August 26th, the day before GDP announcement

Quick update on my Gold position, I was stopped out of my position.  There was 2 conflicting candlestick patterns, there was a evening star that was confirmed followed by a bullish englufing that was confirmed the day i got stopped out (stop loss set above the top candle of the evening star).  I have picked up 2 silver companies now, expecting metals to continue higher if all goes well tomorrow at the GDP announcment
SBB is a favorite it has been so strong but now it seems like it needs to play catch up to other mining stocks as the metals move higher.  Also I wanted to test the waters with a GPR.  It is a sub dollar stock that is at a point where if it gets above the 0.78 mark it could break up decently.

So lets see on an inter-day what happened to the S&P.

Started up however broke down and formed a triangle.  This is a common pattern found and can be used to enter trades that are pretty low risk.  as the pattern is forming what you want to do it set a short at the break out, say you expect it to drop (It makes more sense expect a drop since the market is in an overall down trend).  Set short at 1052.40where the Light blue line is, and set your stop loss just above the light blue line say
  1052.80 - 1053.  On the Breakdown you would have bought, there was a retest of the light blue line that held, that is confirmation that that line is strong and what do you get next 5 minutes strong selling with a continuation candlestick.  Turning that time the Slow Stoch started to embed and the momentum just shifted.

Now lets see what would happen if you were wrong.  If broke you shorted at 1052.4 and you get stopped out at 1053. A loss of 0.6 points or 0.057%.  If you end up getting a triangle like this getting out you would have to time well, but it reached 1046 which is a 6.4 point drop or 0.61% gain.  I don't trade inter-day, but you could see how taking enough of these low risk trades could be quite profitable.

S&P Critical zone.

The nice yellow line held again perfectly, there was a open around that number then it closed well below it again. Similar to the triangle inter-day, there is a triangle formed, and the question is going to be break above yellow or below purple.  That yellow line has puts us in the previous downtrend channel that was created by the flash crash.  The purple line is the majority of lows.  See where the triangle broke down and reversed.  This can happen again but again odds are if it breaks below the purple line (which is my expectation) more down side will kick in with a test of the 1000, then 950, then if it is strong enough 850.  MACD showed stronger downside momentum and the slow stoch is embedded.

Another note on candlesticks, today we have a Bearish Engulfing pattern. Here is more information on this particular pattern : http://www.candlesticker.com/Cs44.asp

So confirmation of this pattern tomorrow will set us below the purple potentially leading to sharp declines on the S&P.  

Tomorrow will be very interesting.  2 big announcements in the morning so pay attention.

On look at ford just to see what happen today.

Another triangle formation, when the triangle was broken it could not recapture it by days end.  This stock swung from 11.55 to close at 11.18 which is 37 cent ~ 3.2% inter-day which is pretty sizable swing. The momentum is down and the slow stoch is not over bought or sold and pointing down signally more down movement.

Long term chart of ford is amazing.

Look at how the fib fits so well (on any major wave fibs work very well on Ford stock).  Remember stocks can't drop to 0 in a day (or can they!) so this makes alot of sense what happened.  There was a gap down to the 200 MA and close below the 200MA, then a strong move to get it close to the 200MA.  In this morning a strong rally towards to 200MA then a sharp bounce off the 200MA.  So what is this? it is confirmation that the 200MA is a strong area of resistance.  3 closes down, and the bullish engulfing pattern yesterday has been not confirmed by todays action.  the Slow stoch is embedded for more down side and the momentum is slightly up for today as seen on the MACD .  What is the price flirting with ? the 61.8% retracement level.  Here is another situation where a break of that level will be relatively low risk since you buy just below it (or wait for a confirmation so 2 days below it.  And set a stop loss just above the 61.8% level.  Low risk, high prob that it will at least head to the 100% level.


Pure speculative silver play. GPR on the TSX

So looking at the weekly, this stock was trading in the 2.50 range.  During the crash it was taken down pass the 100% retracement.  It has had a solid rally lately.  Focusing on the fib levels of the big increase. The level to watch is 0.94 level.  Breaks above that could push up up over the 200 MA and the previous uptrend.
On the daily.

The stock has just managed to get over the 20 and 50 period moving average to day.  Up at that 0.77 mark.  Using the last increase for fibs you can see a side ways consolidation around the 61.8% retracement  then a dip below to come touch the 50% retracement, with a quick more back up.   I haven't counting this using elliot wave but usually a wave A and wave C correct to a 61.8% retracement and a 50% retracement so getting up over this 61.8% retracement level and holding could confirm this is a new impulse wave to the upside. with an initial target of 0.85 at the 200MA but a retest of the 1.15 mark is not out of the question.

USD and how it fits

The USD is tied to everything, the price of all commodities, stocks, bonds etc.

Here is a picture of a daily chart of the USD

Today a touch of that 50 MA resulted in a pull back.  The MACD has dropped off a little, but the Slow Stoch is almost embedded which could lead to more upside.  I am expecting the USD to rally, if it can close 2 days above the 50 MA and hold that up trend.

If the USD doesn't rally then gold should continue to rise and I will be out of my position, i also shorted gold in USD with the expectation that gold would fall and USD would rally.  Today was a down day, however, with 4 days to the upside a pullback at the 50 MA sort of makes alot of sense.  So tomorrow will be interesting, we will see where the USD will end up.

Ford predictions proving to be correct

Looking back I pretty much called the top of that B wave, and have been calling for a C wave down to possibly the $8 area.

Well ford has dropped more than the stock market (% wise) almost every major drop.  Today was not any different.  The key was that it gapped down below the 200 MA and continued to bleed out.  That is huge, one more day below the 200 MA would be confirmation that this market could continue significantly lower.

The power of this wave to break all of the moving averages without much resistance.  The next resistance i see is that white line sloping down.
The MACD is strengthening (bearish), the Slow Stoch is embedding.  And not shown but volume was spiked up today.

My trade on ford is options, for Sept 18th, at a 10 strike price.  I jumped the gun on purchasing these when i did, so this drop was perfect timing, and ideally it will be close to 9-10 in the second week in Sept.

Tomorrow could be a Bounce in the markets but I am still pretty bearish, since the S&P is at that 1050 ish area, the bottom could fall out at any time.  Thursday / Friday are much more bearish news wise.  Job loss claims and GDP revision will be market movers.

August 24th S&P breaks key trendline and GLD sharp rally

S&P on dailly chart

Well I am going to stick to what I have been predicting for a while now, that the when the pink trendline breaks, the market target i have now is initially 1012, and then 950.  

Today was a monster drop, then rally for part of the day, then last 30 minutes a big sell off. 

The gap down was just above the pink line drawn in and then a mass selloff.  

The MACD has continued downward momentum, the slow stoch is close to embedding which would be very bearish.

If you look at the graph we have now entered into the previous downtrend that occured during the "flash crash" in May.  This pink line may be retested, ideally there will be another close below this line to confirm it.  

Remember markets go up and down, as they trend.  They can have the bottom pulled out from them but it is very hard to predict that, however, if fear hits this market a mass selloff that gets through the 1012 level, could continue to that 950 level.

GLD

Now to the incorrect trade.  I have been  very big on silver / gold, I have continuously owned silver mining companies since i have started trading.  I have been under the assumption that gold still required a decent correction before it can make new highs.  So I attempted to place a bet on the bear side until the correction is over.  There was a perfect setup of a evening start on the futures contracts on friday,  So i entered monday since it was a weak confirmation.  My stop loss is still just above the high on thursday.  

Today, however, as the markets dropped and gold dropped initially then rallied sharply.  This setup a bearish engulfing pattern.  This does require confirmation tomorrow so I am still in this trade until the recent high is taken out (I might exit on friday if i am breakeven since I am not sure how the weekend is going to play out).  The slow stoch is still coming out of the embedded mode.  And MACD is still pointing to a slowing of buying momentum. 

The most bullish part of the chart above is that the gap down occurred at the 50 MA, then bounced very quickly, I believe 17 dollars from top to bottom in 3-4 minutes.

The 50 MA was not pierced so it could be Very strong support. 


However....  

This guy i have followed for gold a while and he has said that move today was actually bearish.

check out the video for his explanation 

IF silver/gold takes off.

The stock above is SBB on the TSX I have followed this company for awhile made some money on it but i have not caught any of the big moves.  Such as the move on the August 11th.  If gold and silver start to rally, This stock is setup to take off.  
It touched the 50 Moving average (hourly), and bounced off at the end of the day.
The momentum is up but the slow stoch is overbought.  I expect a partial pull back then a break of that 50 MA and a test of the top purple line, if that breaks and gold and silver make new highs.  this stock could easily reach $4 in a couple of days. 



kayaking time.... 

August 23rd.

1) S&P 500: down 0.4%, 4.33 points.

I mentioned in another post that the triangle of the line, which connects the three bottoms and the line on the top of the current price action, is a pretty important, today all day the markets were holding that bottom line, about 30 minutes until close sell volume kicked in.  Markets closed below the line and lower than previous close.  What to look for now is this small head and shoulders pattern neckline (the light purple line) to break.  A break of that line based on the distance from the neckline to the head would make 1012 the target of this market.  There may be resistances along the way but this next big move could take the S&P down a solid 5% in a day or two.

The longer term chart doesn't look much better.

The next target if the sell pressure is still high, a test of the 1000 area would be expected (intersects with trendline as well).  If that breaks I have will still call the 950 level where support should be found.

I am trading HIU which is a beta pro ETF that tracks the inverse of S&P 500.

2) Gold correlation

First lets look at the Elliot wave count on a long term basis

The first impulse wave had an A wave retrace 61.8%  and the C wave retrace 50%, then the second started. The second A wave was a 61.8% retracement, and the second C wave retrace 50%.  The third impulse the A  wave seems to have retrace 50%, and the targets are the 50% again, or 38.2% retracement.

I think gold is still bullish but right now it has been trading lockstep with s&p 500 today.  With a drop down, then an attempted rally that failed the last 30 minutes of trading.

Typo on the 32.2% should be 38.2%

This is just two impulse waves.  The targets at the 50% and 38.2% would be approx 114 and 111 repectively.

The Elliot count looks like the B wave is ending and the last retracement (C wave)  before another impulse wave.
There is heavy support right now but could be tested or broken before the next impulse wave occurs.
The MACD has decreasing momentum for a few days.
the slow stoch is the most interesting.  For the last half of this rally gold has been in a locked in mode.  Pulling the market higher.  This occurs when the yellow and white line stay above the 80 line (bullish) or below the 20 line (bearish).

Today this has broke down, with the slow stoch at 79.57.

3) Economic news. http://www.bloomberg.com/markets/economic-calendar/

Tuesday: Existing home sales 10am
Wednesday: Durable goods 8:30 am and New home sales 10am
Thursday: Job loss claims 8:30 am
Friday: GDP revision 8:30 am consumer sentiment 9:55 am

Job loss claims were terrible last week, 500k.  If this weeks numbers come in lower than expected expect the markets to move.
GDP revision, I heard from an interview that the market has already discounted the Quarter 2 GDP to 1.4%. The original number reported i believe 2 weeks ago had the Quarter 2 GDP at 2.1%.  If this number comes in below the 1.4% the market will sell hard hard and fast.  If the number comes in higher than 1.4% the markets could bounce or travel sideways until more down arrives.


Silver postions:

I am currently out of all silver positions.  I ended a position today in FR on the TSX.  I ended up with a marginal profit but I didn't want to be long when I expect this week to be rocky.

The end of the day it was dragged down forming I would say a weak inverted hammer (sell signal)  I exited at $4.37

As you can see from a 10 minute chart after the open at $4.40, the price could never breach the $4.38.

A few other charts of mining companies had similar formations.  So confirmation on all this predictions is needed.  If the markets drop some more, this selling could kick in quickly.

Gold and where is it heading?

I want to start this post by saying I am 100% a gold bull, and expect 1300 to be breached probably by year end.  However, no stock, commodity, forex, etc go straight up or down.  There is a lot of analysis on why gold is a solid investment and people should be looking for places to get good entries.  Well, July 28th was one of the good entry points however, this recent rally it is very hard to say it will continue to new highs.  Why?  There is a bunch of reasons but the one i will provide is that the gold market is in a corrective phase, and the recent dip at the end of July was the beginning, the recent increase will most likely break down to either the July 28th low or a bit below that.   Then we are off to the races.  Remember when this last correct occurs (if it does) will be the BEST entry point for anyone buying gold (physical, stocks, etfs).  So that is the context of this discussion since it is based around the high chance gold is reversing.

Lets look at 4 scenarios right now.

1) Stocks Down, Gold Down
2) Stocks Down, Gold Up
3) Stocks Up, Gold Down
4) Stocks Up, Gold UP

When I refer to stocks I will be using the S&P 500.

First question should be has these moves ever occurred in the past?  If not then we don't really need to consider them.  There is a couple of examples of each but I will only mention one to save space / time.
1) Last crash, gold reach its low at $700.  Between sept 29th and Oct 25th both stocks and gold dropped dramatically.  This time period I am using because from my understand so far I think this is the most likely situation.  This will provide an amazing entry point into the gold market.

2) Following the crash Gold rallied until March 2009 well the stock market retreated to its low at 670.

3) On Dec 1st 2009, there was a period where gold dropped dramatically and S&P rallied for a couple of weeks before it dropped off.  Also in 2008 there was a period of this scenario on March 19th.

4) The rally after the massive stimulus March 11th, 2009 there was a months of gold rallying with gold.


So now we know each of these scenarios can occur, so why do i believe that shorting both gold and the stock market right now is the best call.  First off,  I am already "in the money" on my short of the stock market and will continue to hold this position until the market does move lower. So the question I have been wondering is why short Gold when I think the long term fundamentals are very bullish?  For gold to continue to make new highs this correction is necessary, and will help propel the metal upwards.  If you are interest in gold Elliot wave count I refer to the following.

http://www.youtube.com/watch?v=_BSOJ9hKbD4

Before I get into the technicals of why gold is showing weakness.  Lets consider why this move is an awesome hedge for what ever is coming next week and the weeks after.

If stocks fall, and gold rallies the stop loss is very very tight, I have said this before to friends and i will say it  again, trading from my 4 months of following the markets appears to be all about making low risk trades, some will work out some will not but the idea is stacking the odds in your favor is key.  So with a tight stop loss, if the markets move down and gold moves up, I will lose about 1 % of my trade plus $10 commissions.
Lets say the Markets move up (maybe some crazy news will come out next week, more stimulus or recovery news), people may dump their recent gold positions since it has recently rallied take profits and look to the market.  In this case, I have hedged my losses (same with the alternative case with market sinking and gold rising).  

Now the only case I will be completely out of position is if the stock market rallies and gold rallies.  Lets look at the economics right now.  The hope of recovery has almost been completely dashed, 500K unemployment , housing  not doing well etc.  This situation doesn't really make sense for gold and the stock markets to rally together strongly.  Gold is traditionally a hedge against inflation (Which I think is coming however a period of deflation right now is more likely), also people use it as a place to store money when fear enters the market, but to a lesser extend than the US treasury bonds.  I believe there is a currency crisis coming however I think it is more likely to hit the Euro for the USD which means when fear enters the market people should run to treasury bonds initially, with mass sell offs in all other asset classes.

Gold will recover VERY fast just like in the 2008 collapses after gold dropped with stocks, stocks continued to drop while the recovery of gold took hold starting a major impulse wave up.  That wave has ended and we are in the corrective pattern so a major move up after this drop is likely.

So a quick recap.  I may enter a short position on gold if the price on monday doesn't GAP down huge not allowing an reasonable entry.   Out of the 4 situations listed above, 3 of the I will be probability be better off, with the most unlikely situation (doesn't mean it can't happen) #4 being the only case I will be way out of position.

Lets quickly look a gold and technicals to see why today / monday could be the turning point.

So there are some bearish and bullish signals .....

Bearish:
MACD - A reduction of upwards momentum on Friday. Another tick that is lower than fridays would be pretty good confirmation.

Evening start - candle stick reversal pattern, see below.
http://www.candlestickforum.com/PPF/Parameters/16_540_/candlestick.asp 

At the 78.6% retractment (providing a solid stop loss exit point if the trade is wrong.

Elliot wave - As mentioned in the video posted, this evening star reversal is indicative of gold reversals for almost all reversal patterns.   A C wave down is predicted and should occur before the B wave gets to the top of wave 5.  The C wave in theory should be lower than wave A however, gold is quite bullish long term and the economic climate might cause a double bottom where the C wave stops close to the A wave bottom.

Bullish
Moving averages are stressing me out, since I don't like predicting moves below them since they are strong resistance however, in the 2008 crash this was the exact situation before the drop in both gold and stocks.

Neutral

Slow stoch is technically embedded and could result in a locked in trend to the upside however, the momentum coming into monday is down, and if the yellow line gets below the 80 level we could see a sell off.

Anyways, I will be hopefully entering a position monday with an etf that tracks gold probably a horizen beta pro ETF.

Last thought, I am still thinking about if I should be trading in USD or CAN, since in theory, if everyone rushes to US treasury bonds the USD will rally strongly.  However, I do believe CAN is very strong currency at this point but if the USD is use, I could basically get currency gains.   I still have to think this through more, since I still believe with the Quantitative Easing occurring and probably continuing the USD will fall, I just don't think we are at that point yet.

August 20th close S&P and silver

So today was an interesting day,  sell off then an attempt to claw back some losses.

Lets look where the close occurred, Just above that white trend line i drew in.  Now lets see the importance of this line.  And why i expected it to be either heavy resistance or a close below will follow with heavy selling.     Firstly it is drawn from the second recent lowest low (June 7th) to through the second lowest low after the low, ( July 20th), it also held on the 16th of August for the latest  bounce and held today but was pierced.  Why is this line drawn the way it is and why could it be important.  Well it is draw because now 4 points have tested this line, also ignoring the low around the 5th of July, the two lows that are connected are still in an uptrend.  Matter of fact it is the last hope of an uptrend.  all other short term trend lines are in a down trend.  Now it can be seen as maybe the most important level to hold, since if it breaks the only thing left is the pick line which is a Head / shoulders pattern neckline, oh and where did the wick of the candle stop and bounce of of? Yup that neckline i drew in days ago.  Also the level it held was also the 50% retracement of the latest up leg.  Anyways the bulls did their job holding that level, because they just got above it at 2:40 pm est.  Any attempt to move higher however was quickly bounced back at the 1073 level.  The sell volume is up again today, the MACD has the second day of increase in sell momentum and the slow stoch is not over sold but close.  Things don't look good however there could be a temp bounce monday is some news occurs but GDP  numbers come out Friday and they are expected to be terrible.  That could be the catalyst for a major down turn.  The bounce could occur because of the candle stick formation which is a hammer which could indicate a bottom but it has to be confirmed on Monday.  But there is alot of heavy resistance with all the MA above where it stands right now.

SILVER.....
So I bailed out of a position in one of my favorite silver plays AXR.   I took profits with a 11% gain, and exited this stock at 3.58 which was the end price on the day. The reason i closed this position was because the candle stick formation was a "hanging man"  and the stock looked over extended at this point.  I still have one silver play (FR) in motion which i will look at getting out of it things fail next week.  Lets look at the SLV to see what happen in the silver market.

So my hope that silver follow gold up instead of following the markets down has been dashed for now.  It could still happen but at this point until the 20MA and 50 MA is recaptured I can't be confident that this will hold up against the market turn turn ahead.  The silver mining stocks I use do not always trade with silver moves but the major trends etc will be affected so again it was a good place to take an 11% profit on a trade.
MACD has or is about to cross over.  Slow Stoch has shifted to a downward momentum.  The volume is also up today on the selling.  So what was the alarm bells, the gap below the 20 and 50 MA can't be good.  the only reason i thought silver might have a chance was that it was entering the close of the triangle with the 20 and 50 MA under it.  well what happen? yesterday gap up then pull back below the upper triangle trend line then today a gap down to almost right on the bottom triangle trendline then a sell off that bounced off the 23.6%

Anyways i did up my position in a inverse etf that tracks S&P.  My main reason not to wait for a bounce is that at this point there could be a massive selloff anytime, the likely hood of any form of mass buying is highly unlikely.  Nothing is pointing to good news.  more people losing jobs, less customer confidence, poorer housing market.  Until these numbers improve a downturn is quite likely.  If we get through these moving averages then i might reconsider my position.