Bullish or Bearish? Week of Dec. 18, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 one-month trend = Bullish

S&P 500 six-month trend = 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 @ 2670


Sentiment Indicators (+RSI)

II survey: (Dec. 12): 61.9% Bulls; 15.2% Bears = Bearish

AAII survey: (Dec. 13): 45% Bulls; 28.1% Bears = Neutral

VIX: @ 9.42= Bearish

RSI: (S&P 500) @ 72.86 = Bearish

Comment: Even with a bullish bias last week, the S&P 500 ended flat (with a few intraday rallies and selloffs along the way). The bulls are still in control but we’re in the late stages of a bull market. No one knows when but a correction is guaranteed, most likely in 2018. Based on past markets, the odds are we’re going flat to higher to finish off the year. However, as I’ve repeatedly warned, 2018 is likely to be challenging. I am guessing volatility will return in 2018, but I’ll wait first before plunging.

Meanwhile, I’m convinced that bitcoin is in a bubble based on the usual signs:

  1. At Starbucks, I’ve been watching various bitcoin brokers signing up clueless customers. 
  2. Friends of mine who know nothing about investments are buying bitcoin.
  3. Look at the chart!
  4. All anyone wants to talk about is bitcoin and other cryptocurrencies. Those who got in early could do very well (assuming they sell at the right time). Latecomers will get hurt.
  5. Most who own bitcoin have no intention of selling. After all, some pros are predicting bitcoin at $40,000, and even $100,000. (That’s why few are selling.)

Can bitcoin, etc. go higher? Oh, definitely. This is the exuberance stage and it could skyrocket to levels that are inconceivable. But a major plunge is due, perhaps sooner rather than later, but no one can predict when. After bitcoin plunges, then we’ll get a better idea of its true value. At this time, no one knows what cryptocurrencies are worth, and that is why this investment is risky.

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

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