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Where the Dow, Gold,
Silver & Oil Stand
by Chris Vermeulen
Broad Market Trading Analysis
Last week the broad market slide
lower on heavy volume as the DOW tries to hold the 8000 level. If this support
level is broken then we could see another leg lower with the DOW sliding down to
the 6500 level.
The reason I am mentioning this is
because gold surged higher on Friday with big volume as traders start to
anticipate this drop as well as the drop in the USD which is currently at a
short term resistance level. If the market starts to drop, then holding gold
stocks may not be the best safe haven. When the market sells off it tends to
pull all stocks with it, by holding GLD fund or physical gold, SLV fund or
physical silver, and the USO fund or physical crude oil, you could have better
returns on your investment trading the commodity rather than going long stocks
in a bear market.
Dow Index 10yr Monthly Chart -
If you look at the monthly chart of
the Dow Jones Industrial Average you can see that both of the previous bear
markets back in 1998 and 2003 both bounced off the 6500 level before starting a
new bull market. The Dow is currently at the 8000 level and looking very weak. I
don’t forecast prices but technically the market could break down and reach the
6500 within 1-2 months with our current level of volatility in the market and
continued negative news with the tarp bailouts not working.
Dow Index (DIA ETF) Monthly Chart
The Daily Chart of the Dow Jones –
The daily chart of the Dow does not
look so hot. Last month the Dow slowly climbed on lighter volume which is a
bearish movement. Once the price was at the top of its short term trading range
from the past month, sellers jumped in forcing stocks lower on increased volume.
These are the characteristics of a bear market and long positions should be
protected with stops or hedging which is what I mentioned a couple weeks ago in
my report. Currently the daily chart is has sold down to support on increased
volume and flirting with another major breakdown. What has me worried is that
everyone things the market has bottomed, and if that’s the case then all the
buyers are long and a breakdown will trigger everyone’s stops and margin calls
will flood the market sending prices tumbling to new multi year lows.
Dow Daily Trading Chart (DIA ETF)
Dow Trading Conclusion:
The broad market at this levels is
very tempting to buy as dividend funds and stocks are priced to go out of
business thus have big potential for the long term. My concern is that most
people seem to think the markets had bottomed as of a week ago and if that’s the
case, everyone should be long right now. If the markets continue this downward
slide a few more days we could see prices drop very quickly as I mentioned
above. Either way prices for stocks are a steal at these prices and still a
great deal if the market rallies another 10-15%. I would rather see the trend
flatten more or start to head higher before I take long term trades to the long
Gold Trading Analysis
Spot gold prices soared on Friday as
investors move their money into gold which is generally a safe haven during
tough economic times and a US dollar which could drop sharply within the next
Spot Gold Weekly Chart – Explained
The weekly gold chart shows a very
clear breakout to the up side of its current downward trend line. This chart
looks to be strong its is important to note that it still has not made a new
higher high, and is now trading at resistance of the previous short term top put
in place last November. Gold could just as easily drop from here as it could
Spot Gold Weekly Trading Chart
Spot Gold Daily Chart – Explained
We did not have a buy signal last
week because momentum was very strong to the down side on the daily chart. I
only like to play reversals when we have momentum in our favor. That being said,
momentum is now in our favor and we will be looking for a pullback for possible
entry points now. On the daily chart the MACD was headed lower with a breakdown
which is the main reason I was not willing to put our hard earned money to work.
I do miss some nice moves if our funds but I make sure the odds will be in our
favor before pulling the trigger.
Spot Gold Daily Chart (GLD ETF)
Silver Trading Analysis
Silver had the same things happening
to it as gold did last week. MACD (momentum) was down and its risk was over 3%.
We are now looking for entry points during a pullback.
Spot Silver Weekly Trading Chart (SLV
Gold and Silver Trading Conclusion:
Gold and silver look like they have
started a move higher as traders and investors put their money into something
tangible which is a hedge against a falling dollar. I think these metals will
perform much better than the gold and silver equities if the market does drop
from here. That being said, if I get a buy signal for the equity funds I will
take a position in them for sure. Waiting for a low risk trade with the odds in
your favor is difficult but crucial if you want to succeed in the long term.
Crude Oil Trading Analysis
Crude Oil is something that I think
has huge potential because of its prolonged down trend without any real bounces
and because there is so much interest from traders and investors who want to
catch this bounce. The weekly chart is starting to look amazing and the daily
chart looks ready to pop as well.
Crude Oil Weekly Trading Signal –
The weekly oil trading chart shows a
long 7 month sell off without any small bounces on the way down and volume has
increased as the price slides lower indicating that there is more and more
interest from traders and investors. Prices have now put in a small bounce and
will be testing our downward trend line if price continue to rally this week.
Also the MACD (momentum) is about to cross to the upside which is very bullish.
If oil prices breakout above our down trend line and the MACD crosses over to
the upside then we will have a buy signal in oil.
Weekly Crude Oil Trading Chart with
Possible Oil Buy Signal
Crude Oil Daily Trading Chart –
Crude Oil’s daily chart is very
bullish looking as well. The price has broken is downward trend line and has
pulled back to a support level over the past 2 weeks. Fridays big bounce gave us
a buy signal for USO because everything for my oil trading strategy was in favor
(MACD cross, Stochastic, Trend line Break). The only issue was that risk was
over 3%, it is currently at 9% and I will wait for a better entry point on a
Crude Oil Daily Trading Chart with
Oil Buy Signal
Crude Oil Trading Conclusion:
Crude oil as you can see looks to be
a picture perfect setup as momentum in the price is slowly shifting direction.
While many traders went long on Fridays buy signal I am waiting for risk to
decrease before I put my money to work. I don’t mind buying things at a higher
price if the overall risk is lower and the reversal looks strong.
Please visit my website if you would
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Vermeulen is Founder of the popular trading site
There he shares his highly successful, low-risk trading method. For 6 years
Chris has been a leader in teaching others to skillfully trade in gold, oil, and
silver in both bull and bear markets. Subscribers to his service depend on
Chris' uniquely consistent investment opportunities that carry exceptionally low
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This article is
intended solely for information purposes. The opinions are those of the author
only. Please conduct further research and consult your financial advisor before
making any investment/trading decision. No responsibility can be accepted for
losses that may result as a consequence of trading on the basis of this