Here are the latest indicators:
S&P 500 one-month trend = Bearish
S&P 500 is below its 50-day and 100-day moving average and on its 200-day MA = Bearish
RSI: (S&P 500) @29.98 = Oversold
Intraday Volatility: High
Daily results of multiple indicators (from Yardeni Research): https://goo.gl/eT3fzA
Comment: It was a shocking week for the bulls (just look at the dreadful indicators above.) Every rally was met with fierce resistance until the final Friday selloff. The market is back in “correction” territory as the S&P 500 fell to its 200-day moving average.
There are three primary scenarios that may develop this week:
Scenario #1: It’s likely the market will bounce again as it often does after a strong selloff. The “buy on the dippers” will enter with the algos and buy at the lows. With the futures already pointing for a higher Monday opening, this scenario is very likely. However, here’s where it can get tricky: If there is a bounce, it’s unlikely to last longer than a week or two. However, if the market blows back above the 100 and 50-day moving averages, then the bull market continues f0r a while longer. (In my opinion, it’s possible there is one last gasp of the dying bull market before it collapses into history).
Scenario #2: It’s also possible that the market will reverse quickly early in the day or week and plunge below its 200-day moving average. This is the worst scenario for investors because losses will accumulate quickly. This could cause investor panic, which will cause even more selling. Another massive selloff will wipe the confidence from investors, whose mantra has been: “It always comes back.”
Scenario #3: The final scenario is a sideways market with low volatility. Personally, I believe volatility is here to stay for awhile.
Bottom line: The end of a bull market is difficult to trade. Spoiled bulls don’t want to admit the party is nearly over, while scared bears are nervous to short and be wrong again. This is another important week. Let’s see how long the opening rally lasts and if the market can lure more bulls into the market before it reverses direction. As I’ve repeatedly said in the past, learn how to short or buy puts, read about bear markets, and have strategies that can bring profits in both uptrends and downtrends.