The Weekly Trader

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = LOWER. The Bad News Bears finally hit a home run. The question is: Was it a one-day wonder? Last week, SPX fell from 4697 to 4594, a 103-point shellacking, all of it coming on Friday. Futures are higher on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): NEUTRAL.  SPX is above its 20-day moving average but pointing lower, which means there is no meaningful signal.

RSI: (S&P 500) @61.99 (WEEKLY) SLIGHTLY OVERBOUGHT. RSI plunged on Friday from extreme levels but is still overbought.

MACD (WEEKLY) = NEUTRAL: MACD is above the zero line (bullish) and is even with its 9-day signal line. MACD is not giving significant signals. 

Daily Intraday Volatility (VIX) = 28.62 = VIX skyrocketed on Friday as put-buyers gobbled up puts for protection. For the first time in a long time, fear entered the hearts and minds of option traders.

Comment: Anyone who has followed this blog knows how unusual it was for RSI to be above 70 for more than a few days on SPX. Sure enough, SPX came back to earth on Friday, which they are blaming it on the new COVID variant. I don’t completely buy that story. I believe that a large institution with huge positions got spooked (for reasons we will never know) and sold, and the herd followed.

Why the market sold off is not important, but that it did sell off is significant. It is also significant that the futures are rallying on Sunday night. Tomorrow (Monday), watch the rally and see if it continues all day. Even more importantly, see if the rally tomorrow can carry over into Tuesday. If the rally cannot be sustained for long, that is a clue this bull market is struggling.

Friday’s selloff was a surprise but then again, it wasn’t. In the future, if RSI rises above 70 on SPX, pay attention as an extremely overbought index usually doesn’t last long.

On Monday, the buy on the dippers are going to be entering the market with everything they’ve got. I can’t wait to see how long the rally lasts. My suspicion is there are more problems underneath the surface than anyone realizes, and if I am right, expect a lot more fireworks in the weeks and months ahead.

Bottom line: Trade cautiously during these uncertain times. Nothing is as it appears, and that is dangerous.

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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’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = FLAT. The bulls took back control during the week. SPX rallied from 4682 to 4697, landing at the exact spot as a week ago (a 15-point gain). Very odd! SPX is still near its all-time highs. Futures are flat on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): HIGHER. SPX is above its 20-day moving average and is still in an uptrend. 

RSI: (S&P 500) @71.63 (WEEKLY) OVERBOUGHT = RSI says that SPX is extremely overbought (above 70), and can’t seem to budge.

MACD (WEEKLY) = SLIGHTLY BULLISH: MACD is above the zero line (bullish) and slightly above its 9-day signal line. MACD is not giving significant signals.

Daily Intraday Volatility (VIX) = 17.91 = Still no worries on Wall Street as VIX remains on the low side.

Comment: It’s a shortened week so I’ll keep it short. Thanksgiving is Thursday and there is a half day of trading on Friday. Last week, SPX gained back the 15 points it had lost.

There isn’t much to say about the market. Inflation has appeared but the Fed acts like they have it under control. We shall see.

In past years, the market tended to rally before holidays, but there is no guarantee that will happen this week. Enjoy the three trading days but be careful as strange things can happen to the market before holidays (i.e., lots of head fakes). On Friday, volatility should be subdued. It’s usually not a great trading day.

Have a great Thanksgiving and I’ll see you next Monday.

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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’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = FLAT. The bears tried to take over early in the week but failed once again. SPX fell from 4697 to 4682, a mild 15-point pullback. SPX is still near its all-time highs. Futures are flat on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): HIGHER. SPX is above its 20-day moving average and is still in an uptrend.

RSI: (S&P 500) @71.01 (WEEKLY) OVERBOUGHT = RSI is telling us that SPX is overbought. Although SPX and the other indexes pulled back a little last week, the indexes are firmly in overbought territory.

MACD (WEEKLY) = BULLISH: MACD is above the zero line (bullish) and slightly above its 9-day signal line. The slope of MACD is pointing higher, a bullish sign.

Daily Intraday Volatility (VIX) = 16.29 = No worries on Wall Street as VIX remains in the basement.

Comment: Although the indexes are overbought and the bears are still in hiding, we’re coming closer to the holidays. No one can predict if we’ll get a Santa Claus rally but it’s possible. Anything is possible, even a blow-off top. It’s still too risky to short this market no matter how overbought it is.

With the indexes so overbought, the Bad New Bears had a chance to take over early in the week, but they couldn’t finish the job. (Are there any shorts left?)

At this point, the market seems to have stalled out and few are expecting any fireworks as we get closer to the holidays. I also know from experience that sometimes when you least expect it, the market can come up and bite you. This could be one of those times. After all, no one is expecting anything out of the ordinary until next year. That’s the consensus. However, the market is an independent entity that does what it wants when it wants.

Bottom line: No one knows anything so wait and watch. It feels quiet out there, maybe too quiet.

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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’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = WAY UP. The bulls ran the market higher all week. SPX rose from 4605 to 4697, an astounding 92-point rally. SPX is at its all-time highs and is obscenely overbought. The bears are in hibernation but they better wake up soon. Their day in the sun is coming. Futures are flat on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): UP. SPX has moved away from the 20-day in a strong uptrend. This is a powerful bull rally.

RSI: (S&P 500) @72.42 (WEEKLY) = RSI is telling us that SPX is ridiculously overbought. I haven’t seen overbought numbers like these in a very, very long time. RSI is flashing a WARNING sign. Yes, we could get even more overbought but we are in the danger zone.

MACD (WEEKLY) = LEANING BULLISH: MACD is above the zero line (bullish) and even with its signal line and pointing higher. It’s not a slam dunk bullish signal but it’s close.

Daily Intraday Volatility (VIX) = 16.48 = No put buying on Wall Street. All is well, according to professional option traders.

Comment: I am flabbergasted at the overbought readings, but perhaps I shouldn’t be. Last week was a Fed meeting after all (and 80 percent of the time the market rallies on Fed days (at least during a bull market)).

It’s possible we are seeing a blowoff top (can’t be sure until afterwards, however). I do know that anyone who doesn’t heed the signs of this extremely overbought market will regret it one day. If Mark D. Cook was alive, he’s be blowing a gasket right now. In fact, that’s what was his prediction a month ago: “The market is going to blow a gasket.”

I know it’s silly to warn anyone about the increased stock market risks when we’re ready to celebrate the upcoming holidays. That’s one of the reasons I got out of the prediction business. However, while I can’t predict when the market is going to give back a huge chunk of its gains, I know it will. I also can’t predict how bad it will be (correction or crash), but like a looming hurricane, be prepared.

The way to survive the coming volatility is to be diversified, know what you own, don’t go on margin, don’t take unnecessary risks, have cash on the side to go shopping for stocks that are on sale, and learn technical analysis (my new book coming out in March explores the top technical indicators and oscillators, among other things).

Bottom line: I am in awe how this market seems unstoppable. I have seen this story before, but not for a very long time.

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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’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

I am sad to announce that Mark D. Cook, my friend and mentor, passed away last week at age 67. He was an extremely successful self-taught options trader and an expert on bear markets. I had planned to interview him this weekend for my new stock market book, something he was looking forward to. He told me he was convinced a bear market was closer than ever, within months or in 2022, and he was eager to share his thoughts. He was astounded by how far and fast the stock market had risen, and he warned there would be dire consequences. He was extremely concerned about inflation and warned that if anything could kill the market, it was inflation.

I miss his sharp wit, honesty, and daily market commentary. He always told you where he stood.

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = UP. The bulls continue to run with the ball as SPX rose from 4533 to 4605, another remarkable 72-point advance. SPX is near its all-time highs and is overbought again. Meanwhile, the Bad News Bears have gone into hiding. On the other hand, many bulls are getting overconfident and giddy (and some well-known touts are publicly feasting on their good fortune). This is not a good sign. Futures are HIGHER on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): UP. SPX has moved away from its 20-day MA and is in a strong uptrend. The bull run continues. 

RSI: (S&P 500) @68.82 (WEEKLY) = RSI is telling us that SPX is a whisker away from extremely overbought.

MACD (WEEKLY) = LEANING BULLISH: MACD is above the zero line (bullish) but below its signal line (bearish) but it is pointing higher. It’s not a slam dunk bullish signal (until it crosses the signal line).

Daily Intraday Volatility (VIX) = 16.26 = All is well on Wall Street, says the VIX. Nothing to see here. 

Comment: The market is in a strong uptrend and is also overbought. It’s been so long since the markets have had even a 10 percent correction that when one occurs, it will seem like a disaster. Many investors will be caught off guard one of these days (but don’t try to predict when).

Shorting has been extremely difficult unless you’re day trading. The trend is up, up, and away. Until there are signs of exhaustion or a black swan event, we appear to be going even higher. Don’t fight the trend (at least right now). Being early is the same as being wrong.

Those who are long, especially index investors, have never had it so good. Don’t forget these seemingly unstoppable bullish days as no strategy works forever. However, no one knows when they end, either.

PS: As I wrote in the commentary above, some overconfident bullish touts are acting like the market will never go down, one of the reasons I believe that Mark D. Cook may be right about the coming bear market.

Note: There is a Fed meeting this week — typically a bullish affair, especially if they can convince investors that inflation is transitory.

___________________________________________________________

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’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com