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70 Second U.S. Market Outlook – Metals, Dollar, Bonds, Stocks, Energy

October 5th, 2012 · Chris Vermeulen · 5 Comments

Over the past year we have had some really interesting things unfold in the market. Investing or even swing trading has been much more difficult because of all the wild economic data and daily headline news from all over the globe causing strong surges or sell offs almost every week.

For a while there you could not hold a position for more than a week without some type of news event moving the market enough to either push you deep in the money or get stopped out for a loss. This has unfortunately caused a lot of individuals to give up on trading which is not a good sign for the financial market as a whole.

The key to navigating stocks which everyone thinks are overbought is to trade small position sizes and focus on the shorter time frames like the 4 hour charts. This chart is my secret weapon and giving you both large price swings which daily chart traders focus on while also showing clear intraday patterns to spot reversals or continuation patterns with precise entry/exit points.

While I could ramble on about why the stock market is primed for major long term growth from this point forward I will keep things short and simple with some 4 hour and daily charts for you to see what I see and what I am thinking should unfold moving forward.

Keep in mind, the most accurate trading opportunities that happen week after week are the quick shifts in sentiment which only last 2-5 days at most which is what most of my charts below are focusing on…

Dollar Index – 4 Hour Chart

This chart shows a mini Head & Shoulders reversal pattern and likely target over the next five sessions. The dollar index has been driving the market for the past couple years so a lower dollar means higher stock and commodity prices.

Dollar Index TradingDollar Index Trading


Bond Futures – 4 Hour Chart

Money has been flowing into bonds for the past couple weeks with most traders and investors expecting a strong correction in stocks. As you can see the price of bonds hit resistance this week and as of Thursday has now started selling off. Money flowing out of this “Risk Off” asset means money will move to the “Risk On” investments like stocks and commodities.

Bond Futures TradingBond Futures Trading


Gold Futures – Daily Chart

Gold is stuck in both categories in my opinion. It is a “Risk Off” safe haven when people are scared of falling stock prices, and it is also a “Risk On” speculative investment when people are feeling good about the market. Gold has been trading at key resistance for a couple weeks and looks as though it’s starting its next rally.

Gold Futures TradingGold Futures Trading


Silver Futures – Daily Chart

Silver is in the same boat as gold though it carries much more volatility than gold. Expect 2-4% swings regularly and sloppy chart patterns in this metal.

Silver Futures TradingSilver Futures Trading


SP500 Futures – Daily Chart

As much as everyone hates to buy stocks up at these lofty prices I hate to say it but I think they are going to keep going up and they could do this for a long time yet. If the dollar index continues to break down then I expect the SP500 to rally another 3% from here (1500) in the next 1-2 weeks.

SP500 Futures TradingSP500 Futures Trading


Crude Oil Futures – 4 Hour Chart

Crude oil has not had much attention from me in the past few months. While it has had big price action many of those big days took place on news causing an instant price movement making this extra dangerous to trade. I continue to watch rather than get attached to it.

Crude Oil Futures TradingCrude Oil Futures Trading


Natural Gas Futures – Daily Chart

Natural gas has been a great performer for us in the past 6 months as all the short positions slowly get covered. I just closed out my natural gas ETF trade this week with a 31.9% gain and plan on getting back in once the chart provides another low risk setup.

Natural Gas Futures TradingNatural Gas Futures Trading


Trading Conclusion:

In short, I feel the dollar index along with bonds will correct over the next few weeks. That will trigger buying in stocks and commodities. Keep in mind natural gas dances to its own drum beat. The dollar does not have much affect on its price and most times natural gas is doing the opposite of the broad market.

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5 responses so far ↓

  • 1 Greg Atkinson // Oct 6, 2012 at 7:55 am

    The oil price chart does look ugly. A few years ago many analysts were sure oil would smash through $200 a barrel sooner rather than later.

    The S&P 500 has certainly had a good run but it looks primed for a correction to me.

  • 2 Leigh // Oct 6, 2012 at 11:07 am

    “The key to navigating stocks which everyone thinks are overbought is to trade small position sizes and focus on the shorter time frames like the 4 hour charts.”

    Greg, isn’t this sort of thinking contributing to the volatility that Chris Vermeulen is complaining about. I bet half the traders today have no idea what company the stock symbol refers to let alone what the company makes. The markets have turned into a quick junkie fix rather than a long term investment plan.

  • 3 BP // Oct 6, 2012 at 12:41 pm

    Leigh: “The markets have turned into a quick junkie fix rather than a long term investment plan.”

    Yes, you’re right there, Leigh. Saw a pie graph which demonstrated this exceptionally well, recently. 😉

  • 4 Lachlan // Oct 6, 2012 at 5:51 pm

    Greg I will admit to being a high oil price believer back then alas it never happened, thankfully. Now diesel on the other hand is $1.50/L so although I can certainly cope with that (despite racking up a lot of km’s) but it has crept up substantially in price against the oil price.
    Now when will somebody invent a car that runs on free energy and we can get this crisis over with…. for a decade or so.

  • 5 Greg Atkinson // Oct 7, 2012 at 8:45 am

    Leigh I reckon you are right. The trading trend at the moment appears to be to a short term focused jump in/out of sectors/stocks are opposed to buying for the long term. Also investors are a nervous lot these days and are prepared to take profits (if they have some) when spooked by bad news

    Lachlan the oil price is a bit of a mystery to me. According to the China consumes everything theory it should be higher than it is now so what may be keeping it down (besides some new supply) is that demand has slumped in Europe/US/Japan. Also LNG is in the news a lot these days so I wonder if some ‘energy’ money has simply switched from oil to LNG?

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