Nuclear Power Remains a Good Energy Option

Though many Americans are probably doubtful when it comes to nuclear power after what happened in Japan, there are still many benefits of nuclear that simply cannot be ignored. When stacked against coal burning plants or new “green” options like wind and solar, nuclear power plants are hard to beat.

If we shut down nuclear power plants, they would have to be replaced by fossil fuel plants that emit large amounts of carbon dioxide. This is already taking place in Germany, where seven nuclear plants have already been shut down for “evaluation” after the events in Japan. As a result, coal will fill the gap until the nuclear plants are put back on line.

Hopefully, the United States will not be scared into following in Germany’s footsteps. Turning away from nuclear power would be a shame, because doing so would only result in a higher use of fossil fuels as a means of electricity production. Options like wind and solar power simply cannot replace nuclear due to their inefficiency and huge land requirements. For example, one nuclear reactor generates as much power as many acres of wind turbines, and does so efficiently, not depending on if the wind is blowing.

What many forget is that the nuclear plants in Japan survived the huge 9.0 magnitude earthquake, one stronger than they were designed for, without many ill effects. The problem was caused by the fact that the tsunami took out the electrical grid, causing the pumps for the cooling system to lose power. Because the water wasn’t being circulated, it quickly overheated and boiled off. Also remember that the Fukushima reactors were built in the late 1960s and are thus more than 40 years old. Like everything else, reactor design has improved since then, especially when it comes to safety.

All energy sources have their drawbacks, and nuclear power is no exception. However, when compared to other types of power plants, nuclear plants have a lot of good attributes. For example, plants that burn coal and other fossil fuels are big polluters when compared to nuclear, and alternative energy options like wind and solar simply aren’t efficient enough to rely on, and take up much more space.

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Gold, Oil, SPX Trading Around the Election

This week we have a major wild card (Election) happening on Tuesday. Most of you know I don’t get involved with political discussion for several reasons… one of them being that I am Canadian “an outsider” looking in.

That being said, it looks and feels as though the market has been propped up and oil has been held down from an invisible force. Lots of theories going around saying higher stock and lower/stable oil prices will give voters the warm fuzzies to keep the current leaders elected… I prefer trading the charts and not getting caught in the Wall St. hype.

Let’s take a quick look at some charts

SPY - SP500 ETF Trading Vehicle

The broad market has been finding buyers as the beginning of each month and it looks as though it’s ready for another bounce. I do want to note that Tuesday or Wednesday we could see a very sharp move in the market as investors around the world digest the outcome. It is very important to keep positions small and or use protective stops incase of a flash crash or flash rally for those of you trying to pick a top.

Gold Price - Futures Contract

The price of gold looks to be setting up for another wave down in my opinion. More often than not we see a sharp pullback, sideways chop then a pop above recent highs. It’s that pop above recent highs which tends to suck in long positions only to roll over and make new lows quickly after. As noted in previous reports, gold has support around $1300 area and that’s what I am looking for. Again this week’s election will trump recent price action so we really just need to sit tight until the smoke settles.

Crude Oil Futures:

Crude oil has been trading sideways for a solid month while the US dollar has been dropping at tremendous rate. Many oil traders believe the price is being manipulated to stay down until the election is finished because of the strong negative affect rising oil prices have on the economy/end user/voters.

Weekend Trading Conclusion:

In short, this is a going to be a wild week in the market. Keeping position sizes small and using protective stops is crucial during times like these. We have taken profits on both of our positions from last week and have moved our stops to breakeven for the balance just incase of a crash.

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Gold forms Overbought Rising Wedge at Resistance

Precious metals soar as investors flock to gold and silver. But are they looking deep enough to truly understand the current trends at hand?

When reviewing the metals sector I like to look at it from different angles to get a solid understanding of the patterns and trend forming. I follow multiple time frames along with monitoring the gold mining stocks. Gold stocks tend to lead the price of gold bullion and when its out performing the price of gold substantially by 10% or more you should be expecting a pause or pullback in both gold stocks and gold bullion prices temporarily.

Below are a few charts showing the long and short term trends for gold.

Gold Bullion Price - Weekly Trend Chart

Gold continues to be in a strong up trend. The occasional test of support at the major moving averages can provide great long term points for adding to a position. The 50 period average is one which is tested frequently.

Looking at the weekly chart does give me a red flag for the intermediate price of gold. While the trend is clearly up I can’t help but notice the rising wedge which is a bearish pattern. During an uptrend we want to see bull flags and pennants, not a grind higher forming a narrowing range. This grind higher could unfold much similar to the price action of 2005 and 2007 instead of a correction but I am leaning more towards a sharp correction because more people are bullish on gold now then they were during the June top.

For those looking at gold as a long term investment/currency can be patient and wait for a pullback to a major moving average before adding to your position then you would lower your overall risk for this position. You will understand after reviewing the following charts.

GLD - Gold Bullion ETF - Daily Chart

(This fund moves identical to spot gold price so even though I am showing you GLD fund, the spot gold chart is doing the exact same thing.) As you can see below the price of gold is trading at resistance and becoming choppy. Buying gold at resistance does not make much sense to me. There is a very good chance gold will move lower in the coming weeks providing a better price for long term investors to add to their positions. For example, if you waited for the weekly chart to pullback to the 50 period moving average that would be like buying this GLD fund at $113, which is an 8% discount.

Gold continues to hold up within its channel but this week we could see fireworks if the price breaks below the blue support channels.

Gold:Gold Stocks Comparison - Daily Chart

This chart shows the performance of gold vs gold stocks from the Feb 2010 lows. The blue line is the performance of gold stocks while the red line shows gold’s performance. It’s obvious that when everyone is bullish on gold they buy the highly leverages gold investments in order to take full advantage of the upcoming move. This is much like reading the put/call ratio for trading the SP500 and it measures the bullishness of the precious metals sector.

When gold equities are strongly out performing gold bullion you should be thinking about raising your stops, taking partial profits and or hedging your long term position until the sector stabilizes is not trading at a premium.

Precious Metals Sector Trading Conclusion:

In short, Gold is in a strong up trend and will remain in one for a long time. Commodities have higher percentage of going parabolic. That means there’s a small chance that gold continues to move up quicker and quicker surging hundreds of dollars in a very short period of time. That being said, it’s not very likely, and from a technical point of view those buying gold now are paying a premium in my opinion.

Being a patient trader is not easy, but waiting for low risk entry points is very rewarding on many different levels when done correctly.

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Precious Metals, Oil & SP500 Trading At Key Resistance Levels

Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.

Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.

SLV - Silver Bullion ETF Trading

Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.

Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.

GLD - Gold Bullion ETF Trading

Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.

USO - Oil ETF Trading

The oil ETF broke down from its large multi month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.

SPY - SP500 ETF Trading

The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.

Weekend Equities and Commodities ETF Trading Report:

In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.

That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.

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The Gold & Silver Play Has Gone To Greed?

The past few months it seems the gold and silver play has been getting a little crowded with everyone wanting to own gold. While I am a firm believer that these precious metals are a great hedge/investment long term, I can’t help but notice the price action and volume for both metals which looks to me like they are getting exhausted.

Silver - Daily Chart The silver chart below shows an extremely high volume reversal candle in early November which typically leads to lower prices and some times a major change in the trend. That being said silver remains in an uptrend with the possibility of a bullish pennant forming. On the other hand there is a possible head and shoulders pattern forming. I will be looking for light volume sideways chop keeping a close eye for a possible neckline breakdown or a momentum thrust to the upside for a possible trade.

Gold - Daily Chart Gold is forming a bullish and bearish pattern also giving us a mixed signal. I am currently neutral on gold and not really looking to take part until we get some type of clear price action.

US Dollar - 60 Minute Chart The dollar has shown some strength recently. The US dollar play has been to take the short side, and a couple weeks ago we saw the dollar breakdown from yet another consolidation. It seems like everyone shorted the dollar yet again. That could have been a key pivot low for the dollar. On the weekly chart that bounce was off a major support trend line helping add some fuel to the rally I would think.

The chart below shows the recent rally and breakout to the upside. Currently the dollar is pulling back to test the breakout level (support). It will be interesting to see how this week unfolds. If the dollar bounces then we just may see metals break below their necklines to make another heavy volume drop.

Weekly Precious Metals Update: In short, I have mixed feelings for gold and silver. Yes I think they are good long term plays, but after the run they have had it is also very possible a much deeper correction is about to take place and we may not see new highs for another year. That is a long time to have money sitting in an investment when it can be put to work in other investments. I know the herd (general public) is all head over heals in love with gold and silver which is one of the reasons why I think we are nearing a top if we didn’t already see it a couple weeks ago.

Don’t get me wrong I’m not saying to sell of go short metals… not yet anyways. They are both still in an up trend but some interesting things are unfolding which could cause big action in the coming weeks.

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