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by Chris Vermeulen
Commodities took a breather last
week, while stocks slowly continued their march higher. This week (Monday)
commodities moved lower with profit taking and fears of a much larger precious
metals and broad market sell off being anticipated in the near future. While it
sure looks like we are ready for a pullback in entire market we just may not get
one for some time. We could get higher prices for 2-6 weeks still.
Everyone is anticipating a market
correction, which is identical to what everyone thought back in March, yet
prices continued to rise for two more months (June). I am anticipating a sharp
1-3 day pullback but that is just what happens during rallies. Sellers are
quickly met with buyers and the rally continues.
Take a looks at the index DIA back
in April and May, you see sharp pull backs then big bounces higher. I think we
are at this point now. Also small cap stocks are still holding up better than
large cap stocks. This is important because I look at small cap stocks as a
leading indicator for the broad market.
HUI – Gold Stocks Index – Daily
Gold stocks have been on a buy
signal since the middle of July and are currently testing our support trend
line. Let’s see if prices hold up this week. I do expect to see this trend line
penetrated but with any luck it will be an intraday dip in price.
GLD ETF – Gold Bullion – Daily Chart
Gold is pulling back as also. We
want to see prices reverse back up without our trend line support level
GDX ETF – Gold Miner Stocks Fund –
Gold mining stocks sold down today
and are testing support. Let’s watch and see what happens. We will be either
taking out of our position for a small gain or get a bounce tomorrow.
SLV ETF – Silver Bullion Fund –
Prices are still way over the
support trend line so a deeper correction could be just a around the corner
still. This type of price action today could be a “shake” to get traders out of
their positions before prices rally again. Shake-Out’s happen all the time and
very easy to see on small cap stocks intraday as well. This will be explained my
trading report in a few weeks.
USO ETF – Crude Oil Prices – Daily
Crude oil broke out last week and is
now taking a breather as it moves sideways. Oil could quickly go either
direction from here. Could be a double top in crude oil prices or it could be a
large bull flag which points to much higher prices. We continue to watch as it
UNG – Natural Gas – Daily Chart
Natural gas is not to exciting at
this time. It still needs 1-3 week of price action before I will be looking to
enter into a position.
Commodity Trading Conclusion:
Overall the entire market is
unstable. The US dollar looks ready for a big bounce or a big breakdown, same
with Precious Metals, Oil and the broad market. Times like this become very
difficult to trade because so many investments are at extremes. They are either
way over bought or way over sold. I have really tightened up on my trading in
the past 2 weeks because of this situation. My position sizes are small and I am
taking profits quickly. Until we get some type of pullback/profit taking in the
market I do not feel comfortable putting much money to work. I think this is how
most traders are feeling right now.
I would not clear the slate and sit
in cash though, as I mentioned at the beginning of the report we could see
prices claw their way higher for some time so.
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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