Taking A Big Breath Before Heading Lower..

The charts above are a quick visual of what I'm seeing and thinking:

Gold Exchange Traded Fund (GLD) Trading Chart
The gold ETF trading fund is getting closer to completing its four-month correction and starting another rally if all goes well in the coming week or two. What I'm looking for is gold to hit resistance at $113 and then drop to the $110 level, which is a key support level.

S&P 500 Exchange Traded Fund (SPY) Trading Chart
Stocks have been on fire the past few months but this rally looks to be getting long in the teeth. After a rally this strong without any pullbacks one has to think that when a correction does start it will be a very sharp sell off. I will point out that a few years ago we saw this exact type of price action for the broad market and it continued higher for several more months before actually putting in a large correction. If we don’t see a large correction, then we'd see similar price movement, which we saw last November and December with the sideways choppy price action and slow rally higher.

In short, I think the market is ready to finally take a breather. What I'm looking for is another sell off, which will break the low for gold, silver, oil, and S&P 500 last week. If this happens, it will trigger panic, washing the market of all the traders who have been buying at these high levels (chasing prices).

Stocks have been very strong and new money continues to push prices higher so we could just see a relatively small pullback between 3% and 5% and then the rally could continue. This would work very well with gold, silver, and oil as they would be testing key support levels and should be ready for a another upward surge.

It doesn’t really matter what the market does as there will always be great opportunities. Waiting for quality setups requires discipline and focus because it's not very active. I see traders making all kinds of silly trades that chip away at their profits because they can't sit and watch when they should.

During slow times I actually focus on learning more about the markets -- going through charts, comparing inter-market analysis, etc. That kills a ton of time and helps make you a better trader in the long run. So if you don’t see a good trade, get out and do something fun or educational. Don’t just start trading the five-minute charts because you want to trade.