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 @ 2450, 2400

 

Sentiment Indicators (+RSI)

II survey: (July 18): 57.8% Bulls; 16.7% Bears = Bearish

AAII survey: (July 19): 35.5% Bulls; 25.8% Bears = Neutral

VIX: @ 9.36 = Bearish

RSI: (S&P 500) @ 66.27 = Neutral

Comment: The market drifted slightly lower last week as it retreated from all-time highs. Cash is king in my opinion but the market could break through heavy resistance. This is the time to sit and watch what happens. Investors are dreaming of 2500 and 3000 on the S&P 500, and they could get their wish. Nevertheless, the higher we go, the higher the risks. Retail investors are all in while whispers of economic problems flirt through the air. Let’s see if the market has the strength to move much higher from here. Advice: Be ready for anything. 

 

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 even with its signal line = Neutral

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (July 11): 50.0% Bulls; 18.6% Bears = Bearish

AAII survey: (July 12): 28.2% Bulls; 29.76% Bears = Neutral

VIX: @ 9.51 = Bearish

RSI: (S&P 500) @ 62.46 = Neutral

Comment: Using the Darvas “box theory,” we went from the lower end of the box to the upper end within minutes, another way of saying we went from support to resistance on the S&P 500 in one day. How did this happen? Janet Yellen said in “Fed speak” that she was going to be cautious about raising interest rates. At first, the market sold off, then it rocketed to all-time highs when Janet hinted that low interest rates will continue indefinitely.

The main strategy that has worked for the last eight years is “buy on the dip,” and that continues. It won’t continue indefinitely, but as we enter this week, there is no evidence (yet) this strategy will stop working. This week is important: Most analysts are strongly bullish, but I am waiting to see if the S&P can remain above 2450. Once again, the bulls have Janet in their corner. This week, perhaps reality will appear, but I wouldn’t bet on it. 

Bottom line: Although the market can go much higher from here, which is the expectation from most pros, caution is advised. Take a wait and see attitude before committing heavily to one side or the other. Will the S&P remain above resistance? If so, the bull market continues. If not, a pullback is likely. One certainty: No one can predict which direction the market will go this week, although many have tried.

Here are the latest technical and sentiment indicators:

 Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line but pointing down = Neutral

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

S&P 500 support @ 2400

S&P 500 resistance @ 2450

 

Sentiment Indicators (+RSI)

II survey: (July 4): 52.5% Bulls; 18.8% Bears = Bearish

AAII survey: (July 5): 29.6% Bulls; 29.9% Bears = Neutral

VIX: @ 11.19 = Bearish

RSI: (S&P 500) @ 50.24 = Neutral

Comment: One book I read every year (besides the Jesse Livermore books) is “How I Made $2,000,000 in the Stock Market” by Nicolas Darvas. Although written in the 1950’s, Darvas’ ideas are still valid. He created a “box theory” that works very well during bull markets, and gives a warning when a bear market is near. The first warning signal came last week. After the S&P 500 hit an all-time high of 2,453 a few weeks ago, it was unable to move any higher. Last week, the S&P moved into a lower “box,” which is not a good sign. To be more specific, if the FANG stocks keep moving into lower boxes, that would be a warning sign. Keep in mind that Darvas only went long. In a bear market, he would move to the sidelines in cash until it was over. 

Another warning came from respected bond manager Jeffrey Gundlach, who recently said that the Fed will raise interest rates again. Gundlach suggests that stock investors pay close attention. He has previously warned that stocks may have a summer swoon. 

Bottom line: Watch this coming week closely to see if the S&P 500 can retake 2450. If it struggles to move much higher, then caution is strongly advised. After 8 years of a bull market, with the indexes and margin at all time highs in a low volatility environment, it wouldn’t be surprising if the market cracked, and soon. We will get more clues this week. (Note that the technical indicators turned from bullish to neutral, which is another clue.)

Here are the latest technical and sentiment indicators:

 Technical Indicators (daily chart)

S&P 500 is slightly 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 below its signal line = Bearish

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (June 27): 54.9% Bulls; 18.6% Bears = Bearish

AAII survey: (June 28): 29.7% Bulls; 26.9% Bears = Neutral

VIX: @ 10.40 = Bearish

RSI: (S&P 500) @ 49.36 = Neutral

Comment: Although this is a shortened week, it could give us clues as to market direction. The S&P is near support, and it’s anyone’s guess what it will do. Previously, when the S&P came near support levels, it typically bounced. Based on past behavior, the odds are good we will get a short-term bounce. Nevertheless, if the S&P keeps falling, it could slice below support levels (2400) and keep going. Anything is possible so observe what happens if and when the S&P reaches the 50-day moving average.

I’m also watching the FANG stocks, Facebook, Apple, Netflix, and Google, which got beat up pretty badly the last few weeks. If these stocks keep struggling, it would not be positive for the overall market.