MY TWO NEWEST BOOKS WERE RECENTLY RELEASED: Here is the link to Understanding Stocks (third edition): https://amzn.to/3wO761F (Amazon) or https://bit.ly/3udwAUf (Barnes and Noble). Here is the link to How to Profit in the Stock Market: https://amzn.to/35lnjQy
WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK
Short-term trend (DAILY CHART) – RALLY. SPX rallied strongly last week, from 3863 to 3961, an impressive 98-point rally. I believe it caught a lot of people by surprise, but that’s the nature of bear markets. Rallies followed by selloffs: SPX 4000 is within reach, so let’s see how it reacts. Futures are SLIGHTLY LOWER on Sunday night, but that could change in the morning.
Long-term trend (WEEKLY CHART) – SIDEWAYS. Even with last week’s rally, SPX is still below its 50- and 100-day MA but above its 200-day MA. This week should be a revealing week as we could go in either direction (and probably will).
MACD (WEEKLY) = LOWER . The WEEKLY MACD is still displaying a negative market environment.
RSI: (S&P 500) @55.91 (DAILY) NEUTRAL. RSI is a smidge above 50 but still in the neutral zone.
Daily Intraday Volatility (VIX) = 23.03= COMPLACENT: The VIX is telling us that option traders are calm with little fear.
Comment: This is going to be a big week. During the Fed’s two-day meeting on Tuesday and Wednesday, the Fed is expected to discuss changes in monetary policy. Technically, the Fed doesn’t directly raise or lower interest rates (which I mistakenly led you to believe in previous blogs). Instead, they do the following, as quoted from Matthew Graham of Mortgage News Daily:
“The Fed Funds Rate is a target set by the Fed for interest charged by big banks to lend money to each other on an overnight basis. It has several policy tools that ensure the target is reliably hit within a quarter of a percent margin (one reason that the Fed communicates rate targets in 0.25% windows). In other words, the Fed “decides” (for lack of a better term) what the shortest-term loans will cost. From there, the market decides what longer term loans will cost…” (Here’s a link to the entire article: https://bit.ly/3zAtr3J
In addition to the Fed, economic reports including GDP will be released, which will give insights into how the economy is doing. Earnings are expected from Microsoft, Apple, and Alphabet (Google), to name a few. It will be fascinating to see how investors react to all of this news, and whether the tech sector rises or falls.
Be prepared because this should be a wild week, similar to taking a roller coaster ride — there should be numerous intraday reversals. Experienced short-term traders may like this environment but most investors should stand back and think long term.