By Chris Vermeulen of TheGoldAndOilGuy.com
Below are two charts and my thoughts on what I am looking for in the coming days and weeks.
Gold Exchange Traded Fund: Daily
As you can see, the price action of gold has been trading within a few patterns the past couple months. First we saw a nice ABC Retrace correction and now it looks like a possible reverse head-and-shoulders or wedge pattern is forming.
All three of these patterns are bullish, but resistance must be overcome before I will start putting my money to work.
NYSE and Nasdaq Indices: Daily
We saw the broad market trade sideways for the majority of the week. As usual, we had a pre-holiday pop in prices with the week closing slightly positive for stocks. These gains are generally given back the following week as volume picks back up.
The one thing that has me scratching my head is that the major indices like
and Russell 2000, all stayed below their previous week's high. But the
, as the top chart show, clearly broke out to a new high.
I look at the NYSE as a leading indicator and this makes me think we could see stocks grind higher right into earning season. All we can do at this point is wait for more data points on the chart and continue analyzing the market one day at a time.
Weekend Trading Conclusion
As I mentioned last week, the market is over extended as we enter earning season. The market is in the same situation as we saw going into the January earning season.
I do not think we will have a huge pullback, but I think a 3%-5% correction is likely in the coming days or week. Once we get a pullback, we should see support around the 30- or 50-day moving averages and then see the market head toward new highs once again.
The precious metals sector is getting a lot of attention because of the whistle blower on JP Morgan stating that metals are seriously manipulated with a huge amount of short positions still in place. I think this could be helping this sector and I hope we get a low-risk set-up in the coming week or two.
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-- Written by Chris Vermeulen in Collingwood, Ontario, Canada
Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.