 1% per annum return on investment or receive potentially 7% per year but with no guarantee on your principle, which would you choose?

    Most people would choose the 7% return option because they understand financial rewards almost always require some risk. Over the last 90 years the stock market has on average returned 7% annualized gains.

    Obviously not all years will have a positive gain, but when averaged over many years, it is reasonable to expect an annual return of 7% from the stock market.

    What if I told you there is a way to improve on this? For example, if you simply moved your equity investments to a large cash position at the start of each bear market?

    The chart below showing the gain from your would have has from 1995 to 2015 by selling all stock holdings when the US stock market topped during 2000 and 2007 avoiding the last two bear markets.

    100% cash position during bear markets would have generated 635% ROI, which is a 31% average annual return. The numbers are staggering to say the least. But obviously you cannot pick the exact top and bottom, but even if your timing was way off and you only pocketed half of those gains you would still be way ahead of game. SPY, DIA, QQQ,IWM

    635ROI

    You may be asking yourself:
    How do I avoid a bear market?

    I believe for investors this is not that difficult because a major trend change takes time and because the moves are so large you don't need to be perfect with your timing.

    globalcrash250

    Take a look at my analysis charts below. The first one shows the 10 year treasury price which is broken its short term resistance levels and is rocketing higher. We have seen this happen 6-12 months before the last two bear markets started.

    (click to enlarge)

    (click to enlarge)

    Let's take a look at the Fed rates

    Not every rate rise turned into a recession, but nearly everyone has. Rising rates will lead to a market downturn.

    Could the next bear market/recession occur when rates start to climb? After analyzing economic data provided by Brad Matheny I have a max rate at 2% over the next couple years.

    (click to enlarge)

    globalcrash250

    That combination of technical indicators, analysis above couple with the rising fed rate hikes had created the perfect storm for a bear market to emerge which I expect to last 1-2 years.

    Bottom line, we are still in a bull market but only months away from a bear market. Do not ignore these warning signals.

    Keep your eye on the 2 year treasury rates instead because they usually lead Fed funds, and will provide an earlier warning signal as to the markets down turn.

    When rates start to rise, we may only be weeks, instead of months, before the stock market starts to collapse.

    Get My Trade & Investment Alerts: TheGoldAndOilGuy.com - Limited Offer!

    Chris Vermeulen

    Apr 01 11:14 PM | Link | Comment!
  • 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!
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