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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 bears tried to take control last week, but didn’t make much progress. SPX fell by a measly 5 points, from 4185 to 4180. The Dow futures are flat on Sunday night, but that could change in the morning.
Mid-term (50- and 100-day MA) = Bullish: The indexes took a breather last week but are still in an uptrend.
RSI: (S&P 500) @ 71.42 (WEEKLY) = Extremely overbought. RSI is still in the danger zone (above 70), however, indexes and stocks can get more overbought before 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): 17.33 = The VIX is still on the low side, 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: Ignore RSI at your own peril. Although RSI is still in the danger zone (above 70), the bears were unable to take control after a strong pullback early in the week. This week, the bulls have a chance to take over thanks to the Fed meeting (which is typically a bullish affair). Nevertheless, traders should be cautious about trading before and right after a Fed meeting.
The market is overbought by most measures, but that hasn’t stopped the market or some stocks from getting more overbought. The problem is that volatility is low (not good for traders), and institutional volume is almost nonexistent.
I want to remind you of an old Wall Street saying: “Sell in May and come back in November,” Although this axiom will be tested soon, no one can predict the end result. Based on the facts, however, the trend is up but the market is overbought. In addition, volume is low and so is volatility. The verdict? A dangerous, unpredictable market.
Bottom line: The odds are with the bulls this week based only on the Fed meeting. Longer term, there are signs the bull’s 12-year run is stalling out. Add in the calendar, and the odds favor the bears over the next few months, but only slightly.
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