Stocks Market's Moment of Truth

By Chris Vermeulen of TheGoldAndOilGuy.com

NEW YORK (TheStreet) -- The stock market has had an exciting couple of weeks as it slowly formed a top before breaking down this week.

I have been warning all stock market investors to tighten protective stops and keep new positions small because once prices start to fall they most likely will plunge.

This week we have seen all the markets around the world break down, and this indicates that there could be some large waves of selling in the near future. Traders and investors are very bullish on both stocks and commodities, and the financial markets tend to hurt the largest group of investors possible. More than 53% of traders are bullish, and only 18% are bearish (same readings as the January high), and this makes for a perfect blood bath in the stock market.

In the chart of the SPDR S&P 500(SPY) below, you can see the repeated patterns in price and volume.

Also below, I have put together a short video covering charts of gold, silver, oil and the broad stock market. I explain what traders should watch in the coming days and weeks.

Midweek Trading Conclusion

The broad market is now in the middle of a trend reversal, and during times like these we can see wild price swings in stocks and commodities. This makes trading very difficult. But after a few more sessions we should see things smooth out, providing some great shorting opportunities before the stock market starts to head back up to make new 2010 highs.

If you would like to receive my Gold Newsletter or ETF Trading Signals please visit my Web site: www.TheGoldAndOilGuy.com.

-- Written by Chris Vermeulen in Collingwood, Ontario, Canada

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