The Weekly Trader

Here is a link to my most recent book, Make Money Trading Options, which introduces a new trading strategy for beginners: Amazonhttps://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = Bullish. The bulls remain in control and the trend is still up.  SPX rose by 57 points last week, from 4128 to 4185. The Dow futures are lower on Sunday night, but that could change in the morning, especially if a buy-on-the-dip algo enters.

Mid-term (50- and 100-day MA) = Bullish: The indexes keep moving farther and farther away from its moving averages. 

RSI: (S&P 500) @ 71.83 (WEEKLY) = Extremely overbought. RSI is in the danger zone (above 70), however, indexes and stocks can get more overbought before suddenly reversing. 

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): 16.25 = The VIX continues to head lower, reflecting the mindless lack of fear by almost everyone participating in the marketplace.

Barchart Stock Evaluator for SPY and QQQ (link below): According to this proprietary program, SPY and QQQ are both 100 percent buys. 

Comment: Is there any investor not making money? Except for bondholders, buy and hold investors appear to be raking in the dough, or so they tell me. Many traders, however, are not enjoying the market inaction.

While the market is at all-time highs, the “invisible hand” is keeping the market propped up, and doing a darn good job of it. Short at your own risk. Just buy and hold, hold, hold, and don’t think about the future.

And yet, RSI is telling us that investors are playing with fire. As long as the Fed is keeping interest rates low, and nearly all asset classes are moving higher, what could go wrong?

In reality, a lot could go wrong, but no one can predict when and where, so don’t try. Although the uptrend is intact, and all seems well, RSI is giving a clear warning signal. And yet, we can get more overbought before a reversal. It feels like we’re playing a game of musical chairs, so be careful out there.

Bottom line: We’re going higher until we’re not. (Put another way, we’re in a strong uptrend that cannot be shorted…yet. Until we reverse direction on strong volume, and no one can predict when that will happen, we are going higher.) Although the futures are lower on Sunday night, I’ve seen this scenario before. Volatility and volume have to explode higher before I think it’s the real deal.

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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 beginners: Amazonhttps://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q

My latest MarketWatch column on what I learned from legendary investor Peter Lynch can be found here: https://on.mktw.net/39VvB0E

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = Bullish. The bulls remain in control and the trend is up, up, and away. SPX rose by 109 points last week, from 4019 to 4128. The Dow futures “were” strongly higher on Sunday night, but reversed direction at 9:00 p.m. ET., and are slightly lower. I have no idea what will happen in the morning.

Mid-term (50- and 100-day MA) = Bullish: The rally is intact. The indexes keep moving farther away from its moving averages. 

RSI: (S&P 500) @ 70.11 (WEEKLY) = Extremely overbought. RSI is in the danger zone (above 70) and if the overnight futures hold, SPX and the other indexes will get more overbought. This is a warning signal. However, indexes and stocks can get more overbought before reversing.

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. MACD is not giving a clear signal. 

Daily Intraday Volatility (VIX): 16.69 = The VIX continues to plunge, once again reflecting the mindless lack of fear in the marketplace.

Barchart Stock Evaluator for SPY (link below): According to this proprietory program, SPY is a 100 percent buy. 

Comment: This is one for the history books. While the three major indexes appear bullish with no end in sight, RSI is a definite red flag. Based on my past readings, when RSI gets this high on SPX, a reversal is looming. Everyone wants to know when it will reverse! No one can say when, but right now, the bulls are playing with fire.

If you are a trader, I wouldn’t be holding for very long, and as for me, I’m not holding over the weekend. If you’re a long-term investor, as long as you know what you own, and are diversified, a short-term plunge shouldn’t shake you up. Nevertheless, caution is advised.

I’ve talked to trading veterans and they can’t believe what they’re seeing. Timing reversals are near impossible. There are also clues this is a bubble, and if true, then no one knows the real value of anything. Scary thoughts, but meanwhile, enjoy the ride while it lasts.

Bottom line: An extremely overbought market that could get more overbought until reality comes out of the blue and smacks the uninformed in the face with a 2×4. This should be an interesting week.

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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 beginners: Amazonhttps://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q

My latest MarketWatch column on what I learned from legendary investor Peter Lynch can be found here: https://on.mktw.net/39VvB0E

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = Bullish. The bulls took control and we’re off to the races, for now. SPX rose by 45 points last week, from 3974 to 4019. Yes, we’re over 4000 SPX points. SPX Futures are strongly higher on Sunday night, and if that holds, the rally continues. Nasdaq is higher Sunday night but not by as much.

Mid-term (50- and 100-day MA) = Bullish: The rally is intact as the indexes move away from its moving averages.

RSI: (S&P 500) @ 66.47 (WEEKLY) = Overbought. RSI rose a few more points with the market. If we get into the danger zone (over 70) this week, I will be paying close attention to signs of a reversal.

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. MACD is not giving a clear signal.

Daily Intraday Volatility (VIX): 17.33= The VIX plunged, once again reflecting the mindless lack of fear.

Barchart Stock Evaluator for SPY (link below): According to this proprietory program, SPY is a 100 percent buy.

Comment: Like most traders, I will take advantage of the short-term rallies using day trading or even weekly strategies (i.e. swing trading). But I know from experience that the higher we go, the more dangerous it becomes. No one is expecting a 10 percent correction, and they cannot be predicted.

What do you do if you know a 10 percent plunge is coming? If you are a long-term investor, read the article I wrote for MarketWatch (link above).

It discusses the long-term strategies of master investor Peter Lynch. His advice: Stay the course. Although he didn’t like corrections, he knew they were inevitable and just held onto to what he owned.

On the other hand, if you are trading, then you take advantage of short-term trends or reactions. Traders will likely ride the bullish wave tomorrow and perhaps for a few days longer while preparing to sell at the first sign of problems. It’s not easy being a trader!

In the short-term, the market is signaling “full speed ahead.” In the mid-term, this overbought market should cause some concern. I’m watching RSI closely to see if it surpasses 70. Although the market or stock can remain overbought for long time periods, an overbought market is susceptible to unexpected bad news.

Bottom line: Although the market sky looks blue, danger could be lurking. It doesn’t mean you have to react, or try to predict what will happen. It does mean knowing what you own and having a plan.

_______________________________________________________

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, aimed at helping beginning option traders: Amazonhttps://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = Bullish. Although the indexes struggled to gain traction early in the week, it found its footing on Friday, when SPX rallied by 65 points. Last week, SPX rose from 3911 to 3974 , or 63 points. As you can see, all of the gains came on Friday. Futures are slightly lower on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX bounced off of it 50-day moving average and rallied strongly later in the week. On Friday, the bulls took control. Let’s see if they can take the indexes even higher.

RSI: (S&P 500) @ 64.82 (WEEKLY) = Slightly overbought. RSI rose slightly with the market. It’s not yet in the danger zone (i.e. 70).

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. It’s another coin toss. 

Daily Intraday Volatility (VIX): 18.86= The VIX fell from a week ago, reflecting the lack of fear in the marketplace.

Comment: Remember, this is a four-day week. We will have to wait and see if the bulls can keep the rally alive. Even with the Friday rally, it’s not an easy trading environment.

Certain individual stocks are getting smashed or are faltering while the SPX rallies. On many days, its a divergent market: The Dow and SPX rally while the Nasdaq falls. Many of the stocks that were most popular over the last few years are struggling, or flatlining. I’m talking about Amazon, Netflix, Nvidia, and Google.

If you have studied bull markets in the past, one of the clues that the end is near is when the strongest stocks struggle, like what is happening now. In addition, if interest rates rise (see the federal funds rate) because of inflation, that would end the party very quickly.

As a trend trader, it’s been difficult to find winning positions. As many of you know, I use a paper money program to find winners (i.e. the test trading strategy), but finding winners has been a challenge (until Friday).

Strategy Ideas:

1. You can trade less each day, trying to identify winners on the best trading days.

2. You can wait on the sidelines for a better entry. The market is an auction. Ideally, you want to buy at lower prices and sell at higher prices.

3. You can use intraday trading strategies (i.e. scalping) to eke out small gains.

4. it’s a good time to learn how to buy put options. I can’t tell you when, but bull markets always end. After 12 years, many investors are playing with fire.

Bottom line: After Friday’s bullish rally, I would not be surprised to see a short-term pullback. And yet, as the holidays approach, we could see more buying enthusiasm. My advice is to be on guard but look for trading opportunities when they appear.

Note: I’ve talked to professional traders who are shocked at the mindless bullishness that exists in the market right now. Although no one can time the end of a bull market, I believe we’re getting closer.

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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, aimed at beginning option traders: Amazonhttps://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q

PART 1: WHAT THE INDICATORS ARE TELLING US

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

One-month trend = Neutral. The SPX stalled during the week, falling by 32 points from a week ago to 3911. Even with kind words from the Fed, the market was unable to move higher last week. Futures are lower on Sunday night, but that could change in the morning.

Mid-term (50- and 100-day MA) = Neutral. The S&P 500 fell last week, once again breaking the weekly trend, but remaining above its 50-day moving average.

RSI: (S&P 500) @ 62.48 (WEEKLY) = Slightly overbought. RSI pulled back slightly along with the market.

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. It’s a coin toss. 

Daily Intraday Volatility (VIX): 20.95= The VIX didn’t budge from a week ago. It’s telling us there is still no fear.

Comment: It’s been a long time since all of the indicators I follow turn up with the same result: NEUTRAL. Anyone who can tell you what the market is going to do this week is a fortuneteller. However, there are some clues that may help us with our forecasts, but nothing definite.

After the Fed said at their meeting they are keeping interest rates unchanged and low, the market initially rallied before pulling back for the next two days. Whatever the Fed was selling, the market didn’t seem to buy.

The Fed needs interest rates low for the economic recovery to continue. If inflation rears its ugly head, and if interest rates start to rise, the Fed might be forced to raise interest rates. That would not be a pretty sight for the stock market, or real estate.

In an ideal world, the Fed would have room to cut interest rates, especially with a shaky recovery. But in the real world we are in, rates are near zero and there is no room to cut.

Let’s hope that inflation does not heat up, and that interest rates remain low. If either of these things happen, it will not be a pretty sight. Be prepared for the worst, however.

Bottom line: The market is on shaky ground, so caution is advised. It’s been an amazing 12 year bull market but the clues point to a dangerous storm ahead, especially if interest rates rise. Keep your eye on the Fed’s Fund Rate, too.

PART 2: THE TEST TRADING STRATEGY

Because of a more challenging market environment, we will only use the Test Trading Strategy on the days when the futures are pointing much higher. On the flat or down days, we use other strategies (such as buying puts, or hedge), or not trade at all.

Last week, we only had two days that we were able to find winners. It was not an easy week! Let’s hope we get better opportunities this week, but we will let the market guide us. We do not force trades or make the market bend to our wishes. We follow the market, and try not to predict what it will do.

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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