{"id":23849,"date":"2025-04-29T07:30:00","date_gmt":"2025-04-29T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=23849"},"modified":"2025-08-22T08:30:08","modified_gmt":"2025-08-22T12:30:08","slug":"dont-get-caught-in-the-bull-trap","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/dont-get-caught-in-the-bull-trap\/","title":{"rendered":"Don\u2019t Get Caught in the Bull Trap"},"content":{"rendered":"\n

The talking heads have flipped.<\/p>\n\n\n\n

 All those financial TV analysts who were preaching caution last Monday as the S&P was nearing 5100 are now talking bullish. \u201cGet in now\u201d they cheer as the index is trading 400 points higher.<\/p>\n\n\n\n

Somehow, I suspect folks will regret that advice in the days ahead.<\/p>\n\n\n\n

Last week\u2019s action felt like a \u201cbull trap.\u201d That\u2019s when reluctant bulls get coaxed back into the market just in time for the bear to take another swipe.<\/p>\n\n\n\n

At first glance, there was nothing wrong with the action last week. The rally started slowly and then gained strength throughout the week as a steady stream of buyers kept showing up. Typically, this is bullish action.<\/p>\n\n\n\n

But not when it creates extremely overbought conditions.<\/p>\n\n\n\n

Look at these charts of the McClellan Oscillators\u2026<\/p>\n\n\n\n

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

\"\"<\/figure>\n\n\n\n

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

NYMO and NAMO closed above their upper Bollinger Bands, and above the +60 level for two straight days.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Three days above the line is rare. Four days is almost unheard of. And, I don\u2019t ever recall seeing this condition for five days.<\/p>\n\n\n\n

The Oscillators also closed at their highest levels of the past year. The two previous times NYMO and NAMO got this high \u2013 in mid-January, and last July \u2013 the stock market struggled.<\/p>\n\n\n\n

Here\u2019s the S&P 500 chart\u2026<\/p>\n\n\n\n

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

\"\"<\/figure>\n\n\n\n

Folks who bought stocks at either of those two points regretted doing so shortly afterwards.<\/p>\n\n\n\n

Yesterday, as the market approached the opening bell, the S&P 500 was trading 143 points above its 9-day EMA. That\u2019s an extended, overbought condition.<\/p>\n\n\n\n

Yes\u2026 it is possible the S&P could run up towards it 50-day MA near 5650. A bullish trade headline could do the trick. At some point though, the early April low below 5000 needs to be retested.<\/p>\n\n\n\n

So, we have roughly 150 points of potential upside versus 500 points of downside.<\/p>\n\n\n\n

That seems to be a rather poor risk\/reward setup.<\/p>\n\n\n\n

That doesn\u2019t mean traders should be betting on the downside and loading their portfolios with short-selling trades. But, it seems ill-advised to chase stocks higher with the technical indicators in extremely overbought territory.<\/p>\n\n\n\n

All throughout the month of April I\u2019ve suggested folks buy into weakness and sell into strength.<\/p>\n\n\n\n

That has been a profitable strategy.<\/p>\n\n\n\n

Now, though, as the strength is relentless, and we find ourselves with nothing left to sell, there\u2019s a strong temptation to buy anything just to be involved in the rally.<\/p>\n\n\n\n

That is what a bull trap feels like.<\/p>\n\n\n\n

Don\u2019t get caught in it.<\/p>\n\n\n\n

Best regards and good trading,<\/p>\n\n\n\n

\"Signature\"\/<\/figure>\n\n\n\n

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

Jeff Clark
Editor, Market Minute<\/em><\/p>\n\n\n\n

\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff\u2019s 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<\/div>\n","protected":false},"excerpt":{"rendered":"

The talking heads have flipped\u2026 don\u2019t get caught in the bull trap.<\/p>\n","protected":false},"author":100,"featured_media":0,"comment_status":"closed","ping_status":"0","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-23849","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/23849","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\/100"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=23849"}],"version-history":[{"count":2,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/23849\/revisions"}],"predecessor-version":[{"id":25037,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/23849\/revisions\/25037"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=23849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=23849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=23849"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=23849"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=23849"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=23849"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=23849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}