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WHAT THE INDICATORS ARE TELLING US
This is what the technical indicators are telling us this week:
One-month trend = Bullish. The bulls remain in control and the trend is still up. SPX rose by 57 points last week, from 4128 to 4185. The Dow futures are lower on Sunday night, but that could change in the morning, especially if a buy-on-the-dip algo enters.
Mid-term (50- and 100-day MA) = Bullish: The indexes keep moving farther and farther away from its moving averages.
RSI: (S&P 500) @ 71.83 (WEEKLY) = Extremely overbought. RSI is in the danger zone (above 70), however, indexes and stocks can get more overbought before suddenly reversing.
MACD (WEEKLY) = Bullish. MACD is above its zero line and above its 9-day Signal Line. Until MACD gives a sell signal, the bull market is intact.
Daily Intraday Volatility (VIX): 16.25 = The VIX continues to head lower, reflecting the mindless lack of fear by almost everyone participating in the marketplace.
Barchart Stock Evaluator for SPY and QQQ (link below): According to this proprietary program, SPY and QQQ are both 100 percent buys.
Comment: Is there any investor not making money? Except for bondholders, buy and hold investors appear to be raking in the dough, or so they tell me. Many traders, however, are not enjoying the market inaction.
While the market is at all-time highs, the “invisible hand” is keeping the market propped up, and doing a darn good job of it. Short at your own risk. Just buy and hold, hold, hold, and don’t think about the future.
And yet, RSI is telling us that investors are playing with fire. As long as the Fed is keeping interest rates low, and nearly all asset classes are moving higher, what could go wrong?
In reality, a lot could go wrong, but no one can predict when and where, so don’t try. Although the uptrend is intact, and all seems well, RSI is giving a clear warning signal. And yet, we can get more overbought before a reversal. It feels like we’re playing a game of musical chairs, so be careful out there.
Bottom line: We’re going higher until we’re not. (Put another way, we’re in a strong uptrend that cannot be shorted…yet. Until we reverse direction on strong volume, and no one can predict when that will happen, we are going higher.) Although the futures are lower on Sunday night, I’ve seen this scenario before. Volatility and volume have to explode higher before I think it’s the real deal.
Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G
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