Bullish or Bearish? Week of June 14, 2021

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls remain in control: SPX rose by a decent 18 points last week, rising from 4229 to 4247. The Bad New Bears have still failed to run with the ball but their luck may finally change in the near future. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages. If you look at a chart, it looks like “blue skies,” but thunderstorms can appear out of nowhere, especially during the summer. Don’t be surprised when that happens.

RSI: (S&P 500) @70.40 (WEEKLY) = Overbought. RSI is telling us the market is extremely overbought. In the past, RSI has done an excellent job of warning us of a reversal. Now that RSI is above 70, the odds of a selloff have increased substantially.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.65 = VIX is even more ridiculously lower than last week. Buyers beware!

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 88 percent buy (according to this indicator). 

Comment: What, me worry? One glance at a chart and it’s not surprising why investors are feeling so euphoric. Some ultra-bullish financial commentators have even proclaimed that the market forecast is bullish as far as the eye can see, and all they see is blue skies.

It’s what you can’t see that should worry investors. With RSI at extreme overbought levels, and VIX in the basement, caution is recommended. The rallies have been weak and listless. All clues point to a correction in the coming weeks, or sooner.

Granted, no one can predict what will happen, but if you look at the clues, they are pointing to a market that is slowly running out of gas. It wouldn’t take much to send this market much, much lower. As the market struggles at these elevated levels, it is time to play defense, or at least diversify.

Bottom line: No, it doesn’t mean to run out and sell everything, but it means that the odds of a reversal are likely in the coming weeks. As the pros would say, “The upside is limited.” The Bad News Bears have been losing for so long it will be a shock when they finally hit a couple of home runs. Be ready.

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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

Bullish or Bearish? Week of June 7, 2021

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls took control: SPX rose by a respectable 26 points last week, rising from 4203 to 4229. Although it’s not exciting, the bulls are in control and running the market higher. The Bad New Bears have failed to take advantage of any selloffs. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball. 

RSI: (S&P 500) @69.67 (WEEKLY) = Overbought. RSI is telling us the market is overbought. If it reaches 70 or above, it will be extremely overbought. In the past, RSI has done a good job of warning us of a reversal, so pay attention to the Weekly RSI if it rises above 70 (only .33 away).

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.42 = VIX is still ridiculously low, and could go even lower. 

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 72 percent buy (according to this indicator). 

Comment: Once again, the bulls took control and ran the market higher, although slowly and steadily. Every time the market showed intraday weakness, buy-on-the-dip algos and retail traders saved the day. The only losers were short sellers.

Speaking of shorting, shorting the indexes (or buying puts on the indexes) has been a losing strategy. If you can identify individual stocks that are weak, it might work. But betting against the overall market has been frustrating and difficult.

Selling covered call options on certain stocks has worked, and so has going long the indexes, especially the S&P 500. Of course this winning strategy won’t work forever, but until something unnerves the market, it’s up, up, and away. One day, however, the bubble will pop.

Many will argue that this market is not in a bubble, and that would be an interesting discussion. One aspect about bubbles is that you don’t know you’re in one until it pops. Based on my personal experience, and how many investors believe the market only goes up, my opinion is it’s probably a bubble. Of course I could be wrong, which is why I don’t dare bet against this market (right now). Another characteristic about bubbles: Trying to short a bubble is financial suicide. Don’t even try.

If this is a bubble, one day it will pop, and it won’t be pretty. If this is not a bubble, and in fact this is a continuation of the longest bull market in history, then buy and hold investors will continue to rake in the cash.

Bottom line: We’re going higher until we aren’t. Since I don’t do predictions, I cannot tell you when the bull market will end, only that it will one day. Just be diversified. Trade small, especially if trading volatile securities.

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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

Bullish or Bearish? Week of May 31, 2021

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls took control: SPX rose by a healthy 48 points last week, rising from 4155 to 4203. This is a bullish development. The only question is if the momentum can be sustained. Futures are flat on Monday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball.

RSI: (S&P 500) @68.61 (WEEKLY) = Overbought. RSI is saying that SPX is overbought. At 70 or higher, it will reach extreme overbought levels.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.76 = VIX is ridiculously low, and could go lower.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 96 percent buy, while QQQ is a 72 percent buy (according to this indicator). Both are strong buys after a spectacular performance last week.

Comment: The bears keep huffing and puffing, and complaining, but the market defies logic and keeps moving higher. The trend is up for now but as readers of this blog know, that could change quickly. That is why it’s essential to be prepared for anything. It is also wise to have a diversified portfolio, i.e. don’t bet everything on one stock or other security.

It’s a four-day week and there isn’t much to say except let’s watch and see if the uptrend continues. The bears had a chance to take control two weeks ago but fumbled once again. And now the bulls are in control, along with their friends, the algos.

Bottom line: Wait for the market to make its move and then follow.

Note: I have a column coming out on MarketWatch this week, one that is worth reading.

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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