The amount of negative news
that we have seen recently has been mind-blowing. Europe is going into
recession, Greece and several other countries are on the verge of bankruptcy,
the Middle East is a powder-keg, and the U.S. is facing a fiscal cliff.
Shockingly for most retail traders, the past week has produced a very strong
return for U.S. equity indexes as well as risk assets in general.
Retail investors often times
consistently lose money because they focus on the financial media and all of
the negative news that is out there. Trust me, as a longer term trader and
investor, there is never an absence of negative news or potentially poor
economic possibilities. This is not to say that markets cannot decline,
investors just need to understand that markets are cyclical in nature and do
not ever move in a straight line.
Based on what I was reading
from most of the financial blogosphere recently, you would think that the
entire world was about to end. A few blogs were calling for an all out
collapse late last week or a possible crash this past Monday, November 19th.
As is typically the case, the market prognosticators were wrong with the
calls for a crash or an absolute collapse in financial markets.
Unlike those blogs, members of
my service at TradersVideoPlaybook.com were getting information indicating
that we were expecting higher prices. At our service, we lay out regular
videos covering a variety of underlying assets from the S&P 500 Index and
oil futures, to gold and treasury futures. The focus is purely on analysis of
various underlying assets across multiple time frames. We cover intraday time
frames as well as daily and weekly swing time frames throughout the week with
videos and written updates.
To put into perspective what
we were seeing in the marketplace on Monday November 19th, the following
chart was sent out to our members during intraday trading that day.
As can be seen above, the
target we were expecting was at the top of the recent channel. As shown
directly on the chart above was my comments that if the 1,410 level on the
S&P 500 Index could be taken out to the upside, the bulls would have an
opportunity to move prices higher into the end of the year. The daily chart
of the S&P 500 Index after the close on Friday November 23.
As can be seen above, the
S&P 500 Index moved right into the expected target price range and closed
literally at the very top end of the range shown above. If prices move
considerably higher, the bulls will have broken the descending channel and
higher prices will likely await.
Next week's price action is
going to have a dramatic impact on the price direction of the broader market
indexes. One important aspect that I would point out to readers is that the
large move higher shown above came on exceptionally light volume due to the
holiday week. In light of that, a strong reversal cannot be ruled out.
Caution is warranted regardless of a trader or investor's directional bias.
One of the most important
charts to monitor over the past few weeks has been the U.S. Dollar Index
futures. Typically a stronger Dollar has been bearish for equities and risk
assets in general. However, on Friday we saw a very strong selloff in the
U.S. Dollar Index futures as shown below.
As can be seen above, the U.S.
Dollar Index futures closed on Friday right at a key support level having
given back much of the recent gains. If the Dollar continues to move lower it
should put a floor under stock indexes and push risk assets higher overall.
Two major moves higher
occurred in light of this weakening Dollar on Friday in both gold and silver
futures. The precious metals had a very strong move higher after the U.S.
Presidential election and have been consolidating now for a few weeks. Prices
in both gold and silver had strong moves higher on Friday which were
accompanied by very strong volume. The daily chart of gold futures is shown
below.
Gold futures had a huge move
higher today supported by strong volume. Based on today's action, I believe
that we will see the $1,800 / ounce resistance level tested in the near term.
Seasonally speaking, this time of the year is bullish for gold and silver and
should the strong seasonality correspond with a weak U.S. Dollar much higher
prices likely await in the precious metals sector.
Members of
TradersVideoPlaybook were made aware that I was expecting very strong action
in both gold and silver when they broke higher after nearly testing their 200
period moving averages. At the time, I told members that as long as the
breakout from the consolidation zone from the July - August time frame held
as support, higher prices were likely and that is just what we have seen.
Overall, I believe that the
quarters ahead should be strong for both gold and silver. Time will tell
whether oil futures and the broader equity markets will also move higher. I
continue to believe that monitoring the Dollar Index futures closely is an
important part of assessing the directional bias to expect in the months
ahead.
We have a lot of negative news
in the headlines, but Mr. Market has fooled most investors and traders alike
the past week. If you were one of those investors that were fooled, consider
taking advantage of our weekend special by clicking the link below:
Take care and Happy Trading!
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