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Longtime readers know I use this chart to define bull and bear markets. If the S&P 500 is trading above its 20-month EMA, stocks are in a bull market. If the index is trading below the line, the bear is in charge.<\/p>\n
The MACD<\/a> indicator at the bottom of the chart provides one of the early warning signs of a bear market.<\/p>\n Without getting too complicated, if the black MACD line is trading above the red line, stocks are in a bull market. When the black line crosses below the red line, traders need to be on the lookout for the bear.<\/p>\n Notice how in 2000 and 2007, the MACD indicator gave us that “bearish cross” from extremely overbought conditions. In both cases, the S&P 500 dropped into a bear market a few months later.<\/p>\n Of course, you’ll notice the S&P 500 also dropped below its 20-month EMA in 2010 and 2011. But, in both of those situations the MACD was more neutral than overbought. There wasn’t a bearish cross in 2010. And in 2011, the bearish cross reversed just one month later.<\/p>\n So, we didn’t have the conditions necessary for a bear market.<\/p>\n Today, though, the storm clouds look a little more ominous.<\/p>\n The MACD indicator completed a bearish cross last November. And, it hasn’t yet reversed (as it did in 2010 and 2011). That’s a significant warning sign.<\/p>\n The stock market has recovered from December’s breakdown. And, the S&P 500 did manage to make a new all-time high in April. But, that action has created negative divergence on both the MACD and Relative Strength Index (RSI)<\/a> indicators.<\/p>\n Negative divergence – when a chart makes a higher high but an indicator makes a lower high – tells us that the momentum behind the rally is waning. It’s a sign of a potential change in trend from a bull market to a bear market.<\/p>\n This is just one of the reasons that suggests to me that the stock market may be heading for a crash later this year. I’ll share a few more reasons in a special presentation tonight (click here to reserve a seat<\/a>).<\/p>\n For now, the S&P 500 is still trading above its 20-month EMA. So, the bull market is still intact. But, there are plenty of caution signs.<\/p>\n So, like I said earlier, maybe you might want to carry an umbrella. You know… just in case.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S. <\/strong>Tonight’s the night where I’ll fully lay out my case for a 2019 market crash.<\/p>\n Whether you agree with me or not, I urge you to join tonight’s broadcast. Why?<\/p>\n Because if you’re invested in this market, everything you’ve built over the past 11 years is at risk. And I know the one technique you need to use<\/a> to protect yourself, and profit, when (not if) the market crashes. During tonight’s presentation, you’ll learn what it is and how to start using it.<\/p>\n You won’t have many more chances to learn this technique… Sign up right here.<\/a><\/p>\n In today’s mailbag, a Delta Report<\/em> subscriber shares their current trading strategy…<\/p>\n My approach to this impending flood will be relying on your predictions… and I thank you, in advance, for your sincere effort to save my bacon.<\/p>\n – Michael<\/strong><\/p>\n<\/blockquote>\n What’s your “carry-an-umbrella” strategy for volatile market action? How are you preparing for a potential market crash?<\/p>\n![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
<\/p>\nReader Mailbag<\/strong><\/h2>\n
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