Starting tomorrow, many of the world’s most powerful financial players will gather for three days in Jackson Hole, Wyoming.
It’s an annual event where central bankers, finance ministers, academics, and big-league-money folks come together to talk about world economic policies and trends.
And once again, my postal carrier seems to have lost my invitation. So I’ll be watching Janet Yellen’s and Mario Draghi’s speeches from my humble home office in northern California.
Nobody expects anything earth-shattering to occur at the conference. In recent years, the event has come and gone with less inspiration than an Anthony Weiner lecture on how to take great pictures with an iPhone.
But that’s precisely why I think we just might get a market-moving comment or two… Nobody expects it.
Perhaps Super Mario will reiterate his “lower for longer” stance on interest rates. Maybe he’ll talk about the huge economic benefits (sarcasm) of a negative interest rate policy.
Maybe Janet Yellen will soften her stance on raising interest rates in September due to the uncertain political environment, and the renewed potential for a government shutdown over budget and border-wall-building disputes.
If either speech even comes close to supporting those thoughts, then look for a sharp rally in gold stocks and a sharp decline in the banking sector.
I’ve made no secret of my affinity for gold stocks. I like the sector. The technical picture looks bullish. And while the choppy action over the past few months has turned many folks off, the action looks constructive to me.
We just need a catalyst for a larger move higher. And the Jackson Hole conference just might be that catalyst.
Meanwhile, the financial sector – which just about everyone seems to love – looks to me like it’s breaking down. Here’s a chart of the Financial Sector Select SPDR Fund (XLF)…
XLF peaked earlier in August. It has since fallen along with the broad stock market and has formed a series of lower highs and lower lows. Since the low on Monday, XLF has bounced back up to the resistance level of its 9-day EMA, its 50-day MA, and the downtrending resistance line connecting the recent lower highs.
This is an ideal short-selling setup.
Aggressive traders can short XLF right here near resistance at $24.80 per share. If XLF closes above $25.10 – which was the high of the previous bounce – then you can stop out of the trade at a relatively small loss.
Otherwise, look for XLF to make another lower low down around the $24.40 level – and possibly much lower than that over time.
The Jackson Hole meeting might just be the catalyst for such a move.
I like the idea of owning gold stocks and being short bank stocks going into the Jackson Hole conference.
Best regards and good trading,
Jeff Clark
P.S. How do you expect the market to react to tomorrow’s events at Jackson Hole? Send me your thoughts—along with any other questions or suggestions—right here.
Reader Mailbag
For today’s mailbag, we hear from some readers who traded alongside me on Monday, and their results. We also hear from one reader who tells us the most valuable lesson he’s learned from my trade guidance over the years…
I have a small option trading account; followed your lead to go long the market Monday. Decided to buy SPY Aug 30 calls, strike $242.50. Paid $1.92, sold Tuesday at $3.34, nice 74% profit in one day. Thanks, Jeff!
– Dave
I took your suggestion Monday about going long the market. So I purchased VXX $13 puts at $1 on Monday and sold Tuesday the put options for $1.54. Thank you.
– Les
Thank you so much for the education you have provided over the years and the trade ideas that I so look forward to each week. I have been a satisfied follower of your work for several years and appreciate the improvement in my trading and investment success that you have facilitated.
Perhaps the most valuable lesson I have learned from you is the importance of patience. I battle this every day. Ironically, I have learned from you that, coupled with patience, one must act boldly and decisively when opportunity knocks or miss that opportunity. Patience and boldness seem almost contradictory but they are not. Where is the value of patience if you cannot act decisively when appropriate?
Again, thank you for your service. I look forward to following your work for many years to come.
– James