This is what the technical indicators are telling us this week:
One-month trend = Neutral to Bullish. SPX is well above its 200-day MA, a bullish signal, but the rally is still treading water after making all-time highs a few weeks ago. SPX closed at 3465 at the close on Friday, a slight drop from a week ago. Note: SPX futures are lower on Sunday night.
Mid-term (50- and 100-day MA) = Neutral. The S&P 500 is slightly above its 50-day MA and moving sideways.
RSI: (S&P 500) @ 55.75 (Daily) = Slightly Overbought. RSI is overbought but not at extreme levels.
MACD = Neutral. MACD is above its zero line but even with its 9-day Signal Line. MACD fell from its bullish position and is moving sideways.
Daily Intraday Volatility (VIX): 27.55 = Low. VIX is still below its 200-day moving average, indicating that volatility is low, and that fear is nowhere to be found.
Comment: Expect an unpredictable market as the election looms. The algos are aggressively defending any selloffs, but reality is getting in the way. On one hand, the virus is ruining the lives and livelihoods of millions. The economy is teetering over a cliff with too many suffering.
On the other hand, the market is near its all time highs. They can’t both be right. As a trend trader, I’m finding it difficult to find good trades. Therefore, I’m on the sidelines and waiting. I assume there will be more opportunities after the election.
Although it’s a challenge, most investors are holding. I have to give investors a lot of credit. They did not flinch for the last decade, especially during the last year, and it paid off well for them. No one, and I mean no one, can predict what is going to happen in the near future. Many will guess, but no one knows for sure.
My advice: Wait and watch until after the election. I’m not comfortable with the market being at all time highs with so many problems in the economy, and in the world. Then again, logic and common sense didn’t win out over the last year, or even the last four years. That’s why trying to guess what the market will do in the next few weeks or months is a parlor game, one that I will not participate in.
Here is a more detailed analysis about the market from Lance Roberts:
Lance Roberts @ realinvestmentadvice.com focuses on the stimulus package to make sense of a nonsensical market: https://bit.ly/35rdGf2
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: https://wolfstreet.com