The S&P popped 45 points higher at the opening yesterday. By the close of trading, it was up a remarkable 70 points. That’s one of the largest gains ever for the index.
And my Market Minute readers were ticked off.
You see, I wrote yesterday that the market was poised for a bounce. Conditions were oversold enough to justify it. And that’s exactly what happened.
But, in order to take advantage of that situation, you would have had to be willing to buy stocks into the close of trading on Friday.
Good heavens, I’m an aggressive trader. I make my living profiting off of extreme conditions… and even I wasn’t willing to buy into the close on Friday.
But when I looked at the various technical indicators I follow over the weekend, it seemed obvious the market was set up for a bounce. That’s when I wrote up Monday’s Market Minute and sent it to my publisher early on Saturday morning.
You see… I always write the Market Minute at least a day before it’s published. The publisher needs time to edit it and post it before it gets emailed to you.
So, my comments don’t always reflect whatever’s happening in the overnight futures market. Whatever you see from me at 7:30 a.m. ET reflects what I was looking at the day before.
But that shouldn’t discount the value of what you read here.
I was skeptical of the January rally. I told you multiple times that the parabolic move was going to end badly. And I advised against buying stocks as the S&P rallied above 2850.
Then, when the correction finally hit, I suggested three levels at which to buy stocks for a short term move higher – 2650, 2595, and 2530. No matter where you bought, you had a terrific chance to profit as the S&P rallied above my upper target at 2730.
Then I told you to sell. The market was likely to at least retest the February lows. So, you ought to have taken profits on whatever stocks you bought in anticipation of an oversold bounce.
That’s exactly what happened.
The S&P 500 dipped down to 2588 on Friday. Conditions were wickedly oversold. On Saturday morning, as I was reviewing the various technical indicators, it looked obvious that the market was set up for a bounce. So, on Saturday morning, I wrote the Market Minute that published on Monday.
The market popped higher at the opening on Monday. And I got the predictable complaints of “why didn’t you tell us to buy stocks on Friday?”
So, here’s what I’m going to do today… I’m going to tell you where I think stocks will be in the weeks ahead, and how you can best trade them going forward.
You can argue. You can moan and complain that I’ve steered you wrong. You can fight my position. But, just as if you were cautious on the parabolic move higher in January, and bought into the early February lows, and then sold in March in anticipation of a retest of the lows, you ought to be able to profit off of my thoughts here…
The S&P 500 just retested the February closing low near 2581. It did so with oversold conditions – the index was 100 points below its 9-day EMA. So, a bounce seems logical at this point.
The Volatility Index (VIX) just triggered a buy signal by closing back inside its Bollinger Bands. So, in the short term, stocks should be headed higher from here.
But the recent pullback occurred without creating positive divergence on any of the technical indicators. It would be unlikely for the market to rally back to new all-time highs without that setup in place. So, any bullish move is likely to create a lower high on the daily chart of the S&P 500.
In other words, traders should look for this current rally to peak somewhere between 2700 and 2730 on the S&P 500. After that, look for another move down to retest the 2580 February low. That’s where traders should look to be aggressively adding long exposure.
Best regards and good trading,
Jeff Clark
P.S. Here in the Market Minute, I focus on making calls on the broad market indexes that anyone can use to profit. But in my option trading advisory, the Delta Report, we put those predictions to work with specific trading guidance.
If you’d like to learn more about what we do in the Delta Report, and why now may be the best time to join, click here.
Reader Mailbag
Today, a few words of praise from Delta Report readers…
Hi Jeff, Love your work! Let’s see if we can find something to slingshot on the upcoming rebound.
– Ronald
Jeff, I’m ready and stoked for this market plunge! And I couldn’t be in this great shape without you informing and advising us along this journey. We had correction advisories in August and November, allowing us to improve our portfolios, and a parabolic soar in January, giving notice that a correction was likely imminent. I managed to take profits in January and mid-February near/at stock peaks, raising 11% of my portfolio as cash, which was quite a struggle because almost everything has earned profits in recent months, but we need cash to buy low when we retest Feb. low
I too think, for now, that the market will fall a bit further than in February, not just because of parallels to Black Monday 1987 and Debt Ceiling Debacle 2011 corrections, which you pointed out in February, but because Trump’s turmoil with tariffs, Tillerson, and trade war talk has justifiably spooked the market, and bidders have lost interest in risking losses. Since Trump tried to take credit for the bull market, which really resumed globally in 2016 Q2, I’ll be sure to thank him again next time he’s in Palm Beach, with the bargain prices he’s helped realize.
– Tim
Jeff, that was a great call on Volatility today (3/23/18). I don’t trade any of your recommendations on selling puts because my broker (Merrill Lynch) requires 100% reserve on the underlying stock which really ties up my trading capital. I do trade most (80%) of your recs on buying PUTS & CALLS, and some straight up Stock BUYS. But the main reason I took advantage of your Lifetime Subscription offer is because of your Market Minute comments which are pretty darn accurate and I have learned a lot from you over the years. Your knowledge of technical analysis is truly exemplary!
I like the way you inform us if one of your calls is overly speculative so we can choose not to trade them and wait for a less-risky trade rec. Keep up the good work. I look forward to trading with you for a long time to come. Best wishes to you and the family.
– Duncan
Dear Jeff, thank you for your continued willingness to educate new traders like me. I have been with you since June 2017 and have learned a lot of very useful information about technical analysis and the market in general. Your insights have helped to make me a better investor and trader. I read every article you send out – Market Minute, Delta Direct, and Delta Report. I have even checked out archived articles with the Search feature. Saturday morning’s Delta Direct blog post (“My Plea to the Market Gods“) had me anxious to see how the market opened Monday!
– Douglas
We’re always eager to hear your trading stories and experiences, as well as any questions or suggestions about your service. Please keep them coming right here.
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