Stocks, ETFs, Options, Commodities & Currencies

How to trade technology stocks or the technology sector moving forward may not be that complicated. This report shows you where the big technology stocks are likely to go in the coming week or two. This is based strictly on technical analysis not fundamentals as fundamentals typically lag the market drastically.

If you have been following my analysis for some time you will recall the detailed report on AAPL and RIMM shares last year when I called the top in Apple shares and the bottom for RIMM (BBRY). In that report I walked you through the stages which stocks go through and where each of these stocks were trading at then. Be sure to review the charts quickly here: http://www.thegoldandoilguy.com/arti...-market-cycle/

In this week’s report I talk about the technology sector in more detail using the tech giants like Apple, Google, Yahoo, BBRY, and the XLK tech sector exchange traded fund. A picture says a thousand words so here are a few thousand words in picture format with my analysis and thinking as of this week.

Keep in mind that the market changes each day so forecasts and outlooks can flip within a couple days so nothing is set in stone and subject to change.

YAHOO – Daily Chart

Yahoo is in an uptrend with strong share accumulation. It continues to form bullish price patterns and points to higher prices in the coming week.



Research In-Motion/Back Berry WEEKLY Chart:

This is a weekly chart so things move much slower. But overall the pattern on BBRY is very bullish and if the broad market does not start a correction this stock price should test $30 per share this summer.



Apple Daily Chart:

Apple topped out months ago but is now starting to look ready for a bounce. It is forming a possible stage 1 base, and an inverse head & Shoulders pattern. Both point to higher prices and a gap window fill which is the next higher volume resistance zone.



XLK – Technology Sector Exchange Traded Fund

While I like the potential of individual stocks you are subject to individual news etc… which is a little to risky for my blood but my trading partner specializes in this type of trading and has been making a killing this year with his subscribers. The more conservative trader can focus on a basket of technology stocks using the XLK ETF which shows higher prices in the next week or two also.
Another way to play this is through options which is technically the least risky trading strategy there is when done correctly. You can see from these results options are VERY powerful – Options Trading



Technology Trading Conclusion:

In short, I like how the technology sector is looking for a continued move higher. Keep in mind the report I did a week ago talking about the intermediate cycle topping out for the SP500 soon. Stocks may just reach their recent highs then roll over in a big way. So any gains should be protected with partial profit taking and a protective stop.

Chris Vermeulen



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The two most popular investments a few years ago have been dormant and out of the spot light. But from looking at the price of both gold and oil charts their time to shine may be closer than one may thing.

Seasonal charts allow us to look at what the average price for an investment does during a specific time of the year. The gold and oil seasonal charts below clearly show that we are entering a time which price tends to drift higher.
While these chart help with the overall bias of the market keep in mind they are not great at timing moves and should always be coupled with the daily and weekly underlying commodity charts.
Now, let’s take a quick look at what the god father of technical/market analysis shows in terms of market cycles and where I feel we are trading… As I mentioned last week, a picture says a thousand words so why write when I can show it visually.

John Murphy’s Business Cycle:



Mature Stock Market:



Commodity Index Looks Bullish and Should Rise:



Gold & Silver Seasonality, Price Charts w/ Analysis:

Precious Metals like gold and silver are nearing a bounce and possible major rally in the second half of this year.



Crude Oil Seasonality, Price Chart w/ Analysis:

Crude oil has been a tough one to trade in the last year. The recent 15 candles have formed a bullish pattern and with the next few months on the seasonal chart favoring higher prices it has been leaning towards the bullish side.



Chris Vermeulen


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Risk assets and financial markets around the world have been supported by central bank action for several years. Performing financial alchemy on a scale larger than has been seen in the history of mankind, central banks have hijacked global financial markets. Mountains of liquidity, artificially low interest rates, and the creation of future asset bubbles has been their calling card for the past few years.

Unfortunately, time is starting to run out and these great Keynesian minds are on the verge of encountering a series of problems. While central banks can create fiat currency out of thin air, they cannot create real wealth. In fact, central banks cannot print jobs, earnings growth, or an increase in wages.

Furthermore, in a paper put out by the New York Federal Reserve in 2012 and covered by zerohedge.com (“Fed Confused Reality Doesn’t Conform to Its Economic Models, Shocked Its Models Predict Explosive Inflation”) the Fed openly admits that forward outcomes cannot be predicted with accuracy by their economic models. Furthermore, one of the models known as the Smets and Wouters Model has predicted significant inflation if interest rates were held near zero for more than 8 quarters.

For inquiring minds, I would forward readers to the zerohedge.com article for a more in depth explanation. Ultimately the Federal Reserve is performing a gigantic experiment in real time while admitting their economic models do not accurately portray outcomes in the future. Nowhere can this be seen more than in recent price action in U.S. Treasury prices.

Since mid-November of 2012, the 30 Year Treasury Bond has seen prices go down by roughly 9% in value. When Treasury prices are falling, interest rates are rising as there is an inverse relationship between bond prices and yields. When longer term Treasury bonds are demonstrating rising interest rates it is a signal that the bond market is expecting higher inflation levels out into the future. The weekly chart of the 30 Year Treasury Bond is shown below.



As can clearly be seen above, prices have been coming down for several months and we have initiated a price pattern with lower highs and lower lows. This is not a bullish pattern by any means and should the 30 Year Treasury bond take out key support around the 135 price level the Federal Reserve will be in an awkward position.

The Fed’s problem lies in the fact that the Federal Reserve is printing nearly $85 billion dollars of fiat currency to purchase U.S. Treasury and agency bonds and rates have still risen. It would only make sense that at some point, the Federal Reserve will have to ratchet up their program to defend Treasury prices.

If the printing presses fire up fast and furiously to help put a floor under Treasury bonds (cap rates), what is going to happen to commodity prices such as oil? As shown below, the oil futures daily chart illustrates a coiled price pattern that ultimately will lead to a strong move in price.



A move in oil prices above the $96 – $98 / barrel level will likely lead to a powerful move higher in oil prices toward the $100 – $112 / barrel range. Obviously a big move is coming and we could see a move lower just as easily. I have no idea where price is going, but what I do know is that oil prices are staged up for a fast, large move in price.

Interestingly enough, gold futures are also in a basing pattern after selling off sharply earlier this year. Similar to oil futures, gold futures prices are coiling up as well and could go either direction as shown below:



As can be seen above, gold futures are trading in a consolidation pattern which could lead to a strong breakout in either direction. While the upside seems more likely, it goes without saying that lower prices are always a possibility. However, the point I would make to readers is that a large move in the near future seems likely in both gold and oil futures.

Gold is simply a hedge for inflation and acts as a senior currency, however if inflation increases gold will protect owners from a reduction in purchasing power. From an economic standpoint, oil and energy prices are far more important than gold prices. If the Federal Reserve’s Smets and Wouters Model is accurate in its expectation of strong inflation pressure in the future, I would anticipate seeing a strong move higher in both oil and gold prices.

However, the real point is that the Federal Reserve will likely find itself in a precarious position in the future. On one hand, they have to print money to backstop Treasury bonds through additional quantitative easing machinations.
On the other hand, the additional liquidity may start pouring into commodities if inflationary pressures begin to mount.

Ultimately the Federal Reserve may attempt to hold down interest rates to help the economy but if their activities cause energy prices to spike the U.S. economy will begin to move toward recession quickly. In addition to that scenario, it should leave many readers unsettled that it would appear Treasury rates are rising while the Federal Reserve continues to print vast sums of fiat currency to buy more government debt.

Ultimately, the Federal Reserve does not have a great answer about the future since they publicly admit many of their models do a poor job of predicting future economic conditions based on actions that they are taking. At the end of the day, this is just one gigantic Keynesian experiment worldwide and the outcome will follow historical trends.

It does not take an economic genius to understand that the vast amounts of fiat currency created by the unprecedented recent actions of the Federal Reserve will have to find a home somewhere. This process will likely manifest as dramatically higher prices for a host of necessities in the future. In fact, the recent parabolic rise in stock market prices can be viewed not as higher prices for equities, but simply lower valued U.S. dollars.

Perhaps instead of concocting models with large names which simply do not work, why doesn’t the Federal Reserve open a few history books. Regardless of what central bankers believe or what their models produce, history’s version of the outcome is simply unpleasant. Ultimately the Federal Reserve should focus on the old adage that those who ignore history are doomed to repeat it.



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I have previously written Fed/POMO and I have to do mention it again. *Yesterday morning I mentioned that if this trend is to remain up big money needs to be stepping into the market to lift stocks and save the trend. Luckily for the market and Ben Bernanke, there was a huge POMO day scheduled for yesterday where the Fed could buy up to $3,500,000,000 of securities.



That massive QE buying pressure (POMO – Permanent Open Market Operations) I’m sure helped lift the market. Look at my simple yet effective technical traders analysis chart of SP500 Futures below.



The Fed’s massive securities purchases likely helped to trigger a strong short-covering push into the closing bell. *Remember, the prior day the indices had been hammered as short sellers drove the markets lower. When the shorts are forced to cover their positions, they do so by buying. *When strong enough, this produces strong waves of buying.

Remember not to be bias in your outlook on the market, but follow the trend, money and momentum and you should be on the correct side of the market more times than not.

Chris Vermeulen


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Taking a look at the intra-day swings that the Robots use to whack you out of your trades with a loss

Most active traders should be aware by now that some 80% of the daily volume in the various trading exchanges is by what is called “programmed” trading. Some call it Bot’s, Robots, Algo programs, or other not so nice names. They are here to stay and you need to learn what a Robot type move looks like both up or down. If you can learn to spot some of the typical moves up or down, you can profit both on the selling and the buying and better time your entries.

I am sure we have all experienced a feeling of dis-belief when you watch one of your swing trade stocks suddenly turn about face on massive volume and seemingly plummet in the course of minutes or 20-30 minutes right? This is classic Algo trading programs and once you can spot them you are less likely to panic, and more likely to add to your position and grab the reversal back to the upside.

For sure, it helps to fully understand the fundamentals behind the company/stock that you are trading if at all possible, as that will also tend to prevent you from over reacting on the downside.

I use a 10 minute chart in real time, and certain technical indicators to help me follow the intra-day swings and try to better time my entries and exits.

Lets take a look at a few *stocks that today broke out at the open, gapped up, ran hard… then seemingly turned down without notice and with no news… a typical BOT trade pattern:

In this 10 minute chart, you can see the extreme high at 56.20, and about 1 hour and 20 minute later back down to 54.60 from 56.20. *At these extremes a day swing trader is taking those profits, and then waiting for the robots to complete the sell off and stop loss runs, and then SLOWLY entering or what we call “SCALING IN” as the stock bases a bit. (see the light blue line at bottom of chart around 54.50)



Here is another one.. broke out at the open ran to 4.12 ranges, and then in 30 minutes with massive volume dumped to 3.93 for a 5% drop. Again, you could have exited out at the extreme indicator then looked to re-enter at the oversold indicator and Robot dumping ground:



So the key here is be aware of those Robots coming at you with the Hummer vehicle ready to run your position over. *Be aware of “gaps” in the chart and when you see an extreme overbought condition on the daily chart, wait for that Robot truck to show up and run the stock back down towards those gaps before you get caught chasing.



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The OTS trading strategy focuses on selling premium in situations where implied volatility is higher than its historical average, bases entries on probabilities of success around 1 standard deviation or greater than 68% probability of success, and where the passage of time serves as a profit engine.

Since the beginning of April, the OTS Premium Option Trading Service produced the following returns.



The table above illustrates all of the trades that have been closed since April 1, 2013. As can be seen above, on 06/17 the OTS Portfolio sold TNA June Monthly 46.50 Puts naked. The position was closed in the final hour of trading on 06/18.

The trade capitalized on higher prices, time decay, and a reduction in implied volatility while producing a total gain on maximum margin incurred of around 13%. The price chart of TNA is shown below which illustrates where the OTS Portfolio sold TNA naked puts which is a synthetic long position in TNA.



Ultimately the trade was a success and adds to a string of solid trading performance as of late.



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We alerted our stock swing traders to an opportunity in DXM on Friday, June 14th. We felt the stock was poised to move to the upside near term and it was time to enter. This was after watching the stock on our watch list for many days and following the behavior of the stock and how it trades.

Armed with this information, we advised our traders to buy from 17.40-17.90 per share if possible that day.

2-3 trading days later we we booked gains at 8% and 7.7% gains respectively taking 1/2 off the table on each sell alert sent to our traders.

June 18th- 10am EST

“DXM- 19.07*Time to punch out final 1/2 and take 7.7% or so gains”






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The life cycle of most things not matter what it is (living, product, service, ideas etc…) go through four stages and the stock market is no different. Those who recently gave in and bought gold, silver, mining stocks, coins will be enter this stage of the market in complete denial. They still think this is a pullback and a recover should be just around the corner.

Well the good news is a recovery bounce should be nearing, but if technical analysis, market sentiment and the stages theory are correct then a bounce is all it will be followed by years of lower prices and dormancy.

I really do hate to be a mega bear or mega bull on anything long term but the charts have painted a clear picture this year for precious metals and I want to share what I see. Take a look at the chart below which shows a typical investment life cycle using the four stage theory.

The Four Stages Theory

Classic economic theory dissects the economic cycle into four distinct stages: Accumulation, Markup, Distribution, and Decline. Stock, index or commodities are no different, and proceeds through the following cycle:

• Stage 1 – Accumulation: After a period of decline a stock consolidates at a contracted price range as buyers step into the market and fight for control over the exhausted sellers.* Price action is neutral as sellers exit their positions and buyers begin to accumulate.
• Stage 2 – Markup: Upon gaining control of price movement buyers overwhelm sellers and a stock enters a period of higher highs and higher lows.* A bull market begins and the path of least resistance is higher.* Traders should aggressively trade the long side, taking advantage of any pullback or dips in stock price.
• Stage 3 – Distribution: After a prolonged increase in share price the buyers now become exhausted and the sellers again move in.* This period of consolidation and distribution produces neutral price action and precedes a decline in stock price.
• Stage 4 – Decline: When the lows of Stage 3 are breached a stock enters a decline as sellers overwhelm buyers.* A pattern of lower highs and lower lows emerges as a stock enters a bear market.* A well-positioned trader would be aggressively trading the short side, taking advantage of the often quick decline in share price.

Gold Price Weekly Chart – Stages Overlaid



Silver Price Weekly Chart – Stages Overlaid



Gold Mining Stocks – Monthly Chart

This chart is a longer term picture using the monthly chart. I wanted to show you the 2008 panic selling washout bottom in miners which I think is about to happen again. While physical gold and silver are in a bear market and should be some a long time, gold mining stocks will likely find support and possibly have a strong rally in the coming months.

Many gold stocks pay high dividends and are wanted by large institutions and funds. The lower prices go the higher the yield is making them more attractive. So I figure gold miners will bottom before physical metals do. A bounce is nearing but at this point selling pressure and momentum continue to plague the entire PM sector.



Precious Metals Investing Conclusion:

In short, I feel with Quantitative Easing (QE) likely to be trimmed back later this year, and with economic numbers slowly improving along with solid corporate earnings the need or panic to buy gold or silver is diminishing around the globe.

While there are still major issues and concerns internationally they do not seem to have any affect on precious metals this year. Long terms trends like the weekly and monthly charts shown in this report tends to lead news/growth/lack of growth by several months. So lower precious metals prices may be telling us something very positive.

The precious metals sector is likely to put in a strong bounce this summer but after sellers will likely regain control to pull prices much lower yet.
Chris Vermeulen


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Back on June 7th for our TMTF Subscribers we did a chart and outlined a probable ABC pattern showing a likely B wave rally, then a drop to 1560 or 1584. *When the B wave snuck over the 61% fibonacci retracement of wave A, we though maybe it was a shallow 23% Wave 4 (1606). So perhaps the market was done with the correction we wondered…

Below is the June 7th forecast we sent to subcribers in Chart format:



However, we got snookered by the Fed notes and the market continued lower in a C wave to 1560 as it turned out. Our original hunch was right…we should have stuck with that call as we found out… but… the bottom line is we had 1584 and 1560 in our original June 7th views and they both hit on the nose…
So now what?
The SP 500 hit 1560 the 38% retracement of the Wave 3 rally from 1343-1687 on the nose and reversed.
So far 60 points to the upside. *Near term we would expect a minor 2 pullback and then a minor 3 rally to the upside towards the 1680 areas… prior highs.

This wave 5 up from 1560 may be complex and hard to forecast, but we should assume at least a likely re-test of the 1687 highs in the coming weeks, and then go from there.
Here is a 2 month chart-





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