The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- The past few weeks have been fast-moving, with fearful investors clearly in control.
As we all know, fear is the most powerful force in the financial market, and when the hedge funds and the masses get spooked they all dart in one direction like a school of fish.
Watching the charts and volume levels it's clear that money was/is flowing out of stocks and into precious metals as the risk-off safe play.
I explained this in a
about how the
ETF can be used as a fear/sentiment indicator.
To make a long story short, I feel as though euroland is going through something similar to what we (the U.S.) went through in late 2008 and first quarter of 2009.
It's very likely that the eurozone will resolve its financial issues and that its stock markets will bottom in the next month or so. If their market bottoms, so will the U.S.'s.
That would be perfect timing, because the market is currently oversold, sentiment is now turning bearish and we have had a sizable pullback in line with normal bull market corrections.
I expect that in two to six weeks stocks will rally, financials will rocket higher, bond prices will fall, gold prices will fall and oil will rise as a risk-on trading environment returns.
Of course, all this would happen only after the eurozone resolves some of its key financial issues.
I'm being very optimistic here, but we could be nearing a major low that could kick start another massive one-year rally.
Stepping away from that longer-term outlook, let's take a peek at the shorter-term trends for oil, gold and stocks.
Crude Oil 60-Minute Chart (One-Month View)
The recent price action for crude oil remains bearish/neutral in my opinion. We saw a drift higher into resistance with declining volume, then a sharp pullback on heavy volume. This tells me that oil remains in a downward trend. It may be forming a base, which would act as a launch pad in the coming weeks for higher prices, but only time will tell, and I will update readers as this develops.
Gold Four-Hour Chart (One-Month View)
Gold has been performing very well for our entry point, but the recent price action is starting to look toppy. Gold and many commodities regularly form this pattern of three wave pushes to new highs just before a sizable correction takes place.
I am bullish on gold long term and for a few more weeks, but I do feel as though there will be a multimonth correction in the price of gold soon, so be sure to tighten your protective stops as prices move higher.
SPY ETF Weekly Chart (Two-Year View)
The stock market has been hit hard, and a lot of damage has also been done to the charts on a technical standpoint. When there is this amount of damage and fear, it typically takes time for markets to stabilize and heal.
Until the eurozone resolves some of its major issues, the U.S. market will be held hostage and under pressure. So I anticipate several weeks of volatility and wild daily price swings similar to what we saw in July of 2010. This type of trading environment can work very well for options traders.
Weekly Trading Conclusion
In short, the market price action is favoring very shortterm traders (day traders). We are seeing complete price swings that normally can be swing traded happen in just hours.
Until we get another extreme setup or stabilization (less big headline news) in the market we will be more of a spectator than a trader to preserve capital.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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.