During the second half of last week, we saw some strong price action in the equities market. The
broke through the five and 50-day moving averages closing the week just under key resistance levels. The S&P 500 futures will find resistance at the June high of 1099.25, 1100 which is the whole number, then at 1103 which is the 200-day moving average. Each of these are clumped together making it really just one solid area where sellers will be waiting to short the market.
The market momentum and internals are looking strong for the equities market overall. With last week's strong close, we have seen the percentage of stocks closing above their 50- and 200-day moving averages surge from 40% to 68% from the previous week. Stocks closing above their 20-day moving average jumped from 40% to 82% from the previous week. Seeing this type of shift in the market momentum is generally a bullish indicator.
From a quick glance at the internals it looks as though Monday will trade flat or negative for the session. The reason is that the
New York Stock Exchange
advance/decline line is telling us the market is overbought when looking at a short-term time frame.
I would expect some selling Monday or possibly we get a gap up, then a selloff early in the session while the market digests last week's strong closing.
Bullion has been giving mixed signals for a while now. It looks like there has been a possible ABC retrace. But on the hand it looks to be forming a stair step pattern lower (series of bear flags). Until we get something more concrete from the charts let's just keep our eye on it for now.
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The past month we have seen oil form a bear flag which generally leads to lower prices. That said, oil continues to grind its way higher closing at a key resistance level. This could be a possible double-top before heading lower or we could get a breakout and rally this week. I know that does not sound helpful but remember oil is very sensitive to weather, such as hurricanes, the U.S. dollar and geopolitical events making it much more unpredictable than one may think. I am not trading it right now.
Pre-week Trading Warm-up
I feel the equities market has some strength behind it. But we must see the S&P 500 futures contract close strongly above the 1103 area. With the market overbought and trading at resistance I am favoring some early weakness Monday.
As for gold and oil, I am just going to keep an eye on them. I'm just not feeling or seeing the patterns which I find tradable at the moment for a low-risk setup.
Quick Trading Tip
I always try to analyze and trade the market the way which has always worked for me, keeping my emotions in control and filtering out as much news, events and opinions as possible so I can think clearly while I focus on my low-risk setups. The past couple of months have seen big news and events unfold making it harder for traders to stay focused. It is crucial for traders to step back and clear their heads from all the news, hype and opinions shared across all the mediums and just look at a simple chart analyzing the price, volume and trend.
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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.