Yesterday was another tight trading-range day. The S&P 500 stayed within a seven-point range. This time, though, most of the action was to the downside.
Traders do seem to be getting a little nervous about the potential for some volatility later this week. We do have the British election, the James Comey testimony, and the European Central Bank (ECB) decision on interest rates on Thursday.
Nobody is really expecting any big surprises. But you never know. And traders might choose to raise a little cash ahead of those events.
The S&P 500 has immediate support at its 9-day exponential moving average (EMA) at 2422. A break below that level should bring 2411 into play.
Resistance is at 2436, then at 2444.
I expect today will play out similar to yesterday… a tight trading range with a slight downside bias.
Gold and Gold Stocks
While the broad stock market has been lulling us to sleep, gold has been putting on a show. The metal blasted another $13 higher yesterday. Gold closed just above $1,297 per ounce – its highest closing price for 2017.
And… here’s the really important thing… gold stocks finally played “catch-up.”
After underperforming the action in gold over the past month, gold stocks rocketed higher yesterday and solidly outperformed the metal.
Here’s an updated look at the GDX/Gold ratio I showed you on Monday…
In just one session, this ratio made up for lost time and blasted over the downtrending resistance line. This should signal the start of a new, intermediate-term uptrend for gold and gold stocks. Similar moves back in March and early May led to strong gains for gold stocks.
On a short-term basis, many gold stocks are a bit overbought after yesterday’s big move. So we might get a brief pause in the action before gold stocks try to pop higher again.
Keep in mind, we have the ECB announcement on interest rates on Thursday and we have an FOMC announcement next week. The gold sector might pull back a bit heading into either of those events.
But, with the GDX/Gold ratio now trending higher, traders should use any short-term weakness in gold stocks as a chance to add exposure to the sector.
I’ll update Delta Report readers on these trends throughout the day on Jeff Clark Direct.
Best regards and good trading,
Jeff Clark
P.S. Delta Report subscribers, check your inbox later this morning for an update on my earnings trading strategy. I’m finally ready to share my report…
Mailbag
Thanks to all my readers who’ve sent in feedback. If you have any more questions, concerns, or great trading stories, keep them coming right here.
Here's what came in recently…
Hello Jeff, I am one of your subscribers. I love your work. THANK YOU. I have learned so much. I have been trading for a while now. For 15 years I have been “flipping” IPOs very successfully but now that game is gone (at least for now).
I have been using your recommendations, every one of them. I never go all in but I do trade 20-150 contracts. I am profitable.
– Andrey
KORS trade Comment on subject trade- it worked out great for me. I made a $1.00/share in five days. I was working the day you mentioned the trade, and I made the trade the next day but I saw the price had dropped further than you predicted. For this reason I sold puts at 34 for $1.50 instead of 35 for $1.20. I was able to close the put for $0.50/share. The previous earning recommendation you made I missed because I was working that day too and in the morning the price had already skyrocketed.
Point is your so called “Mom trade” (wait to see the reaction to the earnings report) approach worked on the KORS trade but I was not able to play to participate on the “Guess” recommendation. So you were right on both trades just that on one trade the safe approach was best and on the other one the riskier approach worked.
– Ron G.