Stocks, ETFs, Options, Commodities & Currencies

I apologize now for the Christmas colored charts below… Its a lot of red and green but these are the most understood colors for knowing what ranges means (bullish or bearish).

This was a very emotion week for traders. The strong selling Thursday and Friday has traders and investors running for the door and panicking out of positions. While I did close out our long SP500 swing trading on Thursday to lock in a profitable trade, I do feel as though we can re-enter next week a better price.
The only ones feeling pain today are those who do not have enough self-discipline to create rules and trade by them. Again this is talked about in GREAT DETAIL in my new book. If this is you, I recommend buying my book and reading it this weekend as it’s a quick and simple read. There is a paperback version or instant PDF download available: Get Book.

Without self-discipline no amount of courses are trading services will make you a successful trader.
Let’s get technical and jump into the charts…

Momentum Index – The Intraday Extreme Overbought/sold indicator

This is an indicator I follow daily to understand how strong the selling is. If it is broad based or sector related. The last two sessions clearly shows is broad based and that the market has moved to quickly in one direction and is primed for a knee jerk reaction bounce.



Swing Trading Cycles : 3-8 Weekly Overbought/Sold Market Cycles
This is a fantastic tool for timing key pivot lows and highs in the broad market. We are nearing another key pivot low but there is still room for more selling next week.



Options Traders Are Fearful of Continued Selling

If you don’t know what the put/call ratio is, in simple terms it tells us when the majority of traders are buying put options (expecting stocks to fall, ratio of 1.0+), and when they are overly bullish (expecting stocks to rise, ratio below 0.60).

The chart below shows everyone is leaning towards more selling in the stock market. I use this as a contrarian indicator.



The Fear Trade – Shorting Fear with an Instrument that Naturally Loses Value: VXX

There is a lot of interesting way to trade the stock market and once way it through shorting the VXX ETF during bull markets. Instead of buying a long position in stocks, you could simply short the VXX fund. This thing loses value over time because of the way it’s managed/constructed. So logic says, shorting it on bounces can be very rewarding during times when fear is high.

Keep in mind this fund and its underlying index moves FAST with 20-30% percent swings… Trade small position sizes if you ever touch this thing…


Weekly Technical Trading Report Conclusion:

In short, (pardon the pun) I feel the stock market is setting up for another big bounce. The technicals and longer term trend remains bullish. I trade with the trend until proven wrong. Only then will I change the direction and trade with the new trend.

See more here.

David A Banister- www.MarketTrendForecast.com

We have been writing about the bottoming process of the Gold Bear Cycle (Elliott Wave Theory) since December 4^th 2013, and our most recent article on December 26^th reiterated that the best time to accumulate the Gold/Silver stocks was in the December and January window. Specifically this is what we wrote:

“These types of indicators are coming to a pivot point where Gold is testing the summer 1181 lows…at the same time, we see bottoming 5th wave patterns combining with public sentiment, bullish percent indexes, and 5 year lows in Gold stocks.* This is how bottom in Bear cycles form and you are witnessing the makings of a huge bottom between now and early February 2014 if we are right.

The time to buy Gold and Gold stocks is now during the next 4-5 weeks just as we were recommending stocks in late February 2009 with public articles that nobody paid attention to. This is the time to start accumulating quality gold miner and also the precious metals themselves as the bear cycle winds down and the spring comes back to Gold and Silver in 2014.”

Since that article a few of our favorite stocks rallied 40-50% in just 3 weeks or so from the December timeframe of our article. A recent pullback is pretty normal as we set up for Gold to take out the 1271 spot pricing area and run to the mid 1300’s over the next several weeks. By that time, you will be kicking yourself for not being long either the metals themselves or the higher beta stock plays.

A few suggestions that we have already written about we will reiterate here again. Aggressive investors can look at UGLD ETF, which is a 3x long Gold product that will give you upside leverage as Gold moves into elliott wave 3 up. Other more aggressive plays we already recommend a lot lower include GLDX, JNUG, NUGT and others. Picking individual stocks can be even better and we have recommended a few to our subscribers that are already doing very well.

What will trigger this next rally up is sentiment shifts to favor Gold and Silver over currency alternatives. The precious metals move on sentiment, much more so than interest rates or GDP reports or anything else in our opinion. Sentiment remains neutral to bearish as evidenced by the larger brokerage houses running around in January telling everyone to sell Gold, so we see that as a buy signal on top of our other indicators.




See more here.

Recent price action in the stock market has many traders on edge. With the market closing below our key support trend line last week, the market has now technically starting a down trend.

While trend lines are a great tool for identifying a weakening trend and reversals in the market, I do not put a lot of my analysis weighting on them.

Most of my timing and trading is based around what I call INNER-Market Analysis (Market Stages, Cycles, Momentum and Sentiment). Using these data we can diagnose the overall health of the market. Knowing the strength of the market we can then forecast short term trend reversals before they happen with a high degree of accuracy.
In this report I keep things clean and simple using just trend lines. During the last three weeks we have seen the price of stocks pullback. And because 2013 was such a strong year for stocks most participants are expecting a sharp market correction to take place anytime now.

So with the recent price correction fear is starting to enter the market and money is rotating out of stocks and into the Risk-Off assets like gold and bonds.

Stocks tend to fall in times of economic uncertainty or fear. These same factors push investors towards the safety trades (Risk-Off) high quality bonds and precious metals. As more money goes from risk-on to risk-off, stocks will continue to fall and the safety trades will rise. The move by investors to select the safety of gold and bonds compared to the volatility of stocks will result in these risk plays to moving in opposite directions.

Let’s take a look at the chart below for a visual of what looks to be unfolding…



How to Trade These Markets:

While these markets look to be starting to reverse trends, it is critical that we understand how the market moves during reversals and understand position/money management.

Getting short stocks and long precious metals in the long run could work out very well, but if you understand the price action that typically happens during reversals you know that the stock market will become choppy and we could see the recent highs tested or possibly even a new high made before price actually starts a down trend. And the opposite situation for gold and bonds. Drawdowns can be huge when investing and why I don’t just change position directions when the first sign of a trend change shows up on the chart.

Price reversals are a process, not an event. So it is important to follow along using a short term time frame like the daily chart and play the intermediate trends that last 4-12 weeks in length. By doing this, you are trading in the direction of the most active cycle in the stock market and positioned properly as new a trend starts.

What I am looking for in the next week or two:

1. Stocks to trade sideways or drift higher for 3-6 days, then I will be looking to get short. Again, cycle, sentiment, and momentum analysis must remain down for me to short the market. If they turn back up I will remain in cash until a setup for another short or long entry forms.
2. Gold remains in a down trend but is starting to breakout to the upside. I do have concerns with the daily chart patterns for both gold and silver, so next week will be critical for them. We will be using some ETF Trading Strategies to take advantage of these moves.
3. Bond prices (not yields) look to be forming a bottom “W” pattern. They have had a big run in the last few weeks and are now testing resistance. I think a long bond position is slowly starting to unfold but if we look at the futures price charts for both bonds and gold, they have not yet broken to the upside and have more work to do. As mentioned before ETFs are not really the best tool for charting but I show them because they what the masses follow and trade.

See more here.

David A. Banister

Back on January 15^th we wrote an article and also a elliott wave forecast for both the public and our subscribers showing a likely top at a maximum of 1868 on the SP 500.* We said that Elliott Wave Major 3 of Primary Wave 3 would top no higher than that level. In fact, we can go back to September 4^th 2013 and we projected a Major 3 high as 1822-1829. Turns out we were only about 1% off 4 months in advance of projecting that high, and once again we are on track here with Major 4 commencing from Major 3 highs.

Below is the Major 3 chart we sent out on September 12^th in public articles and private reports



We simply use Fibonacci analysis of wave patterns which are based on human behavioural tendencies that go back centuries. Elliott Wave Theory is often hard to put into practice, so sometimes it gets a bad name. However, a bad steak at a restaurant doesn’t mean you never have steak again right? The practitioner must hone his or her skills over time and work to improve accuracy.
Our view is pretty simple in that the Major wave 3 was 583 points going from 1267 to 1850, the double top.

Below is the chart we did on January 15^th in advance of this top:



We now know in hindsight that we topped out at 1850. So what we want to do is simply take the 583 point rally of 1267 to 1850 (major 2 lows to Major 3 highs) and compute a retracement. We use 23.6%, 31.2%, and 38% Fibonacci figures to come up with estimates. Those come in at 1713 on the shallow end of a correction (wave 4) and 1628 on the lower end. (See chart below)



Now, assuming we are on track… once this Major 3 completes we will see a Major wave 5 of Primary wave 3 taking us to all-time highs. This will then complete Primary wave 3 of this 5 primary wave bull cycle and then larger Primary wave 4 corrections will ensue from those highs. We will know we are wrong in our degrees of wave counts if we pierce the 1628 level on the downside. That would indicate Primary 3 topped out 1850 and we are in Primary 4, which is not our current view.

See more here.

It was another wild session…

The SP500 continued to rally and is pushing extreme overbought conditions today. Our net short ETF trading strategy on the SP500 is close to getting stopped out as the trend is on the verge of turning back up if sellers do not step in tomorrow. We are under water on this trade and unfortunately we lose when trends reverse as that is just part of trading. The trend remains down and we could get a miracle tomorrow to save the day. only time will tell.

Natural Gas ETF Trading Strategies: This morning we closed out our natural gas trade for a big profit of roughly 18-20% depending where you entered and placed your stop. I have had a several emails from members wanting to add to their position yesterday, and another bunch today saying they still hold their position in natural gas cause they think price will continue to move in their favor. Technically, closing out our trade today was the proper thing to do. We followed our rules and the trade managed it’s self perfectly. While natural gas could continue to sell down in the long run, wanting to hold your position or add to a trade that is up 40% without any real pullbacks is the sign of a GREEDY trader. General rule is, if you do not take profits on a trade, the market will simply take them back, its that simple.

ETF Trading Strategy for DGAZ Pays out 20% return!





Chris Vermeulen

See more here.

Silver Global Price Forecast: The Sterling Opportunity

Precious metals were under pressure last year, but investors continued to accumulate silver while gold had a record amount outflow selling.

We can see this by looking at the physically backed iShares Silver Trust SLV is up 25 million ounces Oct. 31, 2013 since January 2013. While physical holdings in the SPDR Gold Shares GLD shrunk by 28 million in 2013.

Investment demand for silver now accounts for 24% of overall demand, up from only 4% in 2003 after the introduction of ETFs as a liquid trading source. Additionally, silver investors typically include small investors, whereas large institutional investors have steered toward gold ETFs.

Unlike gold… silver is consumed by industrial and medical usage. Silver’s relative affordability and industrial usage is helping bolster silver demand.

Silver is used in consumer electronics like touch screens found in smart phones and tablets, medical equipment. As such, silver has proven virtually indispensable in almost all electronic devices.

According to the CPM Group., industrial demand should reach 838 million ounces, up about 3% year-over-year. It is important to know that silver’s global mining production shows a pathetic 2.8% during the past 10 years, which will not be enough to supply this new electronic age we live in.

So regardless of the state of the global economy, real demand for all of these electronics, demand in the 21st century might mean that silver’s industrial demand could grow at a faster rate than mine supply in the years to come.

If we look as what Asia is doing, demand continued to grow for physical metal. We can now add other nations, like Turkey or Argentina of silver and gold purchasers. If it weren't for the fact that the Indian government has been trying to profit from its gold market with a 10% tax which has virtually stopped gold buying in India compared to what it was a couple years ago. I think gold would be trading much higher and teach the paper shorts a lesson or two regarding why gold and silver are not just commodities, but in fact are money.

In 2010 we saw India’s silver imports surge 235% over the previous year and 2010 was a huge year for silver. I feel as though the silver market is setting up for something even bigger this time around as the markets technical patterns combined with India’s 284% in silver imports last year will spark the next major rally in silver.

See the chart below for a visual of 2010 rally in silver:

Start of 2014 rally in silver?

The bull market in silver and gold during the 1970s took silver up 30 times and gold up over 20 times. If you were to compare the precious metals bull of the 70s with the recent bull market that began 12 years ago, we could see gold over 5,000 an ounce and silver at roughly 130.

During the metals peak in 1980 nearly everyone was trying to get some exposure to these investments. The 2011 highs do not look at all like the 1980 top, so I do not believe that we have seen the parabolic blow-off top often associated with the end of a commodity bull market.

The list of reasons to buy silver is long and diverse. Perhaps the most significant, is the need for the central banks to keep real interest rates below the rate of inflation. This is one the oldest tricks in the book to spark inflation.

Another reason I think silver should be owned is because of a possible short squeeze. The manipulation of silver is very controversial no doubt. What we do know is that the number of paper claims on physical metal has exploded over the course of the past four decades. This is probably the only fact worth focusing on and someday this will catch up with the price of silver and price could go ballistic.

Why Silver Should Rally Aggressively:

- China’s insatiable demand for the white metal continues growing
- India’s demand in 2013 more than doubled from the previous year and consumes 20% of all silver production.
- Silver’s global mining production shows a pathetic 2.8% during the past 10 years
- Yearly Consumption/Production ratio demonstrates acute deficits
- Unlike gold… silver is consumed by industrial and medical usage
- Chinese solar demand is expected to grow several hundred percent and silver is used and not easily recovered from this product.
- Investment demand for silver up 20% and will go ballistic…once the present consolidation ends
- Currency Devaluation Contagion will soon engulf the world, thus fueling all precious metals higher
- Mexico is considering making Silver the national currency…rather than the fiat peso
- Arizona and Utah legalized the use Gold & Silver As Currency and South Carolina & Colorado are going down this road
- A growing number of states are seeking shiny new currencies made of silver and gold
- Sales of US Minted Silver coins are at all-time record highs despite the recent correction in bullion value
- Silver and gold are both a commodity and financial assets
- Low interest rates in western nations bolster inflation

Here is a perfect example showing how 3x leveraged ETF funds can lose value over a short period of time while the underlying investment is deep in our favor by 5% and should have our ETF in our favor by 15%). But instead we are under water by a few percent still…



This is a prime example of why I don’t trade 3x ETFs that often. And when you actually run the numbers on how much leverage you actually get with 3x ETFs its actually the same or less than if you just bought a single ETF with the same amount of capital and margin… 3X ETFs require you to have 90% margin, while a single ETF only requires you 30%. It’s a little complicated to crunch the numbers and explain but know that 3x ETFs are nothing special when you do the math for both long term and short term trades.

For example, if you wanted to buy $1000 worth of a 3x ETF, the margin requirements on these fund are 90% meaning you must have $900 in your MARGIN account to trade this position. But if you wanted to trade say a single ETF where the margin is only say 30% for a non levegeage fund, you can technically trade the same position size with the same amount of money WITHOUT the 3x leveraged fund price decay we all know is terrible in these highly leveraged funds.

So if you wanted a position to match the power of the $1000 3x leveraged ETF position but using the single ETF, you would only need to buy $3000 worth of the single ETF, but because its only 30% margin requirement. This may be confusing, the only point im trying to make here is that you can get almost the same trade using a single ETF simply because of the margin requirements between the two types of ETF funds. Most individuals do not realize the crazy margin required for 3x ETFs and its likely the reason most traders get margin calls with trading these funds.

Long story short, if today’s price action is a reversal day it will only take another big down day for us to be deep in the money on our inverse ETFs.

The Next Trading Session Is another Big Sell Off in our Favor – Current Live Trade

This is a continuation of yesterday’s post talking about how we needed another big down day for the ETF catch up to the natural gas price action.

Today Nat Gas is down another 10% and has sent our 3x leveraged ETF fund deep in the money with subscribers traded up over 18% in only a couple trading sessions.





See more here.

Hey everyone,

I have had a few emails asking about our silver position and why we are not moving our protective stops and taking more profits similar to how we are trading Natural Gas.

These are great questions and here are my thoughts:

Depending on your outlook and trading/investing type you will either be looking at silver as a quick trade to lock in gains, or as a early entry point into silver as precious metals start to form a basing pattern. What you do is up to you as I cannot give individual investment advice.

We/I did take some profits off the table and move our stop up last week for a portion of this position (1/3rd) and we moved our stops to breakeven. As shown in this morning video gold, silver and miners still have a LOT of work to do to build this basing pattern and it may take a few months yet. If you did not watch*today’s*video then do so for a visual.

I am more of a short term trader which is why I sold 1/3rd of our position last week. My brain/emotions demand I lock in profits when the market gives us a quick move in our favor. That being said, I really like the*precious metals sector and feel we are getting in early and at a great price. If this basing pattern holds up and price continues to rally in our favor this year, it means we will be deep in the money on this position and can add a lot more money upon the next setup in gold, silver or miners with less risk because of our profit*cushion on this first silver trade.

So I am holding the balance of my silver position *with a breakeven stop looking for the longer term trend to pick up speed in the coming months.

If you are a short term trader, then do what you have to do and tighten your stops.

I hope this helps?

See more here.

A pullback in Gold today to 1320’s from the 1348 high. We had been looking at about 1350 plus minus as an initial objective off the 1181 pivot lows for the truncated 5th wave of the bear cycle. We can see support at $1300 for spot Gold right now in the charts in terms of keeping it simple.

Now lets keep in mind we just rallied from 1181 to 1348, or about 167 points which is quite a rally. Indeed, February is often a short term cycle low for Gold and has been in years past.

A normal corrective wave 2 would be anywhere from 38% on the low end to 61% on the higher end as likely.
Using some basic math, 38% of 167 points is $64 an ounce, giving* a possible pivot target of $1284 plus minus a few.
So bottom line? We remain bullish long term, short term we may have a minor wave 2 pullback to work off some of this 167 dollar rally in Gold, and 1284 is a 38% fib pivot and 1300 is traditional support.

May just need to take a rest here for a bit… otherwise we maintain for now our $1550 target for 2014.





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The Dow Theory could be in play here with the broad market. When both the Transports (IYT) and the Dow Industrials (DIA) cannot make higher highs and start making lower lows the market has topped according to Dow Theory.*We are watching the transports closely because the Dow chart has already made a lower low and now e are waiting for the Transports to do the same.*They have both made lower highs if this current rally stalls here. This will be important in the next few weeks to help calculate the markets next major move and if there will be a trend change.



See more here.