Bullish or Bearish? Week of Oct. 21, 2019

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

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: There is no clear trend at this time. SPX retested 3,000 but failed to seal the deal on Friday.

RSI: (S&P 500) @ 54.93 = Neutral

MACD: At Zero Line and at Signal Line = Neutral

Daily Intraday Volatility: 14.25 = Low (Bearish)

Look at the awful charts of a few of the stocks I’ve been following: JNJ, NOW, COUP, AYX, WDAY, BA

Comment: I had been waiting for a failed rally all week and it came true on Friday. Many individual stocks got crushed as the day wore on, and even the indexes slowly succumbed to the selling pressure. Looking at the bigger picture, however, the indexes are holding up while certain stocks (look at the list above) are getting savaged.

As Lance Roberts wrote in his latest piece (link to his site at bottom), the bulls got everything they wanted, but they still couldn’t bring SPX above 3000 for long. According to Lance, here is the bull’s wish list (paraphrased), which has been fulfilled:

  1. ECB announced more QE
  2. Fed reduced capital requirements on banks
  3. Fed initiated QE of $60 billion in monthly Treasury purchases (but they are not calling it QE).
  4. The Fed is cutting rates.
  5. There are hints we could be exiting the China trade war
  6. Economic data is improving in the short term.

Even with all that help from the Fed, there is also a lot of negative news, as listed by Doug Kass (paraphrased):

  1. Untenable debt loads
  2. Unresolved trade war with China
  3. Global manufacturing recession is seeping into services sector
  4. Market structure is “frightening”
  5. We are in an earnings recession
  6. Valuations on traditional metrics are sky high (i.e. it’s bearish)
  7. Few expect the market to “undergo a meaningful drawdown”
  8. Private equity market crashing and burning
  9. WeWork’s problems are contagious

So there you have the bull and the bear case, which leaves us stuck in the middle again (surrounded by clowns and jokers, as the song says). The SPX rose above 3000 for a few minutes during the week before retreating, so if the bulls want to win this battle, they will have to find a way to move well above SPX 3000, and stay there.

The bears, on the other hand, have had multiple chances to take control, but they failed every time. The bulls are still in control and until proven otherwise, the ball is in their court. In fact, every time there was a meaningful selloff, the algos jumped in to either suppress volatility, or spike the market higher (or both).

That leaves us with this week, when we should have a better idea who will win. SPX must be watched closely to see if the bulls can finally rally the market for a final blow off top, or whether the bears can finally take control. Another worry for the bulls: a double top has formed on the SPX.

Bottom line: We could go either way this week, but the clues and indicators are still not clear enough to predict which direction. Just watch and react quickly when one side or the other takes control. Otherwise, we could continue with this tug of war for a while longer until someone is victorious.

Here is a link from Sven Henrich (Northman Trader), which includes an excellent video of the current state of the market: https://bit.ly/31Ct5Wg

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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


Bullish or Bearish? Week of Oct. 14, 2019

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

S&P 500 spurted above its 50-day MA = Bullish

S&P 500 one-month trend: SPX’s uptrend stalled at 3000, retreated, and is retesting 3000 again.

RSI: (S&P 500) @ 53.51 = Neutral

MACD: On Zero Line and at Signal Line = Neutral

Daily Intraday Volatility: 15.48 = On the Low Side

The trade I’m waiting for this week: Failed Rally

Comment: It might seem like a long time ago but last week started in the red, and by Friday we were off to the races again, coming near to SPX 3000. A positive tweet about China, a $60 billion a month Treasury “buying operation” from the Fed plus soothing words from Fed Speakers = a rip-your-face-off rally on Friday.

I have no idea how long these daily selloffs and rallies will continue, but it’s very unusual. One thing for sure: With all the stimulus (QE by any other name), positive tweets, and low interest rates, a year-end rally is possible. In fact, if there is not a year-end rally, it means things are worse than we realize.

Meanwhile, one of these days the market is going to fall off the cliff, and keep falling into a bear market, but until that day comes, it’s wise to stay nimble, and follow the market.

Bottom line: I am unable to determine, based on the clues and indicators, which direction the market will go this week. Once again, be ready for anything. I’m curious if the Friday rally continues into Monday or reverses direction. All the powers that be want a strong end of year rally. Don’t get caught on the wrong side of reality.

Here is an excellent analysis of the current market from Northman Trader: https://bit.ly/2VC1zqk

_____________________________________________________________

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


Bullish or Bearish? Week of Oct. 7, 2019

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

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

S&P 500 one-month trend: SPX’s uptrend stalled at 3000 and retreated, and is now attempting to retest.

RSI: (S&P 500) @ 49.21 = Neutral

MACD: Above Zero Line and below Signal Line = Neutral

Daily Intraday Volatility: 17.04 = Neutral

Comment: As I pointed out last week, the VIX couldn’t remain at 13 forever, and sure enough, we had a vicious two-day selloff during the week followed by a head-turning two-day rally. Unfortunately, there was a lot of bad economic news around the world that appears to be spreading to the U.S. For now, the market chose to focus on lower interest rates rather than deteriorating economic conditions.

Once again, it’s anyone’s guess which way the market will go this week. Neither the bulls or the bears have made a strong case. It’s a treacherous environment for investors and traders (the intraday reversals can cause havoc with your stop losses). On one hand, it appears as if the SPX uptrend has stalled out at 3000 (with a triple top, I might add). On the other hand, there hasn’t been mass selling by institutions, so the bears have been unable to take control. If anything, we’re in this weird no-man’s land where no one wins, and almost everyone loses.

Bottom line: Until the trend is established, staying away from the indexes is a wise choice. There are still opportunities with individual stocks, but be careful. Many stock holders have woken up to vicious 20 percent plunges (i.e. Roku, Netflix, to name a few).

For a technical view of the current market, I recommend the following post from Northman Trader: https://bit.ly/2AMxWZI

______________________________

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