Hello traders everywhere, Adam Hewison here co-founder of MarketClub with your mid-day market update for Thursday the 29th of September.
Do you see the trees in a forest, or do you just see the forest?
There is a saying that goes like this “can't see the forest for the trees” is a reference to people who get so involved with the details of an issue that they lose sight of the big picture.
If your involved in the markets, it is easy to fall into the trap of just looking at the minute or hourly charts, rather than considering the market as a whole. When you can't see the market for the minutia, it means that you are deeply involved in a situation, and you are perhaps focusing too much on the inner workings of the market, and not enough on the big trends.
With all of this talk of problems in Greece, defaults, contagion and a host of other problems in Europe, it is easy for traders to get distracted, and not see the forest for the trees.
The most important element in trading in my opinion, is the direction the major trend for that market. It doesn't really matter what the news is, if the market is doing something else. As traders I believe we have to look at the forest in this case the big trends in the marketplace.
Let's look at them now: S&P 500 index–major trend down. Gold-major trend up. Metals–major trend down. Crude oil–major trend down. Dollar index–major trend up. CRB index–major trend down.
So, there you have it, all the major trends in all the markets we are dealing with right now. Everything else is just individual trees, that don't mean a heck of a lot in the big picture.
It takes a tremendous amount of energy to move a market and change a major trend. This kind of energy normally does not happen in one or two days. As they say in statistics, one data point does not make a trend.
Now let's go to the 6 major markets we track and update every trading day and see how we can create and maintain your wealth in 2011.
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S&P 500 INDEX
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 75
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The S&P 500 index rallied based on the vote in Germany to bailout Greece. This is far from a done deal. As mentioned in yesterday's post, we thought that rallies in this market would run into problems, which they have today. A close below the 1163 area would be negative. Last month, the S&P 500 closed at 1218.89 and last week it closed at 1136.43. So while the market is higher for the week, it is sharply lower for the month and the quarter. The big picture for this market is down. At the moment this index is trapped in a trading range bound by 1120 on the downside and 1220 on the upside. We are looking for this market to break down and be on the defensive for the next several weeks. Intermediate and Long-term traders should continue to be short this index.
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Suggested S&P 500 Trading Instruments:
Non Leveraged ETF's: (Long SPY) (Short SH)
2 x Leveraged ETF's: (Long SSO)(Short SDS)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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SILVER (SPOT)
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trend = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 100
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The action in the spot silver market can only be described as negative. Last month this market closed at $41.60 an ounce and last week it closed at $33.15 an ounce. As of this writing spot silver is down for the week, the month and the quarter. How low can silver go? I think we have to look back at the major support which is around the $20 an ounce level. If that is the case, silver could drop another 30% from current levels. Having said that, we will rely on Trade Triangle technology to keep us on the right side of the trends. Traders who are following our Trade Triangle Technology should be short this market with appropriate stops.
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Suggested SILVER Trading Instruments:
Non Leveraged ETF's: (Long SLV) (Short the ETF SLV)
Leveraged ETF's: (Long AGQ) (Short ZSL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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GOLD (SPOT)
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 70
Our last remaining positive Trade Triangle in spot gold is hanging on, but is under pressure from the other commodity markets. Last month, gold closed at $1823 an ounce and last week it closed at $1656 an ounce. Currently we are trading about $30 below last week's close. We are expecting gold to regroup around current levels. We would prefer to let this market settle down as we do have a mixed picture at the moment. The Chart Analysis Score for gold is now at -60, indicating a near-term trading range. This range is pretty broad-based with support at $1550 on the downside and resistance at $1750 on the upside. I think most traders would be better off just watching from the sidelines as the volatility continues to contract. Only long-term traders should maintain long positions with the appropriate money management stops in place.
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Suggested GOLD Trading Instruments:
Non Leveraged ETF's: (Long GLD) (Short the ETF GLD)
Leveraged ETF's:(Long UGL) (Short GLL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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CRUDE OIL (NOVEMBER)
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 75
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As the equity markets go, so goes the price of crude oil. The November contract appears to be having some problems with areas of resistance at the $84.00 and $84.50 levels. With both our long-term monthly and intermediate term Trade Triangles in a negative mode we expect this market to have another push down to test the $80 and possibly the $78 a barrel level. While this market is presently higher for the week, it is lower for the month and the quarter. Intermediate and Long-term traders should continue to be short the crude oil market.
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Suggested Trading Instruments:
Non Leveraged ETF's: (Long USO) (Short the ETF USO)
Leveraged ETF's: (Long UCO) (Short DTO)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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DOLLAR INDEX
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = + 75
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For the past three days the dollar index has been moving sideways, jarred by events in Europe. As stated above, we felt the big trends are positive for the dollar index and as of right now those big trends remain intact. For the month the dollar index is higher than last month's close of 74.11, but lower than last Friday's close of 78.30. A change could come about tomorrow as it is the last trading day of the week, the month and the quarter. This index is coming from a large energy field that is capable of carrying it much higher, possibly up to the 80.00 - 81-00 area. Intermediate and Long-Term traders should maintain long positions with the appropriate money management stops in place.
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Suggested DOLLAR INDEX Trading Instruments:
Non Leveraged ETF's: (Long UUP) (Short UDN)
Leveraged ETF's: (Long) (Short)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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REUTERS/JEFFERIES CRB COMMODITY INDEX
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 90
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The REUTERS/JEFFERIES CRB COMMODITY INDEX is sharply lower for the month. Last month, this index closed at 342.49 and is currently trading around the 305 area. The bigger trend based on all of our Trade Triangles continues to be negative and we see no signs of any reversal in this market at the moment. It is also possible for this Index to reach our ultimate target zone of 294.47 which represents a 61.8 % Fibonacci retracement. The measurement came from the highs that were seen around April 29th and the lows that came in around August 25th of 2010. We expect the trend to continue until our Trade Triangles inform us that the trend has changed. Short, Intermediate and Long-Term traders should maintain short positions with the appropriate money management stops in place.
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Suggested REUTERS/JEFFERIES CRB COMMODITY INDEX Trading Instruments:
Non Leveraged ETF's: (Long CRBQ) (Short the ETF CRBQ)
Leveraged ETF's: (Long UCO) (Short CMD)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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This is Adam Hewison for MarketClub and I'll see you tomorrow, right here with my Friday wrap. Have a great trading day.
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
I've always wondered why there are no Warren Buffett like billionaire traders, if the patterns are so easy to spot..
I'm currently short GS. I read somewhere that support is now near 91.40.
How do they come up with those numbers to be so specific?
When plotting the support level line (downtrend), it could be off by as
much as 1.00, yes?
Would like to know if Marketclub provides support and resistance levels
automatically or do we have to plot it ourselves.
If Washington really gave a rats ass to increase employment in this country, they would have leaned on the Fed to buy state bonds with a 0% coupon instead of feeding the bankers and speculators with QE.
The Canadian and Australian dollars have lost 8- 10% this month. Is this foreshadowing the direction of the markets?
How low would gold have to go for the monthly TT to turn negative ?
Dave,
I will give yo that answer next week.
All the best,
Adam
I am positive Adam would advise against going in all the way on anything. Markets can remain illogical for a long, long time.
stocks sometimes climb a wall of worry. There's certainly plenty of worry out there. we'll see. I am long with short put insurance.
:-o)
Gold is about to bounce pjorepare for 200&1000 mark with resisence at 200
thank u four your help im go all in all the way
P.S P.S. BIG TIME
thank u four your help im go all in all the way
P.S P.S. BIG TIME
Apologies for multiple posts but I forgot to mention that Citi is now "officially worried":
The pattern above is one of our favourites when completed (A double bottom within a triangle.)
So far we have not managed a daily close above the neckline which stands at 43.18%.
A close above here would complete the double bottom and suggest an impulsive move higher to at least 56%.
That is a problem. Not only does that suggest another sharp selloff in the S&P 500 but it creates an even bigger breakout.
It has not been our base case scenario that the 48.00-48.2% level will be broken on a weekly close basis on this chart. If, however that does happen then there is a real danger that our 1,000 target on the S&P gets hit much quicker than we think.
The pattern on the daily chart above suggests that if we close over 43.18% we will go over 56% which by definition means that a close over 43.18% suggests that the 48.00-48.20% area will give way.
A weekly close above here would almost certainly suggest a move to our 1,000-1,015 target on the S&P 500 extremely rapidly. Such a development would also strongly question our present view in today’s’ weekly highlights that further consolidation was likely in the short-term before the next move lower in “risk”.
The target on such a break for the VIX would be at least 80%+...we are now officially worried.
P.S.
Of interest from CitiFX:
The set up on the VIX is now looking increasingly like a double bottom within a triangle. This often results in an explosive breakout.
The levels detailed below need to be watched carefully as if they go then there is a danger we get to out 1,000-1,015 target on the S&P a lot faster than we thought.
Adam, you catch the situation quite well IMO.
The dollar´s counter-trades are only good for in and out trading.
Next month should be paradise for volatility traders since last Monday the number of October put contracts against the S&P 500 was up to a stunning 7 million. It´s probably up to 10 million by now, haven´t checked it.
Best of luck, g.
From August through October, looks like the DOW has established a double-bottom formation. Should we be able to forecast the next rise in the pattern. I've seen some of your past videos where you show how to estimate the next peak. Would you please share your opinion on this possible formation?