Here is what the technical indicators are telling us this week:
One-month trend = SPX is slightly BELOW its 200-day moving average = Neutral. SPX has failed to stay above its 200-day MA, which is a bearish sign. I am certain the Fed, and its algo friends, will try and rescue the market once again.
Mid-term (50 and 100-day MA): The S&P 500 is still in a sideways pattern = Neutral.
RSI: (S&P 500) @ 45.65 = Slightly oversold = Neutral.
MACD: MACD is above its zero line and and slightly below its 9-day Signal Line = Neutral
Daily Intraday Volatility (VIX): 34.73 = VIX didn’t move much in the last week = Neutral.
Comment: The overbought market had a chance to get more overbought last week, but reality interfered. It might be the virus, the political climate, or awful economic news, but the market fell back below its 200-day moving average on Friday. That was a negative sign. In addition, every rally was met with more selling, another clue that something changed last week.
And yet, I am certain the Fed will do whatever it takes to pump the market higher this week even while the bad news keeps coming. The virus news is the most damaging to the economy, and to the stock market. No one can predict who is going to win this battle this week, although the futures are slightly lower on Sunday night.
In addition to the worrisome news that never seems to stop, many investors and traders are convinced the market will never go down, and if it does, it will bounce back. Any experienced trader knows what once you are certain what’s going to happen to the market, usually the opposite occurs.
Only three months ago the market had a huge correction, and perhaps entered into a bear market. Then we had a monster rally, which could very well be a bear market rally. If that is true, if we are really in a bear market, and this recent rally is only temporary, then look out below.
I’m not predicting that is going to happen, but you better be prepared for any scenario. Personally, I’m amazed that the market is still this high considering everything that has been happening. It’s too early to short (maybe), but it’s a little late to go long.
Bottom line: The market is starting the week with a negative bias, which is not surprising considering everything happening in the world. The Fed appears to be the main entity pushing the market higher almost every day. I sure hope they know what they are doing.
Below is a more detailed analysis of the current market environment:
Sven Henrich @ Northman Trader doesn’t hold back his anger at the Fed for playing games with the stock market: https://bit.ly/3iakGTh
Lance Roberts @ realinvestmentadvice.com analyzes the market from a fundamental perspective, and doesn’t like what he sees: https://bit.ly/3eJAJFr
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