By Chris Vermeulen of TheGoldAndOilGuy.com
NEW YORK (
) -- This past week we saw the financial markets, including commodities, move higher. This was great to see. But the recent run-up has brought both stocks and commodities to key resistance levels.
With gold, oil and stocks (as represented by the
) trading near key resistance points we will most likely have some sharp movements in the coming week, so buckle up!
In short, these markets are trading near key pivot points, giving mixed signals about whether prices will rise or fall. My analysis is pointing to a small move up Monday morning to break Friday's high followed by some selling late Monday or Tuesday. I don't know how much of a move down it will be, but there is the potential for a 3% to 4% decline. On the flip side, if buyers step in and push the S&P 500 above 1100 then we could see the index surge 3% to 4% higher.
This is a very difficult time to pick a direction for the market, which is why it's best to wait for the risk level to diminish before getting involved. If you feel confident about a direction, then take a small position with a protective stop.
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On the following pages, I'll look at charts of gold, oil and the S&P 500.
Gold - Daily Chart
Gold continues to form the large cup-and-handle pattern and is trading near resistance. We should see gold make a move up or break the dotted support trend line and drop toward the blue support level. I continue to wait for a low-risk setup for gold.
Crude Oil - Daily Chart
Crude oil has been trending down for a couple of months and recently rebounded to test its resistance level. It looks as though oil is forming a bear flag, which generally means we should see lower prices in the near future. But another $1 to $2 move up could trigger a surge of buyers if this resistance level is broken. There's a 50/50 likelihood commodities will either rally or sell off.
S&P 500 Daily Chart
The S&P 500 has posted some decent gains over the past couple of sessions, but it's still not in the clear. Most technicians are looking for a move above the 1100-1110 area with heavy volume before they start to commit serious money to the long side.
It looks and feels as though the market could drop or rally very sharply from here. If you are caught on the wrong side of the move then it's going to really hurt your trading account. When the market is at a critical pivot point like this with increased volatility levels and mixed market internals I tend to stay on the sidelines until some dust settles.
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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.