As you can tell from the following chart, Goldman Sachs has been an anchor around the neck of the market since April:
Growth Stock Wire
TradeKing All-Star Commentator
Recently it seems like the broad stock market cannot rally without leadership from the financial sector. If the leading financial stock in the country is under pressure, the entire stock market seems to have trouble gaining ground. GS peaked in April and was a leading indicator for the recent correction in the stock market.
However, this GS chart looks like it's trying to form a bottom. The stock is falling and making new yearly lows, but the MACD momentum indicator is rising. This positive divergence suggests the momentum behind the decline is weakening. If that proves correct, it wouldn't take much to pop the stock higher and reverse the downtrend.
It all depends on how the market reacts to the earnings announcement on Tuesday 7/19. If GS shares rally and close higher on the day, the odds favor a summer rally for the broad stock market.
On the other hand, if GS closes lower on earnings day, the S&P may need to retest its spring-time lows before finding a bottom.
Either way, there's a lot riding on the way GS trades Tuesday. Smart traders should pay attention to it.
Best regards and good trading,
Veteran trader Jeff Clark is author of Growth Stock Wire, a daily read providing investors with a pre-market briefing on opportunities in the global stock, currency, and commodity markets.
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