If you watch it closely, you’ll be able to spot important inflection points in a stock or index. Today, I’ll show you how to use it… and what it’s telling us about the market right now.<\/p>\n
There are two key components to the Kiss of Death pattern. <\/p>\n
One is the 50-day moving average<\/a>. Longtime readers know the 50-day MA acts like a momentum gauge. When stocks are trading above the 50-day MA, that’s bullish. When they trade below it, that’s bearish. That’s because the 50-day MA tends to act as a strong support\/resistance level for stock prices.<\/p>\n So, for this pattern, the first thing that must happen is the price of stocks falling below the 50-day MA. Whenever that happens, the momentum shifts from positive to negative.<\/p>\n But what comes next is even more important.<\/p>\n Take a look at this chart of the S&P 500…<\/p>\n The blue circles on the chart show points where the S&P has fallen through the 50-day MA, come back up to “kiss” it, and fallen again. <\/p>\n These second falls are often dramatic. You can see it from November to December 2018. Stocks came up to the declining 50-day MA resistance level twice, “kissed” the line, and got smacked down again.<\/p>\n It happened in May, too. After touching the 50-day MA resistance line in mid-May, stocks fell about twice as hard as the initial decline.<\/p>\n Now, let’s zoom in on what’s happening today…<\/p>\n On Friday, the S&P 500 closed lower from the 50-day MA at about 2935. It failed to break the resistance…<\/p>\n Normally, I would see this as definitively bearish. But, as Jeff pointed in his blog Delta Direct<\/em> yesterday morning (paid-up subscribers can read here<\/a>), there’s a good reason to stay bullish in the short term…<\/p>\n Individual investor sentiment levels, as measured by the AAII Sentiment Survey<\/a>, are overly bearish right now. Individual investors are typically seen as the “dumb money” compared to institutional investors – the “smart money.” So, this works as a contrary indicator.<\/p>\n At 48%, the number of bearish respondents on the August 8 survey is the highest since it hit 40% on May 30 – which, of course, is right when the market began its rapid recovery from that month’s selloff.<\/p>\n Because of this, I think stocks will push higher on Monday and close above the 50-day MA. But, if they don’t, consider making a bearish bet on the market. As the “Kiss of Death” has told us many times before, that’s a good signal there’s a big fall ahead.<\/p>\n Regards,<\/p>\n Mike Merson P.S.<\/strong> This pattern is just one small part of the trader’s essential toolkit. To do well in a volatile market environment, you have to learn more.<\/p>\n And as any regular readers know, Jeff thinks we’re headed for something ugly<\/a> – and soon…<\/p>\n Most investors will be caught off guard. But traders will thrive… Especially Jeff’s readers, with access to his full pattern list and regular low-risk\/high-reward option trades.<\/p>\n![\"\"](\"https:\/\/jc-stable.s3.amazonaws.com\/ee-assets\/channels\/articles\/mm\/201908-mm\/20190810-MM-01.png\")
<\/p>\n![\"\"](\"https:\/\/jc-stable.s3.amazonaws.com\/ee-assets\/channels\/articles\/mm\/201908-mm\/20190810-MM-02.png\")
<\/p>\n
\n Managing Editor, Market Minute<\/em><\/p>\n