The Weekly Trader

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

One-month trend = Neutral. SPX moved higher early in the week and then flat-lined before and after Thanksgiving. Volume was thin all week. Perhaps participants will return to the market this week. Futures are slightly lower on Sunday night, but wait until the morning for confirmation.

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

RSI: (S&P 500) @ 63.72 (Daily) = Overbought. As SPX creeps higher, so does RSI. It’s not extreme yet but it’s getting closer. RSI has given some remarkably accurate readings in the last few months, so pay attention if it spikes during the week.

MACD = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD will give an early signal of a faltering market. It hasn’t given that signal…..yet.  

Daily Intraday Volatility (VIX): 20.84 = Very Low. How low can we go? VIX tells me that bullish investors have little or no fear, and are high on hopium.

Comment: SPX touched all time highs last week before falling back and then moving sideways. As the virus explodes higher (although half the country thinks the dangers are overblown), as the economy gets shredded, as more people lose jobs and benefits, we are pinning our hopes on the vaccines. If the vaccines work as advertised, that could be a big time game changer. Let’s hope it’s as good as advertised.

Meanwhile, with the market near all time highs, fear has evaporated, and optimism is in the air. The bulls got their wish when Dow 30,000 was hit, before falling back. Investors might get their wish a second time. This is really something: an all-time high of Dow 30,000 during the second worst pandemic in world history. (Powell better not raise interest rates or there will be dire consequences.)

Meanwhile, the thin volume and wait and see actions by the pros have me concerned. There isn’t mass selling, but there isn’t mass buying either. It feels like a game of chicken, one that I’m not not willing to play. A Christmas rally is always possible, especially if the vaccine is successful.

Some pros are recommending gold (see below), which is not a bad idea in these uncertain times. We’re in uncharted territory, one that I can’t compare to any other period in U.S history, except 1918.

Bottom line: Be careful out there as anything is possible. Investors are shockingly bullish (according to the VIX), and hope is on the way with the vaccine. Unfortunately, I just can’t shake the feeling that an unexpected nasty surprise is waiting for the bulls. Since I don’t trade on feelings, I’m sitting this one out for now.

Here is the latest from Lance Roberts (realinvestmentadvice.com), who wisely warns that risks are increasing: https://bit.ly/36kc4p9

Here is a piece from Sven Henrich (Northman Trader), who says it’s time to buy gold: https://bit.ly/39rg7Cc

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

One-month trend = Neutral. SPX started off bullish early the first day but ended the week at the lows. Even the announcement of a vaccine couldn’t prop up the market for longer than a day. SPX closed at 3557 at Friday’s close, lower than a week ago. Futures are slightly higher on Sunday night. 

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

RSI: (S&P 500) @ 57.08 (Daily) = Slightly overbought. RSI fell from extremely overbought to slightly overbought.

MACD = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD will give an early signal of a faltering market. 

Daily Intraday Volatility (VIX): 23.70 = Low. What me, worry? 

Comment: Last week, the indicators warned that the indexes were overbought, and sure enough, it was a rough week for the bulls. The rallies failed, and yet, there is little fear. 

Once again, pay attention to the rallies for clues. If the rallies fail again this week, it will not be pleasant for the bulls. With the pandemic spreading and the economy faltering, I’m amazed the market is still near its all time highs. The Fed is keeping interest rates low, and the algos are working overtime to keep the market stabilized. 

I would not be surprised to see a major pullback or plunge in the next few months. I don’t trade off of predictions, but I do prepare for any scenario. Trend trading has been difficult for quite a while. Scalpers and day traders have probably found more opportunities, but it’s not easy. Indexers are just holding and hoping for the best. 

At the moment, it’s impossible to predict market direction. My gut tells me the market is vulnerable (but I don’t trade off of my gut, my feelings, or predictions). Since the market is unpredictable at this time, I am personally on the sidelines, waiting for better setups. Perhaps others have found better opportunities, and if so, you should be commended. This is not an easy trading environment. 

Bottom line: Unpredictable market, unpredictable trading setups, and unpredictable world.

Here is the latest from Lance Roberts, who wisely took profits last week: https://bit.ly/35ZqqeJ

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

One-month trend = Bullish. SPX started off strong last week, but then plunged the next day, taking quite a few stocks with it. SPX drifted the rest of the week but is still near all-time highs. However, I see a triple top. The futures are higher on Sunday night, but that could change in the morning. SPX was at 3585 on Friday’s close.

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

RSI: (S&P 500) @ 63.57 (Daily) = Overbought. RSI is creeping higher, but not at extreme levels (yet).

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

Daily Intraday Volatility (VIX): 23.10 = Low. VIX is well below its 200-day moving average, reflecting a lack of fear (unless you are shorting indexes). 

Comment: The market broke higher last week before pulling back from overbought levels. A triple top has developed, but it does not mean the market will plunge anytime soon. Possible, but impossible to predict.

The market is still in an uptrend while the virus rages out of control, and the economy suffers. No one can say when reality returns to the market (it’s been a long time), but as I’ve repeatedly said, trade cautiously.

This week, watch the rallies closely. If the rallies have “legs,” and continue to move higher, that is bullish. However, if the rallies reverse direction or fail to make new highs, that would be bearish. In particular, see if the indexes can break through resistance.

Anyone holding indexes long should be pleased. Those who own individual stocks have had a rougher ride in the last few weeks. It’s an unpredictable environment, especially if you own individual stocks.

Bottom line: Let’s see if the indexes can break through resistance and make new highs. If not, it could be dangerous for the bulls.

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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: https://wolfstreet.comEdit

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

One-month trend = Bullish. SPX rallied much higher last week, rising above all moving averages and retesting all time highs. SPX is spiking higher on Sunday night, wiping out traders who are heavily shorting the indexes. SPX is at 3509 on Sunday night, but the futures market is pointing to a 50 point rally at the open. 

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 bounced back above its 50- and 100-day MA. 

RSI: (S&P 500) @ 60.03 (Daily) = Slightly Overbought. RSI went from oversold to overbought in one week. 

MACD = Bearish. MACD is at its zero line but pointing higher. It is also above its 9-day Signal Line

Daily Intraday Volatility (VIX): 24.86 = Lower. VIX plunged below its 200-day moving average, reflecting a lack of fear (unless you are shorting). 

Comment: As I repeatedly warned last week, this is a dangerous, unpredictable market. If you’re on the wrong side, you can get shredded. It was impossible to predict market direction last week. As it turned out, the market rallied all last week, and is expected to rally strongly on Monday at the open. 

I wish I could proclaim the bull market is back but the indexes have moved up too high and too fast, making it a very dangerous market. A reversal can occur at anytime, so trade at your own risk. Trade small if you participate. 

Bottom line: The market is going to rally strongly at the Monday morning open, with strong volume. Don’t dare short this market at first, although shorting opportunities will appear in the near future. In my opinion, it’s dangerous on both sides, so be careful if you are trading. 

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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: https://wolfstreet.comEdit

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

One-month trend = Bearish. SPX is above its 200-day MA but pointing lower as the market plunged last week. SPX closed at 3269 at the close on Friday, a huge drop from a week before. Note: SPX futures were lower earlier Sunday night, but are now higher. Wait until the premarket to be sure.

Mid-term (50- and 100-day MA) = Bearish. The S&P 500 sliced through the 50- and 100-day like it was butter.

RSI: (S&P 500) @ 37.05 (Daily) = Oversold. RSI went from slightly overbought to oversold in one week. The market could get more oversold or it could bounce. Anything is possible.

MACD = Bearish. MACD fell slightly below its zero line and is also below its 9-day Signal Line. MACD is reflecting the current bearishness.

Daily Intraday Volatility (VIX): 38.02 = Higher. VIX spiked higher, rising above its 200-day moving average as fear entered the market for the first time in months.

Comment: Last week brought us a lot of lessons as reality finally overwhelmed the market. Although traders and investors were hopeful, the stock market was no match for the virus and tough economic conditions. Market veterans saw this coming for weeks as the bull market finally ran out of steam all last week.

It is unknown if the bull market is over or if another rally is in the cards. Although the market looks dangerous and unstable at the moment (and futures are falling on Sunday night), the market has reached overbought levels. It is not at extreme levels yet, meaning the market has room to fall even more before reversing.

As I wrote last week, with an election looming and a virus spreading, it’s dangerous to take one side or the other, as anything can happen this week. Most pros will hedge (or hide) rather than commit to one side or the other. If you don’t know how to hedge, sitting on the sidelines is not a bad strategy as it’s easy to get chopped up.

Bottom line: No one can predict what is going to happen to the market this week, so don’t even try. I assume volatility will increase. These are historic times, and it will be a historic week. Be prepared for any scenario.

Here is a more detailed analysis about the market from Lance Roberts: 

Lance Roberts @ realinvestmentadvice.com explores why the stock market plunged last week: https://bit.ly/3mJMJdO

__________________________________________________________

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