Option Milliona...'s  Instablog

By Christopher Diodato

Since the start of September, gold has been floundering around in a well-defined trading range between about 1610-1750, not really deciding to trend in either direction since. Since that time, however, the gold market has been consolidating into a price pattern that allows us to project intermediate-term targets. The pattern I see is a descending triangle.

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There are two targets on this chart. The bull target would be activated once the price breaks above $168.50, corresponding to $1685 for the actual spot price of gold. The bear target is activated once $161 is broken, and confirmed as a strong sell signal once $159.50 is broken.

Which direction do I see price breaking out? Well, it's looking bullish in the very short term. First off, today's price action represented a "bullish engulfing" candle pattern. After these patterns occur, there is, at least, some follow through with a short term price rise.

(click to enlarge)

Other momentum indicators show minor divergences in price, which usually precede a price rise. Still, that price rise might not be sufficient to trigger a breakout. What I would like to see is an advance on high volume, such as the volumes seen in the August-September rally when gold rose over $250 in one month Average daily volumes on both rallies and declines is current about half the Aug.-Sept. levels. Once that buying interest comes back, it's time to catch the gold bug again.

Happy trading!

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

​By Chris D

I'm the type of person that usually wins poker by manipulating the players. Same with playing the stock market; I take advantage of crowd psychology. Today, however, has always been one of the trading days that I come to the market to play pure probabilities.

What's so special about today? There has been a strange "effect" noted by several analysts regarding trading days and holidays. They found that the trading day before a market holiday was usually more positively biased than most trading days. Also, it was discovered that the day ​after​ the holiday was usually negatively biased. Therefore, today, the day before thanksgiving, the market has a positive bias.

Here are the summary statistics I gathered for the last 60 years in the S & P 500. The data goes to 2010. To download my spreadsheet from my DropBox, click here

The trading strategy buys the S & P 500 index at the close of two days before Thanksgiving and sells out of the position at the end of trading the day before Thanksgiving.

Notice that the frequency of winning trades with this strategy is quite high, especially when the average for other days gives us only a probability of slightly above 50% that the market will gain on the day.

While the average gain is not too impressive, this "holiday effect" can still offer traders who use leverage a trading "edge" today. Good luck!

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

By Chris Diodato - OptionMillionaires.com

Today's price action in oil was not surprising. It was a 61.8% retracement of the past ten day's up move. That's great, but does it continue lower, or start a new up trend? As I watch the internals, momentum is beginning to show that a bullish reversal may be in the works. Will there actually be peace in the Middle East come a month from today? Take a look at this YouTube video (clickable) to see the analysis on my computer screen.

Happy trading!

~Chris Diodato

Disclosure: I am long XLE.