Here’s what to look for in the action today…
The bulls have a slight edge today – very slight. The Volatility Index (VIX), the market’s “fear gauge,” declined again yesterday, thereby confirming the broad stock market “buy” signal that triggered on Monday. This, plus the seasonal bullishness that shows up this time of year, favors the bulls.
But… and this is a really big BUT… the S&P 500 needs to climb back above its 50-day moving average (MA) line at about 2354 before we can rule out one more push to the downside. As long as the index remains below its 50-day MA, the bears still have a fair chance of knocking stocks lower again.
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The S&P 500 has support at 2336, 2321, then 2300. Resistance is at 2354, 2363, and 2375. The chart hasn’t changed from what I showed you yesterday. It still shows a pattern of lower highs and lower lows. A rally above 2354 will break the index out of the downward channel pattern, and it should ignite an intermediate-term rally that lasts for two or three weeks.
For today, I expect the bulls to make a run at the 2354 level.
Gold and Gold Stocks
Gold was higher again yesterday. But the gold stocks lost ground, again. When it comes to trading the gold sector, it’s always more bullish when the stocks out-perform the metal. That’s not happening right now. The gold stocks are lagging. This is a sign of caution, and it supports my view that the gold stocks will be lower a week or two from now than they are today.
Coffee and sugar had good gains yesterday. Both closed up 1.4% on the day. Copper was noticeably weak, down 2.6%.
It looks to me like all three of these commodities are reversing trends. Coffee and sugar have been declining for months. Recent gains might indicate the reversal from a bearish trend to a bullish one.
Copper is in the opposite condition. It appears to be reversing from bullish to bearish.
High yield bonds have been surprisingly resilient. Take a look at this chart of the iShares High Yield Corporate Bond Fund (HYG)…
HYG is trading near its 52-week high. And it’s on the verge of breaking out to the upside of an ascending triangle pattern. This is a potentially bullish setup.
HYG is a leading indicator for the broad stock market. An upside breakout here would be a strong clue that stocks are ready to rally as well.
This is just another reason to lean slightly bullish on the market right now.
I’ll update regular readers on these trends throughout the day on Jeff Clark Direct.
Best regards and good trading,
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