{"id":19848,"date":"2022-06-28T07:30:16","date_gmt":"2022-06-28T11:30:16","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19848"},"modified":"2022-06-28T07:30:16","modified_gmt":"2022-06-28T11:30:16","slug":"relief-rally-no-7-just-might-stick","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/relief-rally-no-7-just-might-stick\/","title":{"rendered":"Relief Rally No. 7 Just Might Stick"},"content":{"rendered":"

We\u2019re now in the middle of the seventh relief rally of the year\u2026<\/p>\n

That\u2019s a lot of rallies\u2026 with no real relief.<\/p>\n

After dropping 12% from its recent Memorial Day peak (the apex of its previous relief rally), the market has been on a tear, rising 6.5% since June 16. <\/p>\n

And with each bear market rally that fails, skepticism grows about the next one.<\/p>\n

But this recent rally may have the best chance of them all – or at least last longer than the previous six – because of some good old-fashioned trade location.<\/p>\n

The Importance of Trade Location<\/h2>\n

Good trade location is what happens when you “buy low and sell high.”<\/p>\n

Obviously, it’s easier said than done and is the most simplistic of Wall Street cliches.<\/p>\n

That’s because in hindsight, it seems like a no-brainer.<\/p>\n

The problem has more to do with the emotional side of investing than anything fundamental.<\/p>\n

You see, when everyone is fearful it’s hard to buy low. That’s because it always seems prices can drop even lower.<\/p>\n

And it’s hard to sell high when everyone seems to have lost their minds during the bubble-induced melt-ups like we saw in 2021.<\/p>\n

But those opportunities, although emotionally difficult, are usually the best.<\/p>\n

And paying very<\/em> close attention to the collective market’s trade location is something even fundamental, long-term oriented investors need to pay attention to.<\/p>\n

That’s why on June 10<\/a>, I called the previous relief rally into question. I wrote…<\/p>\n

\n

Here’s what concerns me now… When you combine all the recent price action since the lows, the volume profile shows investors chased this rally near the highs around 4125.<\/p>\n

In the chart below, you can see how all that volume accumulated around this area… The buyers already bought, just at the wrong price.<\/p>\n<\/blockquote>\n

Here’s that chart again…<\/p>\n

\"Chart\"<\/div>\n

Buying the rally at the highs is an example of the market collectively having poor trade location.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

A Change of Scene<\/h2>\n

But the current relief rally has the opposite dynamic at play.<\/p>\n

Investors gained excellent trade location this time around by buying low.<\/p>\n

And some brave souls actually bought the bottom.<\/p>\n

Take a look at the volume profile for the S&P 500 futures from the start of this current rally…<\/p>\n

\"Chart\"<\/div>\n

It shows the S&P 500’s volume profile in green overlaid on its intraday price chart…<\/p>\n

This time, most investors bought around the 3775 area. But even more astute ones bought lower at 3675.<\/p>\n

This is the reverse of the failed rally leading into Memorial Day, where most people chased the highs at 4125.<\/p>\n

When most people buy into a rally at the highs, they’re more prone to let go at the worst possible time. And events that seem<\/em> like gamechangers, are usually the ones that trigger stop losses.<\/p>\n

That’s why in that same essay, I wrote…<\/p>\n

\n

With the Volatility Index (VIX) still above 25, a Fed meeting next Wednesday, and a big quad witching futures and options expiry next Friday… prices are guaranteed to fluctuate heavily. That means stop losses are likely to get triggered at the wrong time.<\/p>\n<\/blockquote>\n

And that’s exactly what happened.<\/p>\n

But all these events are behind us now, with new buy-ins well positioned 3-6% below current levels.<\/p>\n

With new money coming into the market at the right price <\/em>and at the right time<\/em>, they’ll be prone to hold on and fight through any random negative reaction from economic events or headlines.<\/p>\n

Which is why I’m angling to buy dips until the market regains its 50-day average price around 4025, with a stop below 3775…<\/p>\n

The upcoming earnings season kickoff on June 14 will have a lot to say about which level gets hit first.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Will you be buying the market dips?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Good old fashioned trade location is a game-changer\u2026<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19848","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19848","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19848"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19848\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19848"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19848"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19848"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19848"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19848"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19848"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19848"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}