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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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  • Crude Oil Slides To Multi Year Lows And What To Expect

    Looking back to 2007 (seven years ago) we have seen the price of crude oil perform incredible price swings. No matter the time frame in which we observe price when an extreme price spike takes place due to news/event, statistics show that half if not all the event driven price spike will eventually be negated in the future.

    The perfect example of this is the rubber band affect. If you pull an elastic band in one direction, eventually when it breaks or it's released, the band will retrace back to the norm and then go in the opposite direction. You can see this on the chart from 2008 high of nearly $150 to the 2009 low of $40. Price then lost is momentum and has been somewhat range bound from 2011 - 2014 right in the middle at $95 per barrel.

    Observing the price chart of oil below there are many technical indicators and patterns at play. The first important pattern to identify is the series of higher lows shown with the green trend line sloping upwards.

    A rising trend line that has multiple pivot lows (bounces up the trend line) the price of oil creates what I call a perfect storm for waterfall type selloff. This is exactly what we have seen over the past 3 months.

    Each time one of the pivot lows are breached, the stop loss orders are triggered for investors. This causes a flood of sell orders forcing price lower to fall below the next pivot low etc… This may look and sound easy to trade, but keep in mind this is a monthly chart, and short term traders are not trading this long term time frame. Only investors would be focusing on a move that would take months to a year to unfold.

    The second key indicator to look at is the 61.8% Fibonacci retracement level. This level typically acts as a support level for a small bounce usually. Because the 61.8% level is also in alignment with a previous consolidation, and a pivot low, both which have been highlighted on the chart, I suspect a bounce around the $65 level should take place.

    The final potential bottom could take place near the 2009 low. It is a long way away but anything is possible and what we think is most unlikely to happen is exactly what the market does sometimes. USO, SCO, UCO, XOM

    (click to enlarge)

    Crude Oil Conclusion:

    In short, I think what crude oil is doing is healthy and needed for several reasons. If I let my bias/option shine through, I feel the big oil and gas companies have been taking advantage of us with their ridiculously high gas prices over the last seven years.

    The multi-billion dollar, cash rich corporations need a little wakeup call. And the hair cut in their share price should be great for investors. This allows them to build or re-enter new positions at a better price with a higher dividend yield.

    I will be watching the hourly and daily charts for a bottoming/bounce formation in the next week. But any bounce could be short lived as sellers appear to be aggressive still.

    Receive my personal trade alerts via email and SMS text alerts at www.TheGoldAndOilGuy.com with a 50% Black Friday Offer Today

    Chris Vermeulen

    Tags: USO, SCO, UCO, XOM
    Nov 28 6:44 PM | Link | Comment!
  • The Big, Bold And Ugly

    Since July of 2014 the big cap stocks have continued to make new highs as investors dump more and more money into the stock market. Overall bullishness on the stock market is now at extremely high levels which typically happen before a major stock market correction and sometimes start a full blown bear market.

    While the average investor continues to become more and more bullish, the market breadth/health has been rapidly deteriorating. Unless you are market savvy you would not know how weak the market actually is and this always leads to strong losses and drawdowns for the uninformed investor.

    What we know and most do not about this rising market, is that the big cap stocks in the SP500 index appear to be holding the overall market up and masking the weakness. So as investors become more bullish at these lofty levels putting more money into generic funds that push the SP500 higher, we see strong selling and unwinding of the more leveraged position like small cap stocks.

    Over the past couple years the SP500 has formed a series of bullish corrections and running corrections. But the current formation is that of a bearish mega phone pattern and these typically point to lower prices.

    SP500 BIG CAP STOCKS: SPY, UPRO, SH

    (click to enlarge)

    THE BOLD STOCKS:

    I have always liked to follow the NYSE index because its a basket of 1900 stocks with 1500 of them being U.S companies. Its breadth/strength makes it a much better indicator of the market performance than the more narrow indexes with less stocks.

    While this index remains in a bull market, it only looks as though it's a few months away from a possible reversal and confirmation of a new bear market.

    (click to enlarge)

    THE UGLY: GM

    If you have ever read Stan Weinstein's book then you know he followed GM share price closely. He believed that what GM did, the stock market would follow, to some extent. GM was/is an early leader of the US economy and stock prices in general.

    The chart below paints a clear picture of the Stage 1 Accumulation in 2011- 2012, and also of the Stage 3 Distribution phase in 2013 - 2014. GM shares have traded down literally from the first week of the year and have now broken below critical support. Things could get interesting…

    (click to enlarge)

    MY TRADING CONCLUSION:

    In short, I remain bullish on the stock market with both my short term and investing outlook but I am very cautious and have closed out several large positions recently. Cash is king and I plan to protect, rather than invest my nest egg when risk is higher than normal.

    Short term trading where trades only last 3-10 days is the way to go at this stage of the game. Some recent winning ETF trades with my ETF newsletter www.TheGoldAndOilGuy.com have been in SCO, a quick bounce trade in UCO, REM, and our current trade as of last week EEM.

    The majority of my investment capital is traded with my automated trading system. It trades the S&P500 index directly in my brokerage account catching these 3-10 day swings in the market saving me time while reducing my emotional attachment to the market.

    Chris Vermeulen

    Nov 25 10:09 AM | Link | 1 Comment
  • Leading Sectors Breaking Down – Internet & Social Stocks

    In July I showed talked about the Russell 2K index and how it was underperforming the broad market. I went on to explain what it likely meant was in store for the US stock market this fall. The outlook was negative, just in case you were wondering…

    This week I want to talk about two different sectors that have often lead the broad market in rallies and corrections over the years. These sectors have underperformed the broad market much like that of small cap stocks, and this does not bode well for investors going into fall.

    In the analysis below I use Bollinger bands and trendlines. Using only these tools keeps the charts clean and easy to understand. In short, once a trenline has been broken that is the first early warning that a trend may be coming to an end. The second is the break of a Bollinger band.

    A combination of these can be taken as a trend reversal and likely the start of a multi week or month correction. This will depend on the chart time frame you are reviewing though. I use a similar method to identify trends with my automated futures trading system.

    INTERNET INDEX FUND ANALYSIS

    (click to enlarge)

    SOCIAL MEDIA INDEX FUND ANALYSIS

    Futures Trading System

    If you are wondering what exactly these two charts are pointing to… let me share my outlook.

    Because we have seen the support trend lines broken to the downside this month, and the fact that price has pushed more than 2 standard deviations from its norm, the odds favor more downside is to come.

    From years of experience trading price patterns and breakouts I know that when price breaks to the downs side and triggers fear among its investors it is typically your best time to sell short so you can profit from the falling prices. Fear is the most powerful force in the stock market and it must be traded much differently than when prices are rising.

    Although I feel the broad market is still within its uptrend, these two underperforming sectors may just continue to sell lower. Obviously once the broad market rolls over, these sectors should fall even faster to the downside but until then, they could chop around and grind their way down.

    Like My Simple Analysis & Tips? Join My Free Newsletter at www.GoldAndOilGuy.com

    Want My Trades Automatically Trade for You? www.AlgoTrades.net

    Chris Vermeulen

    Sep 23 10:49 AM | Link | Comment!
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