Yesterday was a typical “gap and hold” session to the upside. That’s where the S&P 500 gaps higher, spends most of the session in a tight trading range around the high of the day, and then powers even higher in the last hour.
As a result, the market closed at an all-time high. And despite any number of technical divergences, the price action and the momentum remain bullish.
Here’s an updated look at the daily chart of the S&P 500…
The S&P is bumping into resistance right here at about the 2455 level. And while the market has made a new high, the MACD momentum indicator and the Relative Strength Index (RSI) are trading well below the highs they reached in March. This “negative divergence” should limit the upside action in stocks from here.
At the same time, the index continues to hold above its 9-day exponential moving average (the red line on the chart). That keeps the momentum in the bullish camp and limits the downside.
The last time we saw this same type of action – where support and resistance lines converged and the technical indicators diverged – was back in mid-May just before the one-day 1.8% drop.
I wouldn’t be surprised to see something like that happen again.
Meanwhile, over in the gold sector…
Gold stocks were weak again yesterday. The VanEck Vectors Gold Miners ETF (GDX) dropped 0.6%, and it still looks like there’s more work to do on the downside. As I mentioned last week, GDX may need to come back down towards support at about the $21 level before it finds a short-term bottom.
Keep in mind… gold stocks have a relatively predictable and reliable pattern of forming a bottom. GDX tends to gap lower in an exhaustive move and then spends the rest of the day slowly recovering. Traders should be on the lookout for that sort of action in GDX if/when it approaches the $21 level.
I’ll update Delta Report readers on these trends throughout the day on Jeff Clark Direct.
Best regards and good trading,
Jeff Clark
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Hi, Jeff! I've been following you since 2014 at Stansberry. I just joined you as a Lifetime Member. Although I appreciate all the technical explanations you give your subscribers, my favorite are your trading stories and honest answers to direct questions (like “Why do you write when you can just trade all day?“). Thank you for sharing your wisdom and your new trading system. I hope to meet you in person soon! Take care and please keep up the great work!
– Jesse
Wow! Thanks for the TGT heads up! Sold 50.00 July strikes shortly after your post at 10.06. Sold 52.50's after that. 4 round trips with the last at 3:58. Just one of those days where the tops and bottoms seemed more predictable. Would not have even been aware of TGT move.
– Marty
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– Damon