![\"\"](\"http:\/\/assets.jeffclarktrader.com\/ee-assets\/channels\/articles\/Screen_Shot_2017-09-28_at_11.09.17.png\")
<\/p>\n\tThe S&P 500 is at a critical spot.<\/p>\n
\tFor the past three weeks, the index has chopped around in a tight trading range, building up energy for the next big move.<\/p>\n
\tThe S&P plunged 12 points on Monday – in as much as you can call a 0.5% decline a “plunge” – where it tested the bottom of the trading range. Then the index “rocketed” 10 points higher yesterday – where it tested the top of the range.<\/p>\n
\tLook at this 15-minute chart to see what I’m talking about…<\/p>\n
\t<\/p>\n
\tIf this pattern continues, then the next move should be another dip down toward the bottom of the trading range.<\/p>\n
\tBut I think there’s a bigger pattern about to play out. Let me explain…<\/p>\n
\tTechnology stocks tend to lead the market. Indeed, it has been the strength in the technology sector that has provided the biggest boost to the broad stock market this year. And it was largely the selloff in tech stocks on Monday that caused the “plunge” in the S&P 500.<\/p>\n
\tOf course, tech stocks bounced back hard yesterday, and we got a corresponding pop in the broad stock market.<\/p>\n
\tSo… my point is that the technology sector is likely to lead the next big move in the stock market. And that’s where we have a problem.<\/p>\n
\tLook at this chart of the Technology Select Sector SPDR Fund (XLK)…<\/p>\n
\t![\"\"](\"http:\/\/assets.jeffclarktrader.com\/ee-assets\/channels\/articles\/Screen_Shot_2017-09-28_at_11.24.36.png\")
<\/p>\n
\tFor the past few months, XLK has been tracing out a bearish rising wedge pattern on the chart. The MACD momentum indicator has been diverging negatively as well (meaning that as XLK has been making new highs, the MACD has failed to make new highs).<\/p>\n
\tThis sort of pattern usually breaks to the downside. And that’s what happened on Monday.<\/p>\n
\tRather than producing a sharp and sudden selloff, though, XLK found support at its 50-day moving average (MA) and then bounced.<\/p>\n
\tOftentimes, that’s what happens when a strong stock first breaks down from a bearish pattern. Stocks that are in strong uptrends usually don’t break through that support on the first attempt. And it’s quite common for stocks to bounce off that initial support level.<\/p>\n
\tSince Monday, XLK has bounced. It’s now trading right back up to the former support line of the rising wedge pattern. This level is now resistance.<\/p>\n
\tIf XLK is going to turn back down and head lower, then this is where the bounce should end. And, if XLK turns lower from here, then there’s a stronger chance it will break below the support of its 50-day MA on the second attempt to do so. That will bring the next support line, at $56.50, into play.<\/p>\n
\tThat will be bad news for the broad stock market.<\/p>\n
\tLook at this daily chart of the S&P 500…<\/p>\n
\t![\"\"](\"http:\/\/assets.jeffclarktrader.com\/ee-assets\/channels\/articles\/Screen_Shot_2017-09-28_at_11.26.08.png\")
<\/p>\n
\tThis chart is showing a similar bearish rising wedge pattern.<\/p>\n
\tIf the technology sector turns lower, then the S&P is quite likely to break this wedge to the downside. At a minimum, that should bring the 50-day MA, at 2472, into play.<\/p>\n
\tFor the next few days, keep an eye on tech stocks. They’ll lead the next big move in the stock market.<\/p>\n
\tBest regards and good trading,<\/p>\n
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<\/div>\n\tJeff Clark<\/p>\n
\tP.S.<\/strong> One of the best things about my Delta Report<\/em> strategy is that it works in any market – whether it’s going up, down, or sideways. It’s how my readers are able to reap gains like 185% in just 24 hours… no matter what’s happening with the S&P 500.<\/p>\n If you’d like to learn more about my strategy and how it can work for you, click here<\/a>. <\/p>\n \tReader Mailbag<\/h2>\n