In our most recent post of spread trading strategies for gold we wrote that the $1215 level for gold was still key to the upside and failure for the market to clear that level would lead to a test of strong support at $1185. Last Friday’s close at $1185.8 was a new low close for 9 weeks, so without doubt the short term trend was moving down.

Considering the short term weakness in this market, a failure of support at $1185 should have led to a move down to the next support area at $1168, but having moved lower initially on Monday to $1176.9 the lows were rejected and the market climbed a bit but still closed below prior support at $1181.9, giving a new low close for this contract and a close below prior support.

Yesterday the market made another push lower but once again the market rejected the lows and pushed higher again. This formed a piercing pattern on the daily charts, which is a bullish reversal pattern and the market closed back above $1185 at $1191.7. At the time of writing this morning, the market is fairly quiet, hovering just below the $1190 level.

When considering which spread trading strategies to use on gold, there are a few things to consider, firstly, without a doubt the long term trend is still up and therefore the odds favour higher prices. It will take a large move to the downside to change that long term trend to down.

Also to be considered is that we have 2 good support levels in the market at $1168 and also at $1157. We also have a third good support level at $1125 and the obvious $1100 level as well. Therefore, to get a decent move to the downside would require bulldozing through several strong support levels.

In the more immediate term, the last 2 days candle patterns have reasonably long lower shadows and this indicates rejection of lower levels as well as yesterday’s piercing pattern, which is also bullish short term. I’m not a buyer at these levels as that would be counter to the short term trend and will be waiting for more strength before entering longs, but will not be entering short any time soon.

Good trading

Phil Seaton

PS. Find out more about LS Trader and our spread trading strategies by clicking here.

Today we have another post of spread trading strategies for the coming week, with our focus again on the S&P 500 and Gold. Gold seems to be the ever-popular market and the S&P 500 is the real stock market, so is as good a place as any for our attention.

Last week we wrote that the S&P 500 had been pushing up towards resistance at the 200 day moving average, which was also in the area of another round number, the 1100 area, but that the market was running out of steam at that level. On Wednesday we had a spinning top, Thursday was a northern doji and Friday was a long red candle.

The spinning top and northern doji are not reversal patterns but show that the market is struggling to push higher and has lost momentum. When this happens at a resistance level, which it is in this case, that adds to the bearish scenario. From there we still however need price confirmation to the downside and we got that in the form of the long red candle on Friday, which was a 2.5% down day.

If we look at the candles from Tuesday onwards we have a long green candle, 2 dojis and a long red candle. Although this does not technically make it an evening star pattern, I view it as such as the addition of the extra candle does not alter the market psychology at these levels. This pattern shows a shift back to bearishness in this market again, which is in the direction of the long term trend, down.

We wrote last week that we viewed the recent rally as a bear market rally and that more importantly we were in a classic bear market set up with a series of lower highs and lower lows. Last week’s highs look like yet another lower high in this market so we should now see another lower low, which would take out support at 1000 and give new lows for the year and will likely put a 9 handle on the price with the first sub 1000 target at 980.

The odds therefore favour a continuation lower to test 1000 support again and this market must be considered bearish below what I call resistance 1 at 1100 and resistance 2 at 1129. As we wrote last week, the short term remains bearish as long as the market stays below 1129 but a move above that would change the intermediate trend. Therefore, only short spread trading strategies should be considered here unless 1129 gets taken out to the upside.

Now let’s take another look at Gold. Last week we wrote that $1215 was looking like a key level in this market and that we were looking for a close above this level or a move back towards support at $1185 may follow. Gold cleared $1215 intra day but did not close above it and this led to a move back down to almost exactly $1185, with lows for the week at $1185.8.

We are therefore almost exactly at support 1 in this market and a breach of support here may bring $1170 in to play. For now the long term trend is still up as there has yet to be anywhere near enough weakness in this market for a long term change of trend to down. Our proprietary trend indicators at LS Trader show that the trend is down for the S&P 500 and stock indexes but still up for Gold.

Good trading

Phil Seaton

PS. Find out more about our spread trading strategies for stocks, commodities and forex by clicking here

Continuing our focus on the S&P 500 and different spread trading strategies that can be used on this market, today we are looking at the resistance from moving averages. We tend to focus more on the S&P 500 than other stock indexes as the S&P 500 is the main stock market and the other indexes tend to take their lead from this index.

Yesterday I wrote that the S&P 500 was pushing up towards resistance at the 200 day moving average, which also happens to be at another round number, the 1100 area. The high in the market yesterday on the August S&P 500 contract was 1099, where the market reached resistance and pulled back to close at 1091.1.

Although I’m not a huge fan of moving averages (my research and testing shows that they are not nearly as important or useful as people think and I’ll write more on that another time) one average that is focused on by many traders is the 200 day simple moving average, and on my charts that is sitting at 1101.

What we saw in yesterday’s chart was not a reversal pattern but more a sign that the rally was running out of steam and this carries a bit more significance when we see this kind of formation happen at resistance. That said, I don’t think that the 200 day moving average is particularly huge resistance in and of itself but added to the 1100 level this increases somewhat.

If this resistance at the 200 day moving average holds then what will be important is that this will be yet another lower high in this market from the highs of this year and the prior bull run, formed on the 26^th April. A series of lower highs over a period of time (the longer the better) is a classic set up of a bear market. Therefore, the current resistance level is worth watching closely for short term direction when deciding which spread trading strategies you are going to use on this market.

A far more important level in my eyes is the high on the 21^st June 2010 at just shy of 1130. If the market can clear the 200 day moving average and 1100 level, the 1130 level will be the next target for the bulls. If that level is cleared then we may be looking at a different scenario for the intermediate term but for now things are still bearish and the long term trend is down.

Overall I still favour spread trading strategies from the short side only at present, not just in the S&P 500, but in all stock indexes, and am not looking at any longs as that is counter to the long term trend. Successful spread trading is all about turning the odds in your favour as much as possible and one strategy for this is to only take trades in the direction of the long term trend and reject counter trend moves.

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread trading system and our proprietary spread trading strategies for stocks and commodities please click here.

Recently we have been discussing various spread trading strategies for stocks and commodities and the 2 markets that we have been focusing on are gold and the S&P 500.

Let’s begin today with gold. In our last post on gold we wrote that we were looking for a move back up above short term resistance at $1215. We had written that there had been a bull harami pattern on the weekly charts and that this pointed to higher prices in the short term and a test of $1215 resistance early in the week. We got that test yesterday and the market moved up to $1218.8 (August contract) at one stage in the day but was unable to close above $1215.

We may have another go at this level soon and the long term trend is up. In the short term we have support at $1185 and also around $1200, where gold pushed higher from yesterday having been as low as $1196. We don’t currently have a buy signal out in this market but spread trading strategies at present here should be considered only from the long side, in the direction of the long term trend until or unless we get sufficient weakness for a change of long term trend.

Our other market of focus is the S&P 500 (September contract), which has continued to impress from recent lows at 1003.1. Yesterday saw another big move higher and the market now looks set to test what many people consider an important level, which is the 200 day moving average (I’m not a huge fan of moving averages myself). The 200 day moving average current stands at just over 1100, which once again is a round number and a resistance area.

If 1100 can be cleared then a continuation higher to the highs seen on June 21^st around 1130 may follow, where we expect major resistance may be found. As yet there are no reversal patterns showing in this market (or any of the stock indexes that we trade at LS Trader) so short term strength may continue. The long term trend remains down but I will not be selling at present due to recent short term strength even though I expect that to falter in the not too distant future. It’s always best to wait for confirmation from price action before initiating any positions.

Because there is divergence at present between the long and short term trends our preferred spread trading strategy for the S&P 500 is to stay on the sidelines and wait to see what develops. We still view this as a counter trend rally and therefore won’t be buying it as it is against the long term trend.

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary trading strategies for spread trading stocks and commodities please click here.

Continuing our series of posts on spread trading strategies, today’s post is on strategies for the week ahead with the focus on the S&P 500 and also gold as these are 2 markets that have been important of late.

Last week saw a big counter trend rally in stocks, led by the S&P 500, which launched the rally from support at 1003.1. This rally was during a week of lighter volume, as it was a holiday in the US, with the markets being closed on Monday for Independence Day. This coming week may give a truer picture so it will be interesting to see how the markets react on Monday and Tuesday.

As we have said previously, the long term trend is down for the S&P 500, as it is in fact for all the stock indexes that we trade at LS Trader with the exception of the German Dax, which has continued to hold up much better than the other indexes. Therefore, last week’s rally is against the longer term trend and for that reason is unlikely to develop in to a big uptrend as markets rarely drop sharply and then turn around and go straight back up. Therefore whichever spread trading strategies are to be applied, the bias should be to the short side.

In spite of last week’s rally, the short term trend according to our indicators is still down for the S&P 500 and last Friday’s close is pretty much at a short term resistance level around1070. This fell just a few points short of the highs from the previous week, so we don’t have a bullish engulfing pattern. However, we may still see a continuation higher up towards the prior highs at 1129 but more likely will see the market move lower again and at some point in the not too distant future test support at the psychological 1000 level. The long term trend remains down and we still look for lower levels on the S&P 500 this summer.

The other market that we are looking at today is Gold. Gold ended the week very marginally higher after the steep sell off from the previous week and formed a bull harami pattern on the weekly charts. The bull harami pattern indicates that sellers are losing their breath and that there is a fairly even balance between buyers and sellers. This suggests that we may move higher this week in the direction of the prevailing trend, especially if we get back over $1215 early in the week. The long term trend is still up in Gold so spread trading strategies should be from the long side if any for now

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary spread trading strategies for spread trading stocks and commodities please click here.

Continuing our series of posts on spread trading strategies and stocks, today we focus again on the S&P 500, which has continued to rally higher from support at 1003.1, making a counter trend move.

Last night’s close at 1067 was just below resistance and at the time of writing this morning the market is still holding just below that level. When the US markets get going this afternoon we will likely see a test of resistance early in the session especially due to the proximity of the market currently to the resistance levels. The market’s reaction at that level will likely set the tone for today’s action.

We mentioned previously that there may be support at around the psychological 1000 level and this did appear on Wednesday and the S&P 500 has been moving higher since. What has surprised many is the strength of the rally this week. As of last night the S&P 500 is already up by 5.2% for the week and if resistance is cleared that may be considerably more by the end of today’s session. A close above 1080 would give a bullish engulfing pattern on the weekly chart and this would point to further upside action next week.

As we have said many times before, the biggest up moves come in bear markets and this is in my opinion a bear market and the rally this week is a bear market rally. However, the strength that this rally has shown may well take it through resistance around the 1070 area and if the market closes above that level then we may see a continuation rally in to next week.

If that scenario does play out then this rally may continue up towards the previous high formed on the 21^st June at 1129.3, at which level we would expect major resistance and the long term downtrend may resume from that level if indeed the market even gets that high.

Our proprietary indicators at LS Trader still indicate that the long term trend is down and that we are still looking for a big move lower at some point this year and almost certainly before year end. It must be remembered that the lows of this market continue to be lower than each previous move and the rallies are also stalling at lower levels, so we have the classic bear market set up of lower highs and lower lows and in the long run this points to lower levels for this and the other stock markets.

With that in mind, it is a fairly dangerous game to trade against the trend, which is still down and the risk/reward for long trades at this time is not favorable. When deciding which spread trading strategies to implement in the markets it is always wise to consider strategies and positions that go in the direction of the long term trend as the odds of success increase when one does so.

If one is not already short this market then it is probably better to wait for new confirmation to the downside before initiating any new positions in this market as this bear market rally may yet continue higher. Moves against the long term trend are usually fairly short lived until or unless we get a long term change of trend and this is way off. For me the market would have to clear the May highs around 1210 before that change of long term trend would be confirmed and any long trades should be considered.

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary spread trading strategies for spread betting stocks and commodities please click here.

There are many spread trading strategies that can be used for spread trading stocks and commodities such as the S&P 500 and gold and we have been looking at both of these markets in a fair amount of depth over the past few weeks on this blog.

Let’s start with the S&P 500 today and we will look at Gold later in the week. Firstly, the S&P 500 had a long term change of trend to down last week according to our proprietary trend indicators at LS Trader when it broke through the major support level at 1034.8 before reaching new lows for this year at 1006.5. We have been writing for several weeks at LS Trader that we were expecting the stock markets to break lower and move lower again between now and the end of this year. It remains to be seen if this is the time for that move lower.

Last week we wrote that we were looking for a test of 1000 support, which is a major psychological round number and that we may initially get a bounce higher. Yesterday morning in early trading we saw new lows at 1003.1 (September contract) before a major rally all the way back up to highs for the day at 1038.3, at which level the market stalled and sold off again. Yesterday was clearly then a day of indecision as many bargain hunters initially entered the market and then common sense prevailed later in the session.

In the long run, success in spread trading comes from implementing spread trading strategies that have been proven to work over time. In the S&P 500 scenario that we currently have it is best overall to follow the trend and not try to fight it. If the market fails at 1000 support there is a lot of room to the downside, but if the market rallies then it is best to admit that the trade was wrong and take a small loss. In this way a favourable risk/reward trade is in play, which makes good profit if it is correct but only loses a relatively small amount if it is wrong. If this spread trading strategy is employed consistently over time then the odds are stacked in the favour of success.

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary spread trading strategies for spread betting stocks and commodities please click here.

Gold reaches new all time highs.

Following on from our post yesterday where we were discussing how to spread bet gold and the recent uptrend for Gold and the key levels to look out for, August Gold briefly cleared resistance at prior all time highs at $1251.4, but was unable to stay there. The new all time highs reached intra day yesterday were at $1254.5 before Gold closed slightly lower at $1245.6

As we wrote yesterday, there is significant resistance at the prior all time high, both from psychological factors and also technical factors. The technical factors were the obvious resistance and the reversal patterns mentioned previously. We said that we would need a close above all time highs at $1251.4 to negate the reversal patterns and to entice new buyers. The same now applies from the new all time highs so we’ll be looking for a close above $1255.

The fact that Gold failed to close above prior resistance at new all time highs makes the market susceptible to a retracement but on the flip side both the long and the short term trends are still up and any move back over new highs can quickly trigger fresh buying and another rally. As before the long term trend remains up and will continue to be so as long as support around $1170 holds.

At LS Trader we therefore continue to stay long Gold. Since we are trend followers and the trend is up we will hold longs until support is breached, consistent with a couple of our key spread trading strategies, which are riding the trend and letting winning trades run.

Good trading

Phil Seaton

PS. To find out more about financial spread betting and how we spread bet the markets for profit, including Gold, please visit the LS Trader website by clicking here. The system comes with a 30 day no questions asked money back guarantee