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: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.
RSI: (S&P 500) @ 78.43 = SPX is extremely overbought. Caution is advised.
MACD: Above Zero Line and above Signal Line = Bullish
Daily Intraday Volatility: 13.43 = Low (Bearish)
Comment: It’s another shortened week so volume should be light early in the week but should pick up later in the week after we greet the New Year. The first week of January should be interesting, however, so pay close attention.
When you look at the indicators above, it’s hard to believe. RSI is the highest it’s been in many years at 78.43 (over 70. is overbought). The indicators are telling us the markets are extremely overbought. Could the indexes keep moving higher? Yes, they can, and many people believe they will. Some have even said the dreaded words, “This time it’s different.”
Unfortunately, this game of musical chairs is going to stop one day and anyone still holding the bag is going to be shocked. This is similar to 1999, a year when nothing could go wrong as we ushered in 2000, and then everything went wrong. It doesn’t mean we will follow the same scenario, but extremely overbought markets like this always come to an end eventually.
The Fed has fueled the rise in the indexes with low interest rates and QE , and unfortunately, to keep the bubble from popping, more and more QE is needed. Does it mean you should run out and sell everything? No, but it wouldn’t hurt to sell some of those huge winners along with any losers. After all, the game the Fed is playing could continue a while longer, longer than anyone expects, until the day of reckoning arrives. When that day is, no one knows.
Meanwhile, here are three articles that go into much more detail of how overbought this market has become, and what to do about it. It’s scary reading, so be prepared:
Sven Henrich (Northman Trader) on Apple and the similarities to 1999: https://bit.ly/2ZEr7VJ
Lance Roberts on the Market Meltup: https://bit.ly/2Q6iU9C
Sven Henrich(Northman Trader) on Microsoft: https://bit.ly/37lGB3M
Meanwhile, have a great New Year and stay safe. 2020 is guaranteed to be a fascinating year and in my opinion, it will be one for the history books.
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