Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Israel’s 50-Year Time Bomb, Pushing Palestinians to the Edge - 19th Oct 18
Bitcoin Trend Analysis 2018 - 19th Oct 18
History's Worst Stock Market Crash and the Greatest Investing Lesson! - 19th Oct 18
More Signs of a Stocks Bull Market Top and Start of a Bear Market in 2019 - 19th Oct 18
Stock Market Detailed Map Of Expected Price Movement Before The Breakout - 18th Oct 18
Determining the Outlook for Gold Mining Stock - 18th Oct 18
Investor Alert: Is the Trump Agenda in Peril? - 18th Oct 18
Stock Market is Making a Sharp Rally After a Sharp Drop. What’s Next? - 18th Oct 18
Global Warming (Assuming You Believe In It) Does Not Affect Gold - 18th Oct 18
Best Waterproof Compact Camera Olympus Tough TG-5 Review - Unboxing - 18th Oct 18
Silver's Time Is Coming - 17th Oct 18
Stock Market Volatility Breeds Contempt - 17th Oct 18
Gold 7-Year Bear Market Phase Is Over - 17th Oct 18
Gold - A Golden Escape - 17th Oct 18
Tec Stocks Sector Set For A Rebound? - 16th Oct 18
Real Estate Transactions are Becoming Seamless with Blockchain-Powered Data Sets - 16th Oct 18
Important Elements of a Viral Landing Page - 16th Oct 18
Stephen Leeb Predicts 3-Digit Silver and 5 Digit Gold?! - 16th Oct 18
BREXIT, Italy’s Deficit, The EU Summit And Fomcs Minutes In Focus - 16th Oct 18
Is this the Start of a Bear Market for Stocks? - 16th Oct 18
Chinese Economic Prospects Amid US Trade Wars - 16th Oct 18
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Stocks, Gold & Bonds February Risk-On or Risk-Off Trades?

Stock-Markets / Financial Markets 2014 Feb 03, 2014 - 10:12 AM GMT

By: Chris_Vermeulen

Stock-Markets

Recent price action in the stock market has many traders on edge. With the market closing below our key support trend line last week, the market has now technically starting a down trend.

While trend lines are a great tool for identifying a weakening trend and reversals in the market, I do not put a lot of my analysis weighting on them.


Most of my timing and trading is based around what I call INNER-Market Analysis (Market Stages, Cycles, Momentum and Sentiment). Using these data we can diagnose the overall health of the market. Knowing the strength of the market we can then forecast short term trend reversals before they happen with a high degree of accuracy.

In this report I keep things clean and simple using just trend lines. During the last three weeks we have seen the price of stocks pullback. And because 2013 was such a strong year for stocks most participants are expecting a sharp market correction to take place anytime now.

So with the recent price correction fear is starting to enter the market and money is rotating out of stocks and into the Risk-Off assets like gold and bonds.

Stocks tend to fall in times of economic uncertainty or fear. These same factors push investors towards the safety trades (Risk-Off) high quality bonds and precious metals. As more money goes from risk-on to risk-off, stocks will continue to fall and the safety trades will rise. The move by investors to select the safety of gold and bonds compared to the volatility of stocks will result in these risk plays to moving in opposite directions.

Let’s take a look at the chart below for a visual of what looks to be unfolding…

How to Trade These Markets:

While these markets look to be starting to reverse trends, it is critical that we understand how the market moves during reversals and understand position/money management.

Getting short stocks and long precious metals in the long run could work out very well, but if you understand the price action that typically happens during reversals you know that the stock market will become choppy and we could see the recent highs tested or possibly even a new high made before price actually starts a down trend. And the opposite situation for gold and bonds. Drawdowns can be huge when investing and why I don’t just change position directions when the first sign of a trend change shows up on the chart.

Price reversals are a process, not an event. So it is important to follow along using a short term time frame like the daily chart and play the intermediate trends that last 4-12 weeks in length. By doing this, you are trading in the direction of the most active cycle in the stock market and positioned properly as new a trend starts.

What I am looking for in the next week or two:

1. Stocks to trade sideways or drift higher for 3-6 days, then I will be looking to get short. Again, cycle, sentiment, and momentum analysis must remain down for me to short the market. If they turn back up I will remain in cash until a setup for another short or long entry forms.

2. Gold remains in a down trend but is starting to breakout to the upside. I do have concerns with the daily chart patterns for both gold and silver, so next week will be critical for them. We will be using some ETF Trading Strategies to take advantage of these moves.

3. Bond prices (not yields) look to be forming a bottom “W” pattern. They have had a big run in the last few weeks and are now testing resistance. I think a long bond position is slowly starting to unfold but if we look at the futures price charts for both bonds and gold, they have not yet broken to the upside and have more work to do. As mentioned before ETFs are not really the best tool for charting but I show them because they what the masses follow and trade.

If you would like to get my analysis every day and my gold trades be sure to join me at www.TheGoldAndOilGuy.com

Chris Vermeulen
Get My New Book: “Technical Trading Mastery – 7 Steps To Win With Logic

Please visit my website for more information. http://www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 7 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Chris Vermeulen Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules