Bullish or Bearish? Week of November 28, 2022

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: I’m building and designing an entirely new website, which will be completed early next year. 

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART)  RALLY:  SPX has continued to rally, rising above resistance at SPX 4,000 to reach 4,026. On the daily chart, SPX is close to rising above its 200-day moving average. It looks bullish but be careful as the market could be “topping out.” On Sunday night, futures are lower, but that could change in the morning. 

Long-term trend (WEEKLY CHART) – RALLY. SPX is also rallying on the weekly chart. Unless something unexpected happens, we are on a bullish path right into the end of the year (i.e., the so-called Christmas rally). 

MACD (WEEKLY) = MIXED. The WEEKLY MACD is below the zero line but well above the 9-day signal line. It looks bullish but we still have not received the “all-clear” signal. 

RSI: (S&P 500) @61.99 (DAILY) OVERBOUGHT. SPX is still overbought but not at obscene levels, which means the markets could keep rallying year-end before topping out and reversing. 

Daily Intraday Volatility (VIX) = 20.50. LITTLE FEAR. According to VIX, fear is still on vacation (by evaluating the number of S&P 500 put options purchased over a set time period).

Comment: The rally that started a few weeks ago has continued, even as the Fed plans to raise interest rates (but reportedly not as aggressively as before, which is considered bullish). We may also have the so-called Christmas rally, and if all goes according to plan, we could rally through December. 

Unfortunately, the market has a mind of its own so anything can happen. Based on the odds, however, there is a good chance the market will keep rallying. It’s a gamble to make a big bet on market direction, so it’s wise to avoid making this 50-50 trade. However, that’s a decision only you can make. 

Black Friday was a huge success as shoppers came out looking for bargains, which should bode well for the economy, at least at first. 

Trade or invest according to your plan. Remember that the odds are great the market is topping out and will reverse sometime in 2023. I wish I had a crystal ball so I can tell you when. Until then, be alert to the clues and indicators. 

 

 

Bullish or Bearish? Week of November 14, 2022

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)  SHORT-TERM RALLY:  SPX rallied strongly last week, rocketing by a phenomenal 222 SPX points during the week, from SPX 3770 to 3992 (more on this below). SPX has moved strongly above its 50- and 100-day moving averages, but is still below its 200-day MA. SPX futures are lower on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – SHORT-TERM RALLY. SPX is strongly above its 200-week moving average, which bodes well for the intermediate term. If and when SPX falls below its 200-week, that’s when it will get ugly. Until then, enjoy the rally. No one can predict how long the rally will last, but lately, they haven’t lasted long.

MACD (WEEKLY) = MIXED. The WEEKLY MACD is below the zero line and slightly above the 9-day signal line. To get an all-clear signal, MACD must rise above the zero line. We’re not there yet.

RSI: (S&P 500) @61.96 (DAILY) OVERBOUGHT. SPX went from neutral to overbought, according to RSI. It’s still not at extremely overbought (70 or higher) but it’s getting closer. RSI has been remarkably accurate in identifying potential reversals on both the long and short side.

Daily Intraday Volatility (VIX) = 22.52. LITTLE FEAR: According to VIX, fear is on vacation (by evaluating the number of S&P 500 put options purchased over a set time period).

Comment: Just when the bulls may have thought about giving up, the indexes had one of strongest rallies in recent memory (over 1000 Dow points in one day). This may be hard for many people to believe but this is typical of a bear market. A month ago, on a radio show, I said to the host that SPX could reach 4000 before the end of the year. Little did I know it would happen so fast!

If this is a bear market, although the market could move higher, the odds have increased that a major selloff will occur. Investors who are dollar cost averaging into index funds won’t be too concerned. If trading, however, be prepared for a reversal (as always, timing is the key to success).

Bottom line: There are many cross currents affecting the market, including the Fed, inflation, and interest rates. As a result, the market remains volatile. Proceed with caution.

Crypto News: The biggest news last week was the blowup of FTX, which reflected one of the dangers of cryptocurrencies. Trade in the crypto world with care, and don’t bet money you can’t afford to lose. At times, crypto trading is similar to playing the “whack-a-mole” game, when you never know which platform or currency will get smashed. Poor bitcoin fell to 16,594 (from 19,000 a few weeks ago and 60,000 last year). Ouch.

Bullish or Bearish? Week of November 7, 2022

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)  SHORT-TERM SELLOFF:  SPX retreated last week, plunging 131 SPX points during the week, from SPX 3901 to 3770. Basically, SPX gave up all of the gains it made the previous week, which is reflected in the daily chart. This is a dangerous topsy-turvy market, typical of a bear market. Futures are much lower on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – SHORT-TERM SELLOFF. Even with the selloff last week, SPX remains above its 200-week moving average, a hopeful sign. If it breaks below the 200-week, and stays below, that would be an ominous sign. We are not there yet.

MACD (WEEKLY) = MIXED. The WEEKLY MACD is below the zero line and even with the 9-day signal line. Anything is possible, according to MACD.

RSI: (S&P 500) @49.61 (DAILY) NEUTRAL. RSI was slightly overbought last week, and if on cue, the market retreated. Now RSI is back to neutral territory, so it’s anyone’s guess which direction the market will go.

Daily Intraday Volatility (VIX) = 24.55. SLIGHT PULLBACK: Even with the pullback last week, VIX retreated slightly. Fear is still not rampant, according to this indicator.

Comment: As promised, the Fed raised the benchmark Federal Funds rate by 75 basis points, causing another jump in interest rates. As a result, it will cost more to buy a car or house, and credit card rates will likely increase. Not good for borrowers, and the market took notice.

We’re in uncharted territory, but I stand by my opinion that we are in the early stages of a bear market. If I’m right, by the time the bear plays itself out, it will leave a trail of destruction that causes investor nightmares.

It’s essential to have a plan, or simply stay on the sidelines, rather than playing it by ear. As I wrote earlier, this is a dangerous market, more suited to short-term traders than long-term investors. Nevertheless, investors with a long-term plan can achieve success over the long term. Unfortunately, the short-term is likely to be dangerous.

Added to the market woes are the list of technology companies that announced layoffs. Some of the best and brightest will be let go, but hopefully they will find new jobs with more potential.

The Fed plans to keep raising rates until “something breaks,” as Lance Roberts put it. Roberts says that the Fed doesn’t care if it makes a policy mistake, as long as they can reduce inflation. A “hard landing” is very likely, he says, meaning we could experience a recession.

Bottom line: It’s a very difficult trading and investing environment so tread cautiously. Cash is king during these times, as is taking profits and heading.