I use TC2007 to study the market and find stocks to buy. TC2007 breaks the market up into 239 sectors so that I can track how the sectors behave relative to the rest of the market and each other. The above is a sort of the performance of the worst performing sectors, with their return, since January's bottom.

As you can see the stocks in the bottom 9% of performance since the bottom include silver, gold, drugs, and health care stocks. Oil stocks are also lagging, posting a ranking under 30%.

The gold and health care stocks were actually leading the market in the first few weeks of January. Normally in bull markets sectors that lead towards the end of a market decline become leaders on the next rally. But in this bear rally this hasn't been the case, as a lot of beaten down and heavily shorted sectors have been leading. This is classic for bear rallies.

I'm growing more concerned about gold stocks. Last Friday I got stopped out of my gold stock positions, as reported in WSW Power Investor, and today gold is trading under $15 an ounce. Many gold stocks are going to gap down and actually be in the negative from where they opened up at on the January bottom. At the moment gold stocks are very oversold on a 60 minute chart. They also are trading on their lower 10-day bollinger band, which is an important support area. Support on the XAU is currently at 179. If the XAU can close above this level today then gold stocks will be set to bounce over the next week. We should then see the XAU bounce back up to the 188-190 area. However, if the XAU closes below 179 then you can expect a drop to the 170-174 area.

I'm hopeful that gold stocks can bounce here, because the broad market should find a new footing today or tomorrow morning.

I'm long-term bullish on gold stocks, but it appears to me that they are eventually going to have get in trouble with the rest of the market. Once this bear rally in the broad market ends I expect gold stocks to correct hard - harder than the rest of the market. I see them falling hard in the spring, and making a new bottom in the summer. At some point gold stocks will break away from the broad market and have a massive rally, but this doesn't look like it is going to happen over the next few months. Perhaps in the Fall or in the 4th quarter, but right now all signs point to them having a big correction in the 2nd quarter.

In the first half of January gold and silver stocks rallied sharply. However, other all other commodity stocks dropped. The CRX index, which is heavily weighted by base metal and oil stocks fell while the gold stocks went up and began to underperform the S&P 500 in January.

What this means is that in the commodity complex leadership narrowed to only gold and silver stocks. Gold was the only commodity still making new 52-week highs in January. The other commodities have looked weak for weeks and appear poised to correct over the next few months. If they do it looks like they will take gold and gold stocks down with them for a temporary 3-6 month correction.

At the moment I think the broad market can hold commodities and gold stocks together for the next 4-6 weeks. But once the broad market tops I expect to see a brutal correction in commodities and gold stocks.

The Chinese stock market also appears to have made a major top. Remember back in December how I made note of how the 150 and 200 day moving average begins to slope down when a market makes a major stage three top? Back then I told you how the major US indices were doing this and warning that they were entering bear markets. Now China is doing the same thing. For the past three weeks the Chinese stock market has been lagging the US.

Last year the market was led by commodities, Chinese stocks, and tech stocks such as Google, Yahoo, APPL, and RIMM.

In the past few weeks we have seen major breakdown in the tech stocks that led the rally last year. This month Chinese stocks and commodities stocks have broken down. The sectors that led the market last year are all breaking down and are now lagging during this bear rally. Gold stocks were also leading the market from August to just now. They appear to have lost their leadership and are poised to breakdown just as the tech stocks did.

The weakness in Chinese stocks is particularly ominous for gold stocks, because gold stocks have been more closely correlated to Chinese stocks than to the S&P 500 over the past few years. The same can be said about gold stocks and energy stocks.

by Mike Swanson
http://www.wallstreetwindow.com/

The presented article covers one of the most important (in author's opinion) aspects of trading in general and Forex trading in particular - managing of orders and positions. This includes choosing entry points, making decisions about exit points, stop-loss and take-profit of the trader. I hope this article will help new traders, who just began to work with Forex, and also to experienced traders who trade regularly and regularly make or loose their money to the market.

When I started to trade Forex and made my first big losses and profits I began to notice when very important thing about the whole trading process.

 While the right time to enter a position was rarely a problem for myself (nearly 80% of all my open positions had gone into the "green" profit zone), the problem was hidden in the determining the right exit point for that position. Not only was it important to cut my risk on the potential losses with stop-loss orders, but to limit my greediness and take profit when I can take it and make it as high as I can.

There are many known guidelines and ways to enter a right position at a right time - like major economic news releases, global world events, technical indicators combinations, etc.

But while the entering into a position is optional and trade can decide to miss as many good/bad entry point moments as they wish, this is untrue if we talk about exiting a position. Margin trading makes it impossible to wait too long with an open position. More than that, every open position in a certain way limits trader's ability to trade.

Choosing the good exit points for positions could be an easy task if only the Forex market wasn't so chaotic and volatile. In my opinion (backed by my trading experience) exit orders for every position should be toggled constantly with time and as the new market data (technical and fundamental) appear.

Let's say, you took a short position on EUR/USD at 1.2563, at the time you are taking this position the support/resistance level is 1.2500/1.2620. You set your stop-loss order to 1.2625 and your take-profit order to 1.2505. So now, this position can be considered as an intraday or 2-3 days term position. This means that you must close it before it's "term" is over, or it will become a very unpredictable position (because market will differ greatly from what it was at the time you have entered this position).

After the position is taken and initial exit orders are set, you need to follow the market events and technical indicators to adjust your exit orders. The most important rule is to tighten the loss/profit limit as time goes by.