Where Are the Markets Heading?

By Adam Hewison

Hello traders everywhere!

I think that many of the markets have reached an inflection point. The equity markets appear to have put in an interim low that was seen last Tuesday. Crude oil and the Reuters/Jefferies CRB index also appear to be following that trend.

Gold has more than likely put in a top when it traded over $1800. We don’t believe this is the final top, but just in interim top, as a lot of traders got into this market very late. Silver on the other hand continues to be lackluster compared to gold, and remains on the defensive. Intermediate term traders should be out of silver and on the sidelines.

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So let’s go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.

S&P 500
Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative

Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = – 90

Chances are we have reached an interim low that was put in this market on Tuesday. The Fibonacci retracement zone has been satisfied and this market remains in a heavily oversold condition. We continue to see choppy action overall for this index. Please remember that the major trend is down for the equity markets and that strong rallies represent shorting opportunities with tight money management stops.

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SILVER (SPOT)
Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative

Combined Strength of Trend Score = – 70

Intermediate term traders should be on the sidelines and out of silver at the present time. Our – 70 Chart Analysis Score indicates more two-way market and a trading range. Do not fall into the trap of thinking that silver is comparatively cheap and feel like you want to buy on that one fact alone. If the market is any good, it will again resume its upward trend. Let us be patient and wait for our Trade Triangles to kick in and give us buy signals.
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GOLD (SPOT)
Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive

Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 90

The $1800 level we mentioned in yesterday’s post was breached in this market before a dramatic pullback. Gold had traded as high as $1814.40 in the cash market before pulling back over $60. The gold market has a tendency to move in swings both on the upside and the downside. We have been indicating that we felt gold was going to make its high in the 3rd quarter of this year, and we may have seen the high for the time being. Both intermediate and short term traders should protect profits with tight money management stops. Support for gold comes in today at $1710 an ounce.
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CRUDE OIL (SEPTEMBER)
Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative

Combined Strength of Trend Score = – 100

The low around 76 that was seen in crude oil on Tuesday, in the September contract, we feel is an interim low. This market has now moved back into the Donchian trading channel and we would not be surprised to see a little further upside action here. We would not rule out a rally to 88.00 dollars a barrel based on the September contract.

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DOLLAR INDEX
Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive

Combined Strength of Trend Score = + 65

The dollar index continues to remain in a broad trading range. The index remains below its 200 day moving average while our longer-term Trade Triangles remains positive.

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REUTERS/JEFFERIES CRB COMMODITY INDEX
Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = -90

It would appear that this index has put in an interim low when it traded down to 315 on Tuesday. As mentioned in yesterday’s reports, we want to pay particular attention to this index and the ETF, DBC, as we feel it could be some good plays on the upside in this market. We want to be patient and let our Trade Triangles do the heavy lifting and wait for a signal from that front. We want to watch this index very closely in the next 2 weeks, as we feel we’re very close to making a major cycle low in commodity prices.

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As always, we rely on our market proven Trade Triangle technology for catching the big moves.

[Ed. Note: Adam Hewison is the president, chief executive officer, and a founder of INO.com, Inc. He is also the author of two highly-acclaimed guides to the forex markets: International Monetary Report and Right on the Money, the Definitive Guide to Forecasting Foreign Exchange Rates. Sign up for his FREE email Trading Course by clicking here now..]

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