Everyone is wondering whether gold, silver and the indices have bottomed after last week's heavy selling.
To put things into perspective, there were more than 30 sell orders for every buy order at the
New York Stock Exchange
. That is pure panic. Several of my broker buddies reported that clients last week were demanding to liquidate their positions as soon as possible in order to be 100% in cash.
This type of sentiment and price movement warns us of a possible market bottom. But I get the feeling that traders and investors had been expecting this sharp drop, and I don't see or feel sufficient fear in the marketplace. Last Thursday and Friday were crazy, but I think we need one more drop to really shake things up before a bottom is set.
Below are some charts showing where the market currently stands and what the charts indicate.
SPDR Gold Shares Daily Chart
Gold, as represented by SPDR Gold Shares, is clearly trending down on the daily chart. One more thrust down should shake things up enough to trigger the next rally.
Silver has formed a head-and-shoulders pattern and has broken through multiple support levels. A measured move to the downside would be $14 and could happen in the coming days.
S&P 500, NYSE, Gold Futures, Dollar Index Intraday Charts
These charts clearly show the price action of the past month. As you can see, the trend of stocks and gold are down, with consolidations (pauses). This is the exact reason you must trade with the trend and not against it. Bounces are more like sideway movements and are very difficult to play in a down trend.
If you focus on selling at key resistance levels, then moves tend to be much more profitable. That said, we did go long last Friday because of the market's extreme oversold condition. I was expecting a follow-through Monday or Tuesday, which has yet to happen. We have now moved our stops to break even or better to eliminate our downside risk.
Spot Gold 24-Hour Chart
This chart says it all. The market and gold are very volatile, making it difficult to trade right now. Bulls and bears are battling it out. Only time will tell!
Stocks and Commodities Trading Conclusion
In short, it's been a slow week without any really exciting moves. Thursday and Friday could be interesting if traders exit their positions going into the long weekend in order to protect themselves from any surprising economic news.
From the looks of gold, silver and the indices I sense selling could be just around the corner. We are currently long a few positions in hopes of a pop and rally going into the holiday weekend, but only time will tell.
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At the time of publication, Vermeulen had no positions in any of the assets mentioned.
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. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.