Bullish or Bearish? Week of July 26, 2021

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = The bulls came roaring back. The bulls took back control last week (after a short-lived selloff on Monday), and ran with the ball. SPX rose from 4327 to 4411, a spectacular 84-point gain in one week. Futures are LOWER on Sunday night. The all-time SPX high is 4415, which means KAPOW – we are at the top.

RSI: (S&P 500) @70.96 (WEEKLY) = Extremely Overbought. Once again, RSI is in the danger zone (above 70 and above), reaching extreme levels. As a reminder, when RSI reaches these levels, it’s been remarkably accurate at warning of a reversal. Although you shouldn’t use RSI to time the markets, the odds are on the side of the bears this week (according to this indicator).

MACD (WEEKLY) = MACD is as flat as a pancake. Again, MACD is above its zero line and even with its 9-day Signal Line. MACD is not giving a clear signal on the weekly. 

Special note on MACD: Some of you may wonder why MACD has been unable to give a signal for weeks. The reason is that MACD works off of volatility. When there is low volatility, as there is now, MACD will not be as effective. Be patient, because this brilliant indicator will shine in the future when volatility returns.

Daily Intraday Volatility (VIX): 17.20 = Fear has been temporarily ignored. NOTE:  VIX dropped a bit last week but didn’t plunge. That tells me that traders are a bit cautious as the market reaches all-time highs.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY are both 100 percent strong buys (according to this indicator). 

Comment:  The bears owned the market for a week and a day, and then the bulls took control, but on low volume. That is not a good sign, and points to an algo buy-on-the-dip program. And it worked. The market is at all time highs with not a worry in the world.

Except for RSI, which has put out the red flag (when RSI rises above 70, as it is now, the market is extremely overbought). Since RSI has been so accurate over the last few months, I would not ignore its signal. It doesn’t mean to run out and sell everything, but be aware that the market has a date with its destiny.

Sure, the bulls could run the market even higher this week but it’s playing with fire. Nevertheless, based on the accurate RSI signals from the past, the odds favor a short-term reversal. (And don’t believe the ridiculous reasons from the touts on TV explaining “why” there was a market pullback.)

This spectacular market has run up too fast and too high on nothing but hopes and dreams and low interest rates. It’s dangerous up here in the stratesphere, so caution is advised.

The futures are lower on Sunday night but that could change in the morning. Let’s see if this uptrend has some legs during the week. If you have trading profits, it never hurts to take money off the table, a choice only you can make.

Note: The Fed meets on Tuesday and Wednesday, which is typically a bullish signal (but not always). There are lots of mixed signals so guessing direction is next to impossible this week.

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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 July 19, 2021

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = The uptrend stalled. The bears took back control last week, at least temporarily, and SPX dropped by 25 points, falling from 4352 to 4327. As usual, RSI warned us last week that the market was due for a pullback (although a small one). Futures are LOWER on Sunday night. 

RSI: (S&P 500) @67,54 (WEEKLY) = Overbought. RSI was right again. After surpassing 70 last week (red flag), RSI fell back to normal overbought levels. When RSI on the SPX rises above 70, it is a warning sign, and it’s been remarkably accurate. Nevertheless, don’t use RSI for timing because overbought markets can get more overbought.

MACD (WEEKLY) = Same ole, Same ole. MACD is above its zero line and even with its 9-day Signal Line. Once again, MACD is not giving a clear signal on the weekly.

Daily Intraday Volatility (VIX): 18.45 = A smidgen of fear. NOTE: VIX climbed out of the basement last week and volatility increased. Fear is still in short supply, but at least some bulls were forced to face reality.

Research Note: A reader from Portugal — Gonçalo — correctly pointed out that in 2019, VIX was at 11, and in autumn of 2017, VIX went as low as 9! (We believe this was the “all-time” low.) Thanks to Gonçalo for correctly identifying how low VIX can go.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY are both 100 percent strong buys (according to this indicator). 

Comment:  While everyone was betting on the market to go to the moon, RSI told us that things were getting a bit frothy. That was confirmed by the low VIX. And although the market didn’t crash or even fall by that much, it did fall. The next time RSI rises above 70, it’s an orange alert.

As I’ve written before, no one can tell you when the longest-bull-market-in-history will end, only that it will end one day. It could end in a whimper or a crash, but it is going to end. And each day that goes by, the clock is ticking.

Another worrisome clue is inflation, which appears to be rising. Just look at the price of almost everything important, like food and gas. In case you don’t know, the market typically doesn’t like inflation. Meanwhile, the Fed dismisses inflation concerns as being transitory. Hmmm, I wonder how long they can say that!

This week is unpredictable. The bears are trying to keep control, but judging by history, the bulls will not give up the ball without a vicious fight.

Bottom line: No one knows who will win the week, so placing a bet on one side or the other is a gamble. Until there is evidence of a reversal, the odds are still with the bulls although it’s a lot more dangerous now.

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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 July 12, 2021

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = Still going higher. The bulls eked out a slight win last week. SPX rose by 17 points, moving from 4352 to 4369. After a very rough start to the week, on Friday the bulls saved the day with a 448 Dow gain (and an SPX gain of 48 points). Once again, RSI warned us of trouble, and it was right. Futures are flat on Sunday night.

RSI: (S&P 500) @71.45 (WEEKLY) = Extremely Overbought. RSI is over 70 and is in the danger zone. Last week RSI was at 70 and SPX fell hard for the first two days of the week. It recovered on Friday but now the weekly RSI is higher than it was a week ago. That’s a warning sign!

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line and even with its 9-day Signal Line. Once again, MACD is not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.18 = Little or No Fear. VIX is once again telling us the only fear is the fear of missing out. Few traders are buying put protection since few believe the market will reverse. (That’s another danger sign.) 

Barchart Stock Evaluator for SPY and QQQ (link below): What else is new? SPY are both 100 percent strong buys (according to this indicator). 

Comment:  The indexes including SPX fell hard last week, confirming the warning from RSI. And then, like a miracle, the indexes rallied strongly back to even on Friday. RSI is now saying the market is more overbought and extended than a week ago. Be alert to a potential reversal (but don’t use RSI to time the market).

I have no idea why SPX and the other indexes rallied on Friday to another new high, but I’m guessing it was a strong algo buy program. The bulls are in control again.

There are other warning signs. Anyone who has been at the grocery store or at a restaurant know that prices are surging. It’s not just food prices, either. Put another way, inflation is rising, although the Fed says it’s “temporary.” So we have near-zero interest rates, rising inflation, an extremely overbought market, and millions of investors who believe the market only goes in one direction. It doesn’t take a genius to know this is not going to end well.

No, we are not going to crash tomorrow, but the clues and indicators are telling us the market is on borrowed time. Traders and investors should manage risk, and that means to trade less, diversify, and to avoid plunging with large sums of money.

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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 July 5, 2021

The following is a link to a column I wrote about the top 10 rules to follow if trading cryptocurrencies: https://on.mktw.net/3whLsit

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = Up, up, and away. The bulls continue to be in the driver’s seat, with the SPX rising by 72 points, moving from 4280 to 4352. There is only one problem: SPX is extremely overbought, and keeps getting more overbought. Except for that, the indexes appear unstoppable for the short-term. SPX futures are flat on Monday night.

RSI: (S&P 500) @70.81 (WEEKLY) = Extremely Overbought. RSI is over 70 and is in the danger zone. Do not be surprised if there is a major reversal. Nevertheless, RSI can remain overbought for long time periods, although it has reversed in the past after surpassing 70 on the weekly chart.

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

Daily Intraday Volatility (VIX): 15.07 = No Fear. VIX is once again telling us the only fear is the fear of missing out. Few traders are buying put protection since few believe the market will reverse. (That’s a danger sign!)

Barchart Stock Evaluator for SPY and QQQ (link below): SPY are both 100 percent strong buys (according to this indicator). 

Comment: The market is at all-time highs, investors are complacent and many believe the market will never go down (at least in the short term). And yet, RSI is telling us the market has reached extreme overbought levels.

This does not mean the market is going to reverse and plunge immediately, but RSI has been remarkably accurate in the past. Therefore, be prepared for some fireworks in the coming weeks (if not sooner).

Lance Roberts (link below) wrote a fascinating piece that included a CNBC interview with legendary investor Leon Cooperman. Cooperman said the “market structure is broken,” and he admitted that he was scared. And yet, he says he has to be invested. The CNBC interviewer, Becky Quick, called him a “fully invested bear.” And that’s where we are at: Even the bears are invested, because they can’t afford to miss out.

With the market at all time highs, with little or no fear, with a generation of investors who never experienced a bear market, the risks of a collapse have increased. And as I’ve said dozens of times before, no one can predict when the market will plunge. But it will plunge one of these days. We are in unprecedented times.

Bottom line: It’s a four day week so anything is possible.

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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