June Swoon Potential Rises. It Could be Rough Sailing for the Next Few Days

Time to take a step back, hedge against risk, and let the market sort itself out.

We could be sailing into some rough waters, as the action in the markets this morning suggests we’re about to head into a potential June Swoon.

Image courtesy freepik.com

Yesterday, I recommended a trade designed to protect portfolios. It’s likely to be triggered sometime today if things don’t straighten out as the tariff tantrum is back and the market’s technicals are deteriorating.

Specifically, I noted the following:

“The New York Stock Exchange Advance Decline line (NYAD) is on course to test the support of its 20-day moving average after breaking below short term trend line support. The RSI is headed for a test of the 50 area. If NYAD breaks below the 20-day and RSI 50 decisively, it’s likely that the selling will pick up speed.”

As I write this morning, NYAD has broken below its 20-day moving average and the RSI is below 50. That sets up the potential for further downside action with likely support at the 200-day moving average for NYAD and a likely move back to the 30 area for RSI before some sort of bounce.

What to do now? Stand aside on new trades. Trade one position at a time. Let the market stop you out of any existing positions. If the Sell stops don’t get hit, hang on to the position. Hedge portfolios as I describe below. And see what happens next.

Market Update

The stock market started the day on the wrong foot as new tariff threats from the White House hit the wires.

The New York Stock Exchange Advance Decline line (NYAD) broke below its 20-day moving average and looks headed for a test of the 200-day line.

The S&P 500 (SPX) has decisively broken below key support at 5850. This sets up a likely move to the 200-day moving average. Watch what happens at the 200-day and the RSI. A sustained break below the 200-day and the 50 area for RSI will mean the uptrend is reversing. So far this morning, SPX has tagged the 200-day MA, but has not broken below it.

Bond yields have reversed their recent climb as traders fret over the tariff threats. So far, as I’ve been expecting the 4.5% area has been tough to get above. Let’s see what happens at 4.4%.

I recommended setting up a hedge trade yesterday, which is designed to protect any holdings in the portfolio. You can review it with a subscription to the service.

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