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A Trading Metro Member Blog

Base Metals Weighing Heavy On Markets (0)

This morning, the leading base and industrial metal stock are all coming under early selling pressure. This decline in the base metal stocks comes despite a strong Shanghai Index (Chinese market) last night. Often, when the Chinese markets do well the base metals will rally higher as well. That is certainly not the case today.

One the leading base and industrial metal stocks in the market is Rio Tinto plc (NYSE:RIO). This stock is declining lower by 0.63 cents to $55.18 a share. Short term traders should watch for intra-day support around the $54.90, and $53.60 levels. Both areas are likely to see small intra-day bounces. The daily chart is showing support around the $52.00.

Some other leading base and industrial metal stocks that are declining lower today include Southern Copper Corp (NYSE:SCCO), Cliffs Natural Resources Inc (NYSE:CLF), Freeport-McMoRan Copper & Gold Inc (NYSE:FCX), and BHP Billiton Limited (ADR) (NYSE:BHP). All of these stocks have been trading very close together recently.

High Gasoline Prices Are Sliding Under The Radar (0)

Almost everyone is talking about the euphoric stock market. The big shots in Davos, Switzerland seem very bullish and optimistic about the economy every time they are interviewed on CNBC. The important and highly followed Dow Jones Industrial Average is now just 145.0 points from the 14,000 level. Please remember, the all time high for the Dow Jones Industrial Average is 14,198.10 made on October 11, 2007. So it is safe to say the bullish sentiment is growing by the day. 

What most people do not realize is that gasoline prices are starting to creep up at the pump again. Whenever gasoline prices rise they become a direct tax on the U.S. consumer and that could slow down consumer spending. In fact, if you look at a chart of the United States Gasoline Fund (NYSEARCA:UGA) it is now approaching it’s September high at $61.95 a share. Very often, when gasoline prices become expensive the major stock indexes will usually stage a correction or at least a pullback in the near term. 

Many people do not realize this, but when the value of the U.S. Dollar declines against other currencies it will often cause commodity prices to rise, especially oil and gasoline prices. Unfortunately, this is one of the side effects of printing money and it is going on in the United States, Japan, Europe, Asia, and Zimbabwe. 

Recently, most tax payers in the United States received a tax hike as the fiscal cliff deal was partially settled by the politicians. Higher gasoline prices will simply be another added tax that will have a negative effect on consumer spending. Please understand, consumer spending accounts for roughly 70.0 percent of the GDP (gross domestic product) in the United States. If all of these bailouts and easy money policies are going to be effective the U.S. consumer is going to need to spend money.

Some other energy equities that will also rise on the back of a weaker dollar include the United States Oil Fund LP (NYSEARCA:USO), ProShares Ultra DJ-UBS Crude Oil (NASDAQ:UCO), and iPath Goldman Sachs Crude Oil Total Return Index ETN (NYSEARCA:OIL). 


Nicholas Santiago


Alert: Possible Topping Tail On S&P 500 (0)

The markets have fallen off their highs, back to the flat line. This is significant for a few reasons. First, the S&P 500 hit the master target level of 1500 at the highs. Secondly, if the markets close flat to lower, a topping tail will have formed. A topping tail is a technical signal of a reversal of trend. In this case a move to the downside. The fact that it may coincide with the master level target is very significant.

Gareth Soloway

Markets Hit Key Target: Rocky Road Ahead (0)

Just as all the suckers pile back into the stock market, a major target is hit. Two weeks ago I alerted the world the SPDR S&P 500 ETF Trust  (NYSEARCA:SPY) would hit $150.00. In addition, the S&P 500 would tag the 1500 level. Once this target was hit, the market would start to get rocky and pull back. Sure enough, that level was hit perfectly today. It amazes investors that the markets still pushed higher to that master level regardless of the horrid earnings from Apple Inc. (NASDAQ:AAPL). However, knowing these master levels, you know it will happen, just like the sun will rise in the east and set in the west. This is how master levels work.

As I look to short the markets across the board here, a very sad fact remains constant in every market top. The individual investor just piled in over the last two weeks, thinking it was clear sailing ahead. This always happens at market tops and was no different this time. Recently, mutual funds saw the biggest inflow of capital in 12 years.

When emotion is removed from the equation and the charts are used to analyze a stock, the truth emerges. This could be seen when Apple was at $700 per share and analysts were upgrading it to $1,000 price targets. It was pure emotion and totally illogical. Now look at Apple. It trades barely holding onto the $450.00 level. I gave the sell signal as soon as those analysts were upgrading it. Analysts are supposed to be good at what they do? Frankly, they are no better than the milk man.

The key to knowing every market and stock top and bottom is in the charts. Learn the proprietary PPT Strategies. Take the seven day free trial to the Research Center and get swing trade alerts along with the keys to deciphering every major top and bottom from this day forth!

Gareth Soloway

Will The Public be Late To The Party Again? (0)

The stock market has surged sharply higher since the fiscal cliff vote in the United States in early January. The bulls have run wild at the start of the new year. Many talking heads in the financial media have now started to say that money is coming into stocks instead of the usual mutual fund outflows that have been occurring since 2008. Often, when the public starts to get excited about the stock market it is time for a correction to occur in the markets.

Many professional institutional traders will unload positions right into the public’s buying spree. Just think about it, traders can easily see what happened to tech leader Apple Inc (NASDAQ:AAPL) when it was trading around $700 a share in late September 2012. I will never forget watching a clip on CNBC and seeing all of these individual investors that were saying they will never sell Apple Inc. They were talking about how this stock is a life time hold. That day, I pointed it out to my chat room members that the top was likely in for Apple Inc as the public has reached the emotion of euphoria. Please understand, stocks and markets top out on euphoria and bottom out on despair. This is how it has been from the beginning and this is how it will be until the end.

The central banks around the world are printing money out of thin air in order to try and get the public involved in the markets. Throughout recent history (past 200 years) this has always worked and it is still working today. The public always wants to be a part of something important. Just look at what the public did from 2003 through 2007 with the housing market. They were buying houses at outrageous prices even though they really could not afford them. I remember when I sold my house at that time of euphoria, I had 100 people on my front lawn bidding the house higher. Believe it or not I was a year early, but that was the first day that I had the ad in the newspaper. Soon afterward, the top of the housing market was in.

Everyone in the trading and investing business knows that with every bull market there will be another bear market. This current bull market that started in March 2009 has already been in place for nearly four years. How much longer does this bull have left in the tank before it rolls over and the bear market takes hold? If anyone has ever been to Spain and witnessed a bullfight you know that it takes a lot to kill a bull. So there could be some more upside to go before the bear awakens and claws everything lower. Sure, the central banks are printing a lot of money, they always have, but when the bear comes back it will not matter. Watch the public’s opinion of the stock market for signs that this bull market is coming to an end.

Risk VS. Reward Of Buying The Volatility Index (VIX) (0)

The Volatility Index aka Fear Index is sitting near 12. This level has not been seen since 2007, prior to the financial collapse. While housing prices are not where they were, other bubbles have formed, mainly in the bond market. To see the VIX near 12 is scary to say the least.

So is it smart to invest in an ETF that tracks the VIX? Let’s take a look at the VelocityShares VIX Short Term ETN (NYSEARCA:VIIX) and iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX). Both allow you to play volatility but each carries with it additional risks. First, understand that each month these ETF’s must roll over their VIX contracts. In doing so, there is some slippage that occurs. Like many double and triple ETF’s, these will eventually go to zero over the long term. Because of this, they should only be used as short term trading vehicles, held for days or a few weeks.

If you only use them as short term vehicles, they are fantastic if you can read the market like a pro.  This market is as complacent as ever. Retail investors are dumping money into the markets at record pace just like in 2007. There is an overlying feeling the Federal Reserve will always be there to bail out the markets with more money printing. While the VIX could see $10, the risk reward definitely favors the upside. I myself am scoping it out, looking for the proper entry for a small position in the next few days.

Gareth Soloway

Does The President Really Control The Economy? (0)

Throughout history, many U.S. presidents have had their legacy engraved by the way the economy behaved during their time in office. For example, President Ronald Reagan is credited for a stellar economy, yet the crash of 1987 took place while he was in office. At the start of President Reagan’s  first term in January, 1981 the highly followed Dow Jones Industrial Average (DJIA) was trading around the 950.0 level. Throughout 1981 to 1987 the Dow Jones Industrial Average rose to a high of 2746.70. This is quite a surge in the stock market when DJIA can rise by nearly 200.0 percent in just six years. Did President Reagan implement policies that were so good for the economy that the stock markets just took off to the upside? I would not be so sure about that.

President Bill Clinton will most likely be remembered for a robust economy as well. Under President Clinton’s leadership the Dow Jones Industrial Average climbed from 3232.00 at the start of his first term in 1993, to a high of 11,750.28 in January 2000. That is a gain of more than 250.0 percent in just seven years. Did President Clinton implement policies that were so good for the economy that the stock markets simply took off to the upside? I would not be so sure about that either.

As we all know, the president of the United States does not control interest rates, the Federal Reserve Bank does that. When President Reagan first entered office the fed funds rate was around 19.0 percent. The fed funds rate is the overnight lending rate to the large banks not the prime rate which the public pays for a loan. At the time, Paul Volcker was the Federal Reserve Bank chairman. Once he began to cut interest rates the stock markets soared like eagles to new all time highs. By September 1987, the fed funds rate was as low as 6.75 percent. This is a drastic reduction in interest rates, as the easy money flowed so did the stock market.

Now under President Bill Clinton the fed funds rate was around the 3.0 percent level. The Federal Reserve soon started to raise interest rates into July 1995. At that time, the fed funds rate was at 5.75 percent. Then the Federal Reserve started to lower interest rates, and the stock markets began to climb once again. In 2008, the fed funds rate was as low as 4.75 percent. Once again, the central bank started to raise rates to 6.0 percent in 2000 and the stock markets made their final high before starting a new bear market.

Now, let;s fast forward to modern times. President Obama is now getting credit for a four year stock market rally. Remember, in March 2009 the Dow Jones Industrial Average was as low as 6470.0. Today, the DJIA is trading as high as 13,766, which is a new four year high. Please understand the Federal Reserve has held the fed funds rate at zero to a quarter percent since December 2008. There is also about $90 billion dollars a month worth of bond buying going on by the Federal Reserve.

So I believe it is safe to say that the president of the United States has very little to do with the economy and the stock market. The Federal Reserve has everything to do with the stock market. So the next time someone tells you that Bill Clinton and Ronald Reagan were great leaders you may just want to replace those names with Paul Volker, Alan Greenspan, and now Ben Bernanke.   

Nick Santiago

Unveiled: Financial Stocks Upside Limit (0)

The financial stocks like Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc. (NYSE:C) have been leading the markets substantially higher of late. The their problems appear to be ancient history as the Federal Reserve has allowed them to use every avenue possible to regain their dominance.

While these stocks have shown impressive upside, they are extremely extended. A pull back is imminent. JPMorgan is currently trading at $46.33. Just above this level lies the high pivot from 2011 at $48.35. In addition Goldman Sachs also has a major level near the $150.00 area. Almost all the financial stocks have key levels approaching. When they tag these levels, downside should begin. Look for a 10% pull back on all names across the board.

Gareth Soloway

Key Chart Alert: Chevron (NYSE:CVX) (0)

Chevron Corporation (NYSE:CVX) is trading at $115.43, +1.46 (1.28%). The key to this price point is the gap window. Note the chart below. Generally, stocks will see a pull back off gap window prior to going to gap fill which is at $117.35.

Considering a proprietary time count is seen here as well, there is a solid chance of a pull back in the next few days. 

Gareth Soloway

Analysis And Trades: S&P 500 Tests 52 Week Highs (0)

The S&P 500 broke through the 52 week highs today of 1,474.51. This will get the media buzzing and help push more retail investors into the market. I predicted this scenario already and my prediction still says further upside for another week or so. The upside is based on light volume, retail investors jumping in the market (always near the tops and proprietary PPT Strategy calculations). Once February approaches, the markets will begin to pull back as debt ceiling fears start to take their toll.

The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading at $147.84, +0.79 (0.54%). This is the S&P 500 tracking ETF and will head to around $150.00. Once there, shorts on the overall market can be initiated.

Other stocks to short will include large caps trading north of their 52 week highs, +10% in the new year. These are all ripe for a pull back. Some examples would be, Inc. (NASDAQ:AMZN), 3M Co (NYSE:MMM) and Goldman Sachs Group, Inc. (NYSE:GS). This will be a market pull back for multiple weeks thus every stock should see some modest declines.

The key is patience. Wait for the markets to inch higher into the end of January then pounce.

Gareth Soloway

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