Traders Should Focus on Defense VIEW IN BROWSER By Jeff Clark, Editor, Market Minute The bears finally took over momentum of the market on Friday when the S&P 500 lost 68 points and closed below its 9-day EMA… But by the first hour of yesterday’s session the S&P 500 completely recovered Friday’s decline. And, the bears have been pushed back – again. Whatever might be happening in the Middle East, the market isn’t too concerned about it. And, if you listen closely, you can hear the “tick, tick, tick,” of the Treasury Bond market here in the U.S. So traders have more concerns than the bombs exploding in Iran and Israel… Bond prices fell on Friday – which is unusual when there should otherwise be a “flight to safety.” Bonds are slightly lower this morning, so rates are slightly higher. Rising long term interest rates are a bigger threat to investors than escalating Middle East conflicts. And, with the FOMC meeting this week, that threat might become more noticeable. TLT – the Treasury bond ETF – has been making a series of lower highs and lower lows.
It could easily make a quick break to the downside. And, the post FOMC announcement could provide a catalyst for that move. That will be a strong headwind for the stock market – especially the banks and financial stocks. We’ll find out tomorrow… | Recommended Link | | | | Starting as soon as 7 days from now, you could go for 10X gains from potentially historic AI announcements. How? By following a market signal discovered by master trader Jonathan Rose. He calls it the “Big-Money Tell.” And it gives him a way to invest just before potential major AI-related announcements send stocks flying. He even used the signal to recommend GameStop to his followers before it soared up to 10,633%! Jonathan believes the next big AI-related announcement is coming soon. It’s virtually inevitable. And you can use his “tell” to potentially invest BEFORE it happens… starting as soon as 7 days from now. How? Click here for the full details from Jonathan. | |
The typical pre-FOMC action is for the market to fall on Friday and Monday, then rally on Tuesday and Wednesday morning. The risk of buying the S&P in its current condition is far greater than the potential reward. So, even though the market has recovered from Friday’s decline, it doesn’t change the setup we were looking at last Thursday, or Wednesday, or Tuesday… In fact, yesterday’s action might ultimately prove even more detrimental as it reinforces the “buy the dip” mentality on even the slightest of dips. Here again, I’m reminded of the market’s behavior in mid-February…
That Led to the “Flash Crash”… After trading up to the 6050 resistance level, the S&P has been marking time for the past few hours. Stocks are off their highs. The VIX is off its low. Everyone is waiting. We’re likely going to stay in “wait” mode until tomorrow afternoon – after the FOMC meeting. Traders should focus on playing defense here. Volatility is too low given the potential risks. So, hang onto your cash. Granted, as traders we all want to be active. But, when most stocks and sectors are stretched to the upside, and there is zero momentum on any downside moves, it is usually best to take a seat on the sidelines and wait for a clearer picture. If you’re looking to bet on the downside, I’d suggest targeting the banks. Best regards and good trading, Jeff Clark
Editor, Market Minute P.S. If I’m wrong and the market breaks out to the upside here, I don’t think we’ll miss much. The various moving averages are too far extended from each other to provide much fuel for a sustained rally. Remember, there’s nothing wrong with sitting in cash. We want money on hand to pounce at the best setups, which are sure to show up. | 