Bullish or Bearish? Week of April 15, 2024 (Updated)
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Short-term trend (DAILY CHART) – SLIGHTLY BEARISH: Last week, SPX fell from 5204 to 5123, an 81-point shellacking, the second week SPX dropped. It actually seemed much worse because of the 476-point drop in the Dow on Friday (the worst one-day selloff since January). Another bearish fact: SPX fell below its 20-day moving average, although it's still above its 50-, 100-, and 200-day MA. Note: Futures are HIGHER on Monday morning.
Long-term trend (WEEKLY CHART) – SLIGHTLY BEARISH: On the weekly chart, SPX ran into resistance and pulled back slightly. This could be significant.
MACD (DAILY) = SLIGHTLY BEARISH: MACD fell strongly below the 9-day signal line and is headed lower towards the zero line. This would be a full-on bearish signal except that MACD is still above the zero line, but pointing down.
RSI: (S&P 500) = 44.96 (DAILY) SLIGHTLY OVERSOLD: After two negative weeks, RSI has now moved into the oversold column. Two weeks ago, RSI was flashing an extreme overbought reading, and now it reversed (as we warned could happen).
Comment: What a difference two weeks makes! Two weeks ago, the market was on a tear and it seemed unstoppable. And then, as always, it stopped. The pundits will give you their reasons (Iran attacking Israel, inflation, or a potential oil spike). Or maybe the market was just extremely overbought.
Bearish traders will say the market has topped out, so "look out below." Bullish traders will say this is a slight setback, and soon it will be "full speed ahead."
The reality: it's too early to know who is right. Now that SPX is slightly oversold, it could easily bounce higher. On the other hand, this week we will find out if the reversal has legs. No one knows which scenario will play out.
Just because the 20-day was breached doesn't mean the bull market is over. SPX would have to break through its 50-day to get our attention. And if the Middle East gets even more dangerous, then all bets are off.