Dear Reader,

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

General Trends

Over the past 20 years, the S&P 500 has had a strong bullish bias. On average, the index gains about 0.40% on this day.

Add to this the fact that yesterday the Semiconductor Index (SOX) hit the 965 downside target I wrote about on Monday, and we have a pretty good setup for a bounce attempt in the stock market today.

There’s no guarantee, of course, but I suspect the odds favor a higher market today.

Stocks

Technical conditions still aren’t oversold enough to fuel a strong intermediate-term rally. And even if we do get the Volatility Index buy signal that I wrote about yesterday, any bounce in the S&P 500 from here is likely to relatively mild. The index has resistance at the 50-day moving average at about 2350. There’s more resistance at 2365, then 2373, and then finally at 2385. Bulls are going to have a tough time breaking through the 2385 level without the benefit of the energy that builds up by reaching extremely oversold levels.

On the downside, the S&P has support at 2336, then 2321. If the market falls today, then look for buyers to step in at the 2321 level.

Much of what happens today, though, is going to depend on the market’s reaction to the earnings announcements from the banking sector. J.P. Morgan (JPM), Wells Fargo (WFC), and Citigroup (C) are all scheduled to announce earnings before the market opens this morning. The banking sector tends to be a leading indicator for the broad stock market. If buyers step up to bid on the banks this morning, then look for seasonal strength to help rally the market today.

On the other hand, if the banking sector falters, look for the S&P to test its downside support levels.

Gold and Gold Stocks

Gold stocks continued to push higher yesterday. The VanEck Vectors Gold Miners Fund (GDX) is starting to get overbought, and may be in need of a rest. Take a look at this chart of GDX…

GDX closed above its upper Bollinger Band yesterday. Bollinger Bands indicate the most likely trading range for a stock or an index. Whenever a chart moves outside of its Bollinger Bands it indicates an extended move – one that is likely to reverse, or at least pause for a bit.

The red arrows on the chart show the five times, including yesterday, GDX closed above its upper Bollinger Band. Each of the four previous times this happened, it marked at least a short term top in gold stocks.

Traders should be cautious about buying gold stocks right here in such an overbought condition. We may getter a better chance to buy in the days and weeks ahead.

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

Best regards and good trading,

Jeff Clark

P.S. Send your comments and questions to me right here.