The stock market looks a lot more bullish today than it did on Wednesday when I wrote “The Correction Is (Almost) Over.”

The problem on Wednesday was that the S&P 500 was still trading below its 9-day exponential moving average (EMA), and it was still trading below last week’s high.

The rally over the past two days has solved that problem. Take a look at this updated chart…

The S&P 500 closed yesterday above its 9-day EMA (the thin red line on the chart), and above last week’s high. So, we have the first “higher high” on the chart. That’s a good thing.

Of course, we’re not out of the woods yet. In order to set the stage for a new uptrend, the index now needs to come back down and form a “higher low.”

In other words, on the next pullback (which I suspect will start sometime soon) the S&P needs to hold above this week’s closing low of 2581.

Frankly, though, I’d be disappointed in a pullback that deep. If the market has indeed hit bottom for this move, and if the correction is really over – which I think it is – then the S&P should not pull back much below the 2620 level.

Let’s get a closer view of the situation by looking at the 60-minute chart…

About mid-day Wednesday, the S&P 500 broke out of a bullish falling wedge pattern (the red lines) on this hourly chart. That’s a bullish move – which continued yesterday and pushed the index all the way back up to resistance near 2675.

Typically, following the initial move higher out of a bullish wedge, a chart will come back down and test the breakout level as support. So, traders should look for the S&P to come back towards the 2610-2620 level.

If that level holds as support, then the correction is over. The market will be in a new uptrend.

If support doesn’t hold at the 2610-2620 level, then we’re probably headed back down towards the 2580 level again.

And if that level doesn’t hold, then we’re still in correction mode. We’ll likely have a few more weeks of downward action.

For my money, I think the correction is over. I expect the S&P will make a higher low in the 2610-2620 range, and we’ll see generally rising stock prices for the next several weeks.

Best regards and good trading,

Jeff Clark

Reader Mailbag

Today, some comments on the Delta Report’s trading activity this year…

Hey Jeff. I joined the Delta Report a while ago, but after reading your stuff, I knew I had to join up as a lifetime member. I like the way you break down the market and tell me where you think the market may be headed. Others I have read were just guessing, resulting in a slow churn and burn on the money I allocated to that newsletter.

I love the charts with full explanation. I am here to learn. I really don’t mind holding back until the time is right to make a trade. I don’t feel the need to trade every week. I’d much rather put a little more money on trades that have a great setup. Again, thanks!

– John

Hi Jeff, I am just curious. It seems that before the correction back in February you were more active, giving trade recommendations for aggressive traders that traded the SPY. Lately, seems like you are not as confident as before, or you are being extra careful with your trade recommendations. The S&P 500 reached the support level of 2580 twice, but you did not have a trade recommendation at that target, not even for aggressive traders.

I am still confident on the service that you provide. I just wish you would give more SPY speculative trading for aggressive traders. Thanks again for your service.

– Helmut

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