Monday Mayhem – ETF Panic Selling Has Set In (UUP, USO, GLD, SPY)

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April 18, 2011 9:56pm NYSE:GLD NYSE:SPY

In overnight and pre-market trading the US Dollar (NYSE:UUP) posted a strong rally which in turn caused a sharp selloff in the equities market. The market is currently down 1.6 – 2.3% depending


 on the index traders are following.

Here is what I see on the charts going forward a few days.

Dollar Index – 4 Hour Chart

The Dollar is trading at a resistance level which has in the past triggered strong moves lower. If we get a move lower on the dollar from here then I expect a strong recovery in the equities market and likely higher commodity prices also. If the US Dollar breaks out and rallies above this point then we could see a much further collapse in stocks and commodities.

The falling dollar has also helped to boost crude oil prices the past couple months. One of my trading buddies J.W. Jones at OptionsTradingSignals.com pocketed a nice 86% gain on a U.S. Oil ETF (NYSE:USO) cash secured put based on the credit sold. Also the weak dollar has his SPDR Gold ETF (NYSE:GLD) options trade up over 50% already and it has just begun. Jones is an options expert and always seems to find a way to pull money out of the market month after month…

SPY Daily Chart

The daily chart shows a large gap down putting the market in a short term oversold condition. Typically we see the market bounce back up or gap higher the following day. In some cases similar to today the market actually bottoms. So those long the S&P 500 (NYSE:SPY) I feel have a good change of recouping some of today’s decline by waiting for the kneejerk reaction bounce in the next 24-48 hours.

Market Sentiment – Panic Selling At Extremes

Today we are seeing panic selling at levels not seen since the market bottom in March. The green indicator spikes on the chart show very high levels of traders/investors dumping stocks in fear of a collapse. Today’s negative headline news has sparked mass fear and when levels like this are reached you should think of holding long positions for another 1-2 session to see if we get that bounce or market bottom.

Monday Mass Selling Conclusion:

Today’s sharp drop in equities could be an excellent low risk opportunity to add or take a long position here because most of the downside fear for the short term has been eliminated today.

That being said the trend appears to be down on the S&P 500 now so at this time I am looking to sell into a rally if we get one today, tomorrow or Wednesday.

Get My Free Trading Rule Guide And My Weekly Newsletter Here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Written By Chris Vermeulen From The Gold And Oil Guy.com   

My name is Chris Vermeulen the Founder of TheGoldAndOilGuy. I have more than a decade of extensive experience trading stocks, indices, ETFs, CFDs and Futures. My trading style has been thoroughly refined over the years, blending the best cutting-edge approaches that have only been possible with modern systems and diverse technologies. I believe I represent the ideal combination of trading styles and trade setups including a number of trading breakthroughs entirely on my own. It is this blend of the time-tested and innovatively new that allows me to take advantage of bull, bear and flat markets regardless of how each week plays out. I’ve repeatedly observed that one of the biggest keys to making a lot of money in challenging markets involves aiming for big, quick returns, while maintaining an extraordinary focus on minimizing risk. This may be what most distinguishes what I provide vs. the experiences delivered by the vast majority of other newsletters.


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