Jeff’s Note: We’re just a few days away from the Fed’s next move… And the market is reaching a tipping point. Simply put, the yield curve hasn’t been this inverted since 1929.
These conditions could steer us into the worst recession I’ve seen throughout my 40-year career in the markets. That’s why I’m hosting an urgent live-stream this Friday at 9 a.m. ET. I’ve spent millions preparing for an imminent “Defcon 1” crash, and I want to show you how to prepare.
There’s never been a more urgent briefing, so click right here to learn more.
There’s a lot of energy building up in the stock market. There’s a big move coming.
And it’s most likely to coincide with next week’s FOMC announcement on interest rates…
Take a look at this daily chart of the S&P 500:
The action over the six weeks has created a “consolidating triangle” pattern on the chart. This happens as the index makes a series of lower highs and higher lows.
The choppy, back-and-forth activity allows all of the various moving averages to coil together. It also allows all of the momentum indicators at the bottom of the chart to drift into “neutral” territory.
There’s plenty of energy to fuel the next big move in the market – which, based on the height of the triangle pattern, could be as much as 200 points.
The obvious question, of course, is which way?
Neither side has an edge here. Stocks could just as easily break out as break down. Trying to guess the direction is exactly that: a guess. The only thing we can be relatively sure of is the timing.
The S&P will reach the apex of the consolidating triangle within the next few days. It will break out – one way or the other – when that happens. An upside move will likely lead to a rally to new highs for 2023. A downside break could have the index trading back to where it was in early June.
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How do we trade it?
Since there’s no edge to either side, taking a position ahead of the breakout is nothing more than gambling. The bet could pay off, but there’s an equal chance that it won’t.
Most traders are probably better off waiting until the index breaks out of its consolidating triangle pattern, then betting on that move continuing in the direction of the breakout.
There’s a lot of energy, so it’s likely to be a rather large move.
Best regards and good trading,
Jeff Clark
READER MAILBAG
Do you plan to hold off until the index breaks?
Let us know your thoughts – and any questions you have – at [email protected].