Now… before we get too carried away with this thought, let me admit… I think we’re on the verge of a violent short-term rally. And, if it kicks off today and\/or tomorrow, then the market can avoid triggering a bearish signal.<\/p>\n
But, if stocks can’t hold up over the next two days, then even I’ll have to admit the bull is dead. And, while we still might get a solid year-end rally, the S&P 500 will be headed sharply lower over the next year.<\/p>\n
Look at this long-term monthly chart of the S&P 500…<\/p>\n
![\"\"](\"https:\/\/jc-stable.s3.amazonaws.com\/ee-assets\/channels\/articles\/mm\/201810-mm\/20181030-MM-01.png\")
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The 20-month EMA is the defining line between a bull and bear market. As long as the S&P 500 ends the month above the line, then the bull market is intact. We can look forward to the strong seasonal period for stocks from November through April.<\/p>\n
But, if the S&P closes tomorrow below its 20-month EMA – currently at 2620 – then all bets are off. There’s a really good chance that the long-term bull market is over, and stocks are headed much lower in the months ahead.<\/p>\n
The red circles on the chart show the periods in late 2000 and late 2007 when the S&P closed below its 20-month EMA. Both of those periods led to short-term bounces in the stock market that allowed investors to liquidate positions into strength just before the market turned sharply lower. So, even if we get a sell signal tomorrow, we’ll still likely get a short-term bounce off of oversold conditions that allows us to sell into strength.<\/p>\n
In other words, we’re still likely to get a year-end rally no matter what happens in the next two days.<\/p>\n
But, if the S&P closes below its 20-month EMA tomorrow, then investors are probably better off selling into strength over the next few weeks than buying into weakness.<\/p>\n
Let’s see where we stand by tomorrow afternoon.<\/p>\n
Best regards and good trading,<\/p>\n
![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
<\/p>\n
Jeff Clark<\/p>\n
Reader Mailbag<\/strong><\/h2>\nIn today’s mailbag, readers give their take on investing in metals…<\/p>\n
\nI am bullish on copper, gold, and lithium. Lithium, I think, is a longer hold. I think gold is also a good commodity to hold, and with the higher interest rates on the horizon, I think it could come up a bit as well. I am not an experienced investor, but I try to read about what is trending and read what the experienced people are saying, then use my best judgment.<\/p>\n
I liked your article about copper<\/a>. I have some shares of NAK (Northern Dynasty Minerals). They are just penny stocks, but I figure a little bit to start out is better than nothing. Thank you and I will be watching for more articles.<\/p>\n– Bill<\/strong><\/p>\n<\/blockquote>\n<\/p>\n
\nCopper is due to walk on an upward trajectory. Instead of buying a stock specializing in copper mines, the safer bet is to scan and buy CPER (U.S. Copper Index Fund) or COPX (The Global X Copper Miners ETF). Enjoy the ride.<\/p>\n
– Rakesh<\/strong><\/p>\n<\/blockquote>\n
I am bullish on copper, gold, and lithium. Lithium, I think, is a longer hold. I think gold is also a good commodity to hold, and with the higher interest rates on the horizon, I think it could come up a bit as well. I am not an experienced investor, but I try to read about what is trending and read what the experienced people are saying, then use my best judgment.<\/p>\n
I liked your article about copper<\/a>. I have some shares of NAK (Northern Dynasty Minerals). They are just penny stocks, but I figure a little bit to start out is better than nothing. Thank you and I will be watching for more articles.<\/p>\n – Bill<\/strong><\/p>\n<\/blockquote>\n <\/p>\n Copper is due to walk on an upward trajectory. Instead of buying a stock specializing in copper mines, the safer bet is to scan and buy CPER (U.S. Copper Index Fund) or COPX (The Global X Copper Miners ETF). Enjoy the ride.<\/p>\n – Rakesh<\/strong><\/p>\n<\/blockquote>\n\n