{"id":20366,"date":"2022-11-21T07:30:37","date_gmt":"2022-11-21T12:30:37","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=20366"},"modified":"2022-11-21T07:30:37","modified_gmt":"2022-11-21T12:30:37","slug":"neutrality-is-the-most-dangerous-area-for-the-market","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/neutrality-is-the-most-dangerous-area-for-the-market\/","title":{"rendered":"Neutrality Is the Most Dangerous Area for the Market"},"content":{"rendered":"

$3 trillion<\/em>…<\/p>\n

That’s more money than the entire annual GDP of the U.K., France, and Italy.<\/p>\n

It’s also how much the world’s biggest tech stocks – like Alphabet (GOOGL), Microsoft (MSFT), and Meta Platforms (META) – lost in combined value by October.<\/p>\n

Almost nobody was safe.<\/p>\n

But since then, the tech sector has been able to stage a small comeback because it’s very sensitive to interest rate fluctuations.<\/p>\n

Higher interest rates – or even the prospect of higher rates – tends to push tech stock valuations lower.<\/p>\n

And with inflationary data slightly softening, the market has gotten bullish on tech once more…<\/p>\n

The hope is that the Fed will look at this data and consider softening their current rate-hiking stance.<\/p>\n

As a result, the SPDR Technology ETF (XLK) has rallied 20% off its October 13 lows.<\/p>\n

But is this just a relief rally in an ongoing bear market? Or is it possible this rally has some real legs underneath it?<\/p>\n

Let’s look at a price chart of XLK to find out…<\/p>\n

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

The key features of this chart are the two moving averages (MA).<\/p>\n

The 100- and 200-period MAs (blue and green lines) are long-term… And they usually do a great job of showing us the underlying trend.<\/p>\n

Here’s an easy way to use these two MAs…<\/p>\n

If price is trading above the averages, then we’re in an uptrend… if price is trading below the averages, then we’re likely in a downtrend.<\/p>\n

As you can see, XLK has been trading below both moving averages for a while.<\/p>\n

But now, prices have poked above the 100-period MA while remaining below the 200-period MA.<\/p>\n

When we’re between moving averages like this, the market can enter a state of neutrality.<\/p>\n

There’s still downward pressure on XLK, but there’s clearly some buying interest that’s entered the market.<\/p>\n

The question is whether this interest is enough to carry XLK above both moving averages.<\/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

Such an event would result in a potential reversal of the downtrend that’s been in place for most of this year.<\/p>\n

If XLK can’t break above the 200-period MA, then we’re likely headed lower. This is what happened with XLK back in early August.<\/p>\n

Take another look…<\/p>\n

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

The market was able to break above the 100-period MA but stalled out against the 200-period MA. And this led to XLK breaking down to new lows at the end of September.<\/p>\n

For traders, a market is at its most dangerous when it’s in a state of neutrality because prices could break either way.<\/p>\n

I prefer to scale out of any existing positions as a market moves toward these areas.<\/p>\n

Then, I’ll wait and see which way the market will break… It can’t stay neutral forever.<\/p>\n

Once the next directional move is clear, I’ll hop back onboard.<\/p>\n

That’s the key to good trading… keep it as simple and stress free as possible.<\/p>\n

Happy trading,<\/p>\n

Imre Gams
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

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

What do you think is the next move for the tech sector?<\/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":"

When we\u2019re between moving averages like this, the market can enter a state of neutrality…<\/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":[76],"newsletter-type":[],"ticker":[],"class_list":["post-20366","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-imre-gams"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20366","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=20366"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20366\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=20366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=20366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=20366"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=20366"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=20366"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=20366"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=20366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}