The Weekly Trader

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 is above its 50-day MA = Bullish

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2540, then 2500

 

Sentiment Indicators (+RSI)

II survey: (Oct. 17): 60% Bulls; 15.2% Bears = Bearish

AAII survey: (Oct. 18): 37.9% Bulls; 27.9% Bears = Neutral

UMichigan Consumer Confidence survey: (highest since 2004) = Bearish 

VIX: @ 9.97 = Bearish

RSI: (S&P 500) @ 79.66 = Overbought (i.e. ridiculously overbought) 

Comment: This market continues to defy gravity, and reality, as it continues to break bull market records. For the last month (and even the last two years), the market has slowly creeped higher. If this is the melt-up stage of the bull market, it’s happening in slow motion. Trying to guess the day of reckoning, or even a 3% correction, has been a loser’s game.

No one knows when the music will stop, but it will. Caution is still advised because the risk-reward is not favorable to the bulls. Nevertheless, the market continues to move higher. As I’ve repeatedly said, be sure to initiate protective stops if long. By now, many investors don’t remember the last time the market went down.  On the other hand, veteran traders know how this remarkable market will end.  

Not surprisingly, many who missed the party are just now piling into equity ETFs, another clue the party is about to end sooner rather than later. And yet, selling in a panic has also not been a wise move. Why sell when it feels so good to buy and hold? 

Bottom line: Be patient, trade small, and observe the market for clues, i.e. intraday reversals, or a sudden selloff to 2450 and below. The lack of volatility for this length of time is downright scary, and just in time for Halloween. It feels like the calm before the storm, but up to now, the bulls have been right. Stay alert and wait for the fireworks to start in the future at a time and place only Rod Serling knows. 

The most hated bull market ever? For further reading, check out Lance Robert’s latest: https://goo.gl/z4f1WV

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 is above its 50-day MA = Bullish

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2500

 

Sentiment Indicators (+RSI)

II survey: (Oct. 10): 60.4% Bulls; 15.1% Bears = Bearish

AAII survey: (Oct. 11): 39.8% Bulls; 26.9% Bears = Neutral

VIX: @ 9.61 = Bearish

RSI: (S&P 500) @ 72.39 = Overbought

Comment: I’ve run out of ways to describe how overbought this market is. This from Adam Taggart via Peak Prosperity (thanks to Lance Roberts for the heads-up):

  1. It has been over 100 months (more than 8.5 years) since the current bull market began in April of 2009.
  2. It has been 15 months since the last (and very brief) drop of 5% in the S&P 500.
  3. This past September saw record low volatility, including a stretch now claimed to be “the most peaceful days in the history of the markets.”
  4. Since last year’s presidential election, at which point the markets were already considered dangerously overvalued, the DJIA is up over 20%.
  5. The Dow, S&P and the Nasdaq are all trading at all-time highs.

Anyway you look at it, this low volatile market is in the danger zone and has been for a while. Could the market continue to go higher from here? Absolutely. That is why so many investors are not selling their index funds or stocks. Apparently, most investors believe they will be able to get out in time. When the next correction and bear market arrives (it always arrives), it’s unknown how millions of investors will know it’s time to get out. Many won’t get out and will grit their teeth and hold (typically until the pain gets too great).

Bottom line: This bull market has gone on longer and farther than most imagined. Even a number of bullish pros are getting cautious. When you look at the data points above, you must be cautious, using stop losses when possible. Technically, we’re at historic levels, and when this market unwinds one day, it will be mammoth. The longer the market rises, the more most investors believe the market will keep rising (it’s human nature). In addition, look at the RSI, at over 70, which is always a clue a short-term pullback is near (when over 70).

Once again, read Lance Robert’s most recent analysis of the market here: https://goo.gl/uWfZnc

 

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 is above its 50-day MA = Bullish

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2500

 

Sentiment Indicators (+RSI)

II survey: (Oct. 3): 57.5% Bulls; 17.0% Bears = Bearish

AAII survey: (Oct. 4): 35.6% Bulls; 32.8% Bears = Neutral

VIX: @ 9.65 = Bearish

RSI: (S&P 500) @ 76.09 = Overbought

Comment: It appears we’re playing with fire as the bulls continue to control the market. Several veteran traders are warning of disaster but they’re being ignored as the market continues to break new records. Sentiment among retail investors is a lot higher than the AAII survey, as many believe the market “is never going down.” I mean it. Fighting this bull market at these levels is not recommended, but be on the lookout for weakness. When the ball starts rolling, it will be shocking.  Few are listening, but this bull market is not going to end well.  If you’re a trader, you have to believe there will be opportunities in the future. It’s not easy to be patient, and unemotional…but you must. Read Livermore’s book, or watch The Big Short again. 

As usual, Lance Roberts hit it out of the ballpark with his latest analysis: https://goo.gl/ojtfkV

My latest MarketWatch column: https://goo.gl/REoRXg

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 is above its 50-day MA = Bullish

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2473 (50-day moving average)

 

Sentiment Indicators (+RSI)

II survey: (Sept. 26): 54.3% Bulls; 17.1% Bears = Bearish

AAII survey: (Sept. 27): 33.3% Bulls; 28.7% Bears = Neutral

VIX: @ 9.50 = Bearish

RSI: (S&P 500) @ 68.77 = Overbought

Comment: More professional traders and investors have recently warned that the market is way overbought, the valuations are obscenely high, and that a number of indicators such as the Schiller P/E CAPE ratio are the highest (30) since 1929 and 1997. Schiller wrote that it doesn’t mean a crash or bear market is imminent, but it is a “red flag” (my words). And yet, the market crawls to all time highs on low volume and institutional participation. What is a trader to do? 

In my opinion, sit and wait because the day of reckoning will eventually come. I’ll have a lot more to say later this week when I publish my next column.

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 is above its 50-day MA = Bullish

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2469 (50-day moving average)

 

Sentiment Indicators (+RSI)

II survey: (Sept. 19): 50.5% Bulls; 19.0% Bears = Bearish

AAII survey: (Sept. 20): 40.1% Bulls; 27.2% Bears = Neutral

VIX: @ 9.50 = Bearish

RSI: (S&P 500) @ 62.98 = Overbought

Comment: The S&P 500 made an all-time high of 2508.85 but then fell back to 2502. We’ll have to wait and see if there is enough energy left in this market to move much higher. It’s still a bull market but but the lack of energy tells me the end is likely near. Nevertheless, this market could go sideways for weeks or months, so caution is advised. Sentiment among retail investors is rising. Other surveys show extreme investor confidence. In addition, individual investors have been bragging to me how much money they made, which is always a signal a top is near. Need more evidence we are near a top? Lance Robert at realinvestmentadvice.com nails this market with solid evidence in his piece, “Yellen Takes Away the Punch Bowl”: https://goo.gl/aFQPsH

A word of caution: Just because we appear to be topping out doesn’t mean it’s time to buy puts (or short). Be patient and wait for clear signals. The market might still have a few tricks up its sleeve but as for me, I wouldn’t be buying heavily at the top, nor would I be shorting. Don’t forget that the technical indicators are saying we’re in an uptrend, and yet, it feels like the market is moving higher on fumes, not reality.