Jeff Clark's Market Minute

The Quest for New Highs Depends on This

The stock market is having a good week.

After trading as low as 2864 last Friday, the S&P 500 has bounced all the way back above 2900. The index is within putting distance of making a new all-time high.

Here’s an updated look at the chart I showed you last Friday

The S&P has bounced off the support line of the rising channel pattern. And, it sure looks like the index is headed up to new highs.

This week’s rally has been supported by strength in the technology sector. Semiconductor stocks were lagging earlier this week, but they bounced strongly yesterday. And the high-yield bond sector (HYG) closed at its highest level yesterday.

Given this backdrop, even a cautious trader like me has to concede the market looks like it wants to go higher. There’s just one thing bothering me…

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The bank stocks are acting horribly.

Here’s an updated chart of the Financial Select Sector SPDR Fund (XLF) that I showed you last week

XLF has broken down from a bearish rising wedge pattern. The fund lost almost 2% this week while the rest of the stock market was rallying.

The problem with this is that financial stocks tend to lead the market. The current weakness in the financial sector may be signaling weakness to come in the broad stock market. And it looks like the action today will be important.

You see, XLF closed yesterday just above its 50-day moving average line (the blue line on the chart). That’s an important support level. If XLF can bounce off of support and then rally to play “catch-up” with the rest of the stock market (the same way the semiconductor sector did yesterday) then that should help the S&P to rally to a new all-time high.

On the other hand, if XLF drops below its 50-day MA and loses support, then weakness in the financial sector is likely to weigh down the rest of the market.

Best regards and good trading,

Jeff Clark

P.S. Before I sign off for today, I have something important to tell you…

I’ll be presenting at the first annual Legacy Investment Summit next month in Bermuda. And the organizers have set aside a handful of tickets just for my readers.

So if you want to come meet me in person, read on here for details.

Reader Mailbag

Today in the mailbag, feedback for last week’s “I Can’t Own This Stock Anymore” continues to flood in…

Excellent… Totally agree… I am a non-war vet myself, so I understand your dad’s quietness about his service…Love all your personal stories Jeff. Thanks for being a real patriot!

– Perry

Good for you!  I also won’t own or support Nike. I feel the company made a very poor decision and I do hope they will find they regret that decision due to boycotts of their products. I enjoy your commentaries and value your advice. Thank you.

– Tina

Thank you, sir, for your market wisdom. But like another feedback said, you and the media have this wrong.

You are not a minority in this country, I am. So I see why they (protesting against police brutality) are doing this. Understood they should not be doing this during the national anthem, agreed 1000%. But they are not disrespecting the flag, they are not burning it or cutting it like people are doing to Nike products. But this is the USA, a free country to express your views. Agreed, they should not do this during the national anthem. But Nike is free to do what they want and you are free to invest wherever you like. Thank you sir.

– Karim

And after yesterday’s essay on cash, we asked you how you would put your cash to work in the event of a market downturn. You responded…

Holding gold and silver seems to me a wise thing to do… Just read an email that told me we are in for a lot of changes in currency? Glad I hear from you about our crazy world of trading. Thanks!

– Mildred

I intend to buy the bluest dividend-paying stocks. I hope if they are currently paying a 2.5% dividend, that I will be earning another point or so over the 2.5%. Recovering from a big drop takes too long. Build cash – it will be king!

– Steven

Sell a few puts on stuff like GIS, VZ, XOM, and INTC.

– Wallace

Thank you, as always, for your thoughtful insights. We look forward to reading them every day. Keep them coming right here.

Jeff Clark's Market Minute Archives

Jeff’s intuitive feel for short term market swings and his strong protective discipline have allowed me to lock in thousands of dollars in gains where I might otherwise have just ridden the markets up and down .”  -Chris, a reader and “seasoned investment advisor” from Seattle

Jeff -- your picks and analysis have been nothing short of amazing. I have traded the market for many years but I must admit, I have NEVER seen something this good.” - Mike H.

In only 2 weeks of using the service I’ve booked over $10K in profits. Needless to say I’ve paid for my membership.” - Tony J.

I started following Delta Direct about 3 weeks ago… I bought a small investment from one afternoon to the next morning. About 11AM I got out and made 8K in less than 24 hours.” – D. Tilghman