Because the S&P 500 fell below its 50-day moving average, and the MACD line crossed below the 9-day signal line, and could fall below the zero line, it’s time to pay attention. It’s not just the indicators that are signaling trouble. The dollar is rising (which pressures stocks), earnings were terrible, and the low-volatile market is struggling to gain traction. We will know more within the next two weeks or so, but it appears as if the market is setting up for a pullback.
I have learned the hard way that it’s wiser to be a little late when buying (which is why I like probes). As I wrote in my latest MarketWatch column, when the market is going sideways, stay on the sidelines or probe with smaller share size or fewer option contracts. Actually, the market is starting to drift downward, and if it keeps falling, we could see a major pullback (my experienced technician friends say that if the S&P drops below 2030, look out below).
However, as you’ve seen before, any pullback could be stopped in its tracks with a few words from the Fed (i.e. “We are not going to raise interest rates…”). Unless real fear hits the market, we could go in either direction over the next two weeks. In my opinion, the odds favor a downtrend, but it’s not a 75% probability. Therefore, it’s best to wait, watch, and probe. When a pivot point is finally confirmed, it could be “snapping time.” Until then, be patient, and be on guard. The market is starting to get interesting again.