Bullish or Bearish? Week of July 25, 2022 UPDATED IN BLUE

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 Markethttps://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.

Bullish or Bearish? Week of July 18, 2022

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 Markethttps://amzn.to/35lnjQy  

I wrote a column for MarketWatch on the strategies of one professional trader. It’s a must-read: https://on.mktw.net/3cq5Cmh

I was also quoted in an article on bear markets by Joseph Toppe for Capital.com: https://bit.ly/3cfJ47r

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. Last week could have been a lot worse, even though SPX fell from 3899 to 3863, a mild 36-point pullback. (The 72-point Friday rally saved the day.) The bear market continues as the major indexes are below their moving averages on the daily chart. Futures are HIGHER on Monday morning.

Long-term trend (WEEKLY CHART) – SIDEWAYS. The major indexes on the weekly chart are still below their 50- and 100-day MA but above its 200-day MA (and not moving much in either direction).

MACD (WEEKLY) = LOWER . The WEEKLY MACD is a lagging indicator, so it is reflecting the negative market environment. 

RSI: (S&P 500) @49.10 (DAILY) NEUTRAL.  RSI is neutral, and until it moves to extreme levels, it’s best to wait for a better trading opportunity.

Daily Intraday Volatility (VIX) = 24.23= COMPLACENT: The VIX is still in the doldrums. We’re in a bear market but option traders are not nervous or panicked (as reflected by a low VIX).

Comment: Bear markets are not much fun for most people. As professional trader Kornstein said in my article for MarketWatch, until the Fed stops raising rates in December, the bear market continues.

From a trading or investing stand point, this bear market is not easy. One day the indexes and many stocks are sinking. The next day, we get a 700-point Dow rally. This market is impossible to predict, one of the reasons why it’s important to have a strategy. In the MarketWatch column, Kornstein suggests buying at 52-week lows and selling at 52-week highs.

Most importantly, you need a buy and sell target price before taking a position. In fact, after buying, know the price you will sell. Selling at the 52-week high is distasteful to some traders who try to capture even more profits. The problem with buy and hold forever is investors sometimes get trapped, as many recently did when many major stocks (and indexes) plunged. It may take months or years (or never in a few cases) for some beaten-down stocks to revisit their all-time highs.

Even in a bear market, there are trading opportunities. It takes patience and skill and an ability to find stocks that fit your criteria (such as dividend paying stocks that make tangible products.

In closing, no one can predict which way the market will go this week, but at least until December, it’s going to a wild and wacky journey. Hold on for dear life (HODL)!

Bullish or Bearish? Week of July 11, 2022

MY TWO NEWEST BOOKS WERE JUST 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 Markethttps://amzn.to/35lnjQy  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – HIGHER. Last week, SPX rose from 3825 to 3899, a healthy 74-point rally. Volume was on the low side, but at least we didn’t go backwards. The indexes are still below their moving averages. The 50-day MA is now acting as resistance. We will wait and see if it can rise above it. Futures are FLAT on Sunday night but that could change in the morning.

Long-term trend (WEEKLY CHART) – FLAT. The major indexes on the weekly chart are below its 50- and 100-day MA but still above its 200-day MA. The indexes didn’t move much on the weekly.

MACD (WEEKLY) = LOWER . The WEEKLY MACD is a lagging indicator, so it is reflecting the negative market environment. 

RSI: (S&P 500) @50.50 (DAILY) NEUTRAL.  RSI is neutral, which perfectly reflects the current market environment (i.e., flat). When RSI gets to extreme levels, there will be a trading opportunity.

Daily Intraday Volatility (VIX) = 24.64= COMPLACENT: The VIX is reflecting the summer doldrums. VIX is telling us there isn’t a lot of fear on Wall Street at the moment (i.e., complacency).

Comment: Welcome to a bear market summer. Although the indexes stopped falling last week, the summer doldrums have kicked in, translating into fewer trading opportunities. (I didn’t say “no” trading opportunities, only fewer.)

There are excellent trading setups, but they are harder to find and it takes a lot of work to profit from them. The trading friends I know are patient, and several wait for extreme selloffs, then pounce. Some of my investor friends are accumulating ETFs such as QQQ and SPY (they are scaling in with small purchases).

As you know by now, the easy days are over for now. We are in a bear market, and each one is different. Many investors have severe losses, one reason so many are taking a wait-and-see attitude. It may be a while until we get good trading opportunities, which is why dollar-cost averaging into indexes or certain stocks makes sense.

Do not forget that this is a bear market and that it’s challenging. In a bull market, a rally could run for many days or weeks before stalling. In a bear market, rallies rarely last longer than a day.

Enthusiasm for the stock market has decreased recently. Obviously, it’s a lot more fun in a bull market when everyone appears to be making money. In a bear market, it’s not as fun, especially when there are losses. However, this is a great time to study, accumulate small positions, and improve your skills. When the bear market ends one day, you will be a much more knowledgeable trader or investor, and hopefully with increased profits.

Bullish or Bearish? Week of July 4, 2022

MY TWO NEWEST BOOKS WERE JUST 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 Markethttps://amzn.to/35lnjQy  NOTE: For a limited time, I am offering a signed copy of either book for $24 (list price) plus $3 shipping (in the U.S.). Email me if you want a signed copy of one or both books.

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. Last week, SPX fell from 3911 to 3825, a relatively mild 86-point pullback. During the bull market, strong rallies continued for weeks and months. In this market environment, we’re lucky to get a rally that lasts a week. On the daily, SPX is below its 50-, 100-, and 200-day moving averages. all negative clues. Note: Futures are LOWER on Tuesday morning.

Long-term trend (WEEKLY CHART) – LOWER. The indexes remain below their 50- and 100-week moving averages. As mentioned last week, this is not a healthy sign. Nevertheless, SPX is above its 200-week MA, the only ray of hope in a sea of red.

MACD (WEEKLY) = LOWER . The WEEKLY MACD is a lagging indicator, so it is reflecting the extremely negative market environment. 

RSI: (S&P 500) @44.62 (DAILY) SLIGHTLY OVERSOLD.  RSI is slightly oversold, so a mild rally would not be a surprise. Before it’s safe to go long (according to this indicator), RSI needs to reach 30 or below.

Daily Intraday Volatility (VIX) = 26.70= ELEVATED: The VIX is slightly elevated but lower than in the past, reflecting complacency.

Comment: This is a four-day week so I’ll keep this short. Futures are slightly higher but that could change in the morning.

Each week, it becomes clear that we are in a bear market. The failed rallies, daily volatility, and shock from investors are all signs of trouble. Be prepared for a longer-term bear market. Perhaps the only positive clue is that so many people are bearish, it could be bullish! Nevertheless, that is no reason to go long.

Bottom line: This is a very treacherous market environment and many would be wise to stand aside. If you do participate as a trader, trade small.