By Chris Vermeulen of TheGoldAndOilGuy.com
NEW YORK (
) -- Everyone is talking about commodities as the place to be in the coming months. I tend to agree, but it is still important to know where each commodity is trading to maximize returns and reduce risk.
That being said, we are also seeing money flow out of the small-cap stocks and into the large-cap blue-chip stocks. These companies prove year after year that they are profitable, and that's where investors have been putting their money the past couple weeks.
This can be seen by simply looking at the
Dow Jones Industrial Average
and the Russell 2000 index, which has dropped in value much more than the Dow. But if we see the market turn back up and make a new yearly high in the coming weeks, small-cap stocks will most likely provide explosive opportunities for traders.
GLD ETF Trading -- Weekly
Above is some analysis on gold, silver, natural gas and oil. By looking at the weekly chart of
SPDR Gold Shares
, we can see two simple things.
1) Each breakout is happening quicker as money continues to move into gold.
2) This step-like pattern (bull flags) is powerful and can continue for a long time.
GLD ETF Trading -- Daily
This chart shows the same price action, but on a daily chart. It also shows one way to find and trade low-risk set-ups for the GLD ETF-traded fund.
Silver ETF Trading -- Weekly
iShares Silver Trust
trading has not been as exciting. Silver has yet to break out above the 2008 high. It is actually trading at a major resistance level and still has some work to be done before looking really bullish, in my eyes. This is acting like a major resistance level for two main reasons.
1) It is testing the 2008 highs, where a lot of traders bought silver over a five- to six-month period. There are a lot of sellers to flush out before moving higher.
2) The drop in silver prices in late 2008 was so scary for investors who bought at $16 to $20, that they cannot believe they are getting their money back. This is making a higher volume of investors sell their positions at break-even, because they just want out, after seeing a 50% loss at one point last year.
UNG Fund Trading -- Daily
States Natural Gas Fund
has been sliding lower and lower since hitting its head on resistance back in October. The gap down on Friday is bearish, indicating traders are starting to panic out of UNG and are willing to get out at any price.
UNG Fund Trading-- Natural Gas Seasonality Timing
UNG and the seasonality chart seem to be spot on for timing the price of natural gas. Keeping an eye on seasonality and general market/seasonal patterns can really help improve one's performance. It may be better to trade stocks or commodities, or maybe just carry more cash, depending on the timing and situation of the market.
USO Fund Trading -- Daily
United States Oil Fund
USO has broken out from its large multi-month consolidation from August- early October and is now forming a bull flag. While this flag could last a couple months, I have a feeling we will see a breakdown or a break out sooner than later. This is just a gut feel. I will continue to watch and wait for a low-risk set-up.
To sum up the coming week's market action, I feel it will not be anything to write home about. Gold and silver will most likely trade sideways or up, natural gas should continue lower and crude oil should trade sideways. With any luck, stocks will continue to rally and test the highs once again.
GLD ETF continues to be our investment of choice, as it provides the more accurate low-risk set-ups time and time again. With any luck, we could get some low-risk set-ups this week, but I am not counting on it.
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-- Written by Chris Vermeulen in Collingwood, Ontario, Canada.
At the time of publication, Chris Vermeulen was long GLD.
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.