Bullish or Bearish? Week of Jan. 1, 2018

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 slightly below its signal line = Bearish

S&P 500 support @ 2670

 

Sentiment Indicators (+RSI)

II survey: (Dec. 19): 64.1% Bulls; 15.1% Bears = Bearish

AAII survey: (Dec. 27): 52.7% Bulls; 20.6% Bears = Bearish

VIX: @ 11.04= Bearish

RSI: (S&P 500) @ 60.95 = Neutral

Comment: It’s the first time in a very long time that the AAII sentiment survey surpassed 50% bullish. Like other sentiment surveys, it is telling us that the retail investor finally believes this bull market is for real. Typically, that tells us the end of the bull market is near.

If you add in the huge amount of margin debt (highest in history), and a market that hasn’t retreated by more than a few percent all year, you have the makings of a monster correction. The timing of any correction is difficult, if not impossible, but the clues are everywhere.

This is the time to be more on guard than at anytime in the last year. The odds are good this will be a volatile year, which means it will be time to get to work if you are a short-term trader. This manufactured low-volatility environment can only last so long before reality returns. ¬†Nevertheless, I follow the trend, and we are still in an uptrend (1-month and 6-month). Because of that, it’s still too early to short, but it’s too dangerous to be aggressively long. Advice? Be patient…very patient. Let the market reveal its hand.

As expected, after bitcoin made an all-time high a few weeks ago (20k per coin), it plunged to 11k before recovering to 16k, then falling back to 13k. Those in the know tell me they are “all in” if bitcoin falls to $11,200, but I stand by my original opinion: Bitcoin should be left to the professional traders because its true value is unknown.¬†

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