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WHAT THE INDICATORS ARE TELLING US
This is what the technical indicators are telling us this week:
One-month trend = Still Volatile. It was a tug of war all week. However, the end result was this: SPX fell by 18 points last week, dropping from 4173 to 4155. It could have been a lot worse, but the algos entered on almost every dip. Meanwhile, on Sunday night, the futures started off slow but now appear to be in rally mode. Obviously, that could change in the morning.
Mid-term (50- and 100-day MA) = Somewhat Bullish: SPX and the other indexes are above their 50- and 100-day moving averages but it’s a little shaky.
RSI: (S&P 500) @66.57 (WEEKLY) = Slightly overbought. RSI is still showing an overbought market but it has retreated from extreme levels.
MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is not giving a clear signal at this time.
Daily Intraday Volatility (VIX): 20.15 = VIX is still on the low side.
Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 72 percent buy, while QQQ is a 56 percent buy (according to this indicator). How the mighty have fallen: SPY is still a strong buy, but it’s fallen from a 100 percent buy two weeks ago.
Comment: Truthfully, everyone is watching cryptocurrencies right now, especially bitcoin. From a high of $64,000 per bitcoin only two weeks ago, it’s fallen to $34,000 as of Sunday night. There are many reasons: Elon Musk’s comments, the Chinese banning financial institutions from using cryptocurrencies, and an extremely overbought cryptocurrency market. No one knows where the cryptos will go this week, but be prepared for a rough ride. It’s like the Wild West if trading this product.
Anyone who has been trading for longer than 10 years knows that what crypto is going through can also happen to the stock market. We experienced a little taste of it a year ago after the pandemic first appeared. Since then, the market exceeded all expectations by rallying higher and faster than anyone predicted. And now we have a overbought market and a generation of investors who have never experienced a bear market.
Because I’m not a fortune teller, I can’t and don’t predict when a bear market will arrive. But I can guarantee with 100 percent certainty that there will be a bear market in the future. I also know that millions of investors and traders will be unprepared. Why? Because after 13 years, many believe the market “only goes up.” That’s what low interest rates do for the stock market.
Speaking of low interest rates, it’s a gift to home buyers and anyone refinancing or borrowing money. Unfortunately, once interest rates start to climb, stocks and housing prices will be negatively affected. Until then, however, enjoy these unprecedented times.
Regarding the stock market, the indexes are still overbought but as mentioned at the beginning, cryptocurrencies are the main attraction (for now). I have no idea which way either are going to go, but fasten your seatbelts. I assume the tug-of-war will continue.
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