This 'Counter Trend Rally' is Now Completing!

By: Chris Vermeulen | Fri, May 6, 2016
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Last Friday, April 29th, 2016, the U.S. Indexes were very bearish as price clearly broke below the 20 day moving average then rebounded back up to test that level and was rejected and sold into.

The chart below shows the market bullish and bearish momentum and price action. The momentum of these markets has now shifted away from being 'bullish'. It is currently struggling to find support and hold up. Do not expect new highs on the SPX and I feel its beginning its 'bearish reversal' (topping phase) before making a new leg down.

S%P E-Mini Futures Chart


This 'counter trend rally' is now completing!

It is important to realize that all bear markets have strong rallies within them. In fact, some of the more powerful market rallies happen during bear markets, so what we have experienced this year is very normal.

With being that said, this bear market counter trend rally is running out of steam and is on the verge of a very strong wave of selling which will catch the majority of market participants off guard. Why? Because these super strong counter trend rallies actually convince the average investor that stocks are the place to be and will continue higher. These counter trend rallied get investors to buy up stocks at the ultimate worst possible time, just before prices collapse. We have seen this happen time and time again and this time is no different.

S&P500 Weekly Chart


Where Do We Put Our Money Then?

Gold prices have surged this year. Silver has lagged far behind but has recently rallied to make up for its underperformance this year. Silver, known as 'poor man's gold'' and I feel will do exceptionally well in the coming year as it enters a new bull market.

I would expect sideways consolidation at this point for gold and silver before they continue up again, but they are definitely moving much higher the rest of this year. Subscribers and I are long gold through an ETF and if this trade pans out in the coming weeks it could end up being a multi-year investment.

These 'monetary metals' are now 'confirmed' to keep rising as a safe haven and currency play by both investors and countries in my opinion.

The U.S. dollar has broken support in the last few days. This is a primary driver causing gold and silver to begin these big moves up in the past week.


US Dollar Index Weekly Chart Below:

As you can see below, the dollar broke support early in the week, but has recovered nicely to get back above support for the time being. I feel it's just a matter of time before the dollar breaks down and collapses 10 - 15 cents. If this/when this happens precious metals should sky rocket!

US Dollar Index Weekly Chart


Market Trading Conclusion:

In short, the US large cap stock are in the very final stage of topping before share prices collapse and start a 8-16 month bear market. There will likely be some big event that triggers the selloff, the question is what and when?

 


There are going to be some great short term trades that could generate 50%, 100% or more within the next month which I have been following closely with subscribers of my ETF trading newsletter which you can be a part of. Join at: http://www.thegoldandoilguy.com/etf-trading-newsletter/

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
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Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
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He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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