The Weekly Trader


Bullish or Bearish? Week of May 29, 2023

Short-term trend (DAILY CHART)   FLAT. Last week, SPX rose from 4191 to 4205, a tepid 14-point gain. This is a 4-day week plus the market should react to the ups and downs of the debt talks. I assume there will be volatility. Note: Futures are slightly higher on Tuesday morning.

Long-term trend (WEEKLY CHART) – FLAT: SPX flatlined last week after a strong start . The debt talks should dominate the news all week.

MACD (DAILY) = NEUTRAL. MACD is above the zero line and even with the 9-day signal line. It's not giving a significant signal at the time.

RSI: (S&P 500) @59.43 (DAILY) SLIGHTLY OVERBOUGHT. RSI didn't budge last week. It is signaling a slightly overbought SPX.

Comment: Over the weekend, the news broke that a deal was reached on the debt ceiling. By Wednesday, there should be a vote. To avoid a shutdown, Congress must pass the bill by June 5. The good news is that it is very unlikely there will be a default as the pressure to pass the bill will be immense.

Most of the talk this week will be focused on the debt ceiling, and by Thursday the market should stabilize ( depending on the outcome of the bill). However, even if the bill passes, there are still economic concerns that will affect the stock market. Inflation is a huge problem. Housing (un)affordability is another. Because of high interest rates, borrowing for anything is expensive, including auto, houses, and personal loans. This will affect the stock market, especially if these problems aren't alleviated.

Bottom line: Volatility is likely this week. If by any chance the bill doesn't pass, it could be a disaster. However, the odds are very good that Congress will avoid a default and pass the bill. Nevertheless, although the market has been rallying for the last few weeks, it's in a dangerous place, and could get more overbought before reversing.

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