{"id":20601,"date":"2023-02-15T07:30:46","date_gmt":"2023-02-15T12:30:46","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=20601"},"modified":"2023-02-15T07:30:46","modified_gmt":"2023-02-15T12:30:46","slug":"these-clues-show-us-where-the-market-is-heading-next","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/these-clues-show-us-where-the-market-is-heading-next\/","title":{"rendered":"These Clues Show Us Where the Market Is Heading Next"},"content":{"rendered":"

Both market optimists and doomsayers are out in full force following the recent economic data.<\/p>\n

Their goal is to determine whether the stock market is headed for a boom or bust.<\/p>\n

And there’s plenty of evidence for either camp.<\/p>\n

The payrolls report for January showed that 517,000 jobs were created – that’s more than double economists’ estimates. This suggests a “soft landing” for the economy where a recession is avoided.<\/p>\n

But that puts pressure on the Federal Reserve to keep raising interest rates in a bid to cool the economy and keep lowering inflation. We saw how stocks responded to that last year with a 19% drop in the S&P 500.<\/p>\n

For investors, it might seem like a coin flip to know which camp will prevail.<\/p>\n

But instead of turning trading into guesswork, there’s a better way to discover a clearer picture of where things are heading.<\/p>\n

You just have to sift through the clues being left by the stock market… because buried within the market’s sector trends, price is telling you what lies ahead.<\/p>\n

Follow the Leaders<\/h2>\n

The stock market is a discounting mechanism for future business conditions. That means the market typically turns before key inflection points in the economy.<\/p>\n

And just as the market can reflect the state of the economy, certain sectors can tell you about the health of the stock market.<\/p>\n

For example, last year it was defensive groups like consumer staples leading the way. When companies that are known for being recession-proof are holding up the best, it can be a bad sign of things to come.<\/p>\n

You can see that in the chart below, which plots a ratio of consumer staples stocks against the S&P 500…<\/p>\n

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

A rising line means staples are outperforming, and vice versa.<\/p>\n

You can see that consumer staples took the lead and crossed above the 200-day moving average (MA – orange line) back in January 2022 just as the bear market got underway (red circle).<\/p>\n

Just like how defensive groups can signal a bad market incoming, there are industries sensitive to positive developments in the economy.<\/p>\n

When they perk up, it can be a good sign of things to come for stocks.<\/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

The Message from an Economic Bellwether<\/h2>\n

Companies in cyclical areas of the economy can deliver timely insights about the stock market. It’s also a way of evaluating markets that’ve been around for a hundred years.<\/p>\n

You might have heard of something called “Dow Theory”…<\/p>\n

It’s a framework built on the research of Charles Dow, who in the late 1800s would confirm (or deny) bullish action in the stock market by looking at railroad companies… a new and innovative industry at the time.<\/p>\n

The rationale is simple. Good times coming for the economy would surely be reflected by railroad stocks discounting a boost in profits ahead.<\/p>\n

These days, semiconductor (or chip) companies are among those most sensitive to changes in the economy. That’s because chips are the building blocks of our electronic devices.<\/p>\n

To see what I mean, take a look at what’s been happening in the chips sector. The chart below shows the ratio of chip stocks to the S&P 500…<\/p>\n

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

After bottoming in October, chip stocks have outperformed the S&P 500 and sustained a crossover above the 200-day MA in early January as the market was heating up (red circle).<\/p>\n

So, while warning signs over the economic outlook are abundant, the message coming from the stock market is clear.<\/p>\n

The trend of rallying stock prices is being supported by the right sectors, and signals more gains are in store.<\/p>\n

Best regards,<\/p>\n

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

<\/p>\n

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

In today’s mailbag, a Currency Trader<\/a><\/em> member shares their experience…<\/p>\n

\n

I am excited about trading the Currency Trader<\/em>. I have done options, but they are expensive for me, and I’m happy to hear I can start low and build up. I believe I can trust what you say, and I’ll follow your instructions. Thank you and have a great weekend.<\/p>\n

– Bobby H.<\/strong><\/p>\n<\/blockquote>\n

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com<\/a>.<\/p>\n

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

This sector is sending a positive message for stocks\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":[82],"newsletter-type":[],"ticker":[],"class_list":["post-20601","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\/20601","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=20601"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20601\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=20601"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=20601"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=20601"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=20601"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=20601"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=20601"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=20601"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}