Author: Chris Vermeulen

How To Spot The End Of An Excess Phase - Part 1

Posted on by Chris Vermeulen

If you have been following my team’s research posts recently, we have highlighted some interesting new research related to Appreciation/Depreciation phases in the US stock market and how that relates to Gold. Today we will explore another method of identifying the different phases of market trends that appears to show very clear Appreciation/Depreciation phases and extended end-phase blow-off tops and bottoms.

My research team and I believe the current rally in the US stock markets represents an end-phase blow-off top after a 9.5-year Appreciation phase that began in mid-2009. We believe it is very important for traders to understand these larger Appreciation/Depreciation cycles and how the Blow-Off end phases often create extreme volatility and price rotation.

Below, we are using a custom EURUSD/JPYUSD index divided by GOLD as the base Candlestick chart and have applied the real Gold price levels on the chart for visual reference. Near the bottom of the chart, we are showing the RSI indicator, the TSICCI indicator, and the RSI + MFI Indicator that helps to highlight the broad market trends and cycle phases. We want you to pay attention to the GREEN and RED arrows we’ve drawn on this chart showing the Appreciation/Depreciation phases of Gold and the broader US stock markets in EUR/JPY currency form. This method of charting these phases takes a bit of patience and understanding. We are looking for correlations to US stock market trends in relation to precious metals, and we must consider the end-phase process.

Excess Phase

The end-phase process, after any appreciation or depreciation phase, often includes a very volatile “blow-off” period where trends continue beyond the end of the actual price phase. This happens because the momentum of the previous price move has yet to realize the transitional shift in underlying appreciation/depreciation factors. Traders still want the rally in the stock market or metals to continue, so they chase after the excess phase rally until the momentum of the move fails. Continue reading "How To Spot The End Of An Excess Phase - Part 1" →

Monthly Dark Cloud Cover Pattern May Be Calling The Top

Posted on by Chris Vermeulen

Research Highlights:

  • A Dark Cloud Cover pattern is a Japanese Candlestick Pattern that is typically associated with major top setups
  • Critical Support on the SPY highlighted by multiple technical analysis strategies suggests 335~335.25 is acting as a major support level
  • If price stays below the $339.95 level, then we interpret the trend as being Bearish. If price moves above the $343.55 level, it is Bullish

Critical Support on the SPDR S&P500 ETF (SPY) highlighted by multiple technical analysis strategies suggests 335~335.25 is acting as a major support level. The rally in the markets that started late Sunday and carried forward into early trading on Monday, September 28, 2020, suggests the market is attempting to rally above this support level to establish a potential momentum base. My advanced price modeling systems and Fibonacci Price Amplitude Arcs (originating from the 2009 bottom) have clearly identified this area as a critical resistance/support zone.

The first chart below highlights the SPY Monthly chart data and shows the recent peak in price that broke through the major resistance level near 335, then collapsed back below that same level. Prior to this recent collapse, the COVID-19 peak in February also briefly touched this same resistance level – confirming it as valid. We believe the current price activity suggests the markets are attempting to form some sort of price base above this $335 level on the SPY.

Dark Cloud Cover Pattern

As you can see from the recent highs on the chart above, there is a new Fibonacci Price Amplitude Arc range set up by the COVID-19 collapse that may interrupt this Base Setup process. Look for the smaller OBLIQUE on the chart near where the word “Support” is. This is a new Fibonacci Price Amplitude Arc that reflects the most recent price range activity into targeted Fibonacci based price zones. Continue reading "Monthly Dark Cloud Cover Pattern May Be Calling The Top" →

Topping Pattern Or Just Consolidation?

Posted on by Chris Vermeulen

The Transportation Index, which typically leads the US stock market by 2 to 4+months, has been unusually aligned with the S&P 500 over the past 8+ months. Recently, though, the Transportation Index has rallied up to recent new all-time highs (over the past 9+ months) and has rotated lower – below resistance near 11,440 (the MAGENTA LINE on the first chart). Our researchers are warning us that any continued breakdown below this level could prompt a bigger downside market move.

Is recent rotation a topping pattern or just consolidation?

Currently, the US stock market has rolled into a sideways/topping pattern. After the peak in metals setup near August 7, 2020, the US stock market continued to rally a bit higher, then rotated lower on September 3, 2020. The Transportation Index rolled over on September 3 but climbed higher less than 5 trading days later – breaking above the highs set before the COVID-19 peak.

We’ve suggested a “Bull Trap” pattern may be forming in the major markets, and we’ve urged traders to be cautious regarding the new price highs and appearance of a continued upside price rally. The Bull Trap pattern, sometimes called a “Scouting Party,” happens when price breaks above resistance (or below support) briefly in an attempt to establish a new trend. If the price fails to find support after breaking above the previous resistance level, it typically rotates lower and collapses back below the resistance level (attempting to find a lower support level).

If our research is correct, the recent rotation in the Transportation Index may suggest a Bull Trap pattern has set up and completed (with the price falling back below the 11,440 level). If this trend continues, we may see a much bigger downside price move where price attempts to find support near 9,800 or 9,200. Continue reading "Topping Pattern Or Just Consolidation?" →

Is The Bull Trap Complete?

Posted on by Chris Vermeulen

Some of you may be old enough to remember when Desert Storm started in January 1991. The news of this war took the US and the world by storm – almost literally. It was televised and it changed the way people lived their lives at that time. People were almost glued to the TV watching the videos and satellite feeds. It turned into the ultimate reality TV series – must-see TV.

The US markets reacted to this foreign engagement. At first, the markets rallied for about 7+ weeks in early 1991, then they started to consolidate below resistance. For many people and businesses, this new reality event presented very real challenges for revenues and growth. Many businesses were forced to close because of the sudden shift in consumer activity and concerns. The reason I’m bringing this up right now is that I believe we are experiencing a new type of “reality event” (actually events) that has transitioned to become a driving force in the markets, namely COVID and the protests/riots in many cities across the US.

Chaos & Disease – The Ultimate Distractions

With the US Presidential Election only about 60+ days away and winter fast approaching, the US has a number of fundamental issues to contend with going forward. What happens if the US elections are contested in the courts? What happens to policy and the support for the consumer/markets when the US government potentially enters this chaotic phase? What happens when winter hits and businesses that have been struggling through the warm summer months suddenly find themselves losing more revenues and customers? What happens if the streets remain in a state of unrest throughout the rest of this year and into next year? Continue reading "Is The Bull Trap Complete?" →

Precious Metals Warn Of Increased Volatility

Posted on by Chris Vermeulen

Are the precious metals patterns predicting a big downside price event?

Our trading team witnessed a big drop in Platinum and Palladium prices early this morning while Gold and Silver continued to push moderately higher. We began to question this move and investigate any historical relevance to previous patterns. Our research team pointed out that both Platinum and Palladium rolled lower just 3 to 4 days before the breakdown in the US stock markets on February 24, 2020, while Gold and Silver were reaching recent price peaks. Could the patterns in precious metals be a warning of another potential volatility spike and price decline in the near future?

Our research team created the charts below to help highlight the pattern that we are seeing in Precious Metals right now. First, we highlighted February 24, 2020, with a light blue vertical line to more clearly illustrate where the markets initiated the COVID-19 breakdown event. Next, we drew shaded rectangles around new downside price rotation levels that took place near this peak in the US stock markets. Lastly, we drew a red line that highlights the subsequent price decline that took place in Precious Metals as the markets tanked in late February and early March 2020.

Precious Metals

The current downside price move in Platinum and Palladium are very interesting because it appears Platinum and Palladium both initiated a downside/contraction price event just 3 to 4 days before Gold and Silver, as well as the rest of the US stock market, began to collapse on February 25, 2020. You can clearly see in the bottom two charts that Platinum and Palladium initiated a downside price correction a few days before both Gold and Silver reached their peak levels and began to move lower. Once this peak rotation took place, all four of the major metals groups moved moderately lower for about 7 days before pausing, then collapsed even further. Continue reading "Precious Metals Warn Of Increased Volatility" →