{"id":19981,"date":"2022-08-08T07:30:36","date_gmt":"2022-08-08T11:30:36","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19981"},"modified":"2022-08-08T07:30:36","modified_gmt":"2022-08-08T11:30:36","slug":"watch-out-for-this-short-term-caution-sign","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/watch-out-for-this-short-term-caution-sign\/","title":{"rendered":"Watch Out for This Short-Term Caution Sign"},"content":{"rendered":"

Last week, we took a look<\/a> at a reason to be concerned about the intermediate and longer-term view of the stock market.<\/p>\n

Today, we have a reason to be concerned about the short term.<\/p>\n

Look at this chart of the bullish percent index for the S&P 500 (BPSPX)…<\/p>\n

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

A bullish percent index measures the percentage of stocks in a sector or an index trading with positive technical patterns. It’s a percentage. So, it can only drop as low as zero or rally as high as 100.<\/p>\n

Most sectors are overbought when the bullish percent index rallies above 80. Most sectors are oversold when the index dips below 20.<\/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

But, when it comes to broad-based indexes – like the S&P 500 – which hold stocks in multiple sectors, the parameters are a little tighter. The S&P 500 is overbought when the bullish percent index climbs above 70. And it’s oversold when the BPSPX dips below 30.<\/p>\n

Trading signals occur when the BPSPX reaches overbought or oversold levels and then reverses.<\/p>\n

For example, the red arrows on the chart point to the four times over the past year when the BPSPX turned lower from overbought conditions – thereby generating a sell signal.<\/p>\n

Here’s how the S&P 500 performed following the first three of those signals…<\/p>\n

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

In all three cases, the S&P 500 started to decline within just a few days of the BPSPX sell signal.<\/p>\n

The index fell 200 points in one week last November. It lost 450 points in less than one month in January. And, the S&P 500 dropped over 900 points in less than three months following the sell signal in late March.<\/p>\n

This is important because if you take another look at the BPSPX chart, we got another sell signal on Friday. So, we’re likely to start another short-term decline as early as this week.<\/p>\n

The stock market is likely to be lower in the weeks ahead than where it is today.<\/p>\n

And, if you recall the monthly chart of the S&P 500 that I shared with you last Monday, a weak August will spell trouble for the stock market going into the traditionally weak months of September and October.<\/p>\n

Traders should be careful here.<\/p>\n

Until the BPSPX works off its current overbought condition, there’s limited upside to the stock market.<\/p>\n

The downside could be substantial.<\/p>\n

Best regards and good trading,<\/p>\n\n\n
\"signature\"<\/td>\n<\/tr>\n<\/table>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

Do you think we\u2019re headed for more downside?<\/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":"

Let’s take another look at this key indicator\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":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19981","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19981","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=19981"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19981\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19981"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19981"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19981"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19981"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}