Some days, there just isn’t much of anything new to say. This is one of those days.
Stocks pressed higher again yesterday – though it was lethargic, tired action. The S&P 500 challenged the 2400 level and was turned back, closing at 2398.
With the S&P trading above its 9-day exponential moving average (EMA), the bulls keep the momentum. Most technical indicators are neutral and grinding ever so slowly towards overbought territory. The Volatility Index (VIX) closed below 11 once again. It continues to warn of complacency.
Yada, yada, yada.
Here’s what to look for in the action today…
Stocks
The S&P 500 traded in a ridiculously tight seven-point range on Tuesday. The negative divergence on the intraday charts never played out. Though the divergence still exists and may play out today.
For example, look at this 15-minute chart of the S&P 500…
The MACD momentum indicator has been diverging for two full days on the 15-minute chart. That’s like two months’ worth of divergence on the daily chart.
The negative divergence is likely to kick in at some point soon and cause, at least, a strong one- or two-day pullback in the market.
Of course, a sharp downturn from here could kick off a stronger, more significant multiweek decline. We are, after all, in a seasonally bearish period for stocks.
But, since the daily indicators are not yet overbought, and there’s no negative divergence just yet on the daily chart of the S&P, I’m only looking for a one- or two-day decline at the moment.
Once again, keep an eye on leading sectors like high-yield bonds and semiconductor stocks. They’re likely to weaken first.
Semiconductor stocks traded lower all day yesterday. That might be the first real clue the market is getting ready to pull back a bit from the recent four-day rally.
Gold and Gold Stocks
The gold sector pulled back hard yesterday. The VanEck Vectors Gold Miners Fund (GDX) lost 2.25% on the day.
Most of the TV talking heads attributed the decline to the strength in the U.S. dollar. But, as I said yesterday morning, the lower high formed on the 60-minute GDX chart suggested the sector would likely come back down and retest last week’s low. For GDX, that low is down around $22.45.
Depending on how oversold the various technical indicators on gold look when GDX hits that target, it might be worth adding some exposure to the gold sector at that point.
I’ll update Delta Report readers on these trends throughout the day on Jeff Clark Direct.
Best regards and good trading,
Jeff Clark
Mailbag
Thanks for all your feedback. If you have any questions, concerns, or stories about big trades, send them right here.
Today, some notes on Friday’s essay, “You Won’t Hit a Home Run Swinging at Every Pitch”…
Love the analogy of waiting for the fat pitch. You help temper my more impulsive nature that would tend to go down swinging and end up broke. I am grateful for your conservative advice (and your bearish leaning), especially since I am playing with my mother's money.
– Lana
You can add me to the list of satisfied subscribers. You are the old pro and you know what you are doing. Good response to the disgruntled subscriber.
– David
And from Robert, a great spin on the “Mom Gauge”…
Don't spend a lot of time defending yourself. I am confident 99.5% of your subscribers understand the risks and can take responsibility for their actions. We all would like our trades to always go the way we want, but the mature person realizes nothing in life goes the way we want and the most successful make the best out of whatever is. Have you ever considered recommendations based upon:
Lower risk (Mom Trade)
Higher risk (Dad Trade)
Highest risk (Don't tell Mom Trade)– Robert