Bullish or Bearish? Week of Feb. 24th, 2020

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

Short-term: S&P 500 is above its 50-day MA but pointing lower = Bearish to Neutral

One-month trend: Uptrend has been broken. Watch what happens when SPX hits its 50-day moving average. Will it bounce or slice through like butter?

RSI: (S&P 500) @ 53.66= Neutral

MACD: MACD is above Zero Line but moving below 9-day Signal Line = Neutral

Daily Intraday Volatility: 17.08 = Neutral to Bearish. Volatility appears ready to rise even more.

Comment: It shouldn’t be a huge surprise that the futures market is showing an ugly opening Sunday night (-1.5% and falling). As I and others have warned for weeks, if not months, an extremely overbought market, recessionary signs, a Fed that has pumped liquidity into the market, extremely low interest rates, and high levels of consumer and government debt is a dangerous cocktail.

The sad part is that a virus could be the pin that pops the bubble. The cost to humans is already a tragedy, and it appears as if it could get worse. More than likely, this will cause a short-term or long-term recession. No one knows how long this disaster will last, or if the virus spreads even farther. There are too many unknowns.

Many investors, who have been spoiled by an 11-year bull market, will likely grit their teeth and hope that the Fed protects them. I’m not saying we are definitely headed to a bear market. I’m saying that the market is dangerous and if it did fall by a significant amount in the weeks and months to come, I would not be surprised.

I would also not be surprised if SPX dropped to its 200-day moving average in the future. That would seem like a crash to many investors, but it would be a run of the mill pullback.

The main point is that, as I’ve warned before, it’s a good time to sell some of those winners and raise some cash (but wait until the panic subsides). Evaluate what you own and be prepared for some rocky times ahead. The Fed will do whatever it takes to keep the markets calm, and prevent mass selling, but unfortunately they don’t have a lot of tools to work with. (Perhaps they will announce QE5 while also lowering interest rates).

Bottom line: As I wrote last week, the easy days are over and expect a more difficult trading and investing environment in the future. Don’t panic, but prepare for a market correction as well as for a possible pandemic (that would be a worst case scenario).

I really wish the best for everyone, and again, I wished that it wasn’t a virus that might pop the market bubble. All we can do is hope for the best while making preparations to be physically and financially safe.

I recommend that you read the following from Sven Henrich (Northman Trader) about the market’s turn for the worse on Friday: https://bit.ly/2HQT7xe

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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 Feb. 17, 2020

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

Short-term: S&P 500 is above its 50-day MA but trouble ahead = Neutral to Bullish

One-month trend: Trend still strong until further notice. This is a pivotal week.

RSI: (S&P 500) @ 65.87= overbought

MACD: Above Zero Line and Signal Line above MACD line = Bullish

Daily Intraday Volatility: 13.68 = Bearish

Comment: Futures are lower Monday night due to Apple’s warning (it won’t meet quarterly revenue target due to Coronavirus). Add in an overbought market as well as recessionary fears from Asia due to the virus, and you have the potential for a severe pullback.

The Chinese central bank and the Fed will do everything in their power to keep investors calm. If things take a turn for the worse, the Fed will lower interest rates, flood the market with more QE money, or do whatever it takes to reduce fears. It’s going to be quite a battle this week and in the near future.

The black swan that no one expected was the virus, and it’s unknown how much more damage it will cause. Investors are still in denial because of their full faith in the Fed’s ability to reverse any plunges. For 11 years, the Fed has been able to perform miracles, but at a price: The market is extremely overbought by almost every technical and fundamental indicator.

Whether the market goes up or down this week, one thing I am certain of: The easy days are over. Expect a lot of gyrations moving forward, of short-term rallies followed by short-term plunges. As I’ve written before, this is one of the most dangerous markets I’ve ever seen. It’s like an old, beat up car driving up a hill at full speed as pieces of the car keep falling off. Eventually, the car runs out of gas or falls apart. The warning from Apple, the most popular stock in America, is not a good omen.

Added to all these other problems, I am also seeing signs of a recession slowly creeping towards us. Obviously, the fallout from the virus have accelerated those fears. And yet, with all this bad news, the Fed might be able to pull a rabbit out of the hat and convince investors to “not sell.”

The analysts I follow, Lance Roberts, Sven Henrich, and Wolf Richter, have posted excellent pieces over the weekend. Here are links to a few of the best. In addition, read Bloomberg for the latest on the virus as well as Apple’s warning.

I recommend that you read the following pieces:

Sven Henrich (Northman Trader) on Apple risks: https://bit.ly/2uTvzFg

Sven Henrich (Northman Trader) on the market bubble: https://bit.ly/2UWHpJn

Lance Roberts (realinvestmentadvice) on how the market thinks it’s immune to risks: https://bit.ly/37w3BN2

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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


Bearish or Bullish? Week of Feb. 10, 2020

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

Short-term: S&P 500 is above its 50-day MA but could be forming a double-top: Neutral

One-month trend: After a brief pullback, SPX is trying to recapture its uptrend. It’s too early to say if it will be successful.

RSI: (S&P 500) @ 59.59= neutral

MACD: Above Zero Line but Signal Line is even with MACD line = Neutral

Daily Intraday Volatility: 15.47 = Neutral to Bearish.

Comment: Last week, we went from the edge of the abyss to a four-day rally that miraculously saved the indexes. The market was set to fall below its 50-day moving average last Monday when the bulls arrived in full force. Unfortunately, although the market looked bullish on the outside, underneath the surface it was not that pretty. Only a handful of stocks kept the indexes from falling, but the public doesn’t care. As long as the Dow is climbing, all is good.

Nevertheless, there are some disturbing signs that all is not normal. Obviously, we are watching the virus to see if it spreads farther and faster. The reality is that it is already causing financial pain in China, along with the human toll. It’s too early to say this is a “black swan,” but it does need to be watched closely.

The market has moved up too far and too fast in the last month or two, so caution is advised. A short-term double top formed in the SPX, which is a negative sign. However, it’s also possible the market could blast past resistance and move even higher (negating the double top). No one knows what is going to happen, but volatility has arrived, which is a double-edged sword.

Sign of a top? I have a neighbor who has been bearish on the market for the last 10 years. He hid out in cash and bonds. He told me yesterday that a month ago, he threw in the towel and put 50% of his money into the stock market. When the most adamant bears turn bullish, that is often a warning that a top is near. Not guaranteed but something to think about.

For a more detailed analysis of the current market environment, I once again turn to Lance Roberts and Sven Henrich, who wrote excellent pieces about the current market:

Sven Henrich (Northman Trader): https://bit.ly/38pAwUA

Lance Roberts (realinvestmentadvice): https://bit.ly/2OFZMy5

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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 Feb. 3, 2020

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

Short-term: S&P 500 is at its 50-day MA and pointing down = Neutral to Bearish

One-month trend: The uptrend in SPX has been broken and should be watched closely. It’s too early to know which direction the indexes will go this week.

RSI: (S&P 500) @ 43.44= RSI plunged from a high of 76.56 two weeks ago to 43.44, a neutral reading.

MACD: Above Zero Line but Signal Line pointing lower = Neutral

Daily Intraday Volatility: 18.84 = Neutral

Comment: What a difference a week makes! A week ago, analysts were leapfrogging over each other, making bigger and bolder predictions of an unstoppable bull market (SPX 4000 and beyond, some predicted). And just like that, like a 2 x 4 in the face, investors got smacked. And now, some of those same analysts are backtracking, warning of a 10 percent correction or worse.

At this time, it’s unknown if the recent selloff is meaningful or a run-of-the mill, short-lived pullback. From my perspective, there are a lot of red flashing warning signs, but I’ve seen those signs for months, if not longer. At the same time, I’ve seen vicious pullbacks followed by rip-roaring rallies (such as in January 2018).

Therefore, it’s best to keep your wits about you and plan for any scenario. SPX is at its 50-day moving average, and it could go in either direction. If it falls below its 100-day moving average, be prepared to ride it out (or trade it if you have the skills). Eventually, the panic subsides and a rally emerges.

However, there is always the possibility we are entering a real bear market, but it’s too early to say (keep your eye on the 200-day moving average). It’s been over 10 years since the last bear market, so it wouldn’t be that surprising if one appeared. Nevertheless, there have been so many plunges and rallies in the last 10 years, no one can predict what will happen. Just be diversified, as I’ve repeatedly warned.

Bottom line: Don’t succumb to the fear if the markets plunge this week, and don’t let down your guard if they rally back to overbought levels.

Sunday Night: The Chinese stock market opened down by 9 percent at 8:30 pm.. ET, while the S&P futures are up strongly. Welcome to volatility, and there should be a lot of it this week as the world’s central banks take unprecedented steps to control stock market selloffs. (Maybe someone should forbid short selling this week. Oh, wait).

Once again, Lance Roberts and Sven Henrich wrote excellent pieces about the current market:

Sven Henrich (Northman Trader): https://bit.ly/2OkKmPV

Lance Roberts (realinvestmentadvice): https://bit.ly/2SfbMYj

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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