The Weekly Trader

WHAT THE INDICATORS ARE TELLING US 

This is what the technical indicators are telling us this week: 

One-month trend = The bulls remain in control: SPX rose by a decent 18 points last week, rising from 4229 to 4247. The Bad New Bears have still failed to run with the ball but their luck may finally change in the near future. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages. If you look at a chart, it looks like “blue skies,” but thunderstorms can appear out of nowhere, especially during the summer. Don’t be surprised when that happens.

RSI: (S&P 500) @70.40 (WEEKLY) = Overbought. RSI is telling us the market is extremely overbought. In the past, RSI has done an excellent job of warning us of a reversal. Now that RSI is above 70, the odds of a selloff have increased substantially.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.65 = VIX is even more ridiculously lower than last week. Buyers beware!

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 88 percent buy (according to this indicator). 

Comment: What, me worry? One glance at a chart and it’s not surprising why investors are feeling so euphoric. Some ultra-bullish financial commentators have even proclaimed that the market forecast is bullish as far as the eye can see, and all they see is blue skies.

It’s what you can’t see that should worry investors. With RSI at extreme overbought levels, and VIX in the basement, caution is recommended. The rallies have been weak and listless. All clues point to a correction in the coming weeks, or sooner.

Granted, no one can predict what will happen, but if you look at the clues, they are pointing to a market that is slowly running out of gas. It wouldn’t take much to send this market much, much lower. As the market struggles at these elevated levels, it is time to play defense, or at least diversify.

Bottom line: No, it doesn’t mean to run out and sell everything, but it means that the odds of a reversal are likely in the coming weeks. As the pros would say, “The upside is limited.” The Bad News Bears have been losing for so long it will be a shock when they finally hit a couple of home runs. Be ready.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE TELLING US 

This is what the technical indicators are telling us this week: 

One-month trend = The bulls took control: SPX rose by a respectable 26 points last week, rising from 4203 to 4229. Although it’s not exciting, the bulls are in control and running the market higher. The Bad New Bears have failed to take advantage of any selloffs. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball. 

RSI: (S&P 500) @69.67 (WEEKLY) = Overbought. RSI is telling us the market is overbought. If it reaches 70 or above, it will be extremely overbought. In the past, RSI has done a good job of warning us of a reversal, so pay attention to the Weekly RSI if it rises above 70 (only .33 away).

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.42 = VIX is still ridiculously low, and could go even lower. 

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 72 percent buy (according to this indicator). 

Comment: Once again, the bulls took control and ran the market higher, although slowly and steadily. Every time the market showed intraday weakness, buy-on-the-dip algos and retail traders saved the day. The only losers were short sellers.

Speaking of shorting, shorting the indexes (or buying puts on the indexes) has been a losing strategy. If you can identify individual stocks that are weak, it might work. But betting against the overall market has been frustrating and difficult.

Selling covered call options on certain stocks has worked, and so has going long the indexes, especially the S&P 500. Of course this winning strategy won’t work forever, but until something unnerves the market, it’s up, up, and away. One day, however, the bubble will pop.

Many will argue that this market is not in a bubble, and that would be an interesting discussion. One aspect about bubbles is that you don’t know you’re in one until it pops. Based on my personal experience, and how many investors believe the market only goes up, my opinion is it’s probably a bubble. Of course I could be wrong, which is why I don’t dare bet against this market (right now). Another characteristic about bubbles: Trying to short a bubble is financial suicide. Don’t even try.

If this is a bubble, one day it will pop, and it won’t be pretty. If this is not a bubble, and in fact this is a continuation of the longest bull market in history, then buy and hold investors will continue to rake in the cash.

Bottom line: We’re going higher until we aren’t. Since I don’t do predictions, I cannot tell you when the bull market will end, only that it will one day. Just be diversified. Trade small, especially if trading volatile securities.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE TELLING US 

This is what the technical indicators are telling us this week: 

One-month trend = The bulls took control: SPX rose by a healthy 48 points last week, rising from 4155 to 4203. This is a bullish development. The only question is if the momentum can be sustained. Futures are flat on Monday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball.

RSI: (S&P 500) @68.61 (WEEKLY) = Overbought. RSI is saying that SPX is overbought. At 70 or higher, it will reach extreme overbought levels.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.76 = VIX is ridiculously low, and could go lower.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 96 percent buy, while QQQ is a 72 percent buy (according to this indicator). Both are strong buys after a spectacular performance last week.

Comment: The bears keep huffing and puffing, and complaining, but the market defies logic and keeps moving higher. The trend is up for now but as readers of this blog know, that could change quickly. That is why it’s essential to be prepared for anything. It is also wise to have a diversified portfolio, i.e. don’t bet everything on one stock or other security.

It’s a four-day week and there isn’t much to say except let’s watch and see if the uptrend continues. The bears had a chance to take control two weeks ago but fumbled once again. And now the bulls are in control, along with their friends, the algos.

Bottom line: Wait for the market to make its move and then follow.

Note: I have a column coming out on MarketWatch this week, one that is worth reading.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

Here is a link to my most recent book, Make Money Trading Options, which introduces a new trading strategy for advanced beginners: Amazon link: https://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q Hint: I suggest you read my first book, Understanding Options, if you are an options beginner: https://amzn.to/2S04nQs

WHAT THE INDICATORS ARE TELLING US 

This is what the technical indicators are telling us this week: 

One-month trend = Still Volatile. It was a tug of war all week.  However, the end result was this: SPX fell by 18 points last week, dropping from 4173 to 4155. It could have been a lot worse, but the algos entered on almost every dip. Meanwhile, on Sunday night, the futures started off slow but now appear to be in rally mode. Obviously, that could change in the morning.

Mid-term (50- and 100-day MA) = Somewhat Bullish: SPX and the other indexes are above their 50- and 100-day moving averages but it’s a little shaky.

RSI: (S&P 500) @66.57 (WEEKLY) = Slightly overbought. RSI is still showing an overbought market but it has retreated from extreme levels.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is not giving a clear signal at this time.

Daily Intraday Volatility (VIX): 20.15 = VIX is still on the low side.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 72 percent buy, while QQQ is a 56 percent buy (according to this indicator). How the mighty have fallen: SPY is still a strong buy, but it’s fallen from a 100 percent buy two weeks ago.

Comment: Truthfully, everyone is watching cryptocurrencies right now, especially bitcoin. From a high of $64,000 per bitcoin only two weeks ago, it’s fallen to $34,000 as of Sunday night. There are many reasons: Elon Musk’s comments, the Chinese banning financial institutions from using cryptocurrencies, and an extremely overbought cryptocurrency market. No one knows where the cryptos will go this week, but be prepared for a rough ride. It’s like the Wild West if trading this product.

Anyone who has been trading for longer than 10 years knows that what crypto is going through can also happen to the stock market. We experienced a little taste of it a year ago after the pandemic first appeared. Since then, the market exceeded all expectations by rallying higher and faster than anyone predicted. And now we have a overbought market and a generation of investors who have never experienced a bear market.

Because I’m not a fortune teller, I can’t and don’t predict when a bear market will arrive. But I can guarantee with 100 percent certainty that there will be a bear market in the future. I also know that millions of investors and traders will be unprepared. Why? Because after 13 years, many believe the market “only goes up.” That’s what low interest rates do for the stock market.

Speaking of low interest rates, it’s a gift to home buyers and anyone refinancing or borrowing money. Unfortunately, once interest rates start to climb, stocks and housing prices will be negatively affected. Until then, however, enjoy these unprecedented times.

Regarding the stock market, the indexes are still overbought but as mentioned at the beginning, cryptocurrencies are the main attraction (for now). I have no idea which way either are going to go, but fasten your seatbelts. I assume the tug-of-war will continue.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

Here is a link to my most recent book, Make Money Trading Options, which introduces a new trading strategy for advanced beginners: Amazon link: https://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q Hint: First read my book, Understanding Options, if you are an options beginner: https://amzn.to/2S04nQs

Here is a link to my most recent article on MarketWatch, “Don’t Be a Sitting Duck When This Stock Market Rally Fades”: https://on.mktw.net/3uUEIqK

WHAT THE INDICATORS ARE TELLING US 

This is what the technical indicators are telling us this week: 

One-month trend = Volatile. The bears temporarily took control last week.  To be precise, SPX fell by 59 points during the week, from 4232 to 4173, but it could have been a lot worse. After a vicious three-day selloff, the indexes recovered on Thursday and Friday. The market appeared to be headed for the abyss until the dippers stepped in and saved the day. Futures are lower on Sunday night, and bitcoin is getting smashed in the premarket.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes fell to their 50-day moving averages during the week but suddenly reversed direction. Now, the indexes remain well above their 50- and 100-day moving averages. 

RSI: (S&P 500) @ 68.10 (WEEKLY) = Slightly overbought. RSI warned everyone the market was overbought and sure enough, the market plunged last week. Now you know that RSI is reliable when evaluating SPX and other indexes. Pay attention when it reaches overbought territory (above 70).

MACD (WEEKLY) = Bullish. MACD is above its zero line and above its 9-day Signal Line. Until MACD gives a sell signal, the bull market is intact. 

Daily Intraday Volatility (VIX): 18.81 = VIX is out of the basement for the moment as a dose of fear entered after the inflation numbers were released, the highest in 13 years.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 88 percent buy, while QQQ is a 55 percent buy (according to this indicator). Only a week ago both securities were 100 percent buys. A little fear entered the market last week.

Comment: That three-day selloff really spooked investors for the short-term. The selloff might continue into this week as the futures are lower. We are really in uncharted territory and few can accurately predict what is going to happen. Yes, we are overbought, but last week we were really overbought. For specific ideas of what to do, read my article on “Don’t be a Sitting Duck” (link at top).

As I wrote in the article, this is the time to be diversified, and to raise cash if possible. Timing the market is difficult and yet, buying overbought stocks at all-time highs is risky as well.

What I am looking for: I want to see if last week’s two-day rally fails this week. If it does, it could get ugly fast. It’s been a long time since the market has experienced this much volatility, so fasten your seatbelts.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com