There is a chance, a probability for a high today or Monday. When the July “False Break” low was hit I indicated three probabilities. A new leg up running to a minimum 1247 in 90 to 99 calendar days, a secondary high or fast rally that exhausts before a new high usually 7/8 of the range down in 60 to 65 calendar days. Or a lower double top and this is where the index is now located. So as the index moves into these time window we need to look at the wave structure, volume, price level and the pattern of the trend to confirm the probability. The index is at the “OBVIOUS” resistance of the previous high and now within the time window at 180 days.

There is a 5 wave structure up (5 or 3of 3), volume has been decreasing but not unusual if the trend were up at this stage, but the pattern of trend is not setting up well. Notice how small the daily ranges have become. High points and tops tend to have some volatility. Notice the expansion of ranges during the January top and the April top and in this case the ranges are narrowing. If there is a move down it is possible to see just one to three days down and resumption of the trend due to the resistance being “obvious.”

Running out cycles from the July low has 45 days on the 15th and if a low could indicate a 90 day move up. If this is a counter trend rally in a down trending market the highest probability is to run out 60 to 65 days or out to the first week in September. If there is a high point now it should not exceed 1134. I don’t like the odds for a top due to the small range days and the probability the move down could be a small counter trend down. The small range days leaves a possibility of a large spike up. If today can not advance following yesterday’s reversal up and a daily low is broken I’ll consider a short term move down to trade but I doubt the trend reversal. I hate those small range days as it usually indicates support coming in at high levels and an exhaustion up might be necessary to eliminate the buyers.

GOLD

The two weeks ago I said gold would go to 154 to 157 for a low at 50% of the last leg up. We are now looking for this rally to fail and confirm a downtrend into one of the major support. The move down to 50% of the last leg up to consolidated that leg up. I felt the entire trend since 2008 needed to be consolidated so we are looking for this rally to fail and run down to ¼ of the major range which is the minimum move down to correct or consolidate a major trend or 1122. Once gold establishes a downtrend there is a fast rally as occurred in this uptrend as noted with arrows and this occurs in almost all up trends. So we are looking for evidence this rally will fail at a price above 1212 and possibly on the 12th of August at 1220. If the index runs past 12 trading days there is no high in place and a new high is likely. The pattern of the downtrend was weak so we need solid evidence to conclude a lower high is in place. But that is what we are looking to occur.

Source: McLaren Report

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Commodity prices fell to their lowest levels this year as China took fresh measures to cool its galloping growth. Banks were temporarily told to halt lending in an attempt to reduce the frantic levels of activity during the first few weeks of 2010. Given Chinas and other emerging economies importance in driving commodity prices this move had an adverse impact on markets from oil to metals.

The CRB commodity index which one week into January trading showed a gain of 4 percent have since then been struggling and this week moved back to levels last seen in December 2009 and thereby putting a lot of new established long positions under pressure. Technically the uptrend since March 2009 is in danger of being broken so the next few days will be very important in deciding the near term direction of commodities.

Another piece of bad news has been the renewed strength of the dollar, especially against the Euro, which fell to a five month low this week over continued concerns about Greece’s fiscal problems. The speculative positions recently have heavily been favouring a weaker dollar and this turnaround has forced a lot of selling in order to limit losses.

Stock markets could be the next focus point as Presidents Obama’s proposed overhaul of the banking sector saw equity markets falling through previous support levels. Five failed attempts to crack the USD 1,150 resistance level on the S&P 500 index was followed by a drop through previous support at USD 1,130. This has now opening up for a potential move back towards USD 1,085.

Crude oil for March delivery reached a low at USD 75.6, a 10.50% drop from the recent highs. On top of the factors already mentioned the speculative long position in crude had reached a new record high leaving the market exposed to stop loss selling while OPECs compliance in adhering to agreed production cuts continue to slip.

Adding all these up energy prices had to come lower but considering the amount of unfriendly news prices have held up pretty well. Continued range trading around USD 80 seems to be the most likely trading pattern going forward.  For now though it is pretty clear that commodity markets are not ready to decouple from the dollar and the moves there has to be watched closely.

Technically near month crude is in a wide USD 73 to USD 88 upward sloping channel and the month long uptrend is still intact. Additional support can be found at USD 75.25 being the 100 day moving average while resistance is located at USD 77.80 followed by USD 80.70.

Platinum raced to a 12 percent gain this week before selling drove it lower from overbought levels. The dramatic rise seen so far has been due to the January 8 successful launch of a Platinum ETF. To keep up with demand this fund bought 195,000 ounces of platinum during a ten day period, more than 10 times daily global production. Platinum is primarily used in jewellery and catalytic converters in autos and China has again been mentioned as a reason for buying it given the forecast for 17.2 million new cars on the road this year. Look for support on the April contract at USD 1,515 to hold for now.

The gold market also got caught by the resurgence of the dollar dropping back towards the December lows at USD 1,075. Support was found at 100 day moving average at USD 1,086 ahead of USD 1,075 and the crucial trend line support at USD 1,060. The bull market for gold is still intact and the fundamental factors that have been driving gold are still there but for now the dollar is in the driving seat so we have to advise caution on gold for the next few weeks. Relative value trades like gold/silver or gold/platinum ratio trades should perform pretty well during this correction

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As the dollar has risen in recent days, most commodities have pulled back quite a bit.  As shown, oil has pulled back sharply from the top of its trading range to the middle of its trading range.  Gold and silver have moved down to the bottom of their trading ranges, while corn and wheat are now below the green zone.  Platinum has also pulled back, but it’s still closer to the top of its range than the bottom.  Natural gas hasn’t gotten hit as hard as other commodities, and it is actually up a bit today.

Source: Bespoken Research

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As shown in the first chart, orange juice has spiked above its trading range in recent days as Florida freezes.  OJ has been in a strong uptrend since the middle of 2009, so traders seem to have expected the cold, cold winter that the US has seen so far.

Most commodities are trading at or near extreme overbought territory at the moment.  Both oil and natural gas are right at the top of their trading ranges, and the same goes for platinum, copper, and corn.  After moving down to the middle of their ranges at the end of 2009, gold and silver have had a strong start to 2010 as well.

Source: Bespoken Research

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The move has been driven by a combination of year end position squaring, a more upbeat tone from the U.S. Federal Reserve Bank and not least the cut in Greece’s credit rating.

News this week that Standard & Poor’s had cut the credit rating of Greece, as it struggles with a huge budget deficit, highlighted the risk ahead for the Euro zone with other countries finding themselves in a similar situation. The ten year yield spread between German and Greek government debt rose above 2.5% putting the nine year old currency under some pressure as we head towards 2010.

The timing of the downgrade had maximum impact as markets are slowing down ahead of year end thereby leaving it extra exposed to adverse news. The continued dollar weakness that had been expected as an almost certainty has come under renewed scrutiny and over these past few weeks a more balanced view on the dollar has begun to emerge.

Gold in particular has been struggling with the continued dollar strength. This has got to be viewed in the context of how the market has been performing over the past few months with large flow of funds moving into a crowded space. The USD 1,100 level was tested this week which represents a near 11% correction from the highs made some two weeks ago.

Technically the USD 1,100 represents a decent level of support but continued dollar strength could trigger additional position squaring with the October high at USD 1,070.80 providing the next level of support followed by USD 1,030 which is trend line support from the October 2008 low. Upside resistance is firm at USD 1,142 for the time being and a close above is required before a new push to the upside can be established.

Until we know for sure why the dollar has found some traction, getting out of commodities as an automatic reaction seems premature. If it happens on renewed hope of a U.S. recovery it should be viewed positively and a decoupling of the inverse relation between strong dollar weak commodities could come to an end. Given the time of year it is too early to speculate and the main thing for investors are to have their exposure at comfortable levels.

The energy sector found some support this week as the inventory data showed big draws in crude and distillate as imports stayed low and demand began to pick up helped by colder weather. The most strikingly impact from colder weather in the U.S. has been the performance of natural gas which have rallied 33% this month most recently helped by a larger than expected reduction of NG in storage. The October to November downtrend has been broken and the January high of USD 6.24 is next level of resistance.

Crude oil found support and rallied on the storage data. Focus on the stronger dollar and sluggish outlook for Q1 2010 have so far kept prices under pressure during December but renewed optimism about the prospect for a global economic recovery helped prices put in the biggest weekly gain since October. Support was found below USD 70 and resistance is located at USD 75 on the front month continuation. Next week sees the expiry of the January contract with February becoming the new front month.

We have seen big differences in performance among commodities in 2009. This is worth keeping in mind ahead of the annual rebalancing from S&P GSCI and DJ-UBSCI between the 5^th and the 9^th business day in January. In order to keep the same base weighting between commodities in their portfolio they have to reduce positions of strong performers and add positions of weak performers from 2009.

Given the current performance this rebalancing will have the biggest negative impact on WTI crude and HG copper and positive impact on natural gas and corn. Given that total asset under management in these two commodity funds stands above USD 65 billion some impact can be expected.

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As highlighted over the last couple of weeks this time of year quite often brings reversal in the market. Especially when the direction has been so one sided for the past few months. It all kicked off last Friday as U.S. unemployment surprised the market by being better than expected. The chain reaction that followed led to a dramatic reversal in commodities with a strengthening dollar being the main catalyst for the move. 

Recent reports have talked about a substantial short dollar position having been built up over the past few months and it got to the point where investors were watching each other for the first move. As the unemployment numbers hit the screens a scramble for dollars began which over the next couple days saw the dollar strengthen by 2.7% versus a basket of six major currencies.

The commodities that have seen the largest build of long position over the past few months were also one of the sectors that have been hurt the most by this correction. Gold in a matter of days lost more than half of the November rally, falling by 9% while silver which tend to track gold but with a built in accelerator fell by 12%.

The gold to silver ratio which over the last year has been favoring silver broke out of its downward trend which short term at least indicates that gold could outperform silver. As long we stay above 64.40 (gold price / silver price) further upside can be expected.

Looking at gold the long overdue correction has now occurred. Over the next few weeks the main focus will be on the risk for additional profit taking primarily driven by a reduction in dollar short positions.

The 9% correction seen over the past week have already been met by new buying interest so given the general positive outlook for 2010 current levels may turn out to be a good area to begin re entering the market from. It is also worth mentioning that the recent sell off have brought us closer to the level where IMF sold 200 metric tons to India back in early November. The recent move lower could attract renewed interest from  another central bank to buy the remaining 200 tons that the IMF still have on offer. Such a sale would undoubtedly be viewed positively as it removes a potential overhang over the market and confirms Gold status as storage of value.

Technically gold short term looks vulnerable to further weakness for move towards USD 1,100 and potentially USD 1,085. However given the strong investor demand over the last few months and the positive outlook for 2010 short term sellers will most likely meet good buying interest. Resistance can be found at USD 1,160 and look for a renewed push to the upside on a break above USD 1,172.  

The energy sector have been one of the less convincing sectors over the past few months with the spot month of crude now trading some 15% down from the October peak. The sector have been hit by double trouble as end of year profit taking and continued storage building in the U.S. have hurt sentiment.

The stock building at Cushing, the delivery hub for WTI Crude, has continued to rise with the most recent DOE report showing a build of 2.5 million barrels. This is a total build of almost 8 million barrels over the last five weeks and given that we are roughly another 5 million barrels away from capacity this is hurting spot month prices.

Meanwhile North Sea Brent Crude has outperformed WTI reaching a premium of USD 2.5 this week which is the widest premium in more than 3 months. Historically WTI trades above Brent at premium between USD 1 – 2. The reason behind this reverse situation is three fold, strong demand in Asia, OPEC’s production cuts and not least the above situation with swelling crude inventories in the U.S.

Technically Crude oil is back into the USD 70 to USD 75 range with a continued downside risk towards USD 65 which should provide a solid floor for now. End of year position squaring together with continued focus on the storage situation will drive prices. Next week sees the expiry of the January contract and currently rolling longs into February comes at a cost of USD 1.80.

This week we launched our Emissions CFD which is based on the price of EUA Carbon emissions from the European Climate Exchange. This will provide investors with increased transparency into the cost and price of Carbon Emissions which is strongly related to energy prices such as Oil, Natural Gas and Coal.

The price of carbon emissions has plunged from EUR 30 per tons in July 2008 to only EUR 8 in beginning of 2009 as the recession hit across Europe and thus slowed the industrial production. In the last 6 months the price has been ranging between EUR 12 and EUR 16. A positive outcome of COP15 should have a positive impact on prices.

 A break above EUR 15.20 would target EUR 19.65 followed by EUR 25. Until the break has been confirmed expect continued range trading with support at EUR 12.85.

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This week was the last full trading week ahead of the U.S. Thanksgiving holiday next week. This normally signals the beginning of the winding down for year end. After that time many traders and funds begins to focus on year end and on how they should be positioned into the normally quiet month of December.

Some risk fatigue began to emerge towards the end of the week with energy and base metals giving up some of their recent gains. Whether it is that or just early position squaring time will tell.

The wall of money floating around in the financial system continues to benefit commodities as a way of diversifying portfolios and in order to shield investments from a non-negligible risk of a US debt and currency crisis.  A research note from a major bank sees flows into commodities this year of USD 60 billion which will bring the total amount invested up towards USD 240 billion at year end.

Most precious metals and some base metals made new highs for the year and the Baltic Dry bulk index, which indicates the cost of shipping dry bulk commodities around the globe, rallied sharply. Gold still catches most of the headlines as it despite moving into a very overbought situation continues to make new highs reaching USD 1.150, a 12.3% rally since the news about India buying IMF gold broke some weeks ago.

We see the break above the 2008 high as a signal that a new rally has been initiated which could take the price of gold towards an initial target of USD 1.300 followed by a potential 5 year target of USD 1.500. Gold still has a long way to go – both in terms of price appreciation and in terms of years of increases. It will at times be volatile, experiencing quarterly declines, but the overall direction will be higher

Near term however gold has moved into an extreme overbought situation which has not been seen for many years and we urge new investors to be patient as a correction back towards USD 1,120 and maybe even USD 1,100 is increasingly likely. The trigger for a correction could be the upcoming U.S. holiday next week as positions in correlated markets like the EURUSD could run into profit taking and thereby remove some of the recent support.

The energy sector continues to be driven by present reality versus future expectations as the overall demand situation still remains weak. Good demand from emerging economies continues to be off-set by continued weak demand from the developed economies.

On this basis the overall investor appetite for commodities is still the main driver of energy prices as investors seeks shelter and a hedge from the falling dollar. This tuck of war has kept Crude Oil range bound over the last month with USD 75 to 80 being the current range.

The global economic pick up over the last few quarters is still happening on the back of continued job losses and that leaves a big question about when and by how much consumption will pick up. For now though the worries about dollar weakness and future inflation should be enough to keep the prices supported over the coming weeks and months.

Technically the front month Crude of January is currently stuck in a bullish flag pattern between USD 75 to 80 range and just the last few days some risk adversity has been seen on the back of a stronger dollar. A greater bullish potential remains as long prices stays above USD 75, otherwise there is a risk of returning to the recent USD 65 to 75 trading range. Some position squaring ahead of the US holiday next week will probably be the main focus into the early part of next week.

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As investors know, gold is currently the commodity of the day, and as shown in its chart, it is currently trading right at overbought territory.  Silver and platinum have rallied along with gold, but they don’t quite have the relationship with the dollar that gold has, so investors haven’t plowed into them as much.  Corn, wheat, orange juice, and coffee have also all done well recently.

Source: Bespoken Research

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As printing presses are running at full speed to produce ever-increasing quantities of fiat money as governments engineer the greatest asset price reflation in human history – and the US greenback is heading South – the longer-term fundamental case for the yellow metal is arguably positive.

“The gold bug has caught several big hedge fund managers this year including John Paulson of Paulson & Company, Kyle Bass of Hayman Advisors and David Einhorn of Greenlight Capital, who believe enormous monetary and fiscal stimulus that has been injected into the global economy will eventually result in hyperinflation,” said The New York Times.

The gold price is not only making headway in US dollar terms, but also in most major (and minor) currencies as illustrated by the table and graph below. This is a manifestation of increased investment demand, whereas the initial rise in the gold price from its low in 2001 ($250) was mostly a reflection of US dollar weakness.

Illustrating the message even more vividly, is the chart below of gold expressed in a basket of emerging-market currencies by dividing the dollar bullion price by the Wisdom Tree Dreyfus Emerging Currency ETF (CEW).

The shorter-term technical picture is also looking interesting.

Seasonally, the period from November to December has traditional been good for gold, with average gains ranging from more than 1% to almost 2.5% since 1970.

I remain bullish on gold in the medium term, especially as I believe the vast money printing by central banks could set off strong inflation pressures down the road. I will not be surprised to see bullion remaining in a secular uptrend in the medium term. Add bullion to your portfolios, but given the notorious volatility of the metal only do so on pullbacks.

Research: Prieur du Plessis

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The rebound in GDP however positive unfortunately came about primarily due to a rise in consumer spending helped along by various government subsidies such as “cash for clunkers” and tax credits for homebuyers. Both these subsidies have now been removed and the big question going forward is weather higher consumption can be sustained without government support.

Despite the rise in economic activity household disposable incomes fell during the quarter as unemployment kept rising. This lack of consumer confidence will play an important role during the next few months and whether the risk appetite will stay very much depends on economic data, crucially U.S. employment data next Friday.

The two main market drivers once again decided the direction during the week as early dollar strength combined with a 5.5 pct sell off in the S&P 500 sent commodities looking for support. Interesting support levels were tested in the process but the U.S. number were good enough reason to halt the return of risk aversion.

Crude Oil rally ran out of steam this week as weaker stock markets and an unexpected build in Gasoline inventories gave bears the excuse to test support that they had been looking for. The sell off only lasted a few days as support from previous highs around USD 77 halted the move.

Near term we expect continued consolidation with the range trading being the favoured strategy by most traders. Look for support at USD 77 followed by USD 75 and resistance at USD 82 (100 week moving average) followed by USD 85.

U.S. natural gas prices slipped after inventories rose 25bn cubic to another record of 3,759 bn cubic feet. One piece of good news is that is now highly unlikely that the national working capacity limit of 3,900 bn cubic feet will be breached as winter demand will increase over the next few weeks .

The market is however still left with a huge overhang of supply which has put the new front month of December under pressure as soon it became the spot month. Unless we see a change in weather forecast further upside seems limited. The December contract on Nymex will be stuck in a wide USD 5.45 to 4.35 range until further news becomes available.

The brief return of risk aversion which saw the dollar at one point strengthen by 2.5% also made an impact on gold thereby confirming the continued strong relationship between the two.  Spot gold dropped 4% but found support at the previous high at USD 1024.30 before rallying strongly ahead of the weekend.

Technically the new trading range continues to take shape with support at USD 1024 now confirmed and resistance at USD 1070 having proved solid over the last month. Additional strong support can be found at USD 995 which is trend line support from the 2008 low.

A worrying development recently has been the renewed rally in the price of rice. According to the U.S. Rice Producers prices may return to record levels as bad weather curbs output in major growers including India. In addition the increased cost of oil has pushed up the cost of fertilizers boosting prices further.

Everyone remembers the food price protests that swept the globe last year after fears of supply shortages prompted prices to surge to a record of USD 25 per 100 pounds in April 2008. The Philippines has brought forward rice imports for 2010 after cyclones have reduced the domestic output while the situation in India is being watched closely. So far they have not any plans to import rice as its reserves are adequate.

During the week CBOT Rice for January delivery reached levels not seen since January this year. Look for resistance at USD 14.80 on the front month continuation while a break could set up a move back towards USD 16.35.

In summary commodities had the biggest rise since May primarily driven by agricultural and energy markets with the CRB index rising 10%. Going into November continue to look for clues in the dollar, stock markets, weather forecast and economic data, especially U.S. employment data next Friday November 6.

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Futures Live Data Costs

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Natural gas, on the other hand, has made a significant move higher and broken its long-term downtrend.  With gold charging higher, silver and platinum have also moved up, but they haven’t broken to new rally highs yet.  This is a key signal that the gold move is pretty much based solely on the dollar’s move lower. 

Looking at the rest of the bunch, copper has actually been trending downward, corn has bounced nicely recently, wheat is close to oversold levels, and coffee and orange juice are in neutral territory.

Source: Bespoken Research

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In the days ahead traders will be watching the S&P 500 stock index closely after the break below USD 1,034 on Thursday.  Activity reports from purchasing managers in the US, UK and the euro zone have left the markets struggling ahead of the US Q3 earnings season which kicks off on October 7. The unemployment rate rose to a 26 year high as employers continue to cut jobs. Next Wednesday consumer credit which last month fell by a surprising USD 21.6 bn will be watched closely.

Meanwhile the Euro has begun to weaken somewhat against the dollar falling to EUR 1.4480, a three week low, ahead of important support at 1.4440. At the same time we have seen the yen strengthen against both the dollar and the euro which normally indicates that risk willingness is declining.

Crude Oil reacted strongly to the weekly U.S. storage data rallying back to the USD 70 level after having reached a low of USD 65. For now the upside seems pretty limited as economic data during the week indicated that the U.S. economy is still in the midst of the recession. Also the uncertainty about the direction of the dollar and stocks will play its part in keeping the upside capped for now.

Technically crude oil for December delivery is stuck in a range between trend line resistance at USD 71.90 and 100 day moving average support at USD 67.80. The outer range is now USD 65 to USD 75.

Natural Gas traders returned to the supply situation this week after a month long rally had elevated prices by 67%. The USDA said that underground supplies of natural gas were up 64 billion cubic feet to 3.589 trillion cubic feet, a new record high and up 16% from a year ago.

Technically a gap on the continued spot month chart down to USD 4.035 is in danger of getting filled. This could indicate another 10% drop from current prices on the new front month of November. The USD 4.00 level coincides with 200 day moving average so it will be a good support level.

Gold continues to trade sideways either side of USD 1,000 with sellers emerging on any uptick due to an overhang of speculative long positions. Some disappointment has begun to emerge as investors gets worried that a correction is needed before the next attempt on the 2008 high at USD 1,032.70. Inflation worries have eased further with the forward expectation having dropped to 2.85% from 3.31% back in August (chart below).

Nervousness about the health of stock markets as we head into the Q3 earnings season has not lifted prices and more importantly the risk of a stronger dollar could pull it lower. Technically stay long of Gold above USD 985 but take profits towards USD 1,020 and look for better levels to buy. Keep a close watch on a break below USD 970 as it could signal a deeper and longer correction which would force many to adjust their near term forecasts.

Grain and oil seeds markets continue to watch weather forecasts closely as we enter into the US harvest season. Fears about frost as seen a couple of weeks back is the main factor that could interrupt what is expected to be a record harvest for Soybeans and second largest for Corn. The USDA will update their current yield estimates, production and supply-demand outlooks on October 9.

Corn for December delivery is confined to a USD 300 to USD 350 range with prices having held up despite the record harvest expectations.  A break above USD 350 should trigger a move towards the August high at USD 376.

Soybeans for November delivery meanwhile lingers at the bottom of its USD 880 to 1035 range with the record harvest forecast keeping prices under pressure. Look out for a break above USD 940 as it could trigger a move back towards USD 977.

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As oil has moved to the bottom of its trading range in recent weeks, natural gas has finally moved to the top of its range.  Natural gas also just broke above its one-year downtrend line, and now traders will focus on resistance that was made at its highs earlier this year.

Metals have settled down over the past few days as the dollar has ralllied.  After trading above $1,000 for a short time, gold has moved back down to $992.  Corn and wheat remain in downtrends, while the breakfast drink commodities (orange juice and coffee) have charts that look like a heart-rate monitor with multiple spikes and falls over the past few months.

Source: Bespoken Research

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As shown, the energy and metal commodities are all currently at or above their trading ranges.  Even natural gas, which has been in a perpetual downtrend, has moved into overbought territory over the last couple of weeks.  Interestingly, gold is going up along with oil and the stock market, and the falling dollar definitely has something to do with it. 

The agricultural commodities like corn and wheat aren’t spiking along with energy and metals, which is a positive for those worried about food inflation.  And finally, coffee has bounced nicely in recent weeks after falling to the bottom of its range.

Source: Bespoken Research

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The only commodity currently overbought is copper.  Oil, natural gas, gold, silver, and platinum are all right in the middle of their trading ranges.  Corn and wheat have been tanking lately and are getting close to the bottom of their normal trading range.  And coffee and orange juice are finally seeing some reversion to the mean after seeing some short-term divergence a couple of weeks ago.

Source: Bespoken Research

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One thing I eventually discovered from covering the same markets day after day, month after month, was that the vast majority of the time the vast majority of the markets’ overall fundamental and technical situations did not change on a day-today basis. Yet, as a market reporter I was conditioned to write about why the market went up one day and why the market went down the next day, and so on.

Even though a market may have been in a very narrow trading range for days or weeks, I had to ask the traders and analysts every day to come up with some fresh fundamental and\or technical reasons why that market moved only a fraction. Reporting on the New York “soft” futures markets (coffee, cocoa, sugar, cotton and orange juice) is especially difficult for a reporter. He or she needs to dig up and write about some fresh-sounding news every day. The soft markets many times just do not have much fresh fundamental news on a daily basis — or sometimes even on a weekly basis, for that matter. Conversely, it was easier covering the financial and currency markets because there was usually at least one government economic report that came out every day that would make those markets wiggle a bit. Or, some government official (like Greenspan) would make comments to which those markets took notice.

As time went on and I came to better understand markets and market behavior, and as I studied specific trading strategies, I realized that the day-to-day market “noise” is not of much use to most traders. Here’s a specific example of market noise:

Recently the live cattle futures market was up a bit on a Monday due to talk that the cash cattle trade later in the week would be at higher money. On Tuesday the futures market dropped a bit because of ideas the cash cattle market trade later in the week may not be at firmer money, but steady at best. Nobody was trying to manipulate the live cattle market that week. It was just a case of differing opinions getting center stage when the market closed on different sides of unchanged.

For a trader who tries to follow the near-term fundamentals in a market too closely, hearing that kind of conflicting news can be a nuisance at least, or a factor that prevents successful trading results at most. It’s not easy for less-experienced traders to ignore the differing daily drumbeat of fundamental news that is reportedly impacting a market.

The lesson here is that prudent traders should not become overly sensitive or reactive to most of the day-to-day fundamental news events that are reported to be moving the market on any given day. What is important for the trader is that he or she recognizes and understands the overall trend of the market, and that daily market “noise” is usually an insignificant part of the overall process of trading and of market behavior, itself.

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On the energy front, oil and natural gas have declined quite a bit over the last week.  Oil remains in the center of its trading range, however, while most other commodities are now in oversold territory.  Gold, silver and platinum have all pulled back sharply since early June, while corn, wheat, and coffee have fallen off a cliff.  The one commodity that has bucked the overall downtrend is orange juice.  It was in oversold territory just a couple of weeks ago, but it has rallied nicely in recent days.

Source: Bespoken Research

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Hang Seng Index (HSI)

Contract size – 50 HKD * Index
Minimum trade – 1 contract
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Tick value – 50
Order types – market, limit 

Mini Hang Seng (MHI)

Contract size – 10 HKD * Index
Minimum trade – 1 contract
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Tick value – 10
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Hang Seng China Enterprises Index (HSCEI)(HHI)

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Two weeks ago I indicated the index was going up into the 90 day time window and could be an important high or even a top.  Please understand the trend remains in a strong position holding above swing highs and since the last low the sell offs have only been one day.  So looking to short this market will be very high risk without some evidence but I do have a time window for the next three trading days that could be very difficult resistance.  Price resistance is maximum 1012, then 995 and 963.  A move above Tuesday’s high seems likely and a break of the low of the high day would be the first indication a high could be in place.

LET’S LOOK AT THE 30 YEAR US T-BOND

 

This is the Feds worst nightmare.  Rates are rapidly rising.  Normally this would occur if the economy were improving.  Unfortunately bonds could be falling due to the government policies and not economic demand-we don’t know.  The Fed cannot control long rates-they have tried in the past a failed.  So Bonds could ruin the part and should be watched.  Best date I have to end the move down is around June 16^th but that is not a high confidence cycle but is still a 60% probability.  Could be still in a capitulation move down. Support marginally below 113 then 108.      

LET’S LOOK AT THE US DOLLAR INDEX-DAILY CHART

 

Two weeks ago I said the US DOLLAR was in a panic move down and would not rally past 4 days until the panic was complete.  I indicated the important dates were June 2^nd (the current low) and June 8^th.  The 8^th is Monday and could be another counter trend high if the index goes up into that date and would indicate the panic style of trend will continue.  IF it moves up past Monday then the 2^nd could be a low of some significance. If Monday is a high then June 20^th and July 8^th could be vibrations in “time” and the end of the cycle and possible end of the trend will be July 26^th.  If the Dollar is going down into that end of July date there will be one rally of 7 to 12 trading days before 26^th.  But for now the panic is continuing.  This is very important IF Monday is not a counter trend high then a low of some significance is in place.  The reason for this is the possibility of a “false break” low versus the December low if it can rally past Monday.  If Monday is a high then that “time” factor will be valid.

Source: McLaren Report

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The continued weak economic outlook in Europe and the U.S. and subsequent drop in demand has been the main focus for the bears over the last few months. However crude has now rallied nearly 100% from the January lows and many are beginning to adjust their outlook.

OPEC at their meeting in Vienna refrained from further production cuts, something that is currently difficult to do as some members has been cheating and producing more. Instead they switched to verbal intervention as Saudi Arabia said that the global economy can handle a $75-80 Oil price as they saw demand picking up most notably in Asia. Front month Crude Oil broke above 200 day moving average at $62.18 and this strong technical picture helped drive prices above $65 this week

Up until recently the main factor driving Oil prices higher were the support from rallying stock markets combined with the weaker dollar.  This last move however has happened without the support from the U.S. stock market as no new highs has been seen for over two weeks now.

What has been seen is a rally in government bond yields as traders continue to sell bonds on the basis that yields could continue to rise as governments are struggling to finance ever increasing budget deficits. This week US 10 year yields rose to 3.71%, a level last seen in November 2008 long before Central Banks began Quantitative Easing.

Rising bond yields has unnerved investors and the subsequent risk of a dollar collapse or reemerging inflation are driving investors into commodities.

Technically the rally in Crude Oil is now well established and short sellers have got to be patient. With the break above $62.18 traders now look for a move back to the November high of $71.77 followed by the 38.2% retracement at $76.30.

On the downside $62.25 needs to give way before talk of a correction can begin followed by major support at $59.50. One major word of caution is the RSI level which indicates the market is overbought and the risk of a downside correction could be happening soon. 

I will be keeping an eye on the S&P 500 index which is currently stuck between 200 day moving average resistance at 930.50 and strong support at $885. Continued rise in bond yields and subsequent dollar weakness will be supportive for commodities.

Meanwhile precious metals continue to be driven higher by some of the already mentioned factors. Silver is heading for its biggest monthly gain in 22 years and Gold is back to a three month high with $1,010 again coming into play.

Flows into ETF Gold funds has not increased during the week which leaves us a little concerned about the sustainability of this rally. In the near term however the dominant factor behind moves in Gold will be moves in the US dollar which to certain extend is driven by movements in bond yields.

A further weakening of the dollar combined with geopolitical risks out of North Korea may revive investment demand for Gold and take it back towards the February high at $1010.

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Last interview I indicated the rally may have exhausted into the 60 day cycle.  If that were the case the Key to this strong advance was the number of days and the number of points to the decline.  I indicated if the index exceeded 3 days down it could indicate the uptrend was complete and a downtrend of some sort would take place.  The critical support is 875 and that has still held but the index traded down 5 days.  Although that 5^th day down was just marginally lower.  It has rallied three days and remember the normal counter trend within a trend is 1 to 4 days and this rally failed at 3 days so there could be a lower high in place and the start of a downtrend.  The support below 875 is 863 and very important 831 down to 826.  The 863 support is ¼ of the range up and keeps the uptrend intact so for the bears that is a very important level to be broken.

The next important time window is 90 calendar days from low around the 5^th of June. If the index doesn’t get any legs down it is very likely the index would move sideways into that time window and bring in an important high after a 30 day period of distribution.  If the index doesn’t trend down from here but moves on the side into the first week in June that could be the end of the move up and with 30 days of distribution would represent a very bearish picture.      

NOW LET’S LOOK AT THE US DOLLAR INDEX MONTHLY CHART

The index rallied up from the “false break” low and moved to our forecasted price level of between 1/3 and 3/8 of the last range down.  This level keeps the downtrend intact.  I noted a year ago that countries would attempt to debase their currencies in an attempt to gain a competitive advantage to revive their economies.  The key support on the monthly chart is the 2004 low.  The large amount of volatility the previous 6 months is an indication of a top so there could be a test of the 2008 low or a marginal new low.

NOW LET’S LOOK AT THE DAILY CHART

The index is now in a capitulation style of trend or panic style of downtrend.  This is clear due to the “space” that occurred between the 3 day rally high and the previous low.   The key support is not only the price of the December 2008 low but is also the price of the December 2004 low.  There is a very strong time cycle present that indicates the follow dates can produce a strong vibration in “time.”  The next is June 2^nd and June 8^th – the 8^th is very significant at 96 days from high.  Then June 20, July 8 and the expiration of the cycle on July 26. 

Source: McLaren Report

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The big picture hasn’t changed much this past month. The most surprising news, at least for the ones in the dark, was that China is hoarding Gold. Their reserves have risen a lot and they intend to expand their stockpile even further. Although this is very good news for Gold in the long run it didn’t really have a big impact on the Gold price last month, which is kind of surprising.

Such news is huge because the monetary reserves of China are enormous and although they say they will not shift their reserves into Gold at this time, I wonder if they will still hold that position if the dollar should tank.

Most likely this positive news was put aside by the announcement that the IMF intends to sell a lot of its Gold in order to raise cash and support the various countries that are in trouble, which should have a negative impact. We, however, have to look past this negative force for Gold because once the Gold reserves of the IMF (and other Central Banks) are gone there is nothing left to cap the price of Gold!

Due to the selling of the IMF ,Gold could suffer in the short term but it is my opinion that this fall (should it happen) will be a very good entry level for people that don’t already own the yellow metal.

As the Gold chart will show from a technical point of view, Gold is currently at an important stage and this upcoming month could be the set up for a rise to the highs or a fall to retest the $700 level (Impact of IMF selling Gold).

Whatever the outcome, Gold bulls are certain that Gold will reclaim its power further down the road. Will China be the only one to see the light? I don’t think so, there will be many other countries that will follow in China’s footsteps and I wouldn’t be surprised if a few of them, for example the other BRIC (Brazil, Russia, India) countries are already doing the same as China.

All charts are courtesy of Stockcharts.com

GOLD

The picture for Gold hasn’t changed much this last month. The flag pattern is still intact.

However, this pattern can’t continue for much longer because it will get too big to remain a valid flag, rather, it will then change into a channel. For now the blue lines are the most important ones to watch. They have to support Gold together with the 34 w. MA at $859.

If this level fails we can brace ourselves for a big fall, because the $700 will then be the next target again. As long as the $850 holds we expect Gold to break out of the flag pattern and start a new run at the highs.

SILVER

The Silver chart remains fairly positive. The flag pattern is still intact and completion doesn’t seem that far off.

The current correction wave could be a wave 2 but it is still too early to tell so this EW count isn’t valid yet. The chart is improving further with the 24 w. MA starting to curl up in support of an upcoming move. This move could be the wave 3 higher triggered by a breakout from the pattern.

The RSI and MACD are in perfect position to move higher and a new buy signal in the DMI (cross of buying power over selling power) will follow quickly if Silver moves higher from here on.

OIL

Oil is taking a breather after the first breakout attempt failed. It successfully re-tested the

17 w. MA for support and is moving higher again towards the resistance zone and the 34 w. MA.

The 17 w. MA is rising and should support Oil in the upcoming attempt to break the heavy resistance zone. If Oil succeeds it will trigger a huge buy signal because it will automatically mean a break above the 34 w. MA, a new LT buy signal. The first target after a breakout will be the $80 level ($78 is a 38.2% monthly fibo level shown in last month’s chart).

The technical conditions are improving slowly but are still in negative territory (RSI, MACD) while the selling power remains in charge, meaning that the current move higher is still ‘just’ a correction in the ruling downtrend.

USD

The Bulls are doing a good job supporting the USD. They have manage dto keep it above the 34 w. MA and the uptrend is still very much intact.

The downward pressure is still there and keeps building so the bulls aren’t out of the woods yet. As long as the 34 w. MA holds firm the bulls remain in the driver seat, but once it is taken out we will see a big sell signal and a trigger for a huge fall towards the 72 level.

The technical conditions are still positive but this can change very quickly. The RSI is a whisker away from triggering a sell signal and the MACD is on its way towards the 0 line. This upcoming month will be very interesting to watch.

COPPER

The chart for Copper is coming along as expected and the presented EW count fits nicely into the monthly chart that was shown last month.

The technical conditions have improved further and are in perfect position to get this wave 5 underway. The RSI is back above the 50 level and should start rising from here, the buying power in the DMI is trying to take over and the MACD is steadily rising towards the 0 line and the magenta resistance line.

If copper breaks above the resistance zone the indicators all turn positive at once and could trigger a very big move higher. The $300 level could then come within reach very fast.

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Below we provide our trading range charts of the commodities highlighted above.  The green shading represents between 2 standard deviations above and below the commodity’s 50-day moving average.  When the price moves outside of this green shading, the commodity is considered overbought or oversold.  Oil is pretty close to the top of its trading range, and the last time it moved above the green shading, it pulled back pretty quickly.  Natural gas is the closest to oversold territory and continues to trend downward.  Gold, silver, and platinum have broken their uptrends recently and are approaching the bottom of their trading ranges.  Copper, corn, wheat, orange juice, and coffee are closer to the top of their range than the bottom.

Source: Bespoken Reasearch

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If you lose 25% of your account, you must make 33.3% profit on the remaining equity, simply to break-even. Keep your total equity drawdown to less than 20% and you have a chance of surviving in the sharemarket. Trading is not about avoiding risk – it is about managing risk.

Types of Stops

An initial stop is designed to protect your capital. Even successful traders find that they only make winning trades around 50% of the time. As long as the dollars gained outweigh the dollars lost, then you will be profitable, even if your hit-rate is quite low.

A breakeven stop will help lock in a no-loss trade. This type of stop is implemented once a trade has begun to co-operate and there is now little threat of your initial stop being hit. At least when you have moved your stop to breakeven, there is a chance that you will end up with a profitable trade. Especially with the application of leverage, it is important to move your stop to breakeven as soon as reasonably possible. This will minimise the potential drawdown of your account.

Trailing stops are designed to protect your profit. Once the trade has trended strongly in the expected direction, you can follow the trend by moving your stop. You could also decide to extract money from the position if the option hits your profit target. I only use profit targets for option and warrant trades, not for share trades. Profit targets tend to cap available profits. Learn to protect your profits as well as protecting your initial capital and you will be well on the way to trading effectively.

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Looking at the raw data on Crude Oil provided by the EIA, it is very hard to be supportive of a bullish price action for the near term.  Crude Oil, Distillate’s, Gasoline and Propane stocks all reflect a much higher cyclical average than previously seen for this time of the year.  This is underpinned by above average production level and Crude Oil days of supply.

Taking this into consideration, these types of builds would not be a cause for concern, provided of course, that we are in a situation where demand is on the increase.  According to the IEA, “Global demand is now forecast at 83.4 million barrels per day, 2.4 million less than 2008. The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010″. 

And even judging by the short term movements in demand, there is really nothing to suggest an increase in the present environment.  After all, China’s Crude Oil imports did fall by 5.5% from last year and their Gasoline imports being virtually none.

The recent price action paints a slightly different picture as we approach the top of the range for this year’s prices in WTI. Having seen the sharp rejection of the downside this week, good discipline will be needed in approaching any shorts.  But it is really hard to see why we should be anything but short, targeting a correction in prices over the next couple of weeks towards $41.00.

The Gold price action is very similar to that of Crude Oil over the past week.  However, there too, the upside does seem to be fairly limited.  Much of the upside coming on the back of news saying that China had increased their reserves by 76% since 2003.  I am slightly skeptical about all this talk, as to some extent it sounds like a bid to talk up the market and I am still of the persuasion that no one country is able to buck the market.

We need to remember that we are trading far from the lows in stocks markets, and even when the carnage on equities was at its bleakest, we failed to break higher ground in Gold.  In saying that, it brings to questions whether Gold should carry a high weighting in a general market portfolio.  With little upside potential in Gold, I still believe that Gold at 780.00 remains a realistic target in the near term.

In general, I think in our current market environment, keeping it real and sticking to the facts remains the prudent strategy.

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Successful trading begins with a winning trading plan. It’s as simple as that. If you develop a well-conceived trading plan to guide your actions in the market you will already have the advantage over most of your market competition. Put simply, it gives you the edge you need to win over the long haul.

Here are some important elements of a trading plan.

1. Why am I trading? What are my goals?

The answers to these questions might seem obvious, but they usually are not. Take some time to ask them of yourself, and seriously consider the answers. You may be surprised by what you learn. And whatever the answers, you will have a clearer picture going forward of what this enterprise means to you, and that will help you survive any rough patches.

2. What markets am I going to trade and why?

It is often best to specialize, especially for beginning stock market traders. Many pros make a great living trading the same stock day every single day for years. Choose a market that is appropriate for your experience level and trading style. Consider other factors such as available margin, volatility and liquidity.

3. What is the concept or philosophy behind your trading methodology?

Your trading system must have a concept behind it. Whether you are a value investor like Warren Buffet or a trend trader like George Soros, you should understand why you are doing what you are doing, how your beliefs about the markets define what you will do as a trader.

4. What will be your specific method?

In other words, specifically how will you execute your trading ideas? Will you buy breakouts or pullbacks? Buy oversold or sell overbought? Or will you use specific technical setups such as moving-average crossovers or another indicator-based strategy? Under exactly what conditions will you enter? When will you know to exit?

5. How much money will you risk on any single trade? On trading in general?

This is critical. Of course, start small. But just as importantly, have a plan in place for how much you will risk, emotions don’t cloud your judgment when the time comes. The key is to find an allocation that doesn’t cause any stress but still makes the trade worthwhile financially. One of the biggest problems with newer traders is that they are trading way too big in relation to their account size. Like when you are forex trading. Trading forex at 50-1 leverage. Yes, you can do it, but that doesn’t make it a good idea.

6. What will my trading rules be?

This is also critical. Your trading rules include entry and exit rules, rules governing maximum daily, weekly or monthly losses, maximum risk on any given trade, the maximum number of trades per week, etc., etc. These rules enforce discipline and keep you out of trouble. What price will enter at, what price will I will exit. Be discplined.

7. How will I record and evaluate my trading performance?

Allow me to repeat myself: This is critical. In fact, this might be the most important element of trading for new traders in the stock market. A new trader who evaluates his trades, winners and losers, in an effort to learn what works and what does not, will make quantum leaps forward in terms of ability and profitability. If you have a working trading plan and evaluate every single one of your trades after you have closed it you have already beaten 95% of the competition.

8. What are my rules for managing profits?

What’s the problem with profits? Well, believe it or not there is one, and it’s a serious one. It’s called euphoria, and it clouds the judgment perhaps more than any other emotion related to trading. Start piling up the profits for the first time and it won’t be long before you are convinced you are king of the world. About 30 seconds later you’ll be broke, following a series of unwise and exceedingly risky trades. So have a plan for protecting closed profits when you have reached your goals for the week or the month. Don’t give them all back.

9. How will I reward myself for following my trading plan?

Don’t leave this out. Following your trading plan will bring rewards in the form of profits, but you should also consciously reward yourself for doing so because it is such an important part of successful trading. So if you finish the week or the month (or even the day) without having broken any of your trading rules, find a way to reward yourself. You deserve it. You are in rare company.

If you follow your plan you are improving your chances of becoming sucessful stock market or forex trader.

Source:singapore trader report

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Gold

Gold closed down -1.62% at $878.80 (continuous contract). During the week it hit an intraday low of 865.00. So far, the important $850.00 price level has held. From last week’s report:

$850 is a key support level, as it is the high of the last bull market, and it marks a significant inflection point for the present bull market. It is important for price to remain above this level.

MACD has made a negative crossover, which suggests more downside action to come. It appears that $850 is going to be tested.

The weekly chart below shows a possible inverse head & shoulders formation in the making.

Silver

Silver was down -3.29% for the week, closing at $12.34. Silver has broken its bottom trend line and appears to be setting up to make a negative STO cross over. In last week’s report I said:

I have been bullish on silver and remain so, especially long term, however, I’m not thrilled about the recent action. What started out as a short term correction may be morphing into an intermediate term move.

Not only did silver break its lower trend line, but as the next charts shows, it looks like the STO indicator is rolling over and setting up for a negative cross. If this occurs it would suggest that lower prices lie ahead.

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This week in gold we have seen prices drop lower creating a lower low. This is generally not a good sign if we want to see higher prices in bullion and gold stocks. That being said, a lot of traders are now starting to short gold because is has filling its gap lower which occurred Monday at the open due to over night commodity prices.

I am refraining from this short term play because of several things:

1. Gold is still within its support zone and could reverse any day
2. Although we have a lower low this pattern could very well be a 1-2-3 wave retrace
3. Stochastic Indicator for gold is starting to turn up indicating possibly stronger prices
4. Gold stocks are currently at a short term support level

GLD Gold Fund Trading Chart

Gold Bugs Index (Basket of Gold Stocks)

Technical Trading Conclusion:

The price of GLD has been retracing since February after making its big run from $70 to $98. We all know the market moves in zigs and zags and some bigger than others. And we all know that large moves always require some type of pause whether it’s a sharp pullback, flag, Pennant, wedge or 1-2-3 retrace before continuing in the previous direction. Only time will tell what gold will do next. We simply must manage our exposure and focus on trading low risk setups when the momentum is on our side.

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1. Understand your personal financial situation
2. Understand diversification
3. Select the right portfolio holder for you
4. Do all the research necessary
5. Realize that it will be a bumpy ride

Let me address them individually.

Understand your financial situation
I would actually say “financial and life” here.  Trading is part of your life, not sepeate from it. That is something you need to take into serious consideration. There is the obvious decision about how much money you can put to work in the market. On top of that you also have to think about how much time you can commit.

Understand diversification
For traders this is a bit different than for investors. Diversification in investing is attempting to keep from having all of your money negatively impacted by one set of circumstances, like a downturn in a certain sector. Because traders are in and out of positions relatively frequently, this isn’t as much of an issue. Diversification in trading is more about making sure you have sufficient trading opportunities. Generally speaking, the longer your trading timeframe the more markets and/or securities you need to play.

Select the right portfolio holder
In investing this can mean any number of things from brokers to mutual fund companies to DRIP managers. There are a number of considerations involved there. In trading it really comes down to just the broker. You need to find a broker that suits your specific needs and with which you feel comfortable. By all means seek information and feedback, but in this end this is a decision that only you can make.

Do all the research necessary
Trading is not something you can just jump into and expect to do well. It’s pretty much like any other activity worth pursuing. It takes time to get good at trading. It takes work and study and practice. At times trading will be frustrating and in the beginning it can most definitely be overwhelming with all the different markets, instruments, and ways to trade them. Realize going in that you’re going to have to put forth considerable time and effort.

Realize that it will be a bumpy ride
This one pretty much speaks for itself. There have been all kinds of adjectives used to describe trading and dozens of metaphors applied to it. While it may not make things better, going into trading with the realization that there are going to be any number of ups and downs can help make riding them out a bit easier.

Now I’m not going to say these are the five things to do before trading, but they are among the things you should do before taking the plunge.

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5. Stock Market Trading Plan

The first quarter of the year has passed and it was a volatile one for the markets in general.

They plunged into an abyss straight out of the gate. But last month we saw a powerful rebound. Has the bottom for this horrible bear market been set?

Only the future will tell exactly what will happen to the markets. But to me it still seems that there’s a lot more pain to suffer over the coming months maybe even years. Despite the recent concerted stimulus decisions of the governments of the G20, I’m afraid that it will get a lot worse again after this dead cat bounce is over.

All hopes are set for the outcome of these new plans that the G20 have taken, the question we have to ask is, will these proposed measures really do the job? In our view, as long as the financial system is in bad shape it will not. The banks have to become healthy again with clean balance sheets before they can jumpstart the economy again.

Another very important issue is the level of the consumer debt, which is horrible and will only get worse when the layoffs continue at the current pace. Last Friday we saw the (official) unemployment figure in the US rise to 8.5%, a number not seen since the early Eighties. My expectation is that this rate will get still worse during the year maybe even hitting 10% in 2010 because the layoffs are continuing at a very rapid pace.

Every investor will be eying the upcoming earnings season, especially the guidance for the rest of the year and 2010. This guidance could hand in a very nasty surprise for the bulls because the US economy is a consumer economy where private consumption makes up 70% of the GDP.

But these consumers need money to spend and that’s just what they don’t have because many of them have already maxed out their credit cards and with the uncertainty of employment they will try to save every penny they can to at least make basic ends meet. Consumer spending is likely to dry up even further

This will be reflected in the upcoming company guidance bringing a lot of them in trouble when consumer spending deteriorates further. This will in its turn hurt the banks again which have to write off a lot of “bad loans” to companies, delivering another heavy blow to their balance sheets.

The current bounce in the markets is presenting a chance to raise some cash or at least get out at relatively high levels. With the general markets rising chances are there that the precious metals (and their stocks) will suffer a bit, thus handing us a perfect opportunity to pick up Gold, Silver and related stocks should this decline materializes.

All charts are courtesy of Stockcharts.com

GOLD

The weekly gold chart is presenting a mixed picture with possible positive or negative outcomes.

Negative is the double top pattern with negative divergence in the RSI and MACD, suggesting an imminent decline with targets at the rising blue line at $850 and the blue support zone at $700.

Positive is the possible formation of a flag pattern, similar to the one formed in 2008. If this pattern becomes valid a possible price target can be calculated at $1,200.

For now the positive outlook is preferred, at least as long as Gold remains above both the 17 and 34 w. MA. A decisive break below the 17 w. MA is a first warning sign that the positive outlook is in jeopardy.

SILVER

The weekly chart for Silver is showing a bullish outlook, provided the presented EW count (ABC, abc) is correct.

The pattern formed from the resistance level is taking the shape of a flag pattern which is a continuation pattern usually forming halfway during a move thus suggesting a price target of $19 to $20.

This outlook is valid as long as Silver holds above the MAs. However, should Silver break below them the presented EW count maybe adjusted because the possibility exists that this could turn into a 5 wave down. With A=1, B=2, C=3 and the current high at the resistance level being 4. Then there could be a wave 5 down outstanding with targets at $7 and $6.

OIL

This long term chart is perfectly showing the strong advance Oil made over the past years and the current fall from the high has bottomed or is bottoming at the horizontal support around $40.

If the presented EW count is valid the current bottom could be wave 2 of a higher order (or the A with B in progress and C yet to come). Waves 2 tend to retrace a lot of the gains made by waves 1 and in this perspective the current wave 2 bottom would fit perfectly.

The advance for oil began at $10 reaching a high of $147, the 76.4 % fibo level of this rise can be found at $42, so the current lows at $35 would fit within such a decline.

As long as the support level holds we can expect Oil to rise back towards the presented magenta fibo levels, with the 38.2% level as the most common for a (dead cat?) bounce in a strong decline. After such a bounce we should see another decline towards the $40 (a new wave 2) but first we have to see where this bounce takes Oil to.

USD

The weekly dollar chart shows that there might be trouble ahead for the greenback.

We can see that the last high wasn’t confirmed with higher highs in the RSI and MACD thus creating negative divergence with the price movement. Such divergence is almost always an early warning sign that a change in the trend is coming. In this case a new negative trend could be next. Confirmation of such a change in the trend will follow when the dollar breaks below the 17w and later 34 w. MA.

The last line of defence is at the blue support zone. A break hereof will most likely lead to much lower levels, a retest of the all time low at 72 for example.

The coming month will give us more clues on what we can expect later on this year.

COPPER

What a rise and what a fall we can witness in the chart.

The bull run started in 2001 at $61 and lasted until around the middle of 2008 when Copper touched the $408 level, a rise of over 550%. If we take a closer look at this rise from a fibo perspective we can calculate that the current fall that bottomed at $140 (closing base on the monthly chart) is almost a perfect 76.4% fibo retracement (at $143) of this rise.

Because waves 2 tend to retrace a lot of gained ground in waves 1, this fall could qualify as a possible wave 2 down. If this is the case we should see a wave 3 higher in the coming years. Wave 3 could take Copper to highs never imagined. Fibo level 162% of wave 1 triggers a price target of just above $700 for this wave 3!!

Although such a level seems impossible now, it could easily be reached if we experience a long period of hyperinflation down the road, which isn’t that imaginary with the current money creation going on in the world.

Related posts:

1. Central Banks are Buying Gold for their Reserves Now!
2. Gold and Gold Stocks Riding a Thin Line
3. Hyperinflation Is Not Coming Soon…Here’s Why
4. Money Gold and Silver Report: Market Wrap
5. Gold and Gold Stocks During Periods of Deflation and Inflation

Source: Bespoken Research

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2. S&P 500 Breaks Above 200-Day Moving Average
3. Moving Average Trading Secrets
4. Forex Trading: USD/JPY Hovering Above 100-Day Moving Average
5. S&P 500 index vs. 200-day moving average

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A key pivot point resides above near $945.00.

Silver

Silver has been acting a bit better than gold as of late. GLD corrected below its 50% level but SLV hasn’t yet to come even close to its 50% level.

Part of the reason for this however, is that silver fell much further than gold did from the long term highs, and thus had a lot more room to move back up into.

Silver’s daily chart shows it bumping into overhead resistance and backing off. Its 50 ma offers good support, and below that its rising trend line does as well.

To the upside, $13.55 and 13.75 offer immediate overhead resistance levels that would be bullish if taken out, followed by $14.00.

by Douglas V. Gnazzo

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2. Gold, Silver and Oil Special Trading Report 5-5-09
3. Active Trader Breakout Signals for Gold, Silver and Oil
4. Equities, Gold, Silver and Oil – Active Trader Report
5. Gold,Silver and Oil rises on weak Dollar

Source: Bespoken Research

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3. Gold Approaching 200-Day Moving Average
4. Gold and Gold Stocks Riding a Thin Line
5. Gold and Gold Stocks During Periods of Deflation and Inflation

Gold bounces off support again today with some indicators pointing to much higher prices.

GLD Gold ETF Fund – Daily Trading Chart

This week gold has been pulling back after last week’s massive one day rally. Hopefully that rally was not a one-day wonder but rather a sign that smart money is still moving into gold and not most retail traders trying to make a quick buck.

Gold Stocks/Gold Bullion Ratio – Weekly Chart

This chart shows we now have a clean breakout, which is extremely bullish for the price of gold. This signal is not fully confirmed until we have the closing price Friday at 4pm ET.

GDX Gold Miner Stocks Fund – Daily Trading Chart

This chart shows a nice rally to the February resistance level with a small bull flag and a daily close above resistance. Wednesday’s price action is very bullish but our support trend line is much to steep for gold stocks to maintain. Those with a high-risk appetite may like this, but I prefer to wait for a more conservative setup.

The USD is Half Way Done It’s Move

The Dollar broke down sharply a few weeks ago and is now forming a bear flag chart pattern. This pattern generally forms at the half way point of a move. If the trend continues, we can expect to see much lower prices for the USD in the next 1-2 weeks.

Gold Trading Conclusion:

While gold bullion is looking a little top heavy, the internals like gold stocks and the USD are shouting the opposite. Gold is currently at support, which is generally a good place to add to positions. If the price of gold breaks down from here, there is a clean exit point, which is a daily candle close below the support level on the GLD gold fund chart.

Related posts:

1. Gold testing downside support
2. Gold and Gold Stocks Riding a Thin Line
3. Gold Bullion and Crude Oil Bull Market Turning Point
4. Gold Testing Downside Support
5. Active Trader Breakout Signals for Gold, Silver and Oil

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1. Commodity Snapshot
2. Commodity Snapshot
3. Commodity Snapshot
4. Commodity Snapshot
5. Commodity Snapshot

1. Always live to fight another day
2. Entries must have a statistical edge
3. Patience and discipline
4. Be a jellyfish (swim with the current)
5. Trade only liquid securities
6. Focus on trying to capture the middle 80% of a move
7. Know your exit points when you open a position (and stick to them!)
8. When in doubt, reduce position size by 50%
9. Limit losses to 2% of total equity for any single trade
10. Start each day with a clean financial and emotional slate

The above list is relatively generic, but it helped provide me with a framework for organizing how I would approach trading as a business, what strategies I should adopt, how those strategies should be executed, and ultimately defining what success should look like.

Trading rules are vitally important – as is knowing when they should be broken. Even more important, I believe, is the process that one goes through in order to arrive at these rules and to make sure that as new market situations unfold and new blind spots are revealed, the rules and guidelines are enhanced to maximize the opportunity for the trader to continue to grow and develop.

Posted by Bill Luby

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1. Determination of time-units. Gann studies (preferably) require squaring of time and price; this set up can give the 45 degree angle for 1×1 angle. If the chart is not properly scaled traders can’t draw lines based on angles; instead they can use ratios (e.g.: 2×1 angles indicate 2 unit of price movement for one unit of time).
2. Time periods. Although Gann indicators can be used to any time periods, they offer better results when used in intermediate time periods (weekly or 10-day charts).
3. Determination of highs or lows to draw lines. Traders can use recent highest high or lowest low to draw the lines. It would be better to use Fibonacci tools and pivot points to determine these line originating points.
4. Slops of lines. Gann lines should always be plotted to right side; downwards if from a high (resistance) and upwards if from a low (support). The most used slops are 8×1, 2×1, 1×1, 1×2 and 1×8. Market rotates according to ‘Rule of All Angles’, which is when one angle is broken then the price, moves to next angle.
5. Clustering with other indicators. Traders should use appropriate time indicators to get better results with Gann indicators. Fore example Fibonacci time zones and retracement levels are excellent tools to use in conjunction with Gann indicators to predict market movements for long time periods.

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If you’re an Investor, Trader, have your own SMSF or working towards Financial Freedom you don’t want to miss this!

In the comfort of your own home you will receive insight, knowledge, tips and strategies that will empower and position you to prosper from this current economic environment.

This webinar will focus on:

- Equipping you to take advantage of the opportunities in the current Economic Climate
- The launch of Build Wealth Club our new initiative to provide investors with the keys to financial freedom.
- Tricom Trader presentation, which will identify its new features and walk you through setting up your workspace to best suit your trading style.

Build your Knowledge and be empowered to use it.

Limited numbers available, it will be a closed group and open to questions. Register your interest ASAP.
https://www2.gotomeeting.com/register/966077416

Title: Build Wealth
Date: Tuesday, March 31, 2009
Time: AEST 8-9pm, QLD 7-8pm, SA 7.30-8.30pm, WA 6-7pm
After registering you will receive a confirmation email containing information about joining the Webinar.

If you have specific questions you would like answered; please email them to eden.hage@tricom.com.au before 5pm 30th March.

Feel free forward this email to family and friends so they can also be equipped and empower to prosper from this current economic environment.

System Requirements
PC-based attendees
Required: Windows® 2000, XP Home, XP Pro, 2003 Server, Vista

Macintosh®-based attendees
Required: Mac OS® X 10.4 (Tiger®) or newer
There is no charge to be on this webinar, but there is LIMITED SPACE available, so I urge you not to procrastinate.

Register NOW at:
https://www2.gotomeeting.com/register/966077416

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2. The Forex Market and Its Success Potential
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5. Learning Styles and Trading Success: Are You Playing to Your Strengths?

We must remember that success in trading and investing often requires a counterintuitive approach. The markets often go the opposite way they should. Here are a few examples. Gold was in a bear market for 20 years despite what can be called a credit hyperinflation in the United States. Gold has performed spectacularly this decade in the absence of the kind of price inflation we saw in the 1970s. Treasuries have risen this decade along with Gold, Oil and Commodities. When has that happened in history?

Now back to precious metals. The main idea for investing in this sector is to protect your purchasing power or protect against inflation. So it makes sense to buy the sector during an inflationary period. Right? A look at history combined with some common sense analysis reveals that precious metals and the producing companies outperform during deflationary periods and in advance of an inflation cycle.

Let’s look at the 1930s and 1940s. The Great Depression initially was a deflationary event but it concluded in inflation. Using the calculator from inflationdata.com, I calculated the change in prices in the 1930s and 1940s. In the 1930s, prices fell 18%, while they rose 70% in the 1940s. But what happened in the markets?

Which gold bug hasn’t seen this chart of Homestake Mining, from http://www.gold-eagle.com. If I remember correctly, its bull market lasted from 1921 to 1937. The stock made a lower low in the early 1940s and wouldn’t surpass its Great Depression peak until the 1960s. The stock performed especially well from 1931 to 1934, during the later stages of deflation and initial stages of inflation.

This is a chart of the Barrons Gold Mining Index, dating back to 1939. Thanks to http://www.bgmi.us. The rectangle shows 1940 to 1950. There was deflation in the 1930s and huge inflation in the 1940s. Yet the gold stocks performed far worse in the 1940s.

It was the commodity sector that prospered most during the inflation of the 1940s. The rectangle shows 1933 to 1951. Chart from TopLine Investment Graphics: http://www.topline-charts.com/.

The reality is that the precious metals complex outperforms AHEAD of reinflation, while the rest of the commodity sector outperforms DURING the ensuing inflation. Gold stocks perform best when their margins are expanding. That can happen when the price of Gold stays flat and cost inputs (oil, steel, labor) fall. It can happen when gold rises and rises faster than cost inputs. When inflation begins to take hold, the precious metals complex has already anticipated it. Inflation raises the cost of everything. As the cost of steel, oil and labor rise, it hurts the profit margins of gold producers. Hence, gold companies outperformed during the deflation and early reinflation of the 1930s, but underperformed during the inflation of the 1940s.

How did the gold stocks do in the 1970s? The aforementioned BGMI index, rose from a bottom of less than 100 to a peak of about 1300. Let’s call it a 14-bagger. Outstanding right? Well, consider that the price of Gold rose from $35/oz to as high as $888/oz. That is a 25-bagger! Gold stocks unperformed Gold despite a rising gold price. Why? Because of rising commodity prices and rising inflation, gold companies didn’t benefit as much as you’d expect. In relative terms, gold stocks were better performers in the 1960s. The BGMI rose very nicely, while the price of gold remained fixed.

In the early 2000s, there was a fear of deflation. As you can see from the chart below, from 2001-2003 gold stocks strongly outperformed gold as well as commodity stocks. Gold bottomed before the rest of the commodity sector and advanced before inflation began to take hold. As inflation began to take hold, the gold stocks underperformed both gold and commodity stocks and even while the price of gold rose from $600 to over $1,000.

Conclusion

It appears the consensus is wrong on both counts. One side says there is no inflation on the horizon, so the precious metals sector isn’t an appropriate investment. The other side says that there will be hyperinflation, so buy gold. Hyperinflation may be good for physical gold but it is deleterious to everything else including society and the political structure. The reality is that the current macroeconomic environment is most advantageous for gold stocks and then gold. However, if and when inflation begins to take root the precious metals complex will underperform and your funds will best be utilized elsewhere. For more on this analysis, visit our website and consider joining our newsletter. Good Luck!

Related posts:

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2. Silver in a Deflation
3. Treasury Inflation Protected Securities ETF
4. Long-Term Outlook: Slow Growth And Deflation
5. Double Top – Gold or the S&P Index

Below we highlight our trading range charts of the ten commodities shown above.  The green shading represents two standard deviations above and below the commodity’s 50-day moving average.  As shown, oil has moved to the top of its trading range in recent days, while natural gas remains oversold.  Precious metals have pulled back from overbought levels over the last week, while copper remains at the top end of its range.

Subscribe to Bespoke Premium to view our trend and timing analysis of commodity ETFs.

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2. Bespoke’s Commodity Snapshot
3. Commodity Snapshot
4. Commodity Snapshot
5. Commodity Snapshot

 FIRST LET’S LOOK AT THE S&P 500 DAILY CHART

We have had this chart up on the website for the past month.  When looking at important dates within stock groups many had hit important highs on December 9^th and therefore we though the vibration in time could be significant from that date.  So the first few days in March had 90 and 60 calendar day cycles expiring.  As I pointed out last report all last legs down in bear trends have definite period of time with 45 to 51, 60 to 64 and 90 to 99 calendar days down as that time factor.  And as we have pointed out many times a 90 day high to low or low to high is strong probability for completing movements.  So there is “TIME” for a low but qualifying the significance of this low is difficult.  I feel confident it will run at least 7 to 12 trading days and is currently up to resistance from the previous low set in February 23^rd.  That price level is very significant if the trend is to remain down. 

If this does turn down within the 7 to 12 trading day time window then a significant low and possible end to the bear trend will occur in the first week in April. That is the next series of the cycles.  If the rally can exceed 13 trading days then the last low could be very significant and the rally could run for a few months.   It should now consolidate the move up due to the resistance level with a small correction or a few days on the side.

LET’S LOOK AT THE US DOLLAR INDEX

The US dollar index moved to a new high in March and failed.  This remains in the 1/3 to 3/8 retracement of the last leg down and is very important resistance.  I thought around March 18 was a valid date for a high but that seems too soon considering this index usually needs to distribute for a month or so.  But because of the failure at the previous high (obvious resistance) it is important to look at the next rally to see if there is a possibility it can be qualified as a counter trend.  Critical support for holding the up trend is marked on the chart.   Technically there has developed a probability for a top so we’re looking for evidence of distribution and that lower high.  No signals yet just a point of interest so far.    

THE NEXT CHART IS CORN

Back in January I said the agricultural commodities had completed a counter trend rally and should resume the downtrend.  Corn and other agricultural commodities are struggling down too much now to look for a continued downward move.  You can see each time it has broken to a new low it immediately recovered indicating a struggle down.  I don’t know if a strong low is in place but there appears to be too much risk for the short side.

Related posts:

1. CNBC Report by Bill McLaren – 1 March 09
2. CNBC Report by Bill McLaren – 27 March 09
3. CNBC Report by Bill McLaren – 24 April 09
4. CNBC Report by Bill McLaren – 22 May 09
5. CNBC Report by Bill McLaren 13-2-09

Gann believed that trading in commodities is not gambling, as some people think. Rather, it is a practical, safe business when conducted on business principles.

The following words of wisdom are the reasons given by Gann why one can make more profits trading commodities than trading stocks.

Why Trading in Commodities is More Profitable Than Stocks

1. Commodities follow a seasonal trend and are much easier to forecast. They move with supply and demand.
2. It requires much less work to keep up charts and calculations on commodities. There are 1200 stocks listed on the New York Stock Exchange and you must keep a separate chart on many of them as you wish to forecast the trend. With cotton, you need one to three charts, and the same with Grain and other commodities.
3. When you have a forecast made with cotton or grain, if you are right, you are sure to make money because all options follow the same trend. There are no crosscurrents, as in stocks, with some stocks declining to new low levels and others making new highs.
4. In dealing with futures, there are no heavy interest charges as there are when long of stocks and no dividends to pay as when short of stocks.
5. Dividends can be suddenly passed or declared which will affect stock prices. This cannot happen in commodities.
6. Pools cannot manipulate a commodity as they can a stock
7. Facts about a commodity are generally known while many stocks are mystery stocks all the time and some stocks are subject to false rumours.
8. The stages of the business cycle tell more about the prices of the commodities than they do about stocks.
9. Commodities are governed only by supply and demand. This is not always true of stocks.
10. Speculation in commodities is more legitimate than speculation in stocks because you are dealing in necessities.
11. Commodities are consumed. Stocks are not. This has a bearing upon the ease of forecasting commodity prices.
12. You can forecast tops and bottoms of commodities with greater certainty than of stocks.
13. Stock prices tend to move by groups of stocks, while commodities move independently.
14. Stocks go into receivers’ hands and go out of business. Commodities go on forever. Crops are planted and harvested each year.
15. There is always a demand by consumers for commodities, which is not the case with stocks.
16. Marginal requirements are much higher on stocks than on commodities. Therefore you can make more money on the same capital trading commodities rather than trading stocks.

Gann was adamant that once a trader learns the rules for forecasting and trading in commodities, then the trader will not see change, because there will always be wheat, corn, and cotton crops each year. These crops will be consumed annually, while stocks change and one has to study new stocks to keep up with changed conditions.

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2. Making Trading Journals Work for You
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5. COMMODITIES. Why?

People seem to forget this, but all bubbles start with a seemingly strong premise. In the case of gold it’s that the printing press is going wild, thus gold should strengthen relative to the dollar. This makes sense to a degree. The Internet DID change the world, but Pets.com didn’t become a worldwide leader in pet accessories; oil SHOULD have increased in price due to a global economic boom, but at $145 / gallon businesses failed and people stopped driving; financial innovation DID allow many first time buyers the access to finance a new home, but someone making $20,000 a year should not be buying a $1,000,000 house.

In other words, a great story can explain why the boom begins, but it doesn’t justify the price if it becomes outlandish. As money pours in and the bubble gets larger, investors pour in more money. Gold has been a similar story as the shiny metal formerly used in jewelry vs. 401k’s has become exceptionally self-feeding as gold has been one of the few asset classes that has shown strength, attracting new capital.

The following are a few reasons why I believe gold may be entering the next bubble:

1. The same people that argued gold is a BUY BUY BUY because of inflation are now coming up with well-articulated reasons why gold is a BUY BUY BUY because of deflation. I personally don’t have a clue how deflation or a decrease in credit can possibly be good for gold.
2. Pre-house bubble pop, everywhere you looked there was housing TV show this (i.e. Flip that House), housing seminar that, become a realtor this. Now there are “gold guys” preying on frightened investors’ 401k’s, infomercials about gold coins, and the Internet sensation CASH4GOLD.
3. Gold serves no useful purpose, to my knowledge, outside of a minor uses in electronics / dentistry and major uses (at lower prices) in jewelry. I say “at lower prices” because gold is already to being replaced by cheaper metals in jewelry (the demand for gold jewelry was down 35% in the fourth quarter) and the existence of CASH4GOLD means people may be net sellers of gold in jewelry (I personally like to picture a frightened investor selling all their prized jewelry out of fear, only to take that cash and invest it in gold out of fear of inflation).
4. The wildest thing to me is that in most cases this investment is not in bars you can actually see (the value in gold is supposedly its beauty), but in an ETF where you see its value in your account statement.

After all that you’d think I’m shorting gold? Well, I actually am in the short-run (The Financial Ninja read my mind with his post regarding that opportunity), but I am ready and waiting for gold to make new highs to reverse my positioning with expectations that this bubble train is far from over. I’ve learned my lesson with the Internet Bubble (and recent housing bubble) that most people are illogical and invest based on fear (sometimes fearing loss, sometimes fearing they will miss out on the next big thing) and money can be made even if the premise makes absolutely no sense in the long run. As long as fear reigns supreme and equity markets remain volatile, there will be plenty of people convinced gold is the only “safe” investment.

My expectation is that eventually the golden bubble will run its course and come crashing back down to earth. If the economy gets worse, people will realize you can’t eat the stuff and investors will sell their stakes to pay for necessities. On the other hand, if the economy recovers, investors will have much better opportunities with their capital… as I mentioned Tuesday, asset inflation, especially in precious metals, serves no economic purpose in the long run.

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Gold stocks look to be finding support and are testing resistance levels from both our trend line and 50 EMA. A breakout to the up side would be very bullish for these golden investments.

Gold Bullion Stocks ? Daily Chart

Gold Bullion Prices

Gold bullion has had a great rally this year but it was tough to time entry points due to the V shaped bounces compared to consolidation style patterns. As you can see on the gold GLD chart below we are seeing a possible bounce which could be the beginning of a new leg higher.

Gold is currently trading at the bottom of our trend channel and trying to break above our resistance trend line. Gold bullion stocks (equities) our out performing the price of gold which is a very bullish sign for higher bullion prices. The momentum MACD is testing the 0 (zero) level which can be support for gold and the stochastic indicator is pointing to higher prices in the near future. I expect we will see gold gap higher at the open on Friday as international traders will push the price higher over night.

Gold Bullion GLD ETF ?Daily Trading Chart

Crude Oil – Continuous Futures Contract

Crude oil futures are trading and trending higher and look to have some legs behind the move. Oil has been slowly trying to bottom and with any luck the next couple weeks we will see a full trend reversal and start to move higher. You can see from the chart below that the momentum (MACD) has been moving higher over the past few months and this kind of divergence is bullish for oil. In the past 2 weeks oil has broken an important resistance trend line. Things are starting to look up for oil.

Crude Oil USO Fund ? Daily Trading Chart

Crude oil is tough to trade because all the funds seem to have contango which alters the price of the fund several percentage points away from the actual price movements of crude oil futures contracts. The USO fund today has made a nice move higher with strong technicals. As you can see on the chart energy stocks are out performing oil which is very bullish. The momentum (MACD) is bullish as well. Oil could find some resistance at the 50 EMA but we will cross that bridge when we get there and hopefully Friday. I can reassess the situation over the weekend.

Gold Bullion and Crude Oil Conclusion:

Gold and oil are both looking very bullish as of today.

The weekly chart of gold bullion although it is down for the week is currently testing the 10MA which is a technical support level and has held many times before when gold is trending higher. We would like to see a bounce in gold which would last several weeks or months.

Crude oil has bullish charts as well but is the flip side of gold. Oil has been moving higher and has broken out to the up side with momentum (MACD) generating a breakout signal. The next few weeks could provide some great buy points for these commodities if the technical?s hold up.

Gold is currently at support which is generally a good buy point and oil is trading at the high but with a new trend line support drawn today it is trading near a possible support level.

Related posts:

1. Market is Bottoming, Equities VS Gold Bullion
2. Crude Oil and Gold
3. Gold bullion surging in all currencies
4. Gold bullion: regaining its shine?
5. Gold Bounces Off Support Again and Internals Look Strong

1.Having no trading plan
When you don’t have a plan, you don’t have a template to follow. It becomes very costly when your emotions are high and you have to make decisions on the fly.

2.Using strategies that do not match your personality
You hear of a trading strategy that has worked very well and you are anxious to follow it. One important factor to consider is: does it match who you are and your lifestyle?

3.Having unrealistic expectations
Most traders assume that it is very easy to make money in trading. They have unrealistic expectations with regard to their initial capital, their risk profile and how much money they can expect to make.

4.Taking too much risk
Usually when traders are down, they want to make their money back very quickly. Therefore, they increase their position size without thinking about the risk/rewards.

5.Not having rules to follow
Most traders think if they have rules to follow, they are restricting themselves. It is on the contrary. Having rules allows you to be more flexible since you have thought about lots of issues beforehand.

6.Not being flexible to market conditions
It is very important to see the markets as they are and not as you want them to be or as you assume them to be.

7.Failing to take responsibility for your results
When the results are not in your favor, the tendency is to blame the markets, circumstances, advice of others… When you blame things outside of yourself, you become a victim of circumstance. When you take responsibility, you can react differently to your circumstances and become the success you know you can be.

8.Being addicted to volatility
One of the reasons that people get into trading is because they like the excitement of it. If there is no excitement, they create it. This is one of the reasons that traders sabotage themselves.

9.Not having a process to keep track of your performance
If you don’t keep track of your results, how do you know what has worked and what has not? How can you tweak your process to get the best results that you can?

10.Not dealing with your Emotional Risk
When dealing with money, there are lots of emotions involved. Emotions are part of everyday life. What separates the successful traders from others is how they react to their emotions.

So what can you do to become a more consistent trader and increase your profitability?

1.Think of trading as a business and have a trading plan.

2.Make sure that the strategies you select, match your personality so you can follow them.

3.Have a realistic expectation of what your returns are. Include all the costs associated with your trading business.

4.Have an idea for your risk/reward ratio. Don’t confuse trading with gambling. If you are increasing your position, make sure that your strategy warrants it.

5.Have trading rules and follow them. Think about them as contingency plans. Because when your emotions are very high, the tendency is that you make very poor decisions that can cost you your account!

6.Be flexible to the market conditions. When you see the market as it is, you have a much better chance of managing your portfolio and increasing your profits.

7.Take responsibility for your results. Taking responsibility does not mean that you have control of everything that happens. It means that you have a choice of how to react to the things that happen.

8.Find out why you are in the trading business. If it is for the excitement of it, find other hobbies or activities that you can get your excitement from.

9.Keep track of your performance. This is a way of objectively looking at how you are doing, what you did right and what you learned. Be gentle with yourself.

10.One of the most important things that people don’t handle is their Emotional Risk. When emotions run high, the quality of decisions goes down. It is very important to learn how to react to your emotions and thus increase your profits.

“At first, something seems impossible. Then it becomes improbable. But with enough conviction and support, it finally becomes inevitable.” Christopher Reeves

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3. Major Forces That Affect the World’s Currencies
4. Three Lessons From Professional Forex Traders
5. Market ‘Noise’: How Seasoned Traders Learn to Ignore It

Regardless of your long-term views (mine, as it happens, are bearish), it’s hard to look at the accompanying chart and not feel like the market is setting up for some sort of corrective bounce.As of now, the S&P 500 index is about 35% below it’s 200-day moving average, which is not far below the one-day gap of 39.65% seen on November 20th – just before the market staged a 5-day, 19% rally – as well as the record differentials hit during the Great Depression, which also proceeded powerful upside reversals.

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Successful stock market trading begins with a winning trading plan. It’s as simple as that. If you develop a well-conceived trading plan to guide your actions in the stock market you will already have the advantage over most of your market competition. Put simply, it gives you the edge you need to win over the long haul when trading the stock market or forex market.

A stock market trading plan will not guarantee your success in the markets, but a good plan will enable you to work methodically toward your stock market trading goals while reviewing on a regular basis what is working and what is not. It will act as a roadmap for your trading journey. It will enable you to respond positively and constructively no matter what happens with your individual trades. And, most importantly, it will help you control the only thing a trader can control: his or her own actions.

Finally, stock market trading is a business. It can be a fascinating and sometimes thrilling business, but in the end it is a business. A trading plan helps you treat it as a business.

Here are some important elements of a trading plan.

1. Why am I trading? What are my goals?

The answers to these questions might seem obvious, but they usually are not. Take some time to ask them of yourself, and seriously consider the answers. You may be surprised by what you learn. And whatever the answers, you will have a clearer picture going forward of what this enterprise means to you, and that will help you survive any rough patches.

2. What markets am I going to trade and why?

It is often best to specialize, especially for beginning stock market traders. Many pros make a great living trading the same stock day every single day for years. Choose a market that is appropriate for your experience level and trading style. Consider other factors such as available margin, volatility and liquidity.

3. What is the concept or philosophy behind your trading methodology?

Your trading system must have a concept behind it. Whether you are a value investor like Warren Buffet or a trend trader like George Soros, you should understand why you are doing what you are doing, how your beliefs about the markets define what you will do as a trader.

4. What will be your specific method?

In other words, specifically how will you execute your trading ideas? Will you buy breakouts or pullbacks? Buy oversold or sell overbought? Or will you use specific technical setups such as moving-average crossovers or another indicator-based strategy? Under exactly what conditions will you enter? When will you know to exit?

5. How much money will you risk on any single trade? On trading in general?

This is critical. Of course, start small. But just as importantly, have a plan in place for how much you will risk, emotions don’t cloud your judgment when the time comes. The key is to find an allocation that doesn’t cause any stress but still makes the trade worthwhile financially. One of the biggest problems with newer traders is that they are trading way too big in relation to their account size. Like when you are forex trading. Trading forex at 100-1 leverage is like introducing your mistress to your wife. Yes, you can do it, but that doesn’t make it a good idea. Normally they don’t get along too well.

6. What will my trading rules be?

This is also critical. Your trading rules include entry and exit rules, rules governing maximum daily, weekly or monthly losses, maximum risk on any given trade, the maximum number of trades per week, etc., etc. These rules enforce discipline and keep you out of trouble. What stock price will enter at, what stock price will I will exit. Be discplined.

7. How will I record and evaluate my trading performance?

Allow me to repeat myself: This is critical. In fact, this might be the most important element of trading for new traders in the stock market. A new stock market trader who evaluates his trades, winners and losers, in an effort to learn what works and what does not, will make quantum leaps forward in terms of ability and profitability. If you have a working trading plan and evaluate every single one of your trades after you have closed it you have already beaten 95% of the competition.

8. What are my rules for managing profits?

What’s the problem with profits? Well, believe it or not there is one, and it’s a serious one. It’s called euphoria, and it clouds the judgment perhaps more than any other emotion related to trading. Start piling up the profits for the first time and it won’t be long before you are convinced you are king of the world. About 30 seconds later you’ll be broke, following a series of unwise and exceedingly risky trades. So have a plan for protecting closed profits when you have reached your goals for the week or the month. Don’t give them all back.

9. How will I reward myself for following my trading plan?

Don’t leave this out. Following your trading plan will bring rewards in the form of profits, but you should also consciously reward yourself for doing so because it is such an important part of successful trading. So if you finish the week or the month (or even the day) without having broken any of your trading rules, find a way to reward yourself. You deserve it. You are in rare company.

If you follow your plan you are improving your chances of becoming sucessful stock market or forex trader.

Happy Trading

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