Bullish or Bearish? Week of August 31, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3484 on Sunday night, higher from a week ago. The 200-day is at 3083. SPX futures are edging higher. 

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 79.26 (Daily) and 67.59 (Weekly) = Extremely Overbought. SPX and the other indexes are in the danger zone. More on this below.

MACD = Neutral. MACD is above its zero line and is still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.96 = Danger Zone. VIX is getting crushed by the volatility-killing algos. VIX is below its 200-day moving average, which tells me there is still no fear. 

Comments: Last week I remarked that you should wake me up when something happens. Something happened. All the major indexes are extremely overbought and in the danger zone. The RSI of SPX is near 80 on the daily chart. This is equal to the readings in February, right before the March 35% selloff. Lance Roberts referred to it as exhibiting “technical extremes,” and he is correct.

In non-technical terms, I would refer to the market as being in the Twilight Zone.

As every technician knows, indexes and stocks can remain overbought for long time periods, especially individual stocks. I have seen stocks that had an RSI of 90 and above but remained overbought for weeks before coming back to Earth.

This does not mean that the market is going to crash, or that a correction is imminent, but it does say the bulls are playing with fire right now. Any spark could send the market reeling downwards.

Some technicians are predicting a “blow-off top,” and that’s also possible. That means the indexes could have one final push higher, a last hurrah, before the ultimate downfall. Shorting a blow-off top is not recommended, as Tesla shorts learned the hard way.

On the other hand, investors are feeling invincible right now as the bears got mauled. Anyone who knows market history knows the markets are at rarified levels right now. It has moved too high and too fast under less than ideal economic conditions. Something just isn’t right.

This is not going to end well, but no one can say when it will reverse or what the cause will be. Just be on the lookout for clues. This is not the time to take on large positions. This is the time to manage risk.

Bottom line: The market has my attention now. I’m watching RSI closely to see how overbought we get this week. Be prepared for anything, including a major market selloff in the near future.

Below is further market analysis by Lance Roberts via his blog:

Lance Roberts @ realinvestmentadvice.com says you better be ready, as a major market decline is possible: https://bit.ly/3hDvgl3

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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 August 24, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3397 on Sunday night, slightly higher from a week ago. The 200-day is at 3073. The futures market is edging higher.

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 68.30= Overbought. A few more points higher and we’re in the danger zone. 

MACD = Neutral. MACD is above its zero line and is still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.54 = Danger Zone. VIX is still getting crushed by the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is still no fear.

Comments: Records are made to be broken because we’re at all-time highs for the major indexes. Only a handful of stocks are pushing the indexes higher, and if you’re fortunate enough to own one of these stocks, happy days are here again.

If you look at the indicators above, nothing has changed. The indexes are overbought but the market keeps climbing higher. Sadly, the economy is in deep trouble and the virus still isn’t done with us.

It’s likely that volatility will be suppressed for a while longer, perhaps until after the election. That is the most likely scenario, but then again, Mr. Market sometimes surprises everyone, but not often, and not lately.

The odds are also good we will inch higher this week and beyond but that is based on the clues, not facts. The facts are the market indexes are extremely overbought, and yet, they can get more overbought.

I know that investors are playing with fire right now, like playing a game of musical chairs, but how can you argue with success? Few are buying, and few are selling. Right now it’s a waiting game.

Bottom line: Wake me up when something changes.

I’m going to turn it over to Lance Roberts and Sven Henrich, who have more to say about the market than I do:

Sven Henrich @ NorthmanTrader does a “reality check” and includes a video: https://bit.ly/3aX5DZV

Lance Roberts @ realinvestmentadvice.com compares the market to a garden, and says that winter is coming so you better prepare: https://bit.ly/3j8Aplk

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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 August 17, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3372 on Sunday night, higher from a week ago. The 200-day is at 3065. 

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 67.27= Overbought. A few more points higher and we’re in the danger zone. 

MACD = Neutral. MACD is above its zero line and and still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.05 = Danger Zone. VIX is still getting crushed by the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is no fear. Not good.

Comments: Futures are slightly higher on Sunday night as the indexes slowly keep climbing. Although the SPX and the other indexes are overbought, as you may know, markets can remain overbought for long time periods.

Buy and hold investors with index funds are the most pleased with this low volume, volatility-suppressed market. I’m guessing the markets will keep edging higher until the election. There’s a lack of buyers except for the Fed, it appears.

You can go along for the ride but be careful, because one day this bubble will pop. No one knows when, unfortunately. The higher we go, the more convinced most investors believe the market “will never go down,” and if it does, they believe, it will bounce back. I’ve seen this story before, but this one takes the cake.

As long as volatility is suppressed, the market can keep climbing. Any hint of a selloff is met with a strong reaction by the algos, so shorting the indexes at this time is not recommended.

There isn’t a lot to say except to be patient, and wait for better opportunities. The odds are good the market will continue in this direction a while longer, so be prepared for some very boring times (if you are a trader).

Obviously, that could change at any time if investors get spooked for whatever reason. For now, however, try not to fall asleep! Investors are pleased with this environment, and that’s fine. Anyone selling options is also pleased. Traders, however, must wait for better opportunities.

Meanwhile, Lance Roberts and Sven Henrich will try to make sense of this very unusual market with their latest blogs:

Lance Roberts @ realinvestmentadvice.com says the bulls still didn’t reach all-time highs: https://bit.ly/321pQK7

Sven Henrich @ NorthmanTrader tells the truth about this market in a radio interview: https://bit.ly/31ZqI1S

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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 August 10, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX broke out of its sideways pattern and is well above its 200-day MA. Note: SPX is at 3351 on Sunday night, higher from a week ago. The 200-day is at 3056.

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 68.90= Overbought. A few more points higher and we’re in the danger zone.

MACD = Neutral. MACD is above its zero line and and still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.21 = Danger Zone. VIX got crushed last week thanks to the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is no fear. That’s not good.

Comment: This is really something to see. The overbought market has gotten more overbought. The RSI and VIX are flashing warning signs, so be prepared for a sudden reversal in the near future.

Ask any stock market veteran: They’ve never seen anything like this. I have my suspicions about what is happening, but the facts are that volatility has gotten crushed since March. That means buy and hold investors are celebrating while many speculators are sitting on the sidelines, waiting for better opportunities.

The economic and virus news continues to be dreadful as the market comes close to hitting all time highs. Either the economy is not really in bad shape or the stock market is lying. But the stock market and economy can’t both be right. Something has to give…eventually.

Bottom line: I’m speechless. I’m on the sidelines waiting for better trading opportunities.

Meanwhile, Lance Roberts will try to make sense of this very unusual market with his latest blog entry:

Lance Roberts @ realinvestmentadvice.com says the bulls have a very loud megaphone: https://bit.ly/3ivkcql

__________________________________________________________

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 August 3, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Neutral. SPX is above its 200-day MA but has moved sideways. Note: SPX is at 3271 on Sunday night, slightly higher from a week ago. The 200-day is at 3048. If SPX falls below 3000, there will be trouble. 

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is above its 50- and 100-day MA. 

RSI: (S&P 500) @ 61.03= Slightly overbought

MACD = Neutral. MACD is above its zero line and and even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 24.46 = Neutral. VIX still hasn’t moved much in the last week, thanks to the volatility-killing algos.

Comment: Futures are flat on Sunday night. Although the indexes managed to squeak out a small gain last week, fueled by positive earnings from Apple and Amazon, beneath the surface there is trouble brewing.

The market is moving ever so slowly, and is relying on a few favorite stocks to keep the market going. It may seem like the market is moving higher, but in reality it’s gone nowhere for weeks. It is going sideways, not higher.

This means that one unexpected piece of bad news could send the market plunging. In reality, there has been so much bad financial news it’s hard to keep up, but the institutions still aren’t selling. When they do one day, all hell will break loose. Until then, however, be very very careful.

Unless you already owned shares of Apple and Amazon, it was a difficult week (and also unless you were able to buy call options on Kodak before the big announcement. In the old days, “front-running” was illegal). Many investors are doing well, but traders are struggling to catch a strong trend. It’s extremely difficult to sell short, but I’m sure that will change in the future.

Bottom line: I’m waiting for reality to catch up with the market, and when it does, it will not be a pretty sight. Until then, I patiently wait.

Here is a detailed analysis of the current stock market from Lance Roberts and Sven Henrich: 

Lance Roberts @ realinvestmentadvice.com smartly keeps his hedges in place as the market gets more insane: https://bit.ly/2PgrXn9

Sven Henrich @Northman Trader correctly exposes this ridiculous market and tells the truth. Be sure to see his video: https://bit.ly/2PgUglo

__________________________________________________________

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