We’re in the final days of August, and what a month it has been.
We’ve had hundreds of stocks report earnings…
A stock market stall out…
Fed Chair Jerome Powell’s annual speech in Jackson Hole…
But now, the month seems to be closing out on a high note…
Will that buying continue into September? Or will we see another stall out?
Let’s look at my favorite market tracking tool to find out.
Here’s What’s Going On in the “Four Corners” of the Market
Stocks, bonds, futures, and currencies — they all forecast where the market is and where it’s going. That forecast becomes even clearer when you see them all together. And, if you’re able to take a broad look at all of that, you can unlock the opportunities the stock market is offering each week.
That’s why I’m always checking in on these asset groups — what I like to call the “Four Corners.” They’re my favorite tool to track (and even predict) the markets. Altogether, they give you a nice overview of what’s coming, and how to prepare for it.
And here’s what they’re saying…
S&P 500:
Recently, we’ve been monitoring the Fibonacci retracement levels for the SPDR S&P 500 ETF Trust (SPY) chart, which you can see below.
Anything you trade (whether it’s stocks, bonds, commodities, futures, or currencies) tends to pull back to these percentage retracement levels before resuming the overall trend either up or down, which is exactly why technical analysts love the Fibonacci sequence. In fact, I just put together an in-depth writeup explaining how to use these lines (and how to avoid the No. 1 mistake traders make when drawing them). You can check it out here.
While SPY has traded near the 38.2% retracement level at $427.88, it hasn’t actually hit it — and it may not.
That’s because there’s another pivot low at $435 (circled in yellow with the green arrow pointing to it), and it’s also acting as support. In fact, SPY traded down to this level again on Friday before bouncing higher to close the week a few pennies below $440.
For now, the line in the sand for SPY is that pivot low around $435. As long as SPY trades up or even sideways from here but does not breach or take out that pivot low on a closing basis, I will continue to lean bullish in my market sentiment.
In fact, I just recorded a presentation on a little-known strategy that lets regular people take long-term bullish positions in winning stocks at a fraction of the cost of buying shares… while also giving us the leverage to potentially increase our profits by 10-fold.
Click here to see how to start investing long term for just pennies on the dollar — even in some of the most expensive AI stocks!
Bonds:
One can say that iShares 20+ Year Treasury Bond ETF (TLT) was overdue for a bounce.
And we got a pretty good one in the middle of last week.
The gap you see in the chart is a Bullish Kicker Pattern, where the two trading days are set up so we get (1) a bearish day with a lower close followed by (2) a day that gaps away from the prior day’s candle and closes up.
This pattern typically signals a potential bullish reversal. How long it lasts is the key. Maybe a fill of the gap down from $98 is on our way?
Currencies:
The dashed lines on the Dollar Index Fund (UUP) chart above represent what are called Chart Peaks; they indicate support and resistance levels.
You can see on the chart above that UUP is at or near yearly highs.
When a security reaches a high and then retraces lower, it often falls to a previous resistance level.
For UUP, that previous resistance level is at $28.60, indicated by the thick green horizontal line. Last week, the chart formed a bearish engulfing pattern, which can indicate a possible trend reversal to the downside.
Commodities:
My top former student and now friend, Rob Roy, recently blew me away with a strategy he’s used for 25 years. It’s a “Goldilocks” pattern in stock movements that has made him money on 8 out of every 10 trades he’s placed whenever he’s seen it come up.
Thanks to that kind of consistency, Rob has beaten the world’s best traders by 6X… 8X… up to 15X over the past three years.
After seeing it in action, I invited him to start up a weekly classroom and trading service. If you haven’t jumped on board with him yet, I’d strongly consider it.
One of his favorite strategies is based on a zig-zag pattern. Last week’s price action in SPDR Gold Shares (GLD) resembles a zig zag to me, which gives me the sense GLD can trade higher out of it.
But I will let Rob — the master of zig zags — educate you further. You can catch his full presentation right here.
To your continued success,
Tom Gentile
America’s #1 Pattern Trader
