The Weekly Trader

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

One-month trend = Neutral. As expected, the algos pushed the indexes above its 200-day MA last week, which is a slightly bullish sign. Let’s see how long it lasts. Note: SPX is at 3130 on Sunday night. The 200-day is at 3022.84.

Mid-term (50 and 100-day MA): The S&P 500 is slightly above its 50- and 100-day MA = Neutral. 

RSI: (S&P 500) @ 56.37 = Slightly overbought = Neutral. 

MACD: MACD is above its zero line and and even with its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 27.68 = VIX didn’t move much in the last week = Neutral. 

Comment:

As you can see above, we are in a holding pattern. Everything is in neutral for the second week on a row. That means it could be the calm before the storm (if you’re bearish), or happy days are here again (if you’re bullish).

When I look at reality, I am still having trouble finding good financial news. The employment numbers were not as rosy as Wall Street led you to believe (read Wolf Richter @Wolf Street below for a more thorough analysis). The virus keeps expanding with no end in sight. And the market is moving sideways, slightly above its 200-day moving average.

As the elections get closer, volatility should increase, and that could cause havoc with the market. I can’t predict what is going to happen in the near future because the algos and Central Banks are running the show, but if I had to place a bet, I’d say this is the calm before the storm. I just don’t know when the storm is coming!

Bottom line: We are at war with a virus so please stay safe and follow the rules. Below is a more detailed analysis of the market environment:

Lance Roberts @ realinvestmentadvice.com lists 15 rules for investors that are very helpful: https://bit.ly/2YZg7n6

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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:www.wolfstreet.com

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

One-month trend = SPX is slightly BELOW its 200-day moving average = NeutralSPX has failed to stay above its 200-day MA, which is a bearish sign. I am certain the Fed, and its algo friends, will try and rescue the market once again.

Mid-term (50 and 100-day MA): The S&P 500 is still in a sideways pattern = Neutral.

RSI: (S&P 500) @ 45.65 = Slightly oversold = Neutral. 

MACD: MACD is above its zero line and and slightly below its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 34.73 = VIX didn’t move much in the last week = Neutral. 

Comment: The overbought market had a chance to get more overbought last week, but reality interfered. It might be the virus, the political climate, or awful economic news, but the market fell back below its 200-day moving average on Friday. That was a negative sign. In addition, every rally was met with more selling, another clue that something changed last week.

And yet, I am certain the Fed will do whatever it takes to pump the market higher this week even while the bad news keeps coming. The virus news is the most damaging to the economy, and to the stock market. No one can predict who is going to win this battle this week, although the futures are slightly lower on Sunday night.

In addition to the worrisome news that never seems to stop, many investors and traders are convinced the market will never go down, and if it does, it will bounce back. Any experienced trader knows what once you are certain what’s going to happen to the market, usually the opposite occurs.

Only three months ago the market had a huge correction, and perhaps entered into a bear market. Then we had a monster rally, which could very well be a bear market rally. If that is true, if we are really in a bear market, and this recent rally is only temporary, then look out below.

I’m not predicting that is going to happen, but you better be prepared for any scenario. Personally, I’m amazed that the market is still this high considering everything that has been happening. It’s too early to short (maybe), but it’s a little late to go long.

Bottom line: The market is starting the week with a negative bias, which is not surprising considering everything happening in the world. The Fed appears to be the main entity pushing the market higher almost every day. I sure hope they know what they are doing.

Below is a more detailed analysis of the current market environment:

Sven Henrich @ Northman Trader doesn’t hold back his anger at the Fed for playing games with the stock market: https://bit.ly/3iakGTh

Lance Roberts @ realinvestmentadvice.com analyzes the market from a fundamental perspective, and doesn’t like what he sees: https://bit.ly/3eJAJFr

__________________________________________________________

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:www.wolfstreet.com

Here is a more detailed analysis of the current market: 

One-month trend = SPX is slightly above its 200-day moving average = NeutralSPX is struggling to rise well above its 200-day MA, and if it does, the market has room to climb higher. If it falls below this week, it would be a negative sign.

Mid-term: The S&P 500 is still in a sideways pattern = Neutral. Perhaps it will be resolved this week.

RSI: (S&P 500) @ 55.12 = Slightly overbought = Neutral. 

MACD: MACD is above its zero line and and even with its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 35.12 = VIX didn’t move at all in the last week = Neutral.

Comment: I’m really struggling to find good news to report. The rising virus numbers, protests, upcoming election, job losses, and economic damage isn’t going away anytime soon. Wait! There is some good news, the only good news I can report: The stock market is near its all time highs.

It’s hard to believe the stock market has ignored all of the bad news swirling about and is slowly grinding higher. Based on the indicators I use, the mountain is steep and getting harder to climb.

Friday was one of the most bearish days I’ve seen in a while. The Dow opened higher by over 300 points, struggled all day, but closed down 200 points. A bearish intraday reversal is a very negative sign.

The indicators above are telling us nothing significant as we wait until the market makes up its mind this week. It’s anyone’s guess which direction we will go.

Another troubling sign is the huge number of beginner traders who have entered the market near all time highs. That is typically a sign we are at or near the top. Only time will tell.

The average investor believes “I will get out in time before the crash.” It appears as if almost everyone is expecting another crash near or after the election, but that everyone thinks they will get out with their profits intact. I’ve heard this story before.

Bottom line: The market is struggling to move higher as the bad news keeps growing. Either the stock market is right and good economic news is coming soon, or the economy is right and reality will hit the market like a 2×4 in the face.

Below is Wolf Richter’s take on the market (Hint: He’s shorting. FYI, in January he correctly predicted the market would plunge).

Wolf Richter @wolfstreet.com who hates to short, wrote an excellent piece on why he has started new short positions: https://bit.ly/2Ngaz0P

Lance Roberts @ realinvestmentadvice.com agrees the bulls are in control….for now: https://bit.ly/2AWuYFQ

__________________________________________________________

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:www.wolfstreet.com

One-month trend = Stalled Uptrend. SPX is slightly above its 200-day moving average = Neutral. SPX was in a strong uptrend until Thursday’s 1800 point drop in the Dow. Reality finally returned.

Mid-term: The S&P 500 was in a strong uptrend until last week’s pullback = Neutral.

RSI: (S&P 500) @ 51.72 = Don’t ignore RSI. It went from over 70 early last week back to neutral = Neutral.

MACD: MACD is above its zero line and and is slightly below its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 35.09 = VIX spiked last week, signaling that a little bit of fear crept into the market.

Comment: The signals last week were flashing red. First, there was RSI, which went above 70. As I wrote last week, anytime RSI moves above 70 on SPX, it’s a danger sign.

In addition to RSI, all of the indexes were bullish while the economy was struggling and the virus was spreading. There was no warning for the Thursday selloff, which is typical for corrections. Another warning sign: The hosts on several financial programs were outright giddy, including one well-known tout who acted as if the market would never go down.

Sunday night, the futures are telling us the market may open lower, but wait until the opening before trading. The market could go either way.

The powers that be, including the Fed, does not want to see another big selloff, but I would not be surprised to see us hit the March lows in the next few months. And yet, the algos will do everything in their power to suppress volatility and keep the rally going.

The big question is whether SPX can hold the 200-day moving average this week. If it can, then all is well for the rest of the week. If it can’t, then it’s going to be a very unpleasant week if you are bullish.

Bottom line: it’s anyone’s guess which direction we are going this week except to say that we went up too fast, and too far. Thursday brought a dose of reality to the markets, so let’s see if that was enough to slow the momentum. Once again, be on guard as we could go either way, and no one but the market itself knows the winning side.

Here is a more detailed analysis of the current market: 

Lance Roberts @ realinvestmentadvice.com analyzes the market from a realistic perspective: https://bit.ly/2YvnSzQ

__________________________________________________________

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:www.wolfstreet.com

One-month trend = Uptrend. SPX is above its 200-day moving average= Bullish. Very impressive, I must admit.

Mid-term: The S&P 500 has been in a lengthy uptrend = Bullish.

RSI: (S&P 500) @ 72.48 = Extremely Overbought. RSI is telling us the market is way overbought. Caution is advised.

MACD: MACD is above its zero line and above its 9-day Signal Line = Bullish

Daily Intraday Volatility (VIX): 24.52 = VIX keeps falling but not extreme yet = Neutral

Comment: Last week I thought that reality was going to hit the market, but it was not to be. The indexes continued to climb higher and higher, and even though it feels like the world is falling apart, the stock market acts as if all is well.

On Friday, the market supposedly rallied because the unemployment rate is only 13%, the worst since the Great Depression, but some thought it could have been worse. Hmmm.

Everything looks delightful for the market except for RSI, which is flashing a very strong warning sign. We are more overbought than even in March. Although you never fight the tape, I also don’t ignore RSI, which tells us the party will be ending in the near future. Sunday night, futures are higher, but let’s see what happens at the opening.

Enjoy the good times while they last, but they won’t last. Retail investors, and now hedge funds, are joining in for the fun. Everyone is sure the Fed has their back, and even if the market plunges, the Fed will save us (or so they say).

In fact, there is little fear, which reminds me of a Jesse Livermore saying, something about people are greedy when they should be afraid and afraid when they should be greedy. (Warren Buffett said something similar).

Bottom line: I sense a lot of greed right now.

Here is a more detailed analysis of the current market:

Lance Roberts @ realinvestmentadvice.com breaks down the jobs numbers in more detail with this excellent piece: https://bit.ly/3cE3TEh

Sven Henrich (Northman Trader) writes a scathing piece about how the Fed’s misguided policies are going to end in disaster: https://bit.ly/2Ycir8L

__________________________________________________________

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:www.wolfstreet.com