{"id":21087,"date":"2023-07-31T07:30:06","date_gmt":"2023-07-31T11:30:06","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=21087"},"modified":"2023-07-31T07:30:06","modified_gmt":"2023-07-31T11:30:06","slug":"why-this-market-is-resilient","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/why-this-market-is-resilient\/","title":{"rendered":"Why This Market is Resilient"},"content":{"rendered":"

On July 3, readers were alerted to a short-term target of 4512 in the S&P 500 (SPX)<\/a>. Just ten days later, the market reached this level.<\/p>\n

And now that the Fed’s most recent decision on interest rates is behind us, it’s time to assess the market with fresh eyes.<\/p>\n

Last Wednesday, the central bank raised rates by another 25 basis points.<\/p>\n

Usually, such an event would result in considerable volatility in the markets. But not this time…<\/p>\n

In fact, the initial reaction to the interest rate hike was quite muted.<\/p>\n

By the end of the trading session on Wednesday, SPX had gone nowhere for the entire day.<\/p>\n

\"Image\"<\/p>\n

There are two key features to this price chart.<\/p>\n

First, we have bearish divergence in the Relative Strength Index (RSI). This is a common occurrence near market tops.<\/p>\n

Notice how the RSI actually peaked in the middle of June. Since then, prices have gone higher, but the indicator has trended lower.<\/p>\n

This is a sign that bullish momentum is getting exhausted.<\/p>\n

The second important feature is how prices are testing the upper boundary line of the parallel channel. Channels are a great way to forecast potential turning points in the market.<\/p>\n

Hitting the resistance line of the channel in combination with the bearish momentum seen in the RSI should have traders on high alert.<\/p>\n

<\/p>\n

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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<\/p><\/div>\n<\/div>\n

<\/p>\n

But there’s no doubt that this market is proving to be very resilient. Since putting in a bottom on March 14, SPX has rallied over 20%.<\/p>\n

It’s very possible the market will ignore these bearish signals and just keep trading higher.<\/p>\n

The truth is that trading and market forecasting are separate disciplines, even though they are closely related.<\/p>\n

The major difference between forecasting a market and trading it is the risk involved. Simply making a market call doesn’t usually cost anything, except for wounded pride. Trading on the other hand, can definitely cost you money.<\/p>\n

That’s why all successful traders know that the key to consistent profitability is all about risk management. And right now, the risk is getting heavily skewed to the downside.<\/p>\n

In other words, the market likely has a lot less room to go higher than it does to go lower.<\/p>\n

In terms of how to use this analysis, you have options. Which choice is right for you ultimately depends on a combination of your personal risk tolerance and the kind of trader you are.<\/p>\n

Short-term traders, for example, could look to play the downside by buying puts. Long-term investors, however, could look to take profits or move up stops to protect any profitable positions.<\/p>\n

As the market continues to unfold, I’ll be sure to keep you updated on whether the odds of a greater sell-off are getting higher or not.<\/p>\n

Until then, happy trading,<\/p>\n

Imre Gams<\/p>\n

<\/p>\n

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READER MAILBAG<\/h2>\n<\/div>\n

Are you a short-term trader, or long-term trader? Why?<\/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":"

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