This year may be young but it has already been quite interesting for options trading investors. There’s high volatility in the stock and commodity markets sending mixed trading signals. This choppy activity usually indicates trends in their late stages and that suggests even more daily volatility.
Generally the largest moves take place during the final 10% of trend, but with a sharp rise in price the day to day gyrations are much larger than normal, hence the false buy and sell signals back to back on some investment vehicles.
The charts indicate we are on the edge of some sizable moves in both stocks and commodities. It’s just a matter of time before a correction is confirmed or this current pullback in stocks is just a dip (buying opportunity). I am in favor of the longer term trend at work here (bull market) but it only takes a one or two bid down days and that could change.
SPDR S&P 500 Growth (NYSE: SPY) – 60 Minute Chart
This chart of SPY shows intraday price action with my market internals. It is signaling a short term bottom within the overall uptrend on the equities market. The big question is if this is a just an opportunity to buy into this Fed-induced bull market or the start of a larger correction?
I am bullish but the next couple trading sessions could either confirm that or indicate an unfolding correction. Until then, we must remain cautious.
SPDR S&P 500 Growth ETF
Gold has staged a strong recovery in the past four weeks. But it has yet to break to a new high. I feel it will head higher because of the way silver has been performing (new highs). But it is very possible we get a pause for a week or two before continuing higher.
Because of the international concerns in the Middle East both gold and silver should hold up well even if the US dollar bounces off support. But, if the US dollar breaks down below its key support level we could see stocks and commodities go parabolic and surge higher in the coming months. It’s going to be interesting year to say least…
Gold Futures
This long term view of the dollar shows a MAJOR level which if penetrated will cause some very large movements across the board (stocks, commodities and currencies).
In short, a breakdown will most likely cause a spike in stocks and commodities across the board which could last up to 12 months. On the flip side a bounce from this support zone will trigger a pullback in both stocks and commodities. This weekly chart is something we must keep our eye on each Friday as the weekly candle closes on the chart.
Dollar Futures
In short, 2011 has been interesting but trading wise it’s has yet to provide any real low risk trade setups which I am willing to put much money on. There are times when trading is great and times when it’s not. It all comes down to managing money/risk by trading small during choppy times (late stages of trends), and times when we add to positions as they mature.
I continue to analyze the market probing it for small positions as this market flashes short term buy and sell signals. Last week we say a lot of emotional trading and that typically indicates large daily price swings should continue for some time still so keep trades small and manage your positions.
You can get my FREE Weekly Analysis here: https://www.thegoldandoilguy.com/trade-money-emotions.php
