We came into this week looking for some bullish action in the stock market. And that’s what we got.

The Volatility Index (VIX) gave us a buy signal, and the CBOE Put/Call ratio (CPC) – a contrary indicator – reached an extreme level of pessimism. So, traders who were ready for it could have bought into Monday’s big decline as the S&P 500 dropped down towards 2800.

That trade is looking pretty good today – with the S&P all the way back up to 2884.

But, after three strong rally days, conditions are starting to get a little stretched. 

The S&P 500 is bumping into resistance. So, traders who bought on Monday should consider selling as we head into the weekend.

Here’s an updated look at the chart of the S&P 500 along with its various moving averages…

The most concerning part of this picture is that the shorter-term moving averages – the 9-day and 20-day exponential moving averages (EMAs) (the red and green lines) are on the verge of crossing below the intermediate-term moving average – the 50-day moving average (MA) (the blue line).

The last time we saw this “bearish cross” in the moving averages was back in October, just as the market entered a severe correction phase.

Now… it hasn’t happened yet. And, if the S&P 500 can continue to bounce, then maybe we can avoid a bearish cross in the moving averages, and all the potential heartbreak that goes along with it.

But, if you bought stocks on Monday, in anticipation of an oversold bounce, then why risk it?

The S&P is up more than 3% in just three trading days. That’s a nice gain. Traders should consider taking it and heading into the weekend with a little less stock market exposure.

Best regards and good trading,

Jeff Clark

P.S. Taking profits instead of waiting to see what happens next is the basis of my trading strategy in the Delta Report.

While a 3% profit in three trading days may not sound like a lot, consistently pulling money off the table is better than getting greedy and losing it all. After all, successful traders know how to reduce risk.

And reducing risk is one of the strategies I use to prepare my subscribers from market hiccups… and even market crashes. You see, market crashes can be down right catastrophic for investors. But for traders, it’s a whole different ballgame…

The next market crash could be a goldmine for traders who use my strategy.

And on Wednesday, May 22 at 8 p.m. ET, I’ll reveal all the details… along with the exact day I believe the market will crash. Reserve your spot right here.

Reader Mailbag

Was there a time you took a profit on a trade, knowing the stock might go higher in the days to come? How did it play out?

You can share any trading stories, along with any other questions or suggestions, at feedback@jeffclarktrader.com.