Bullish or Bearish? Week of Oct. 23, 2017

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

I will notify you of my blog posts via twitter @michaelsincere

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