Technical Timing of Commodity ETF's Trading
Commodities / Commodities Trading Jul 09, 2009 - 01:54 AM GMTBy: Chris_Vermeulen
The broad market including commodities is under some serious selling pressure as traders and investors panic to exit positions. Today small caps stocks and commodities took the majority of the beating. Although the market looks bearish at this point, I do think there is a very good chance of a bounce Thursday and Friday, but I figure we will see selling into the close on Friday as traders stay in cash over the weekend.
This week’s price action for all our funds provides us with new technical analysis on the charts. Support levels were broken and we are now in free fall mode for these four commodities. I do like the way the charts are setting up. The bigger and quicker the drop in price the better the odds that the next setup will follow through for a profitable trade.
Gold Sector Timing – GLD ETF Fund
Gold confirmed the breakdown with a 1.5% drop today. We continue to wait for prices to stabilize and provide an opportunity to enter long. We are 5-10 days from any possible setup.
Silver Sector Timing – SLV ETF Fund
Silver has had a nice sharp pullback from the May high which we expected. We continue to wait for more price action to unfold to generate a low risk buy signal.
Oil Sector Timing – USO ETF Fund
Because of crude oil’s extreme popularity of speculate traders, the price has dropped like a rock. The price broke down from is head & shoulders pattern last week and everyone saw this which triggered another wave of selling. Oil is currently at support and we could see a bounce or sideways action here.
Natural Gas Sector Timing – UNG ETF Fund
Natural gas managed to hold its ground today. Many traders were spooked with UNG halted Wednesday because they are trying to add more shares to the fund. UNG applied for 1 billion more shares to the SEC. They may or may not get them and if UNG cannot increase the amount of shares then this fund will start to trade like a closed end fund. This means shares will trade at a large premium or discount from the actual price of gas simply because of supply and demand from investors wanting to own shares. If this happens we will simply move on to a different gas fund to trade.
UNG broke down this week and now trading at support. Overall price action is still very bearish so let’s wait and see what happens over the next few days.
Technical Sector Timing of Commodities
So far this week the market has caused some serious damage to the technical’s. Overall the market looks over sold and I am expecting a positive day tomorrow. The price action today looked very much like panic selling and that is generally when we see stocks and commodities rebound for a couple days.
The S&P500 penetrated a critical support level intraday but closed higher. One more down day in the market and we will most likely see program selling step in which will force stocks lower for another couple days triggering even more panic selling.
We continue to let the market unfold analyzing the technical’s on a daily basis. Waiting for a low risk trade can be a slow process but this down time allows us to learn and fine tune our technical analysis skills even more.
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