Bullish or Bearish? Week of Sept. 25, 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 @ 2469 (50-day moving average)

 

Sentiment Indicators (+RSI)

II survey: (Sept. 19): 50.5% Bulls; 19.0% Bears = Bearish

AAII survey: (Sept. 20): 40.1% Bulls; 27.2% Bears = Neutral

VIX: @ 9.50 = Bearish

RSI: (S&P 500) @ 62.98 = Overbought

Comment: The S&P 500 made an all-time high of 2508.85 but then fell back to 2502. We’ll have to wait and see if there is enough energy left in this market to move much higher. It’s still a bull market but but the lack of energy tells me the end is likely near. Nevertheless, this market could go sideways for weeks or months, so caution is advised. Sentiment among retail investors is rising. Other surveys show extreme investor confidence. In addition, individual investors have been bragging to me how much money they made, which is always a signal a top is near. Need more evidence we are near a top? Lance Robert at realinvestmentadvice.com nails this market with solid evidence in his piece, “Yellen Takes Away the Punch Bowl”: https://goo.gl/aFQPsH

A word of caution: Just because we appear to be topping out doesn’t mean it’s time to buy puts (or short). Be patient and wait for clear signals. The market might still have a few tricks up its sleeve but as for me, I wouldn’t be buying heavily at the top, nor would I be shorting. Don’t forget that the technical indicators are saying we’re in an uptrend, and yet, it feels like the market is moving higher on fumes, not reality.

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