We came into last week looking for a rally. It was an unpopular opinion.
The stock market was breaking down. And many of the financial television talking heads were predicting a deeper selloff towards 2600, and even 2500 on the S&P 500.
But several indicators – including the CBOE Put/Call ratio – were indicating extremely oversold conditions. They were telling us the downside was probably limited. We were nearing the start of a significant oversold bounce.
That’s exactly what we got.
The S&P 500 had its best week of the year last week. The index rallied from a low of 2730 the previous Friday, to a high of 2885.
That’s nearly a 6% gain… IN JUST ONE WEEK.
That’s an insane move. And it has caused a lot of traders to quickly rush to the other side of the boat. Just about everyone now seems to be looking for the stock market to make a new all-time high, soon.
But, before we join that crowd, let’s think back to the Friday before last. Remember how you felt that day?
The stock market was way oversold. The Put/Call ratio spiked above 1.4. The McClellan Oscillators were flirting with extremely oversold territory.
We, however, figured there probably wasn’t much more downside since everything was already so extremely oversold.
Now… look where we are today…
The S&P just had its best week of the year – which is saying quite a bit when you consider the huge ramp higher we saw during the first quarter. We’re nearing the upside target of 2900. The Put/Call ratio closed Friday at 0.79. The McClellan Oscillator for the New York Stock Exchange (NYMO) closed well above its upper Bollinger Band – indicating an overbought condition.
And, most of the financial television talking heads are now talking about the potential of the market to hit new highs.
This is probably a good time to be cautious. We’re due for a bit of a smack-down early this week.
The next move lower will likely form a higher low – above 2744. And, that will set the stage for another rally later this month.
For this week, though, traders ought to be a little cautious.
Who knows? The market may continue to move higher. But, just as it was a bad idea to chase stocks higher into overbought conditions in April, it’s a bad idea to do that today. There will likely be a better time to buy sometime in the days ahead.
Best regards and good trading,
Today, readers respond to Jeff’s piece on D-Day…
Very meaningful essay today. Thank you.
– Mark M.
Merci, for going the extra mile to share and remind us of the great sacrifice our Americans made.
– Garret F.
Outstanding letter (about your visit to Normandy). Every kid in our country should read this… and many of their parents. Thank you for sharing.
– Jackie D.
AMEN. Thank you for REMEMBERING!
My grandfather was a POW for 20 months captured at Battle of the Bulge.
– John G.
Jeff, I liked your piece, but I think you should have mentioned all allied soldiers and not just Americans, people from India, Australia, N Zealand, Ireland, where I am from and the United Kingdom of course, who lost more men and women than all the other nations put together.
– Peter G.
My wife and I were at the Normandy cemetery last week. We also went to Utah and Omaha Beach and the cliffs where 250 Rangers fought with only 85 left after 2 days. It was gratifying to see it crowded everywhere, mostly Europeans and many school children. Not forgotten!
– Jimmy J.
And two subscribers write in about their recent Delta Report wins…
Sir, you now have my attention. I shelled out $2,500 to join the team and in less than one week I am up over $3,600 after 4 trades. If my math is correct that is over $1,100 profit after I paid off my subscription. You passed the test Jeff. Let’s GO!
– John M.
Jeff, I followed your advice and bought the SPY calls for $4.46 last week and just sold them at $7.08. That’s a very nice profit for just 3 or 4 days. Thank you so much. I just paid for my subscription on the very first trade.
– Robert P.
Thank you, as always, for your kind feedback thoughtful insights. We look forward to reading them every day. Keep them coming [email protected].