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Articles and Commentary

Weak Dollar Boosts Commodities ... So What's Next?
By Chris Vermeulen
November 26, 2009

Another fantastic week for precious metals as the USA dollar continues its slide lower. When commodities start to trend they become very profitable for those riding them up or down. But when a short term trend starts to virtually go straight up (parabolic) then we must be prepared for a sharp pullback. Once the price starts to slide I figure a lot of short-term traders will begin locking in profits, sending gold down.

I've recently discovered the Money Flow Table from The Wall Street Journal and I gotta say it's awesome. My thanks to John Townsend for bringing this resource as well as hidden gem play - DFSH - to my attention.

The Money Flow table calculates whether money is moving in or out of a stock or ETF on a given day, and whether it is selling on strength or buying on weakness. It also tells you if there are more up or down ticks. Really powerful stuff in my opinion.

For example, the GLD gold fund continued its move higher today as it must follow the underlying commodity. And though the fund traded higher institutions were selling their positions in masse. For every 9 block trades bought there were 100 block trades on the sell side. This is strong evidence that institutions/large traders are moving out of GLD. Indeed, over $161 million dollars moved out of GLD today alone and a total of $251 million dollars in the two days preceding today.

The SPY fund was 12 buy orders for every 100 sell orders. Today alone over $675 million was flowing out of SPY which his CRAZY huge.


Gold Weekly and Daily Trading Charts
Gold continues to claw its way higher as trader's trip over each other trying to buy this shiny investment. The weekly chart clearly shows a parabolic spike. Vertical spikes like this do not last for long, but the largest percentage of the move will be made riding this trend up with a tight stop.


SLV ETF Trading - Weekly & Daily Trading Charts
Silver is still trending up but lagging its big sister (gold). The daily chart shows a nice mini bull flag and we could get an upside pop soon.


Conclusion:
Gold continues its incredible rally and we love every minute of it. I keep moving our stops to lock in maximum gains while providing enough wiggle room for more growth. Silver and precious metals stocks are lagging and that is a concern. The charts look solid but I think investors are not currently willing to pay higher prices for riskier plays which include silver and precious metal stocks.

The broad market is starting to look and feel over bought. We could see the market continue higher Friday because of the holiday light trading volume which virtually always moves the markets, or whatever investment is HOT, higher. This is because the large traders take time off so there are not a lot of large sellers in the market. But be ready for next week because these nice lofty prices could start tumbling down.

Get my economic trading indicator tool and my free weekly trading reports: www.TheGoldAndOilGuy.com.

I just want to wish you a great holiday!


TheGoldAndOilGuy.com is owned and run by me (Chris Vermeulen), an individual gold trading specialist. After sharing my gold analysis with friends, traders and financial advisors, I decided to make TheGoldAndOilGuy.com my full time job in 2003. This service was designed from the ground up to help individual traders who want to focus on consistent, accurate and profitable trades. Over the past ten years my strategy has been refined to one golden trading vehicle which has an almost 100% accuracy. The GLD (DGP and DZZ) gold exchange traded funds are now the most accurate trading vehicle I have seen, so it's my vehicle of choice. Members of TheGoldAndOilGuy.com not only get to trade my signals, but see my live trading charts and ask me all the questions they wish. My goal is for all of us to make money and have fun in life.


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