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Gold In Focus

6/12/2014 5:44:53 AM

Good morning Traders,

When we developed the barometer, the intent was that traders would check it every day before they traded, just as they would check the weather forecast as they'd plan their day, what to wear and whether to bring an umbrella or wear a jacket... So what is the barometer saying?

Stock Barometer Chart

The barometer is a formula that uses 12 variables that traders look at and incorporates them all into one signal as you never know which one will drive the market. So here we see a sunny day, but a storm on the horizon. We don't know if that storm will just be cloudy, or result in high winds, heavy rain, etc. Just as the Japanese named a bearish candlestick a 'dark cloud cover' we are at the same place in the market.

So that leads us to gold:

Gold Options Open Interest Chart

We watch what options traders are doing as part of our making our trades in our gold, oil and natural gas option trading services. This shows option writers preparing for a potential advance in gold. We haven't initiated a Gold Options trade yet, but we're close. If this translates into an advance in gold, that means stocks could get weak. If stocks remain strong, gold is very vulnerable. It's not there yet, I'm expecting about a week and a half before we reach extreme levels of sentiment in gold that will result in the next move initiating... So we're on the watch for a gold trade.

Back to market sentiment, here's data showing as you would expect, the market is getting complacent to an extreme level.

AAII % Bulls minus % Bears Chart

And last but not least, a little indicator that's showing some short term bullishness as the internals of the market weaken, but prices hold up. That's potentially bullish for a quick pop at least.

NASDAQ Advancing Stocks Chart



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