Bullish or Bearish? Week of June 26, 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 slightly below its signal line = Bearish

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (June 20): 51.5% Bulls; 19.4% Bears = Bearish

AAII survey: (June 21): 32.7% Bulls; 28.9% Bears = Neutral

VIX: @ 10.02 = Bearish

RSI: (S&P 500) @ 58.74 = Neutral

 

Comment: After a strong Monday (June 19), the S&P petered out and went sideways the rest of the week. The lack of follow-through is not healthy, so the bulls are on warning. And yet, the bears were unable to take advantage. Last week was the kind of environment where “even a skunk couldn’t make a scent.”

There are times to be in the market, but wise traders also know when to be out. Obviously, the market environment could change on a dime, and it will one day. In fact, veteran traders warn that when a market moves this slowly and with so little volatility, it builds up energy, which will result in a huge market explosion, either up or down. If they are right, volatility should violently increase (no one knows when, however). 

Bottom line: As long as the sideways market continues, cash is your friend. Don’t forget that the indexes are at all-time highs, so it’s about time the market “puts up or shuts up.” Until then, remain on guard. There are too many people holding index funds on margin who believe that the market will never go down. History tells us that never ends well. 

 

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