The recent gold futures chart has been a good visual barometer of geopolitical financial uncertainty; and it has given our broadcast media so much easy content. But what could really happen in the next week? I think it's beyond most forms of analysis. But I do think that volatility-based analysis can help to identify the extreme possibilities for the short term. (if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.) For full disclosure, I'm currently long GLD beginning 6/28/2011 at 146.42, with a stop at 152.49.... Continue reading

If you only looked at charts of the major indexes, and paid no attention to the calendar or the temperature outside, you could probably tell it's June. Corrective, risk-off, price action seems to be the order of the day. What follows is a look at the intermediate term support levels for the Russell 2000 and the S&P 500. (if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.) Above, the 3 day chart of the Russell 2000 index shows that price has sold off near to lower... Continue reading

This is a follow-up post to my last about Natural Gas. As time continues its pattern resembles a price basing period after a protracted downtrend. In the 3 day chart below you can see that price has continued to push upward into the SR 3 line level. Bear in mind that this is a multi timeframe chart where each candle's date range changes with each day added. Therefore individual candle O-H-L-C values change on a 3 day cycle. (if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart... Continue reading

Natural Gas has seen its share of fundamental market changes in recent years resulting in relatively low prices. As we look ahead there is some clear volatility-based overhead resistance in the months to come. (if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.) Below there is a monthly continuous chart of Natural Gas. The behavior of the N bands and SR lines show a year-long reduction in price volatility. The dual oscillators below confirm the drying up of volatility. Additionally both N bands are turning inward.... Continue reading

My previous two blogs focused on the support and resistance in metals, and the resulting forward probable trading ranges, based solely on that analysis. In this blog we will follow up on how those projections have turned out. Also we will look at a similar analysis for the current picture of silver. (if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.) In the blog post from November 26th, 2010 and January 15th, 2011, we looked at the effect of a weekly compression of the upper S/R... Continue reading

In my last blog I noted that Gold had entered weekly support/resistance compression area. It had traded in that range for about 7 weeks. Also the daily chart compression had just ended when its S/R lines reset higher. See chart below. Update: Since then it has traded another five weeks in the upper half of that compression. See the chart below. Compression ranges don't hold forever. But when if it breaks above the compression the highest S/R line will make for significant support. Likewise the lowest S/R line will form significant resistance should price break below. It is important to... Continue reading

When Markets Experience S/R Compression In my last blog I noted that he the Dollar Index had just reached a weekly support level at 76.23. It went on to test that level again, and has since reversed. It is now headed upward into a support / resistance zone originally defined in February of this year. The zone is from 80.80 to 82.19. It functioned as resistance in during February through April, and as support in August. The dollar is once again heading into that zone. This may not have much impact on directional movement this week (the week beginning 11/29/2010),... Continue reading

I have found, for my own well being, that reacting to the market is much better than constantly trying to predict it. Here is a trade from last week which occurred only because the bank of Japan fueled a further drop in the dollar. I couldn't predict that event, but I could react to it. In the chart of the S&P500 below you can see how the broader market is stalled in a resistance zone from 9/21/10 through 10/4/10. This resistance zone is between S/R 3 and S/R 4. My gut had been telling me that the market would roll... Continue reading

In this post I want to look at a way to use volatility-based support and resistance to gain insights on sector relative strength. If you want to better understand the support and resistance discussed herein you can see the VBSR QuickStart chart. Last month we looked at the overhead resistance that faced the XLK (Technology SPDR), and the XLB (Materials SPDR). The resistance for the XLK was further away than for the XLB. I also mentioned that the XLY (Consumer Discretionary SPDR) resistance was similar to the XLK, and that all were more overbought than not. As soon as I... Continue reading

When I make my best decisions it's usually when I consider four independent forms of analysis: overbought / oversold conditions, the trend, specific directional signals, and support / resistance. I prefer to use volatility oriented arithmetic when measuring all four areas. This blog is about volatility-based support and resistance analysis (VBSR). Note: VBSR is a somewhat different form of support and resistance than most are accustomed to. I use my own volatility bands (N bands), along with support and resistance levels derived from them (SR lines). You may wish to take a moment and review this instructional chart that explains... Continue reading

Do we really need to establish a pattern of previous highs and lows to identify a point of resistance or support. I don't think that's required. Further I believe that the markets will not make things that simple for us. Projecting forward significant chart-based volatility levels can be the answer to the challenge. This past week the S&P 500 Index reached significant daily support at 1012, when it got to within one half ATR(40) of the lower N Band. Simultaneously the index sunk to the weekly SR 5 support line. The upper SR lines, 1 through 4 are tightly bunched... Continue reading

This market has been rising with more force than a Saturn V rocket. For trend trading statisticians it has been a fun time in the 'fat tail'. And for as much as most of us can predict, it may be that way for some time. However the presence of resistance is usually best not ignored. The S&P 500 Index daily chart is currently skirting the one ATR proximity zone to its upper N Band. Even though the band is already rising, the S/R 1 and S/R 2 lines are very close at 1093 and 1078 respectively. To confirm this overhead... Continue reading

To virtually all private and independent professional traders the actual mechanics of program trading, a.k.a. ‘algorithmic trading’, are unknown. I do hope that this condition will change. Everyone that buys or sells securities for profit is affected by program trading. I would even say that we are handicapped by it. It’s a very awesome layer of competition, and one that I bring to light in chapter one of Volatility-Based Technical Analysis. An article by Charles Duhigg of the New York Times is a healthy sign that the broader trading population and the general public are finally being given some understandable,... Continue reading

Since last week's confirmed over sold condition on Wednesday July 8th, the news has fueled the broader market. On the S&P 500 Index there was an intraday Adeo Long signal which did not hold through to closing. However, at the time, I noted in a Tweet that a reversal was likely. Now the tables have turned; somewhat. The S&P 500 is printing Adeo Shorts yesterday and today (see chart), and is getting to within 1 ATR of the upper N Band. This is serious resistance. Any upside action tomorrow will provide excellent opportunities for some quick shorts at exuberent resistance... Continue reading