Market Melt-up Brings Volatility to Metals

By: Chris Vermeulen & John Winston | Tue, Jan 31, 2017
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Our recent analysis bases on a previous report of the potential for a further run in the US markets based on a number of technical and fundamental factors leads to the question of "what could happen with Gold and Silver". A broad US market rally may put some pressure on the metals markets initially, but, in our opinion, the increase in volatility and uncertainty will likely prompt more potential for upward price action in precious metals.

As with most things in the midst of uncertainty and transition, the US Presidential election has caused many traders to rethink positions and potential. As foreign elections continue to play out, wild currency moves are starting to become more of a standard for volatility. Combine this with a new US President and a repositioning of US global and local objectives and we believe we are setting up for one of the most expansive moves in recent years for the US general markets and the metals markets. This week, alone, we have seen a flurry of action in DC and the US markets broke upward on news of the Dakota Pipeline and other Executive actions.

As we wrote week or so ago, we believe the US markets will push higher in 2017 a business investment, US strategy and foreign capital runs back into the US equity market chasing opportunity and gains. Additionally, we believe the strength of the US market, paired with continued strength of the US Dollar, will drive a further increase in global volatility and wild swings in foreign markets. This volatility, uncertainty and equity repositioning will likely drive Gold and Silver to continued highs throughout 2017 - possibly much longer if the new trend generates renewed follow-through.

Our belief that the US markets will continue to melt-up while certain foreign markets deteriorate relates to our belief that currency variances will become more volatile and excessive over the next few months. This, in combination with a renewed interest in developing US economic solutions, will likely drive the US markets higher while the metals markets will continue to become a safe-haven for US and foreign investors to protect against deflation and foreign market corrections.

S&P Futures are setting up a clear bullish pennant/flag formation that will likely prompt an explosive price move within 2~3 weeks. This bullish flag formation is likely to drive the ES price higher by roughly 100+ pts.  Currently, strong resistance is just above 2275, so we'll have to wait for this level to be breached before we see any potential for a bigger price move.


SP500 Weekly Chart

SP500 Weekly Chart


SP500 Daily Chart

SP500 Daily Chart

GOLD is channeling in a very clear and narrow upward price channel and trading in the middle of a support zone. The recent reversal, near the end of 2016, was interesting because GOLD trailed lower after the US election, but then reversed course just before the new year. The interesting fact about this move is that this new upward swing in GOLD correlates with the beginning of the Bullish Flag in the S&P Futures as well as a decrease in volatility.  We believe as this Bullish Flag will prompt a jump in volatility and price action that will result in is a strong push higher in GOLD.


GOLD Weekly Chart

GOLD Weekly Chart


Gold Daily Chart

Gold Daily Chart

SILVER is setting up in a similar manner as GOLD. Although the SILVER chart provides a clearer picture of the downward price channel that is about to be breached - and likely drive both SILVER and GOLD into a new bullish rally.  The support Zone in SILVER, between $16.60 ~ $17.40 is still very much in play.  SILVER will likely stay within this zone while the Bullish Flag plays out.  Yet, when the breakout begins, a move above $18.00 will be very quick and upside targets are $18.50~18.75 and $19.50~$20.00 (possibly much higher in the long run).


Silver Weekly Chart

Silver Weekly Chart


Silver Daily Chart

Silver Daily Chart

EUR/USD correlation to the US moves should be viewed as measure of strengthening US economy/USD as related to foreign market volatility and potential. As the USD strengthens, this puts pressure on foreign governments and global transactions based in USD. This also puts pressure on the METALS markets because billions of people around the globe consume precious metals as a "safe-haven" related to currency volatility. We expect the EUR/USD levels to fall near "parity" (1.00) again and possibly dip below parity based on future foreign election results. This volatility and uncertainty will translate to increased opportunity for GOLD and SILVER to run much higher over the next few months.


EURUSD Daily Chart

EURUSD Daily Chart


USDMXN Daily Chart

USDMXN Daily Chart


USDGBP Daily Chart

USDGBP Daily Chart

Right now is a fantastic opportunity to take advantage of these lower prices.  We may see rotation near to the lower support zone levels as price rotates over the next few weeks. The key to any trade in the metals market is to understand the potential moves and watch for confluence and volatility in other markets.  We believe the next few weeks/months will be very telling. If we are correct, we'll see new highs in the US markets fairly quickly and we'll see a new potential bullish breakout in GOLD and SILVER.

 


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Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

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
- MB Trading
- OEC OpenECry
- The Fox Group
- Dorman Trading
- Vision Financial

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.

Copyright © 2008-2017 Chris Vermeulen

John Winston

Author: John Winston

John Winston,
Chief Investment Strategist
Active Trading Partners

John Winston

John Winston, Chief Investment Strategist of Active Trading Partners.com. is a recognized industry expert who specializes in providing financial advisors, hedge funds and individual traders with accurate market forecasts and trading opportunities. John's mission is to bring a unique combination of relevant market news, experience, and dynamic crowd behavioral trading ideas.

Prior to Active Trading Partners.com, He spent years studying human behavioral patterns, fundamental analysis, Fibonacci retracements, and Elliott wave patterns. He knows investors love to chase stocks up and by doing so, they increase their risk without knowing it. And that the crowd loves to sell low and buy high, John attempts to do the opposite.

Chris Vermeulen of TheGoldAndOilGuy.com met John in late 2008 as the financial crisis was unfolding. After numerous months of following the trading profits of and methodologies that John employs now at ATP, Chris suggested that a joint venture be formed and we offer this service to a select group of partners (subscribers).

Over a 23 year period, John learned how to consistently profit from investor behavior outperforming the market in both bull and bear market cycles. These strategies have become the foundation for his premium Stock and ETF trading alert service.

Copyright © 2017 John Winston

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