Oil and Gold Update

Oil Update

The February 21 Profit Radar Report said the following about crude oil:

Crude oil filled the massive gap left by Wednesday spike and is sitting right atop trend line support. Seasonality is strongly bullish until late April. For anyone interested in trading oil, this is a tempting setup to go long.

The problem with this trade is that oil has had massive daily swings, which makes identifying an effective stop-loss level nearly impossible. One of the goals of the Profit Radar Report is to keep risk at a minimum.

There is much up side to oil. Investors who don’t mind short-term drawdowns in exchange for potentially sizeable profits, this is a trade worth taking. However, since we cannot effectively limit risk, this won’t be an official trade.”

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The updated chart below shows that oil soared higher until it hit resistance near 38.

This resistance paused the rally and generated a bearish RSI divergence. More weakness is possibly, but ultimately higher prices are likely.

Gold Update

The March 2, Profit Radar Report pointed out a potential triangle formation for gold, and stated:

Gold appears to be carving out a triangle. Upon completion, triangles often lead to strong, but temporary breakouts. A quick spike to 1,300 +/- could mark the end of the initial up leg from the December low. Such a quickly reversed spike higher followed by a multi-week/months correction (see yellow projection) would harmonize to a satisfactory degree with seasonality and sentiment. A break above 1,255 would be the first steps towards a post-triangle spike.”

The chart below was published via the same update.

The second chart provides more long-term context. The purple lines outline the triangle formation. The initial post triangle thrust stopped at trend line resistance (ascending red line), and created a bearish RSI divergence. Gold found support today, and rallied higher. This keeps the potential of a move to 1,300+/- alive, but chasing this move would take impeccable timing.

Continuous updates for oil, gold, silver, S&P 500 and other assets classes are available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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Watch RSI for a Possible S&P 500 Breakout

Here is a chart frequently seen in recent Profit Radar Report updates.

In my humble opinion, it is the best visual nutshell summary of the stock market right now. Here is what we see:

  1. The S&P 500 (NYSEArca: SPY) is at the top of its trading range, just below key resistance. The bold red trend line goes back almost two decades. No wonder the S&P has stalled here.
  2. The percentage of stocks above their 50-day SMA has been lagging significantly. Buyers are obviously getting picky.

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  3. RSI (Relative Strength Indicator) is bumping against its very own trend line resistance. Every attempt to move above has been repelled, thus far.

Summary: The S&P 500 and RSI are at key resistance. A breakout here should reel in more buyers. However, the lack of participation (indicated by the % of stocks > 50-day SMA) cautions that buyer’s remorse will set in eventually and limit up side potential. Failure to break out may lead to lower prices.

Detailed target levels for a breakout (if it occurs), and continued out-of-the-box analysis are available via the Profit Radar Report.

Some recent sentiment readings increased the odds of a (temporary?) ‘pop.’

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

S&P 500 is Showing First ‘Chink in the Armor’

After many weeks of relentless gains, the S&P 500 is showing first ‘chink in the armor.’ In fact, there are three persuasive reasons to expect lower prices, but there’s also one strong force that’s pushed the market continuously higher.

After weeks of strong price action, the S&P 500 is showing the first signs of weakness. Here are three early developments that may lead to lower prices:

1) Bearish reversal candle: On Tuesday the S&P 500 shot higher, but closed the day below its open price. This created a red reversal candle. A similar reversal candle on April 4 led to further weakness (blue boxes).

2) S&P 500 reversed at resistance. The S&P 500 reversed at the ascending red trend line (which connects all highs since April 2, 2012) and monthly pivot resistance (short red line) at 1,967 (both outlined in the June 22, Profit Radar Report).

3) S&P 500 moved above and dropped back below long-term resistance: In its 2014 S&P 500 Forecast (published on January 15), the Profit Radar Report projected a pre-summer market top at 1,955. Why 1,955?

1,955 is a convergence of two significant resistance levels: a) Long-term Fibonacci projection resistance (red horizontal line) and b) Parallel trend channel going back to the October 2011 low (black line).

Summary

The S&P 500 (NYSEArca: SPY) has run over similar setups before. Although this time may be different, we should keep in mind that one snow goose doesn’t make for a winter.

Especially since there is one force that continues to drive stocks higher. This force is not QE. No, it’s much more visible. In fact, it’s an ‘in your face kind of nuisance’ that’s easily assessed, but often overlooked.

The article below exposes the development that keeps extending the bull market’s life:

False Promises: Where is the Promised Crash or Correction?

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

The Biggest S&P 500 Dilemma Explained in One Chart

The S&P 500 is struggling to ‘seal the deal’ and build on the recent break out. There are multiple reasons for the lack of follow through, but this chart best explains the S&P’s dilemma with ‘escape velocity.’

Like a commitment shy bachelor, the S&P 500 has been flirting with a bullish breakout, but unable to ‘put a ring on it.’

It’s not been an issue of persistence, more an issue of commitment.

This weekly S&P 500 MACD bar chart highlights the dilemma.

The blue oval highlights at which point MACD confirmed prior rallies with a bullish crossover.

Since 2011, every S&P 500 rally was confirmed by a bullish MACD crossover on or before the week new S&P highs were reached.

Not this time. The S&P 500 (NYSEArca: SPY) moved to new highs three weeks ago, but the MACD Histogram (which measures the distance between MACD and its 9-day EMA) remains negative.

The March 9 Profit Radar Report featured the same chart and observed that: “MACD has not yet confirmed the S&P’s up trend. This emphasizes the potential for an upcoming ‘fork in the road'” (more about this ‘fork in the road’ in a moment).

Simply put, there was no reason to be long because the S&P didn’t have the escape velocity needed to break out for good.

Although not shown on this chart, there’s another reason why the S&P 500 stalled and why it stalled exactly where it did. It reached a multi-year resistance. It’s the kind of resistance most investors aren’t aware of, that’s why it’s so effective. This perfectly explains the ‘fork in the road’ scenario mentioned above.

A closer look at this key resistance level and what it means for the S&P 500 going forward is available here:

Is it Too Late to Jump into Stocks? Watch How S&P Reacts to This Inflection Point

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Rejected: S&P 500 Destroyed These 2 Bullish Patterns

For much of 2013 the S&P 500 adhered to two repetitive bullish patterns. In 2014 it rejected both patterns. The effect of this change of character is already visible, but will it lead to much more damage?

During much of 2013, the S&P 500 followed two predictably repetitive bullish patterns:

  1. Persistence below resistance leads to higher prices.
  2. Quickly recovered dips below trend line support lead to higher prices.

The S&P 500 chart below illustrates the bullish outcomes of both patterns with green rectangles and circles.

The red box highlights a change in character.

For much of 2014 the S&P 500 was bumping against resistance at 1,855.

In 2013 that kind of persistence around resistance would have been followed by a bullish break out. Not in 2014.

Furthermore, the S&P 500 (NYSEArca: SPY) dipped below trend line support on Friday. Unlike the October 2013 instance (green circle), where a dip below trend line was quickly reversed, the S&P 500 of 2014 continues to head south.

The Dow Jones even sliced below significant long-term support.

The weekly Dow Jones (DJI: ^DJI) bar chart below shows a 15-year support/resistance line.

The Profit Radar Report referred to this support/resistance line many times and warned that a drop back below it would spell trouble.

No doubt we’ll soon see a powerful bounce, but there are persuasive additional reasons why this correction will ultimately have further to go.

3 Reasons Why a Longer Correction is Likely

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (stocks, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Insider Trading just Became Legal

Only a small group of Americans is allowed to legally trade based on insider information. Fortunately for the rest of us, there is a perfectly legal trick to get an edge. All that’s needed is a computer, a set of eyes and some study time.

Congressmen are legally permitted to trade based on insider information.

There’ve been cases where even the Federal Reserve leaked information to Wall Street before it hit the newswires and average mortal investors.

High Frequency Trading (HFT) is not considered insider trading, but – like insider trading – HFT is based on information not yet received by ‘the herd.’

Legal ‘Insider Information’ for Everyone

Unbeknownst to many, investors also have access to legal ‘insider information,’ but most don’t take advantage of it. All it takes is a computer and watchful eyes.

Allow me to illustrate the power of legal insider info (do not peek ahead to the second chart). Take a look at the S&P 500  chart below. Do you see anything suspicious?

You should, because all the information you need to pocket a 15%+ profit is right there.

Now take a look at the same S&P 500 chart.

One single line changes the complexion of the entire chart. More than that, trading based on the red line break down resulted in a gain of 200+ S&P 500 (NYSEArca: SPY) points to the upside (green ovals) and 200+ S&P 500 points on the down side (red oval).

The red line provided strong support on several instances (green ovals) and a break below support (red oval) was an obvious sell signal. In my actual July 28, 2011 (one day before the red oval break down) note to subscribers, I warned that: “A break below the red trend line may trigger panic selling”.

The legal ‘insider information’ available to everybody is support/resistance (S/R) levels.

S/R levels work like subway stations. Imagine a New York subway, it can stop anywhere but is most likely to stop at the next station. S/R levels are the most likely place for the market to turn around and reverse trend.

When the market moves beyond one S/R level, it is likely to move on to the next “station.” Once resistance has been broken, it becomes support and once support has been broken it becomes resistance.

The Biggest Benefit of S/R Levels

S/R levels allow us to pinpoint low-risk buy, sell, and stop-loss levels.

The real beauty of S/R levels is that they let us know exactly when we are wrong. There is nearly no guesswork and we can enter any trade with confidence that even the worst-case scenario would be only a small loss. Nearly every trade against S/R levels is a low-risk trade.

Here’s a very recent example.

The Dow Jones  chart below shows the recent collision of the Dow Jones with long-term trend line resistance.

The initial attempt to move above resistance was met with selling. After re-grouping, the Dow Jones was able to move above resistance and accelerated from there. Prior resistance is now support for the Dow Jones (NYSEArca: DIA).

The Profit Radar report went short at Dow Jones 16,100, covered the short position at 15,745 and noted that a move above the trend line means that the rally is ready to resume and quite possibly accelerate (unfortunately we didn’t get to go long the Dow or S&P 500 as the reversal after the Dec. 18 Fed meeting was just too quick).

This strategy doesn’t just work on paper. The worst trade (in terms of performance) recommended by the Profit Radar Report in 2013 is a 1.02% loss.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (stocks, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. We are accountable for our work, because we track every recommendation (see track record below).

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Federal Reserve FOMC Meetings Zapped Stocks 4 Times in a Row

The Federal Reserve has been very accommodating and assured Wall Street of its full support (no taper) each of the last four meetings. Nevertheless, stocks sold off every time. Will this time be a repeat?

Wall Street anxiously anticipates the outcome of this week’s two-day FOMC conclave.

Taper or no taper is the question … and it will be answered on Wednesday around 2pm EST.

Until then, speculations run wild.

I don’t participate in the speculation for two reasons:

  1. The market’s reaction is simply unpredictable (more below).
  2. Technical analysis usually provides some clues even before the Fed announces anything.

The timelines in the S&P 500 chart below mark all 2013 FOMC meetings.

The first three meetings of the year were near-term bullish for the S&P 500 and S&P 500 ETF (NYSEArca: SPY), but eventually gave way to new lows.

The last four FOMC meetings were all followed by immediate declines.

The September 18 meeting (blue dot) was followed by an exciting twist. Most of Wall Street and the financial media expected the Fed to announce tapering at their September 18 FOMC meeting.

Surprise! The Fed did the unthinkable and continued unbridled QE. The S&P 500 soared the day of the announcement and a few hours on the next day, but dropped lower thereafter.

More or less ignoring the Fed’s noise, the September 18 Profit Radar Report published the projection chart below and warned:

“The S&P 500 red resistance line will be at 1,735 tomorrow. A temporary decline from this line (around 1,735) followed by another rally leg to 1,750+ would make most sense (see projection).”

What about the July 31 FOMC meeting? The July 31 Profit Radar Report stated that: “The Nasdaq-100 and Dow Jones chart suggest a period of correction or consolidation.”

What do technicals say this time around?

Technicals allow for some near-term weakness and a test of the 50-day SMAs for the S&P 500 and Dow Jones (DJI: ^DJI). I favor the odds for a year-end rally, but with sentiment at multi-year bullish extremes, any move below support would caution of a sizeable drop.

A more detailed technical forecast for the S&P 500 and Dow Jones, along with a chart that highlights important support, is available here: S&P 500 and Dow Jones Short-term Forecast

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (stocks, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. We are accountable for our work, because we track every recommendation (see track record below).

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.