Bullish or Bearish? Week of Dec. 30, 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: 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.

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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 Dec. 23, 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: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.

RSI: (S&P 500) @ 75.73 = SPX is extremely overbought. Caution is advised.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.51 = Low (Bearish)

Comment: It’s a shortened holiday week as the stock market closes early on Christmas Eve (1:00 p.m. ET), and all day on Christmas. Volume should be light unless there is unexpected breaking news.

This is the first time I’ve seen RSI this high (75.73) on the S&P 500, which signifies an extremely overbought market. Yes, SPX can remain overbought for a while longer, but the clock is ticking.

The Fed appears to be the main reason for the market’s mind altering rise. With low interest rates and QE4 (the Fed continues to pump liquidity into the market), the market has risen to levels that have many market veterans shaking their heads in disbelief. When this bubble unwinds eventually, it’s unlikely we’ll see numbers like this for many years.

Obviously, there is always the chance I’m wrong (along with others who are warning to be careful). Perhaps the bull market has much more room to run, as almost everyone in the financial media is predicting. It’s possible, which is why you don’t run out and sell everything. It’s also possible we have a blow-off top, which would be a signal to reduce positions dramatically before the market plunges.

In my opinion, the smartest choice is to stay diversified while reducing positions with large gains, and also selling losing positions. Obviously, that’s a choice only you can make.

Money manager Lance Roberts (realinvestmentadvice.com) wrote an excellent piece about the current market meltup and some of the steps you can take to reduce risk in an extremely overbought market: https://bit.ly/2ZcubbB

Meanwhile, have a great holiday and stay safe!

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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 Dec. 16, 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: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.

RSI: (S&P 500) @ 67.08 = SPX is still overbought. At over 70 RSI, it will be extremely overbought.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.63 = Low (Bearish)

Comment: The market meandered around last week with one big rally, which brought the indexes back to overbought. RSI is near 70, which is always a warning sign, and VIX remains in the basement.

The trade deal appears to be completed, but no one knows for sure. The market had a muted reaction to the news on Friday. By the way, the market also had a muted reaction to the Fed meeting (except for the one-day rally).

By any measure, the indexes are overbought, and that could continue through the holidays. Nevertheless, no one knows what is going to happen because we are in uncharted territory. I won’t even attempt to guess which direction the indexes are going this week. However, common sense tells me if you have extreme profits on any index or stock, it would not be a bad idea to take some money off the table. That being said, everyone is waiting for the “Santa Claus rally,” and the odds are good the market will not disappoint.

Bottom line: A Santa Claus rally is possible, even likely, but that does not reduce the increased risks as the market bubble expands. One day the market will have a date with reality, but we’re not there yet, but as I’ve repeatedly said, that day is coming (one day).

For a scathing opinion on the Fed’s actions regarding lower interest rates and QE, here is a fascinating read by Sven Henrich (Northman Trader). His seething anger at the Fed is evident as you keep reading: https://bit.ly/2El0QSC

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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 Dec. 9, 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: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.

RSI: (S&P 500) @ 63.98 = SPX is still overbought. At over 70 RSI, it will be extremely overbought.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.62 = Low (Bearish)

Comment: Last week, SPX sold off for two days, but then rebounded back by the end of the week, fueled by a blockbuster jobs report. RSI is still high but it is off its extreme highs, and VIX is still low but it is off its extreme low. Now that we’re almost back to where we started, all we can do is sit back and look for opportunities, if any.

The Sunday night futures are slightly lower, and aren’t telling us much. At this time, predicting what the market will do over the next week or two is a useless exercise. No one has a clue. The Fed has the market’s back so the odds are with a rally, but anything can happen, especially in the geopolitical world. My best advice is to take it day by day.

Bottom line: The indexes are still overbought but that could change in a heartbeat. Investors are enjoying the ride higher while traders sit and wait for a better risk reward.

For a trader’s perspective, read the following piece by Sven Henrich, Northman Trader, who makes a strong case for selling: https://bit.ly/2RxOrmc, and also this more detailed analysis: https://bit.ly/33YQthD

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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 Dec. 2, 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: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.

RSI: (S&P 500) @ 69.34 = SPX is overbought. At over 70 RSI, it will be extremely overbought.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.62 = Extremely Low (Bearish)

Comment: RSI went above 70 last week before pulling back slightly. The indexes are extremely overbought, and judging by the Sunday night futures, we could become more overbought.

The market is like a game of musical chairs and when the music stops, all hell is going to break loose. No one knows the time or place, or what will be the catalyst. However, if you believe in reality, then this market has a date with destiny sometime in the near future.

Veteran market watchers are in awe, and many have stopped warning others to be careful. At the moment, the market doesn’t care. Fueled by kind words from the Fed, additional quantitative easing, and low interest rates, the market seems unstoppable. And it is, until it isn’t.

Be cautious as we are in rarified air. This market is for short-term traders, long or short. Meanwhile, my article on blow-off tops was just published on MarketWatch: https://on.mktw.net/2OK343V

Bottom line: Stand back and observe. This market is 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