We went into last week expecting weakness in the stock market early on, followed by strength later in the week. And, that’s what we got… sort of.

The S&P 500 was far weaker than I expected it to be. The index dipped below its 9-day exponential moving average (EMA) on Monday. That shifted the immediate momentum from bullish to bearish. 

By Thursday, the S&P 500 was testing its next support level near 2680. But, that’s when the buyers stepped up.

The market reversed, put on a good bounce on Friday, and the S&P finished the week right on its 9-day EMA.

Take a look…

I’m still not convinced the “bounce phase” of the correction is over yet.

Using the February correction as a guide, the market needs to press higher one more time. The 9-day EMA needs to pinch closer to the 50-day moving average (MA). And investors need to be more fearful about missing out on the rally.

Plus… it’s Thanksgiving week. And the typical seasonal pattern for the stock market this week is weakness early, followed by strength on Wednesday and Friday, followed by weakness early next week. This pattern supports the idea of the S&P pressing back up towards its 50-day moving average once again before we get to the “retest phase” of the correction.

As a trader, I’ll be looking to buy into any weakness today. Then I’ll be looking to sell into strength on Friday. And, if the S&P does manage to get back up near its 50-day MA – currently at 2813 – that’s where I’ll be looking to establish some short exposure.

Remember, we still have the “retest phase” of the correction in front of us. 

Best regards and good trading,

Jeff Clark

Reader Mailbag

Are you looking to buy into weakness today and sell into strength on Friday? Or do you plan on approaching the market differently this week?

And as always, send in any other trading questions, suggestions, or stories to [email protected].