The Weekly Trader

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

S&P 500 is slightly above its 50-day moving average = Neutral

S&P 500 one-month trend = Multiple Short-term Trend Reversals (Inconclusive)

RSI: (S&P 500) @57.65 = Neutral

MACD: Below zero line but slightly above signal line (Neutral)

Daily Intraday Volatility: 15.28 (Subdued). Volatility is still on the low side.

Comment: The Fed has their two-day FOMC meeting on Tuesday and Wednesday, followed by a press conference on Wednesday afternoon. The consensus is there will be NO rate cut at this meeting, but Powell’s words will be closely scrutinized. No one can predict what Powell is going to say, or how the market will react. It really could go either way, so expect volatility during the week, and especially after he speaks.

My prediction: He won’t cut rates but he will say that he will in the future depending on market conditions.

Meanwhile, the best analysis I’ve seen on how to manage the current market environment comes from a piece that Lance Roberts wrote: https://bit.ly/2WIp3cq

Bottom line: It is going to be a tricky week for traders and investors, so stay alert, or wait until the dust clears. Wall Street really wants Powell to cut rates, and if he doesn’t deliver now or in the future, Wall Street won’t be pleased.

_____________________________________________________

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 even with its 50-day moving average = Neutral

S&P 500 one-month trend = Multiple Short-term Trend Reversals (Neutral)

RSI: (S&P 500) @56.31 = Neutral

MACD: Below zero line but slightly above signal line (Neutral)

Daily Intraday Volatility: 16.30 (Subdued). Volatility is on the low side.

Comment: So now we know what happens when the indexes fall below their 200-day moving averages! The next time the 200-day is breached, expect to see Jerome Powell or others appear on TV to say something sweet about interest rates. Voila! The market suddenly reversed direction and rallied strongly not just the day Powell spoke, but all week. Wow!

As you know from reading my blog, I expected a strong rally during the week. But even the most bullish analyst (nor I) could have predicted the rally would last the entire week. That was extremely impressive, but also brings us back to even more dangerous territory.

Now investors know that if the market falls by too much (below the 200-day moving average), the Fed has got their back. One of these days the market will fall, the Fed will appear with soothing promises, and the market will keep falling. That is when we’ll know it’s going to go from bad to worse.

Meanwhile, looking at the indicators above, in one week we went from bearish to neutral (RSI gave us an oversold reading last week which correctly hinted there would be a rally). Now RSI is back to neutral. SPX is well above its 200-day moving average and a couple of points above its 50-day moving average.

If I had to guess, I’d say we went too far too fast last week, and that the indexes will struggle to move much higher this week. Since I don’t like to guess, all we can do is watch and see if this market has the power to stay above its 50-day moving average. The futures are slightly higher Sunday night but that should change by the opening bell.

Bottom line: It’s going to take extraordinary strength to bring this market much higher, but anything is possible. Investors have an extremely distorted view of the world thanks to the Fed. One of these days this game the Fed is playing is going to backfire and bullish investors are going to pay the price. That day is drawing nearer. Oh, I forgot to mention that the jobs numbers was very disappointing on Friday and there are other signs that a recession is near or already here.

_____________________________________________________

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 slightly below its 200-day moving average = Bearish 

S&P 500 is below its 100-day moving average = Bearish

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @30.84 = Oversold (Bullish)

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 18.71 (Subdued). Volatility is still on the low side, which means there are many opportunities for volatility spikes in the coming weeks.

Comment: If you’ve been reading this blog over the last few weeks, you’d know that the indicators above correctly forecast the trend change last week. We went from mildly bullish to bearish within days, and with help from the tariffs, the market plunged on Friday.

And just like that, everything has turned negative except RSI, which is telling us we are oversold. As expected, the futures are lower on Sunday night but there should be a brave attempt by the algos and their bullish friends to keep the indexes above their 200-day moving averages. Therefore, be prepared for a rally on Monday and at various times during the week. The key is whether the rally will continue, or fail. Another failed rally will be an extremely negative sign for the overall market.

As I wrote last week, investors are feeling a little anxious but there is no panic yet as they believe the Fed will bail them out. This is a very dangerous belief. There are many signs a recession is drawing closer, and although the market has been falling, we’re still near all-time highs.

What does this mean? Even though the market is short-term oversold, and even though we might have bounces, the market is in the danger zone. A massive correction or crash is possible, so be prepared. It’s been a long time since I’ve seen such a dangerous market. It’s possible we’ll get out of this unscathed but the odds are there will be a lot of pain in the near future.

Bottom line: Volatility should return to the market this week although the algos will do anything in their power to keep it subdued. This is a very important week to observe. Will the indexes stay above or below their 200-day moving averages? We will know the answer by the end of the week.

_____________________________________________________

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 moving average = Bearish

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @40.93 = Neutral

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 15.52 (Bearish). Volatility is still in the basement even as the indexes fell. This divergence will be resolved soon.

Comment: The S&P 500 fell below its 50-day moving average during the week, a bearish development, and yet, volatility was very subdued. In the near future, volatility is going to spike or the markets are going to rally, but this divergence can’t last for long.

The indicators above are telling us that winter could be coming to the stock market in the next few weeks, if not sooner, so be prepared. The drop below the 50-day moving average is an early warning sign. In addition, the trade war, multiple geopolitical problems, and economic warning signs (car sales and real estate slowdown) need to be watched closely. 

I have also observed that some of the strategies that worked in the past (such as chasing momentum stocks) have stopped working over the last few months. This is a clue to me that the market is going through a transition. I am guessing that the bull market is coming to an end, but I won’t be sure until I see further deterioration of the indexes. The next two weeks should give important clues. 

It is also a concern that so many investors are expecting a pullback but almost no one is selling. The Fed has convinced investors that no matter what happens in the market, the Fed will use their tools to reverse any correction or crash. It is very risky to believe that the Fed always has your back, and that the market will “always go up.” Yes, people are saying that a lot lately, and that is very scary because it’s not true. Markets do not “always go up.”

Bottom line: Once again, be prepared for anything. For now, use hedge strategies if you’re a trader, diversify if you’re an investor, and keep a healthy supply of cash in case a worst case scenario occurs. Futures are flat to higher on Monday night, which could be the calm before the storm.

_____________________________________________________

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 slightly below its 50-day moving average = Neutral

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @45.59 = Neutral

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 15.96 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators turned slightly negative last week, with MACD turning down and SPX falling slightly below its 50-day moving average. In addition, investor sentiment is at sky-high levels, and few investors feel anything but overconfident. If the market does pull back, investors are certain it will “come back” as it’s done several times in the past. What a recipe for trouble!

In reality, no one can predict what the market will do this week except to say that volatility has returned. With a number of geopolitical events swirling around, and a number of Fed members speaking on Monday night, anything can happen. With the market at all time highs, it’s not a bad idea to increase cash levels (no, it does not mean to sell everything).

A number of analysts I follow did turn short-term bearish over the weekend, and although the market could test all-time highs, the odds are good we’ll go lower during the week, but I wouldn’t bet the mortgage or rent on it.

Bottom line: The increased volatility has made predicting extremely difficult, especially intraday. I’ll be watching to see if the Fed says something sweet on Monday night to rally the markets higher on Tuesday (or so investors hope). I’ll also be watching to see if the 50-day moving average can hold. If not, it could get ugly very fast.

_____________________________________________________

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