Trends And Setups: Gold, Oil And The SPX

Over the past year, my long term trends and outlooks have not changed for gold, oil or the S&P 500, though there has been a lot of sideways price action to keep everyone one their toes and focused on the short term charts.

As we all know, if the market does not shake you out, it will wait you out, and sometimes it will do both. So stepping back to review the bigger picture each week is crucial in keeping a level trading/investing strategy in motion.

The key to investing success is to always trade with the long term trend and stick with it until price and volume clearly signal a reversal/down trend. Doing this means you truly never catch the market top nor do you catch market bottoms. But the important thing is that you do catch the low risk trending stage of an investment (stage 2 – Bull Market, Stage 4 Bear Market).

Lets take a look at the charts and see where prices stand in the grand scheme of things:

Gold Weekly Futures Trading Chart:

Talking about about how precious metals are nearing a major tipping point and being aware of those levels because the next move is likely to be huge and you do not want to miss it, let's take a look at last week's precious metals price levels.

Overall gold and silver remain in a secular bull market and have gone through many similar pauses to what we have been watching unfold over the past year. The gold market looks to be trying to not only shake investors out but to wait them out also with this 18 month volatile sideways trend.

A lot of gold bugs--gold and investors in mining stocks--are starting to give up, which can been seen in the price and selling volume for these investments recently. I am a contrarian by nature so when I see the masses running for the door I start to become interested in what everyone is unloading at bargain prices.

Gold is now entering an oversold panic selling phase which happens to be at major long term support. This bodes well for a strong bounce or start of a new bull market leg higher for this shiny metal. If gold breaks below $1500 – 1530 levels it could trigger a bear market for precious metals, but until then I’m bullish at this price.

I think we could see another spike lower in gold to test the $1500- $1530 level this week but after that it could be off to the races to new highs.

Crude Oil Weekly Trading Chart:
Oil had a huge bull market from 2009 until 2011 but since then has been trading sideways in a narrowing bullish range. I expect some big moves this year for oil and technical analysis puts the odds on higher prices. If we do get a breakout and rally, then $130 will likely be reached. But if price breaks down then a sharp drop to $50 per barrel looks likely.

Utility and Energy Stocks – XLU – XLE – Weekly Investing Chart
The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for itself. If the overall financial market starts to peak then these sectors should hold up well because they are services, dividend and a commodity play wrapped in one.



S&P 500 Trend Daily Chart:

The S&P 500 continues to be in an uptrend which I am trading until price and volume tell me otherwise. But there are some early warning signs that another correction or a full blown bear market may be just around the corner.

Again, sticking with the uptrend is key, but knowing what to look for and prepare for is important so that when the trend does change your transition from long positions to short positions is a simple measured move in your portfolios.

Trend Conclusion:

In short, I remain bullish on stocks and commodity related stocks until I see a trend change in the S&P 500.

The Energy sector is doing well and looks bullish for the next month. As for gold and gold miners, I feel they are entering a low risk entry point from which to start building a new long position. Risk is low compared to potential reward.

When the price of a commodity or index trade nears the apex of a narrowing range or major long term support/resistance level, volatility typically increases as fear and greed become heightened which creates larger daily price swings. So be prepared for some turbulence in the coming weeks while the market shakes things up.