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<\/p>\n\tThe stock market doesn’t crash when everybody is looking for it to happen.<\/p>\n
\tCrashes also don’t occur when the S&P 500 is trading just 2% below its all-time high.<\/p>\n
\tSo if you’re worried about a huge drop in the stock market over the next few months… stop worrying. Everything is going to be alright.<\/p>\n
\tThe stock market is vulnerable to a decline of 5-7% over the next few weeks. We are headed into a seasonally weak period for stocks, after all. And it feels like forever since we’ve had at least a 5% pullback in the market. So a move down toward 2360 or so on the S&P 500 seems like a reasonable target between now and the end of September.<\/p>\n
\tBut if you’re looking for a stronger pullback than that, I just don’t see it happening – not yet, anyway.<\/p>\n
\tYou see, all the important moving averages for the S&P 500 are still in a bullish configuration. And history tells us that stock market crashes just don’t happen with this setup.<\/p>\n
\tTake a look at this weekly chart of the S&P 500…<\/p>\n
\t<\/p>\n
\tThe last significant correction in the S&P 500 occurred back in August of 2015. That’s when the 9-week exponential moving average crossed below the 50-week moving average.<\/p>\n
\tThat’s a bearish cross. And stocks entered a five-month-long downtrend that knocked 6% off the S&P by the time the market bottomed in early February of 2016.<\/p>\n
\tA 6% decline certainly does not qualify as a “crash.” Heck, it’s barely worth calling it a “correction.” But the point I’m trying to make here is that the “correction” occurred after the 9-week EMA and the 50-week MA had coiled together. That’s what created the setup for a bearish move.<\/p>\n
\tWe don’t have that potential for a bearish setup right now.<\/p>\n
\tThe 9-week EMA is currently more than 100 points above the 50-week MA. There’s almost no chance of seeing a “bearish cross” over the next month or two.<\/p>\n
\tBest regards and good trading,<\/p>\n
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<\/div>\n\tJeff Clark<\/p>\n