Dear Reader,

Here’s what to look for in the action today…

General Trends

The broad stock market continues to chop back and forth in a ridiculously tight environment. Neither the bulls nor the bears can seem to make much of a move. We are entering a seasonally bullish period for stocks, and we do have a new Volatility Index (VIX) buy signal. But nothing has come of it yet.

The longer the S&P goes without making a move above the 50-day moving average (MA), the more likely the bears will seize the momentum.

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Stocks

The S&P 500 ran right into resistance at the 50-day MA yesterday. Then it turned back down and closed on the lows. The bulls simply could not muster enough momentum to break out to the upside.

Today… I’m thinking it’s the bears’ turn to show how little momentum they have.

The S&P 500 has immediate support at 2328. If it loses that level then it should open the door for a larger move lower towards the 2300 level.

On the upside… resistance is at 2352-ish. A decisive move above that level could open the door to a move towards 2385.

I want to lean bullish here. But the S&P needs to get above its 50-day MA before I’m willing to add much more exposure to the long side. Otherwise, I’ll wait for a stronger decline and extremely oversold conditions on the technical indicators before stepping up to buy stocks.

Gold and Gold Stocks

Gold stocks got slammed yesterday. There’s no other way to put it. The gold sector lost almost 4%. It was the worst performing sector in the market.

But that’s a good thing.

We’ve been expecting a decline in the gold stocks. And we’ve been looking to add exposure on that decline. Now we have a chance to do just that.

Aggressive traders ought to be looking to buy into the gold sector on a decline early this morning. We’re probably not at the bottom just yet. But gold stocks ought to be close enough to a bottom here to offer a good risk/reward setup for adding at least some small exposure.

Elsewhere

Tomorrow is option expiration day… when anything goes.

There’s often no rhyme or reason to the action on the third Friday of the month. It’s usually best to avoid trading right in front or right after that day – unless there’s a set up that’s so compelling that it’s worth the risk of stepping in front of computer trading programs.

I’ll update regular readers on these trends throughout the day on Jeff Clark Direct.

Best regards and good trading,

Jeff Clark

P.S. Although I can’t respond to your feedback directly, I welcome your comments and questions. Send them to me right here.