The Weekly Trader

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX uptrend is up but hitting resistance at all-time highs.

RSI: (S&P 500) @ 61.93 = Slightly Overbought

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.74 = Low

Comment: This is one of those rare times when the indicators above are screaming bullish but the sentiment indicators are screaming, “Be careful!” If you look at the chart, everything looks wonderful with a few potential problems:

  1. We are hitting resistance at all-time highs in SPX (3007), and twice in the past, the indexes retreated at these levels.
  2. The drone attack on the Saudi oil processing facility is causing havoc on oil around the world. Futures are lower Sunday night, which should continue into the open. However, the buy-on-the-dip algos will be buying at the open to attempt to calm volatility.
  3. Most concerning of all is investor sentiment. From my conversations with investors, they are pleased with their portfolios, their profits have increased beyond their wildest expectations, they will “never” sell no matter how low the indexes go, and they are now strong believers in buy-and-hold. With the markets at all time highs and investor sentiment so complacent with a belief the markets can only go higher, I see a major break in the near future. Investors are relying on the Fed to save them from any downturns. To me, this is similar to what happened when bitcoin hit $20,000 before collapsing. Bitcoin investors were also buying at the top. If anything goes wrong with the bullish scenario in the stock market, all hell is going to break loose.

To give you a different perspectives (although slanting to the “be cautious” side) are the following two must-read columns. They go into much deeper detail than I have.

Bottom line: The indicators are flashing “Go Go Go” but the sentiment and resistance levels are flashing “Watch out below!” Let’s see if the Fed can once again prop up the market (Fed meeting on Tuesday and Wednesday). I agree with Sven, who says that investors are “playing with fire.”

Here are the two articles that I recommend reading:

Sven Henrich (Northman Trader): https://bit.ly/2lP4C0G

Avi Gilburt using Elliott Wave (Seeking Alpha): https://bit.ly/2kKHlN5

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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


S&P 500 is above its 200-day moving average = Bullish  

S&P 500 spurted above its 50-day MA last week on low volume = Neutral

S&P 500 one-month trend: SPX uptrend is still broken but indexes are making a run for all-time highs at SPX 3000.

RSI: (S&P 500) @ 58.33 = Slightly Overbought

MACD: Slightly Above Zero Line and strongly above Signal Line = Neutral

Daily Intraday Volatility: 15.03 = Neutral. Volatility is on the low side.

Comment: After a poor start early in the week, the algos got their mojo back and ran the market higher on low volume, bringing the SPX back above its 50-day moving average. We are very close to our all-time highs so it’s going to get interesting. In addition, the Fed will have their FOMC meeting in a week (Sept. 17 and 18), which almost always attracts volatility. Soon we will learn whether the latest rally to all-time highs is the real deal or a head fake. Everyone will be listening closely to the Fed chairman’s words.

There are signs of a slowdown in manufacturing, car sales, and house sales, and yet the market moves higher. Volatility has been suppressed and most investors are complacent about the market (“It goes up and down, what can you do?”).

I’m taking a wait-and-see approach as the market is rallying on light volume and numerous warning signs. With the Fed ready to speak about lowering interest rates, if they please Wall Street, the market could rally to SPX 3000. If the Fed disappoints, then we could fall to SPX 2800 or lower.

Bottom line: It’s all about the Fed for the next two weeks, so be cautious. It’s not a bad time to increase cash during these turbulent times (it doesn’t mean sell everything), or to diversify into less-risky investments.

For a more detailed analysis of technical and economic indicators, I will refer you below to two excellent columns from market technician Sven Henrich (Northman Trader), and money manager Lance Roberts (realinvestmentadvice.com). Both are excellent reads.

Northman Trader: https://bit.ly/2k6BSjk

Lance Roberts: https://bit.ly/2lFvVdA

______________________________

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


S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is below its 50-day MA but above its 100- day moving average = Neutral

S&P 500 one-month trend: SPX broke its uptrend, went lower, and is now stalled in a sideways trend.

RSI: (S&P 500) @ 51.92 = Neutral

MACD: Below Zero Line but slightly above Signal Line = Neutral

Daily Intraday Volatility: 18.98 = Neutral. Volatility is elevated but not extreme.

Comment: As expected, the computer algos bought on the dip last week and brought the indexes close to the SPX 50-day moving average. How do I know it’s computer algos? Because volume was pitifully low all week. The latest algo game is gunning the futures market higher before the open. After the market opens, it often spikes higher, and then moves sideways the rest of the day. Bottom line: There has been little buying and selling by individuals and institutions. The good news for the bulls is there has been no panic. The bad news is there hasn’t been strong buying by individuals or institutions. (Note: S&P futures are lower on Monday night but nothing is certain until the open).

Right now, no one can predict which way the market will go. The indexes must rise above their 50-day moving averages (and stay above) for any hope of a strong bullish uptrend. Based on what I see on a three-month chart, this market is struggling. It’s as if most traders and investors are taking a “wait and see” approach to the market. That is reflected in the “neutral” settings on most of the indicators above.

For a more detailed and technical analysis of the current market, I’d like you to read the following piece by Sven Henrich (Northman Trader). He gives a bearish view of the market backed up with facts, and he could be right. Here is his excellent analysis: https://northmantrader.com/2019/08/31/thunderdome/

Jerome Powell speaks at 12:30 p.m. ET on Friday, and the jobs report will be released earlier that day. Obviously, this should be another volatile week, especially on Friday. One thing we can all agree on: this has been a difficult trading and investing environment, and that will continue for many months longer.

______________________________

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


S&P 500 is above its 200-day moving average but pointing straight down = Neutral  

S&P 500 is below its 50-day and 100- day moving averages = Bearish

S&P 500 one-month trend: SPX broke its uptrend and is in a downtrend.

RSI: (S&P 500) @ = 40.78 = Slightly Oversold

MACD: Below Zero Line and below Signal Line = Bearish

Daily Intraday Volatility: 19.87 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has increased.

Comment: A lot of pundits and financial know-it-alls are going to tell you “why” the market went down last week. To tell you the truth, knowing “why” the market goes up or down is not helpful. What is helpful is knowing “what” the market is doing. That will be our focus today.

As I’m writing this on Sunday night, the SPX futures are lower, but there is no panic. As you know, we fell hard last week, especially on Friday, and we’re getting closer to the S&P 500 200-day moving average (at or around 2800). As SPX gets closer to this line-in-the sand support level, the algos will do anything possible to defend it. The odds are very good we will bounce at the 200-day moving average (assuming it gets there).

The only way SPX slices below the 200-day in the next few days is if there is panic selling. So far, all of the selling has been orderly and calm. In fact, if it wasn’t for the algos buying on every dip, the selloff last week would have been much worse.

But, based on the broken uptrend, the extreme negativity, the low PMI, and a struggling economy, the bull market appears to be over. However, the programmed buy-on-the-dip algos will keep defending until investors start panic selling, and that hasn’t happened yet.

This is a very dangerous market and difficult to navigate. If you’re a complacent investor, you will remind yourself that the “market always comes back,” which are dangerous words in a recession and bear market, especially if you own individual stocks. And if you are a trader, one tweet can cause the market to rocket higher or plunge. Yes, it’s dangerous for both investors and traders.

To survive, you must use hedges if you are a trader, and diversify if you are an investor. If you make an all-or-nothing bet on one side or the other, you are gambling, not trading. Nevertheless, as we enter the difficult months of September and October, the odds are with the bears (based on the indicators above and dire economic indicators such as PMI and the inverted yield curve). However, the algos will do everything in their power to run the market back to the 50-day moving averages. They might fail this time, but they will do their best.

Volatility is here to stay for a while, and no one can predict what the market will do in the near future. It’s times like these that I like to raise cash, but that is me.

Bottom line: Keep your eye on SPX 2800 and watch the algos defend it. If SPX slices below 2800 and stays below, it will get a lot uglier a lot faster. This week should be another wild ride (on some days), so be ready for anything.

Options Alert: There is a lot of option interest for the SPY October 280 put.

______________________________

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


S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is below its 50-day and 100- day moving averages = Bearish

S&P 500 one-month trend: SPX broke its uptrend and is in a downtrend. The algos are going to have to bring the indexes back to the 50-day to save this market.

RSI: (S&P 500) @ = 44.87 = Neutral

MACD: Below Zero Line and below Signal Line and pointing lower = Bearish

Daily Intraday Volatility: 18.47 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has increased.

Comment: For the first time in years, many pundits were talking about a recession over the weekend, so the White House pushed back on Sunday. As I noted several weeks ago, the signs of a recession are coming closer, and for many, it was the inverted yield curve that confirmed the economy is struggling. The only thing holding the economy up are consumers, who are still buying online, and jobs (there haven’t been massive job losses). 

Last week was a wild and ugly week. If it wasn’t for the buy on the dip algos, it could have been a whole lot worse. The trend was broken as SPX dropped below its 50-day and 100-day moving averages. The 800-point Dow shellacking last week made a lot of people nervous (this is the second major one-day selloff in two weeks), and the indexes only recovered some of its losses. And yet, there is still no panic. This tells me there is plenty of room for the indexes to fall as we enter September and October. 

With all of the danger signs swirling about, do not forget that the buy on the dip algos will do almost anything to keep this market propped up by any means possible. If it means a tweet in the middle of the day, a tax cut, a 50 basis point cut by the Fed, or QE, it will be done.

We are going through very, very dangerous and unprecedented times. The tug of war between the algos vs nervous sellers will continue into the fall. The good news: Retail investors are still holding tight and are not panicked at this time. 

For the next three or four months, you must be on high alert for some very crazy times. If you make money with puts (or shorting), take profits fast. For the last 11 years, the buy and hold strategy has been a winner. In my opinion, in the future this strategy will not work like it did before (perhaps for years, but this is pure speculation on my part). 

Keep in mind that Jerome Powell is in Jackson Hole this week and will be speaking next Friday at 10:00 a.m. ET, so prepare for occasional volatility spikes all week, and especially on Friday.

If you want to read some very thoughtful but scary analysis, click on the following links. These analysts say it a lot better than me (be sure to also read the links from Wolf Street and Lance Roberts below) for additional insights. This is not the time to panic, but to get educated.

From Northman Trader: https://bit.ly/2Z095jT

From Victor Dergunov (Seeking Alpha): https://bit.ly/30gedN5

______________________________

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