The end of 2010 is rapidly approaching and the pundits and commentators continue to make their 2011 market predictions. I for one believe predicting future market moves is a futile endeavor where if you are right one year later you are viewed as a sage; if you are wrong nobody seems to remember or care.

In fact, I try not to read any predictions for fear that it might place a bias in my subconscious. I am a trader and thus have no need for emotions, bias, or opinions when trading. I try to stay away from the media and the pundits as often as possible.

With that being said, the managed money crowd will be finishing up their window dressing and the performance anxiety of 2010 will slowly shift to assessing their portfolio risk and making appropriate adjustments for the coming year. Based on current market sentiment it would make sense that most money managers are bullish as cash levels remain quite low when looking at mutual funds and institutional money managers’ portfolios.

S&P 500

The S&P 500 is extremely overbought in almost every time frame and headline risk remains high. At current price levels I would not be interested in being long the S&P 500, in fact I would likely be taking some money off the table before 2011 rolls in.

I think opportunities are going to present themselves in 2011 for outstanding longer term entries into the equities market, however a disciplined approach will be required. Headline risks such as continued monetary and fiscal issues in the Eurozone, municipal budget concerns and potential defaults, potential for rising interest rates, inflation / deflation, and rising energy prices to name just few. Unfortunately some, if not all of the headline risks listed above will likely come to pass. Having fresh capital ready to deploy and developing a trading plan ahead of time for solid entry points will likely lead to a positive trading outcome in 2011.

I believe there are going to be some outstanding trading setups in 2011 regardless of market conditions or economic factors, but in order to be prepared we need to have trading capital available and a trading plan prepared. The weekly chart below illustrates some key support levels on the S&P 500 e-mini contract.

At some point in the future, the S&P 500 is going to suffer from a correction and I intend to be prepared to take advantage of lower prices in my longer term investment accounts as well as in my short term option trading accounts. While I am generally a contrarian when sentiment and bullishness are this high, deep down I am hopeful that the economic recovery continues. However, I am not blind to believe that the worst is over and it is smooth sailing from here. There is nothing about financial markets that is ever easy, and when the directional bias is this strong I tend to step back and develop contrarian strategies just in case the crowd is wrong.

Oil

I try to stay away from opinions and focus on facts when conducting analysis regarding financial markets. However I am going to break my rule briefly to point out that in my humble opinion, the single largest threat to the U.S. domestic economy is not unemployment or housing, but energy. If energy prices continue rising, it causes nearly everything to rise in price in the United States as producers and manufacturers pass down rising fuel costs to the consumer. Essentially we have leveraged the ability to support our substantial population and tremendously high standard of living with the ability to use cheap and plentiful oil.

Some of the reasons that oil prices could rise have fundamental and technical foundations. From a fundamental standpoint, supply appears to be declining and will continue to decline going forward unless some oil fields that are currently unknown are discovered and make available immense supplies of oil. Additionally, the basic principles of supply and demand are present as emerging market countries are needing more and more energy to keep their economies growing and to satisfy the concurrent rising standard of living. Countries like China, India, and Brazil are only going to see their need for energy increase and other countries in the world need to recognize that demand is rising and supply is falling.

While the argument among economists rages on regarding inflation versus deflation, if inflation were to rise suddenly this would also be bullish for energy. Most investors may not have considered that oil prices are over $90/barrel and the economy is relatively sluggish. Where would prices be if the economy were to boom in 2011?

From a technical standpoint, the Great Recession pushed oil down from the all time highs in 2008. Many economists believed that the rise in oil prices is what really caused the market to crater in early 2009. If we view a weekly chart of oil, it would appear that we are continuing to trend higher and that in the longer term this trend will likely persist.

I would be shocked if oil prices do not reach at least $100/barrel in 2011. Some analysts are saying that it could reach $115-$120 by the summer and could probe all time highs as early as 2012. The fundamental and technical analysis is mutually supportive and in the longer term I think rising energy prices is not only a near certainty, but also a major threat to the global recovery.

Gold

The recent pullback offered a nice entry around the $133/share on GLD. In full disclosure, I purchased GLD around 133.25 and sold a slew of naked puts on silver and gold which I have closed for solid gains. Argument surrounds gold and silver as economists bicker over whether we are going to see hyperinflation or deflation in 2011. I for one do not know or claim to know. What I do know is that gold appears to be nearing a final wave of buying which could push it to all time highs.

However, I do believe without question that the volatility in the price of gold is likely to increase dramatically. Large price swings are likely in 2011 as headline risks will drastically impact the price of gold and silver and cause volatility to increase. While this is somewhat speculative, the various headline risks in Europe and in the United States will have a significant impact on precious metals prices.

Gold continues to trend higher and fighting the trend makes little sense and could be a great way to lose precious trading capital. I will continue to play the rising trend until it fails which at some point in the future is inevitable. Neither gold, nor any other asset can continue rising forever. A pullback at some point is not only likely, but would be healthy. Obviously gold remains in a bullish uptrend as illustrated by the weekly chart below:

I do believe that gold is a solid hedge against currency risk and higher inflation based on recent price action, but I am not willing to buy into the world is ending philosophy that many gold bugs envision.

I do not believe that the entire financial construct will fail and that a barter system will be created with gold becoming currency. Through a variety of emails from all over the world I have been presented with all kinds of analysis and data that all fiat currencies fail, that gold is a store of value, and that gold will protect investors from currency manipulation and inflation. While all of these things may be true, I am unwilling to abandon hope for peace, prosperity, and a better future.

Conclusion

I am optimistic about the domestic and global economy in the long term. I believe that great opportunities for long term investment will be offered in 2011 and I intend to take advantage of the price action. I am an options trader at heart, but in the end I am an eternal optimist. Being pessimistic is not only depressing, but it offers very little in the form of solutions. Consequently an absolute pessimistic forward looking view serves to only create biases that are not conducive to success in financial markets. Let’s forget about predictions and pundits and focus on what really matters – price action.

If you would like to receive my Free Options Strategy Guide & Trade Ideas join my free newsletter: www.OptionsTradingSignals.com/profitable-options-solutions.php

J.W Jones

2010 was an awesome year! Yes there were some downs, with the economy and all, but trading wise it was outstanding! I’m sure you’ve read an article or two that I’ve posted from Chris Vermeulen, but I have a little moreunknown insight into his trading service and it’s records…If you have followed Stock Market News throughout the years you know that we have had some GREAT “Radar Plays” from Chris. This is his 2010 members only trading performance…its audited and 100% verified: CHECK IT HERE: http://www.thetechnicaltraders.com/158-17-3-32.html

But there’s something missing…

The last 5 closed trades and their results!
SPY 0.9%, Nov 12 – Nov 15
GLD 1.2%, Nov 4 – Nov 12
SPY 3.5%, Oct 27 – Nov 5
TBT 2.4%, Oct 21 – Nov 2
GLD (1.1%), Oct 19 – Oct 21

Second: He and his members (including myself) currently have three open positions with the following gains: OPEN POSITION 65% OPEN POSITION 28%, OPEN POSITION 9%

Chris let me work a special set-up just for my members for 75% savings…

CHECK IT HERE:
http://www.thetechnicaltraders.com/158-17-3-32.html

All my best,
Jeff –Stock Market News

by Karl Denninger

This is vomit-worthy material…

Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months.

So what’s the meaning of this surge?

Paul gets so close to getting it right, then, of course, he falls right into the trap.

He goes to assert that this is all about “a finite world” and that “we’re just running up against the limits of supply.”

Oh really Paul?

One response has been a proliferation of conspiracy theories, of claims that the government is suppressing the truth about rising prices. But lately many on the right have seized on rising commodity prices as proof that they were right all along, as a sign of high overall inflation just around the corner.

Notice the immediate appeal to class-warfare and partisan garbage.

As for conspiracy theories may I ask where?  You mean like the government’s PPI numbers, right?  Those are some grand conspiracy?

Or how about the regional Fed indices?  They have consistently shown a widening spread between prices paid and prices received for the last year or so.  That, of course, means that the economic conditions do not support passing through cost increases.

The markets, for their part, seem to think this is grand – for now.  Yet increasing materials cost can only do two things – it can show up in final prices (price inflation) or it can be absorbed (margin destruction.)  Those are the only two possibilities.

It cannot “disappear”, no matter how much you would wish it be so.  There are no candy-crapping Unicorns in the real world and balance sheets always balance.

In particular, today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies.

That’s true, but irrelevant.

Again, rising input costs can only do two things - raise final prices or destroy margins.

Pick one.

And be careful which you pick, because whether you like it or not, rising prices is exactly what happens when you have a weak currency and import far more than you should, especially when it comes to energy.

The real problem with imports is in the energy area.  See, oil is in (literally) everything.  The computer on your desk?  The monitor has plastic in it – made from oil.  Your cellphone?  Oil.  Your coozie wrapping your drink? Oil. Your synthetic rubber shoe-sole?  Oil.  The food you eat?  Oil, oil and oil (to till, to plant, to cultivate, to harvest, and to move from place of growth through to place of consumption.)

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We have spent 30+ years denying that we must develop our own energy infrastructure.  We have lots of oil, both as actual oil and as things convertible to it (specifically coal.)  Getting it and putting it in usable form ****es off the greenies, which includes Krugman.  But the fact is this – high prices solve high prices, and when headline “inflation” is running 10%+ a year due to the push-through of high energy prices into collapsing demand due to the inelasticity of incomes, we will suddenly develop the will to convert coal to oil, to build nuclear plants, and to drill for oil everywhere we have it.

Bet on that, because it will happen.  I’m certain of it.  The problem is that it’s likely to happen only when people are hungry enough to eat all the “Greenies.”

The real problem is the claims of “pumping liquidity” being a positive for the markets in the intermediate term, and indicating “economic recovery.”  They do no such thing.  Krugman says “it still feels like a recession in America.”

That’s because it is one, you jackass!

All we’ve done is charge up the credit card to post bogus numbers.  The truth is evident in the statistics from our own Treasury and other government agencies - no “conspiracy theory” required.

But as we do this other nations (and some astute people in the US) are realizing that we’re extending our credit as a nation without any credible plan to stop doing that, or (gasp!) pay any of it off.  Rather, we’re just running up the bill incessantly, with no evidence of any sort of fiscal constraint, restraint, or even recognition that what we’re doing cannot go on forever.

Remember, we were told originally that all these “stimulus” spending-style measures and extraordinary deficits were a “temporary” thing.  That was in 2007.  We’re now three years beyond that – into 2010 – and instead of “pulling back” we have instead added another $500 billion, roughly, to our structural deficit for each of the next two years.

Will some of what we have done up until now come out of the system and be reversed?

It had better, and we had better stop the ZIRP crap right now, because the data up above strongly implies that we’re going to continue to play this game right up until every Senior Citizen who saved for retirement (and has gone from a 5% safe return to zero over the last three years) runs out of money and starves.

If we wait too long to do the right thing we will get to deal with a whole bunch of really angry – and hungry – Seniors.

Somehow, I suspect those who have promoted “liquidity forever!” as a “solution” will be the first ones on the BBQ if that time should come.

We’d be wise to make sure it doesn’t.

Submitted by FMX Connect H/T Zero Hedge

Get Short

The last two weeks have not been good to gold. A new all time high came and went, and the market swooned $60.00 off that level. We now look like we are in a flagging bearish formation with a steep drop to follow if we pierce the 50day moving average again.

From Nic Lenoir, one of our favorite technicians courtesy, Zero Hedge.

Precious metals give worrying signs to investors. On December 7 both Gold and Silver posted key bearish market reversals. After the initial drop markets tried to recover and failed at the 61.8% retracement for Gold on the 14th. Now we have triggered a H&S pattern we are trying to re-test the neckline as resistance and have managed to hold the 50-dma for now but when that support gives and knowing how bullish everyone is I expect a major correction. The February 1350/1300 put spread can be bought for $11 or $12 right now and for any asset manager out there who is long it offers great protection and a good risk reward for people who feel like taking a stab.- Nic Lenoir

We’re Agnostic For Now

The following chart is our favorite and most understood by our team. It focuses on volatility. Volatility is much more predictable and has less noise than pure direction. So for us, as options people, it makes more sense to use it to trade. One thing worth using volatility for is finding good risk reward scenarios and using volatility breakouts to predict directional breakouts.

Simply put, the Bollinger bands currently represent shrinking volatility in terms of trading ranges. When they widen in opposite  directions the trade is to go with the direction the midline takes. Your stop out is the midline. A ridiculous risk-reward. Why is this often successful? Because volatility cycles. And you are looking at one extreme of the cycle. That is not to say it can’t flat line for an extended period of time. But you will be doing nothing during that time, and your powder will be dry for the trade.

Sometimes the break out occurs, and then you get stopped out. That is ok, because the risk-reward works in your favor historically. Furthermore, if the market pierces the redline and moves to the other extreme with the bands still widening, you have what we call: “first way, wrong way”. Consider reversing your position. Note: The dark line drawn at 1372 is the 50 day moving average.

FREE Weekly Gold Updates HERE

Don’t get short

The last 2 times the moving average was pierced we observed the selling coming from momentum funds. They expressed themselves heavily in options as well, buying puts in a flurry of activity that lasted 2 hours. But then it all but stopped. As the market crept back above the 50 day, all put buying ceased. Historically, options buyers are undercapitalized players or they are simply piggybacking what their desk’s bigger futures traders are doing. That is not to say they are wrong. But it is to say, their conviction is mechanical, and they react to moves. We think that for now they sold it in the hole, but are simply expressingthat belief by not getting short yet.

Conclusion:

• The double bottom shown above is powerful support, but triple bottoms are made to be broken. If you need to be long, get long here with a stop out at that level.
• If you are bearish and need to be short sell it but use our Hourly Bollinger Band breakout to help you decide a stop loss level
• Nic Lenoir’s bear flag and head and shoulders observations are good ones, and are tempering our own bullishness.
• It is the end of the year, many Dealers have pulled in the reins hoping to preserve money for the Kung Fu Grip GI Joe. There could be a lot of noise. Lighten your volume and widen your stops.

Our position: flat. We’ll let the Bollinger bands tell us what to do. We are expressing the ”flatness” being long straddles in addition to putting on futures when the time comes. The straddles are hard to justify with the holidays’ coming, but nothing is ever easy.

FMX Connect will post a twitter alert if they spot a B-Band breakout.

The “Golden Trading Vehicle” that has nearly 100% accuracy CLICK HERE

It’s that time again when volume dries up and prices rise into the new year. A lot of individuals are scrambling to prepare for the holidays, even though we had a year to prepare. The big money has already done most of their year end shuffling and will be taking it easy until January.

The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets. While I am keeping a close eye for a top, there is not much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The U.S. federal government is the only wild card going into year end that should be on traders’ radars. They have been doing a great job boosting prices in the equities and commodities market, but can they continue to hold things up when the big money and the proverbial herd start unloading positions in 2011?

SP500 Holiday Grind – Daily Chart
This chart shows the slow and steady grind higher that we have seen in the S&P 500. I expect this to continue into 2011 The market in my opinion is on the verge of some serious selling so long positions should be small going forward.

FREE Weekly Gold Updates HERE

US Dollar On Pause For A Couple of Weeks
This 4 hour candle stick chart of the dollar shows price testing resistance (a previous high). I am expecting to see the U.S. Dollar trade sideways or possibly move closer to the previous high as we enter the new year. A sideways dollar will allow the equity and commodity markets to rise.

Weekend Conclusion:
In short, I think we could see an intraday pullback early this week and then a grind higher. The pullback would shake out some weak positions before the holiday march higher takes place. I typically don’t trade much going into the holiday season and new year. I may put on a small long position if I like what I see forming on the charts, but that would likely be about it. Light volume can be very dangerous to trade because sharp price spikes up or down can occur in a blink of an eye catching traders off guard.

If you would like to learn more about trading while getting trade alerts for ETFs join my newsletter at: http://www.TheGoldAndOilGuy.com

Chris Vermeulen

So far this week we have been seeing fear creep in the equities market. This Wednesday we started to see fear (green indicator) reach a level which tells me to start looking for the market to bottoming. I do follow a few other charts and indicators which warn me of a possible trend reversal (high probability setup) before it takes place but the US Dollar and selling volume are key.

As we all know, when the market is trying to top and roll over it tends to be more of a process than a couple day event. It’s this lengthy topping process which has a lot of choppy price action sucking traders into a position much to early or shakes you out of the position before the market does what you anticipated. Knowing that tops tend to drag out for an extended period of time is critical for an options trader simple because of Theta (time decay)

On the flip side, bottoming is more of an event because it tends to happen after a strong wave of panic selling. Fear is the most powerful force in the market (other than the Fed/Manipulators.. but that’s another topic). That being said, when you know what to look for in bottoms you can generally see the market starting to bottom and prepare for it.

The charts below of the US Dollar Index and the SPY clearly show the inverse relationship they have. Right now it seems everything is directly connected with the dollar… it has been like that for most if the year… I will note that its not normally this clear. Anyways, the dollar is currently trading at resistance which means there is a good chance it will turn back down. So if the dollar drops, then it should boost the SPY (equities market) and put in a bottom for stocks.

Looking at the lower chart of the SPY etf you can see that recent prices have dropped down to a support zone. The important thing to note here is how selling volume is ramping up. This to me means more traders are getting worried and are cutting their losses or locking in gains before it gets worse. We typically see panic selling enter the market near the end of pullbacks. Just like in a bull market where the retail trader (John Doe) is the last to buy into a stock before it falls, it’s the same but flipped in a down trend. The retail trader is the last to panic and sell out of their position before the market bounces/rallies.

Currently the equities market looks to be showing signs that a bottom is nearing. Over the next session or two the rest of this equation should come to light as a tradable bottom or to start playing the down side of the market, only time will tell…

If you would like to learn more and get my trading alerts along with my pre-market morning videos so you know what to look for in the coming session I recommend taking up a subscription with my ETF trading newsletter here: www.TheGoldAndOilGuy.com

Chris Vermeulen

The “Golden Trading Vehicle” that has nearly 100% accuracy CLICK HERE

Market pundits and prognosticators are all worried as to whether Santa is going to deliver presents to Wall Street this year. While we have seen the S&P 500 reach new highs in December, the S&P 500 is facing a wall of resistance around the S&P 1250 area. Based on price action today, Santa may not be coming to Wall Street in 2010.

Market participants are aware that the holiday season tends to usher in light volume and declining volatility historically. When volume is light and volatility is declining there is generally a bias to the upside as equities typically grind their way higher. In the recent past, Santa has come to Wall Street and delivered gifts of good fortune to those that were heavily invested in the domestic financial markets.

Unfortunately Santa may not deliver presents to Wall Street this year as apparently one sector in particular has behaved poorly. If the financial sector does not start behaving, Santa may not come to Wall Street at all in 2010. Apparently Santa and Mr. Market are good friends as they both like to watch the financial sector closely.

The action in the KBW Banking Index (BKX) recently has not been inspiring. In fact, the action suggests that the financial sector may potentially be putting in an intermediate to longer term top. Before coming to any conclusions, we need to watch the price action in the financial sector play out before jumping in on either side. As Minyanville founder Todd Harrison often writes, “as go the piggies, so goes the poke.”

Essentially what he is saying is that without the banks participating in a rally, the broader market will have limited upside. If the banks are sold heavily, the broader market is likely to follow. As can be seen from the chart illustrated below, the BKX tested recent highs and has failed on its first attempt to breakout. As most traders are already aware, every time a level is tested it becomes weaker so we will be watching to see if this level is tested again in the near future. Illustrated below is the daily chart of the BKX banking index:

Price action in coming days will help us determine if this is just a pause before a breakout or whether the BKX index is telling us that prices are headed lower in the financial sector. If the KBX, XLF, & KRE start to breakdown, as traders we should anticipate that the broad markets such as the S&P 500 will likely follow.

The Tuesday morning session saw the S&P 500 climb higher, only to be sold off in the afternoon eventually closing up around 1.13 points (+0.09%) while the Dow Jones Industrial Average rose 47.98 points (+0.42). However, the Financial Select Sector ETF $XLF closed the day down (-0.89%), the KBW Banking ETF $KBE closed down (-1.55%), the KBW Banking Index $BKX was down (-1.52%), and the KBW Regional Banking ETF $KRE closed up (+0.28%). While the broader markets were in positive territory, the banks for the most part were under suspicious selling pressure.

The S&P 500 weekly chart indicates that we are approaching some major overhead resistance levels. Is the financial sector trying to warn us of potential downside? Is the rollover in the banking sector a head fake before they break higher and the S&P 500 follows suit? It is impossible to know for sure at this point, but I for one will be monitoring the financial sector quite closely for any possible clues about possible direction on the broad domestic indices.

Is Santa going to put a lump of coal in Wall Street’s stocking this year? That question will be answered in due time, but for now investors and traders alike should be watching the banks as the broader markets will struggle to rally without their participation.

If you would like to receive my Free Options Strategy Guide & Trade Ideas join my free newsletter: www.OptionsTradingSignals.com/profitable-options-solutions.php

J.W Jones

Profitable Options Strategies Report

by Louis James, Senior Editor, Casey’s International Speculator
In the midst of any long-term trend, like the secular bull market for metals we’re in now, there will be trends within the trends. You could think of them as being like eddies, whorls, and side-channels in a great torrent. We see one such developing that could benefit junior gold stock investors in the near- to mid-term.
Here’s the basic idea: metals prices, especially precious metals prices, have been increasing at a faster rate than mining costs. Gold and silver are up 75.9% and 61.7% respectively over the last three years, while the cost of things like power, equipment, and wages have not risen as much (-1.0% for oil, and 5.1% for wages, as examples). Obviously, this is good for producing companies, and we have seen the market’s reaction in their share prices.

What may not be so obvious is that companies with major, low-grade discoveries in hand that are preparing economic studies on their projects may enjoy a particular window of opportunity. Sometimes 300-day trailing averages are used to project prices used in estimating mining project economics, sometimes 3-year averages are used. In either case, the top line is going to look great, especially since many costs have risen little or even gone down as a result of the crash of 2008.
Here at Casey Research, we’re predicting more economic turmoil ahead, as the global economy exits the eye of the storm. As that happens, many costs could drop substantially, with economic activity in general. That would hurt the top line for base metal projects (copper, nickel, etc.), but would probably drive it even higher for gold projects (and silver ones that don’t rely too heavily on base metal credits).
For instance, Osisko Mining (T.OSK), one of the big winners among our recent speculations was able to take advantage of the crash of 2008 to greatly improve its cost projections, and even to order big-ticket items at lower prices and with shorter wait periods. This added wind in the company’s sails and helped them to wow the market and raise the capital needed to build their mine with no hedging and little debt.
Of course, margins will look better for all projects studied during a period when revenues are rising faster than costs, but that improvement will be an added benefit for high-margin operations, whereas it could be the difference between life and death for lower-margin operations.
In other words, known large, low-grade deposits are being discounted because the grades make their economic viability questionable – and that discount will seem overdone while mining margins are unusually high.

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For example, a company called Geologix Explorations (T.GIX) has a large but low-grade deposit in Mexico. The project has been around for a while, not getting much love from mine analysts – myself included – because the low grade didn’t seem to promise robust economics. However, the company reported a preliminary economic assessment recently, with a startling 28% internal rate of return (IRR) at $900 gold, and a terrific 49% IRR at $1,200 gold. The net present value (NPV) -5% figure came in at $258 million at $900 gold ($555 million at $1,200 gold), which was about 650% of the company’s market capitalization at the time. The market responded, and the company’s stock chart now looks like a hockey stick.
Now, over the life of a large mine, which can be 15, 20, 30, or more years, I doubt margins like those that can be reported at this time will be maintained. Does that make IRRs and NPVs published over the next year or two lies? Not necessarily; if the economics are good enough, the project might be able to pay back the capital expenditures needed to build the mine while margins are high. After that, even a low-grade operation might be able to continue operating profitably for decades.
And it must be said that whether or not a low-grade projects actually becomes a mine, its owner’s share price may still soar, if the company reports credible, robust, and substantial economics.
In today’s frothy market, in which the obvious winners are all getting huge premiums from the market, it’s hard to find anything worthwhile selling cheap. Large projects trading at discounts because of their low grades – but with chances of delivering exceptionally strong numbers while this window of opportunity is open – are just what the doctor ordered. Be careful, however, to do your due diligence, as not all low-grade projects will have what it takes, even with higher metals prices.

—-

[“Due diligence” is Louis James middle name. For years, has been picking the best small-cap metals juniors as the Metals Strategist at Casey Research… beating the S&P 500 by more than 8 times and physical gold by 3 times for his subscribers. For a very limited time, you can save $300 on the annual subscription fee for Casey’s International Speculator– plus receive Casey’s Energy Report FREE for a year! To learn more, click here now.]

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The past week has been interesting to say the least. Gold is trying to find support while the SP500 grinds its way higher. Let’s jump into the charts and analysis to get better feel for what I feel is happening here.

Gold 4 Hour Chart
As you can see from the chart below gold has formed a possible double top. The fact that it made a higher high is actually a bearish sign for the intermediate term 1-3 weeks. When we see a higher high getting sold into with big volume it typically means the big money is unloading large positions into the surge of breakout traders and short covering that occurs when a new high is reached. Following the big money is very important to keep an eye on as it can warn us of possible trend changes before it occurs.

The current selling volume is not exactly a healthy sign if you are looking for higher prices in the near term. If this pattern breaks down I would expect $1340 to be reached very quickly.

Keep in mind gold it in a strong up trend still. Shorting is not the best play in my opinion. I prefer to see pullback which washes the market of weak positions then jump on the long side for another bounce/rally.

SP500 Market Internal Strength – 10min, 3 days chart
I watch these charts to get a feel for the overall market strength on a short term basis. The top chart shows the SPY etf breaking above a resistance trend line on Friday afternoon. This occurred on light volume meaning it is mostly likely a false breakout and Monday we could see a gap lower at the open or a pop & drop. The two other indicators are reaching an extreme level which normally tells us a pullback is due in the next 24-48 hours of trading. The question is, will us just be a bull market pause or will we get a decent pullback.

The red indicator in the top chart and the red indicator levels on the charts below that help us time the market as to when profits should be taken or to tighten our stops if we have any long positions.

The broad market is still in a very strong uptrend so moving stops up and buying on oversold dips is the way to play it.

Weekend Market Analysis Conclusion:
In short, both gold and the stock market are in a bull market (uptrend). Trying to pick a top to short the market is not a good idea. Instead I am looking for an extreme oversold condition to help reduce downside risk before taking a long position.

The overall strength of the market (SP500 and Gold) I think are starting to weaken but in no way am I going to short them. We continue to buy dips until proven wrong because indicators can stay in the extreme overbought levels for a long period of time. Generally the biggest moves happen in the last 10-20% of the trend.

If you would like to get these weekly reports and my trading tips book free be sure to visit my website: www.thegoldandoilguy.com/trade-money-emotions.php

Are you an active trader looking to make money in the markets? Click Here…….

Chris Vermeulen

From The Market Guardian is a Radar Play posted yesterday!

OREX rockets higher on Diet Pill news. Orexigen rose $5.20, or 109 percent, to $9.96 at 9:57 a.m. New York time in Nasdaq Stock Market composite trading, the most since April 2007. Options traders placed record bets on Orexigen last week, saying a positive panel vote would double the company’s value. Vivus shares gained $1.20, or 15 percent, to $9 as analysts said the Orexigen recommendation bodes well for the heart risks with Vivus’s drug, Qnexa. Arena jumped 20 cents, or 14 percent, to $1.61 in Nasdaq trading.

About 68 percent of American adults are overweight, raising their risk of diabetes, heart disease, high blood pressure and cancer, according to the 2008 National Health and Nutrition Examination Survey. Almost 34 percent are obese, measured as a ratio between height and weight.

This could easily be a $25+ stock going forward. Marketclub has a very interesting take on how this news affects OREX. They are offering a Free complimentary OREX Stock Analysis sent directly to your in-box not strings attached. Just tap this link and check your e-mail. “Smart Scan Chart Analysis confirms that a strong uptrend is in place and that the market remains positive longer term”

FREE OREX Stock Report