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