Stocks are mixed after a slew of morning headlines. The most important, an update on trade talks, as President Trump is set to meet with some key Chinese officials.

Of course, this has been an ongoing story for about a year now, but recent reports speculate we could be nearing a deal with China, which should be seen as bullish for stocks.

Equities have been strong for so long, it’s become a boring market.

And you know what?

My strategy works in dull markets…

I was still watching the market, just on my iPhone, like how I usually trade…

(These are call options, but if you want to know how to make money when stocks crash, click here.)

That’s the really cool thing about trading options. Even small moves in stocks can turn into big winners.

I usually spend my mornings sifting through economic reports, studying market internals… it helps me gauge investor sentiment and tells me how aggressive I should be and whether I should have risk on or off.

You see, as a trader, you need to know when it’s time to trade and when its time to step back. However, when you’re trading less, it doesn’t mean you should stop working on improving.

For example, if trading opportunities are scarce, review (or work on learning a new strategy) instead of trading something because you’re bored or “it’s the best thing out there”

Click here to see what I’m watching for the remainder of the week and other trading opportunities.

Potential Bearish Market in the Cards?

The market is getting interesting at these levels. We’re seeing little overnight activity in the S&P 500 futures contracts – which gives traders an idea of where the market is headed.

With a narrow range in the futures market… that tells us one thing… the quants (so-called genius traders who use math, computer science, and physics to speculate on stocks) are running the show.

You see, since there is a lack of overnight volatility… these algorithmic traders are able to buy the market into the close nearly everyday.

For example, just yesterday, we saw the market gap up… only to give up those gains… but we saw the markets rally from 3 PM to the closing bell. Consequently, the SPDR S&P 500 ETF (SPY) and the PowerShares QQQ Trust (QQQ) notched its fifth consecutive green day.

It seems like the risk-on theme is back on the table.

However, what happens when there is some actual volatility?

These market longs will probably dump their positions… which would cause SPY to drop.

You’re probably wondering, “Jeff, when is the market going to pull back?”

Well, I actually look at the money pattern – it lets me know exactly when to be bullish and bearish on the market…

What I’m Watching in SPY

Here’s what I’m talking about… take a look at the hourly chart on SPY.

If you notice in the encircled areas above… the last two times the blue line (13-hourly simple moving average (SMA)) crossed below the red line (30-hourly SMA)… the market pulled back into the green line (the 200-hourly SMA)… only to rebound and run higher.

What we’re noticing here at Weekly Money Multiplier is the market is nearing highs around the $293 level… however, the blue line looks like it can cross below the red line.

QQQ on Watch

Here’s a look at the QQQ.

The QQQ is entering overbought territory once again, with the relative strength index (RSI) looking to get above the 70 level. However, I’m going to be patient and wait for a clear sell signal (the blue line crossing below the red line).

If that happens, there are some levels to watch… the $183 level is currently the first line of defense… if it breaks below that, the $181 level will be in play… now, if that breaks… well, the next line of defense is around $176 (the 200-hourly SMA).

Moving on.

Market Internals

There is a lot going on in the market right now. Here’s a look at what’s going on with the macro now.

• The President of the U.S. (POTUS) is meeting with China’s Vice Premier Liu.
• We’re expecting Trump to announce plans for a summit with China’s President Xi Jinping. This indicates that trade talks may be finally concluding soon.
• Ongoing Brexit catalysts.
• The Pound sterling is firming up with lawmakers passing a bill to block a no-deal Brexit.
• U.S. Jobless Claims fell to a 49-year low… surprising all analyst estimates.
• Tomorrow, we’ll be getting some U.S. Employment Situation data… which could move the markets.
• The Federal Open Market Committee (FOMC) is in a tough spot. The POTUS has called for interest rate cuts of 0.50%… however, with jobless claims at nearly 50-year lows… it’s hard for the Fed to actually cut rates.
• Earnings season is approaching, and we’ll be keeping a close eye on mid-, large-, and mega-cap stocks. If we see weak earnings… that’ll tell me to get bearish, but I’m going to be patient to see a clear signal with the money pattern.
• The 10-year Treasury and 3-month Treasury yield spread is flirting with negative territory again.
• Basically, when you subtract the 3-month Treasury yield from the 10-year Treasury… you get the “spread”.
• If the spread stays around 0, or breaks below… that could signal another potential crisis.
• The last time this happened was back in 2006… and you probably know what happened after that (the global financial crisis). Previously, we saw this activity during the Internet bubble.

Am I calling for a market crash or a recession now?

No. I’m going to be patient and assess the data, the charts (the money pattern), earnings, and macro variables.

That said, they say everyone is a genius in a bull market. But will you be ready when stocks turn south?

Watch my webinar on how to capitalize on crashing stocks.

 

Source: WeeklyMoneyMultiplier.com | Original Link