There Is Only One Word to Describe Q3: Volatility

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Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Friday, the 30th of September.

It's here! We've reached crunch time for the markets and portfolio managers everywhere. It is not often you have the weekly, monthly and quarterly markets all ending on the same day, but Q3 is playing out to that scenario.

I think there is only one word to describe Q3: volatility. Volatility ruled the markets and has pushed many investors to the sidelines. Conservatively, it is better to be in cash than be long the equity markets at the present time.

I find it hard to believe that some of the pundits say we can go into defensive stocks. My question would be why? Why be in the market when it's going down? It just makes no sense to me.

The philosophy behind our Trade Triangle Technology is very simple. We want to be long the market when it is going up and either short or out of the market when it is going down. The reality is the market can only do three things: it can go up, down, or sideways, that's it! How many things in life do you know that are that simple?

Yesterday, we talked about the major trends in the markets and how important it is to know the direction of the trend for each and every market you have an interest in.

In today's video, we will be focusing on the 6 markets we track everyday in a slightly different way.

As always, our goal is to share with you ideas that have been used by generations of successful traders. I'm sure you have heard the expression, "that there is nothing new under the sun" and that expression can be applied perfectly to trading. With nothing new under the sun, using some tried and true methods that I am sharing with you today, I'm sure you too will be successful trading the markets.

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 is lower for the quarter and for the month. For the week it appears to be a little higher, but that would change with a close below last week's close of 1136.43. While the market remains incredibly choppy, it does appear that we are seeing a series of lower highs from the highs that were seen on August 31st. These highs have been followed by lower lows. Has the market stopped going down and building a base to rally from, or is this just a pause before resuming the longer term downtrend? As always, we are going to rely on Trade Triangle technology to guide us on the path to profits. At the moment this index is trapped in a broad 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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For the past five days the silver market has been trapped in a rather interesting pattern, creating a battle between the Bulls and the Bears. When we see situations like this we tend to want to lean on our Trade Triangle technology to help us decipher the next swing. It would appear as though the next swing is going to be on the downside, as all of our Trade Triangles are in a negative mode. As of this writing, spot silver is lower for the week, the month and the quarter. This is not a sign of a bull market. How low can silver go? I think we have to look back at the major support, which is around the $20 an ounce level. 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 = - 60

Like the silver market, the gold market has been treading water for the past five days. However, the gold market is lower for the week and the month but higher for the quarter, which ended at $1500 an ounce. With the Chart Analysis Score for gold at - 60, it indicates a near-term trading range. This range is pretty broad with support coming in 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 = - 85
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Crude oil has been quite predictable. Tell me what the equity markets are going to do tomorrow, and I'll tell you what the crude oil market will also do. This market is lower for the quarter and the month, but at the moment is slightly higher for the week. Our Trade Triangles are still indicating a very negative mode and we would not be surprised to see the $78 level tested again. A market close below $80 a barrel today, should be viewed as extremely negative for the crude oil. 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 = Positive
Combined Strength of Trend Score = + 100
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The dollar index jumped to life today moving it to its best levels in three days, pushing all of our Trade Triangles into a positive mode. A close over the 78.55 will be a new high close for this index. Presently this market is higher for the quarter, the month and the week. This all indicates that a strong trend is in place for this market. 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 = - 100
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The REUTERS/JEFFERIES CRB COMMODITY INDEX is lower on the monthly and quarterly time frames that we track. Only the weekly is higher at the moment, but should we see a close below 301.878 it would put this index on the defensive for next week. We continue to see a contraction in this market and that certainly is one that is evidenced by the quarterly and monthly charts. It is also possible for this Index to reach our ultimate target zone which is 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 weekend wrap. Don't forget to enter for a free 1 year subscription to MarketClub on a HP WiFi Tablet!

All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub