{"id":20085,"date":"2022-09-07T07:30:05","date_gmt":"2022-09-07T11:30:05","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=20085"},"modified":"2022-09-07T07:30:05","modified_gmt":"2022-09-07T11:30:05","slug":"when-doves-cry","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/when-doves-cry\/","title":{"rendered":"When Doves Cry"},"content":{"rendered":"

Fed Chairman Jerome Powell’s latest speech at Jackson Hole made it clear that a dovish pivot was not<\/em> in the works.<\/p>\n

Since then, the doves have been crying.<\/p>\n

Most notably, Powell commented that “restoring price stability will likely require maintaining a restrictive policy stance for some time.”<\/em><\/p>\n

He also acknowledged that the Fed’s primary avenue for fighting inflation is to reduce aggregate demand – another term for overall economic activity. And the past week has seen several reports that the economy is still going strong…<\/p>\n

Payrolls roughly matched expectations with the addition of 315,000 jobs in August, while manufacturing activity continues to expand at a modest pace according to the most recent ISM data.<\/p>\n

That gives the Fed a green light to keep raising rates and reducing their $8.9 trillion balance sheet, which weighs on stocks as the Fed drains liquidity from the financial markets.<\/p>\n

So good news on the economic front has become bad news for investors… That helps explain the 9% decline in the S&P 500 since mid-August.<\/p>\n

But before you assume we’re amid the next big plunge in stock prices, you should peek under the stock market’s hood first…<\/p>\n

Washed Out<\/h2>\n

With three straight weekly declines in the S&P 500, it feels like stocks can only keep falling at this point.<\/p>\n

But that’s what makes trading bear markets so tricky. Just when you’re convinced that the next move is lower… bear market rallies can come from out of nowhere.<\/p>\n

In fact, some of the most epic rallies over a short time have happened right in the middle of bear markets.<\/p>\n

For example, during the “dot-com” bust the S&P 500 ultimately fell 50% from its 2000 high to the low in 2002.<\/p>\n

But during that plunge, there were at least three<\/em> bear market rallies that gained an average of 20% in just a few months or less!<\/p>\n

Or just take 2022, for example, in the chart below.<\/p>\n

After falling 23% on the year through mid-June, the S&P 500 went on a tear… rallying 17% in just two months before this latest swoon.<\/p>\n

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

So how do we know what comes next?<\/p>\n

Well, I put these bear and bull trends under the microscope by evaluating what’s happening underneath the hood. Participation in a trend can tell you a lot about its ability to continue or reverse.<\/p>\n

One way I do that is by tracking an indicator called the McClellan Oscillator. This metric examines the momentum behind how many stocks are advancing versus declining on the New York Stock Exchange.<\/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

One way to utilize this breadth measure in assessing the stock market’s trend is to look at the extreme highs and lows.<\/p>\n

That’s an indication that a trend has run its course, and to be on the lookout for a reversal.<\/p>\n

The current pullback in the stock market since mid-August made the McClellan Oscillator the most oversold since the pandemic bear market in 2020.<\/p>\n

You can see that in the chart below…<\/p>\n

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

Because of such an oversold level, it’s a good sign the market is gearing up for a rally.<\/p>\n

However, it’s not enough to rely on any single indicator to determine market direction.<\/p>\n

So, I’ll need to see confirmation from other measures like price action to verify these oversold readings.<\/p>\n

In the meantime, I’m patiently waiting for the right opportunity to play a bounce.<\/p>\n

And next week, I’ll show you the key sector on my radar right now… And how to trade it for a profit.<\/p>\n

Best regards,<\/p>\n

Clint Brewer
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

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

What other trends do you follow to gauge market action?<\/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":"

Dry your eyes\u2026 a tactical buying opportunity in stocks has arrived…<\/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":[82],"newsletter-type":[],"ticker":[],"class_list":["post-20085","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-clint-brewer"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20085","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=20085"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20085\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=20085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=20085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=20085"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=20085"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=20085"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=20085"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=20085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}