Best Financial Markets Analysis Article The past few weeks traders and investors have been completely spooked from the surge of negative news and collapsing stock prices. This fear can be seen by looking at the volume on the GLD gold ETF fund. With gold being in the spot light for several years now and the fact that anyone can own gold simply through buying some GLD shares. It only makes sense that reading the volume on this chart gives us a good feel for what the masses are feeling emotionally.

If we step back to trading basics we know that fear is the strongest force in the financial market for moving prices. And that there are a few ways to read fear in the market and the more which line up at the same time means there is a higher probability of trend reversal in the near future.

The first thing I look for is a rising volatility index (VIX). This index rises when investors become fearful of stock prices falling be hedging positions or flat out buying put options to profit from a falling market.

Second, I look for a high selling volume ratio meaning at least 3:1 shares traded are from individuals hitting the sell button in a panic thinking that the market is about to collapse.

And last but not least… I look at the GLD gold etf volume and price action. A surge in GLD volume after a strong move up means everyone is scared and dumping their money into a safe haven.

Let’s take a look at some charts to get a better feel.

GLD Weekly Gold Chart:

As you can see there are sizable price movements which ended with strong volume surges. Those volume surges mean that the majority of investors have reached the same emotional level and bought gold for safety (GLD ETF). Keep in mind that the big money players and market makers can see this taking place and that is when they start selling into that surge of buying volume locking in maximum gains before there are no more buyers left to hold the price up. Tops generally take a few weeks to form so don’t expect a one day collapse.

The recent rally in gold has taken place when stocks have fallen sharply. Money has been pulled out of stocks and pushing into gold but I think that is about to change…

SPY Weekly SPX Chart:

The past month has been a blood bath for stocks. But from looking at the charts, volume and the fear in the market I can’t help but think we are going to see higher stock prices as investors see stocks moving higher, they will pull money out of gold and dump it back into stocks and likely high dividend paying stocks…

Mid-Week Trading Conclusion:

In short, everyone piled into gold sending it rocketing higher and I feel it has moved to far – to fast and is ready for a pullback (pause lasting 2-12 weeks). In association with gold’s pullback I feel investors are now realizing they sold their stocks at the bottom of this correction because fear took hold of their investing decisions. Now they are starting to think about getting long stocks but it still may be a bumpy ride for a few weeks yet…

Consider subscribing so that you will be consistently informed, have 24/7 Email access to me with questions, and also get Gold, Silver, SP500 and Oil Trend Analysis on a regular basis. Subscribe now http://www.thegoldandoilguy.com/trade-money-emotions.php

By Chris Vermeulen

Chris@TheGoldAndOilGuy.com

Please visit my website for more information. http://www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com. There he shares his highly successful, low-risk trading method. For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.