S&P-500, Gold & Oil Trend Trading Charts
Source: Chris Vermeulen, TheGoldAndOilGuy (6/9/10)
Market volatility continues to shake things up.
The SP500 daily ETF chart shows my simple volume analysis during market corrections. During the early stages of a trend, pullbacks are quick and simple. But as a trend matures we start to see corrections become much more complex. We first saw the simple one-wave corrections in 2009, then we saw a much deeper three-wave correction, which was enough to shake most retail (average Joe's) out of the market before heading higher, and now it looks as though we are headed into a complex five-wave correction, which should be enough to shake out the majority again.
It's important to note that the longer a trend lasts the larger the corrections/shake outs must be in order to get everyone out. From what I am reading and seeing everywhere online are doom and gloom scenarios. In my opinion this is good. One more leg down should be enough to shake everyone before we see a nice 10%-20% rally. Once we see that bounce/rally then we can reanalyze the market to see if we are headed back up to test the 2010 highs or if its just a bear market rally. In the end it does not matter as we play both the long and short side of the market.
The Gold ETF continues to unfold as planned. We caught a good chunk of the recent rally and are now in cash waiting for another low risk entry point in the coming days or weeks.
Crude oil Fund (USO) has been struggling to stay up the past two months. As you can see by the chart below, it's trading at a key resistance level and at this point it could go either way. . .I don't like to get involved in trades when they look to be a 50/50 probability of going each direction. If anything I would think oil will head back down as the USD continues its strong rally.
Midweek ETF Trading Conclusion:
In short, the broad market is in a down trend and selling volume continues to rise. Investors around the world continue to accumulate gold and the USD as they seem to be the safe havens for the time being. Oil is also in a down trend and trading at resistance which means we should see lower prices for oil and oil companies and this will weigh heavily on the equities market.
Cash is king and during times of uncertainty that's for sure. . .It is very comforting to know we are in cash most of the time and only get involved with the market when there is a low risk, high probability setup on the charts.
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