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The Market Is Sending a Major Warning About a Potential Pullback In trading, market breadth is a critical indicator. Typically, positive market breadth occurs when more stocks are advancing than declining, confirming an uptrend in the market. Conversely, a disproportionate number of declining stocks can signal bearish momentum and a potential downturn in benchmark indices. Over the past four weeks, we've observed a significant anomaly... There have been seven trading sessions where the S&P 500 traded higher, despite more stocks finishing lower than higher on those days. This scenario represents one of the largest instances of negative divergence in a 20-trading-day rolling period since 1990. Such negative divergence is a red flag, indicating underlying weaknesses even when major indices appear to be performing well. Volume and Advancers vs. Decliners For a robust stock market rally, we need to see two key elements: 1. Big Trading Volume: A surge in trading activity typically indicates strong investor interest and confidence. 2. More Advancers than Decliners: A healthy rally is supported by a broad base of rising stocks outpacing those in decline. Since the beginning of June, there has been only one trading day where the total trading volume for stocks across the New York Stock Exchange, Nasdaq, NYSE American, and NYSE Arca exceeded the rolling year-to-date average. This lone instance underscores the lack of substantial volume that often accompanies a sustainable market rally. Long story short… Current market conditions highlight a concerning trend. Despite the S&P 500 showing strength, the lack of broad-based support from advancing stocks, and the low trading volume suggests caution. These indicators could be signaling a potential slowdown or correction ahead. In trading, it's crucial to look beyond the surface and understand the underlying market dynamics. Positive headlines about major indices can sometimes mask deeper issues, such as the negative divergence and low volume we're currently seeing. Remember, stay informed, analyze the data, and be prepared to adapt your strategies to the evolving market landscape! I hope that helps! How I’m Tackling Election Volatility Who will win the White House this November? Frankly, I don’t care because we’re here to talk about making money. As we gear up for what could be one of the biggest presidential elections in history… I’m tapping into a very rare phenomenon to prepare for the coming volatility. I just gave my biggest, most important projections heading into the November elections, so be sure to hit the link below to catch the replay. No, we didn’t talk about politics, but we did cover my top 3 election stocks, my biggest predictions, and more… Most importantly, we discussed how I plan to trade what will likely be rising volatility the closer we get! Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. |
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