Bullish or Bearish? Week of February 24th, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA but pointing lower = Bearish to Neutral

One-month trend: Uptrend has been broken. Watch what happens when SPX hits its 50-day moving average. Will it bounce or slice through like butter?

RSI: (S&P 500) @ 53.66= Neutral

MACD: MACD is above Zero Line but moving below 9-day Signal Line = Neutral

Daily Intraday Volatility: 17.08 = Neutral to Bearish. Volatility appears ready to rise even more.

Comment: It shouldn’t be a huge surprise that the futures market is showing an ugly opening Sunday night (-1.5% and falling). As I and others have warned for weeks, if not months, an extremely overbought market, recessionary signs, a Fed that has pumped liquidity into the market, extremely low interest rates, and high levels of consumer and government debt is a dangerous cocktail.

The sad part is that a virus could be the pin that pops the bubble. The cost to humans is already a tragedy, and it appears as if it could get worse. More than likely, this will cause a short-term or long-term recession. No one knows how long this disaster will last, or if the virus spreads even farther. There are too many unknowns.

Many investors, who have been spoiled by an 11-year bull market, will likely grit their teeth and hope that the Fed protects them. I’m not saying we are definitely headed to a bear market. I’m saying that the market is dangerous and if it did fall by a significant amount in the weeks and months to come, I would not be surprised.

I would also not be surprised if SPX dropped to its 200-day moving average in the future. That would seem like a crash to many investors, but it would be a run of the mill pullback.

The main point is that, as I’ve warned before, it’s a good time to sell some of those winners and raise some cash (but wait until the panic subsides). Evaluate what you own and be prepared for some rocky times ahead. The Fed will do whatever it takes to keep the markets calm, and prevent mass selling, but unfortunately they don’t have a lot of tools to work with. (Perhaps they will announce QE5 while also lowering interest rates).

Bottom line: As I wrote last week, the easy days are over and expect a more difficult trading and investing environment in the future. Don’t panic, but prepare for a market correction as well as for a possible pandemic (that would be a worst case scenario).

I really wish the best for everyone, and again, I wished that it wasn’t a virus that might pop the market bubble. All we can do is hope for the best while making preparations to be physically and financially safe.

I recommend that you read the following from Sven Henrich (Northman Trader) about the market’s turn for the worse on Friday: https://bit.ly/2HQT7xe

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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:www.wolfstreet.com


Bullish or Bearish? Week of Feb. 17, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA but trouble ahead = Neutral to Bullish

One-month trend: Trend still strong until further notice. This is a pivotal week.

RSI: (S&P 500) @ 65.87= overbought

MACD: Above Zero Line and Signal Line above MACD line = Bullish

Daily Intraday Volatility: 13.68 = Bearish

Comment: Futures are lower Monday night due to Apple’s warning (it won’t meet quarterly revenue target due to Coronavirus). Add in an overbought market as well as recessionary fears from Asia due to the virus, and you have the potential for a severe pullback.

The Chinese central bank and the Fed will do everything in their power to keep investors calm. If things take a turn for the worse, the Fed will lower interest rates, flood the market with more QE money, or do whatever it takes to reduce fears. It’s going to be quite a battle this week and in the near future.

The black swan that no one expected was the virus, and it’s unknown how much more damage it will cause. Investors are still in denial because of their full faith in the Fed’s ability to reverse any plunges. For 11 years, the Fed has been able to perform miracles, but at a price: The market is extremely overbought by almost every technical and fundamental indicator.

Whether the market goes up or down this week, one thing I am certain of: The easy days are over. Expect a lot of gyrations moving forward, of short-term rallies followed by short-term plunges. As I’ve written before, this is one of the most dangerous markets I’ve ever seen. It’s like an old, beat up car driving up a hill at full speed as pieces of the car keep falling off. Eventually, the car runs out of gas or falls apart. The warning from Apple, the most popular stock in America, is not a good omen.

Added to all these other problems, I am also seeing signs of a recession slowly creeping towards us. Obviously, the fallout from the virus have accelerated those fears. And yet, with all this bad news, the Fed might be able to pull a rabbit out of the hat and convince investors to “not sell.”

The analysts I follow, Lance Roberts, Sven Henrich, and Wolf Richter, have posted excellent pieces over the weekend. Here are links to a few of the best. In addition, read Bloomberg for the latest on the virus as well as Apple’s warning.

I recommend that you read the following pieces:

Sven Henrich (Northman Trader) on Apple risks: https://bit.ly/2uTvzFg

Sven Henrich (Northman Trader) on the market bubble: https://bit.ly/2UWHpJn

Lance Roberts (realinvestmentadvice) on how the market thinks it’s immune to risks: https://bit.ly/37w3BN2

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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:www.wolfstreet.com


Bearish or Bullish? Week of Feb. 10, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA but could be forming a double-top: Neutral

One-month trend: After a brief pullback, SPX is trying to recapture its uptrend. It’s too early to say if it will be successful.

RSI: (S&P 500) @ 59.59= neutral

MACD: Above Zero Line but Signal Line is even with MACD line = Neutral

Daily Intraday Volatility: 15.47 = Neutral to Bearish.

Comment: Last week, we went from the edge of the abyss to a four-day rally that miraculously saved the indexes. The market was set to fall below its 50-day moving average last Monday when the bulls arrived in full force. Unfortunately, although the market looked bullish on the outside, underneath the surface it was not that pretty. Only a handful of stocks kept the indexes from falling, but the public doesn’t care. As long as the Dow is climbing, all is good.

Nevertheless, there are some disturbing signs that all is not normal. Obviously, we are watching the virus to see if it spreads farther and faster. The reality is that it is already causing financial pain in China, along with the human toll. It’s too early to say this is a “black swan,” but it does need to be watched closely.

The market has moved up too far and too fast in the last month or two, so caution is advised. A short-term double top formed in the SPX, which is a negative sign. However, it’s also possible the market could blast past resistance and move even higher (negating the double top). No one knows what is going to happen, but volatility has arrived, which is a double-edged sword.

Sign of a top? I have a neighbor who has been bearish on the market for the last 10 years. He hid out in cash and bonds. He told me yesterday that a month ago, he threw in the towel and put 50% of his money into the stock market. When the most adamant bears turn bullish, that is often a warning that a top is near. Not guaranteed but something to think about.

For a more detailed analysis of the current market environment, I once again turn to Lance Roberts and Sven Henrich, who wrote excellent pieces about the current market:

Sven Henrich (Northman Trader): https://bit.ly/38pAwUA

Lance Roberts (realinvestmentadvice): https://bit.ly/2OFZMy5

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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:www.wolfstreet.com


Bullish or Bearish? Week of Feb. 3, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is at its 50-day MA and pointing down = Neutral to Bearish

One-month trend: The uptrend in SPX has been broken and should be watched closely. It’s too early to know which direction the indexes will go this week.

RSI: (S&P 500) @ 43.44= RSI plunged from a high of 76.56 two weeks ago to 43.44, a neutral reading.

MACD: Above Zero Line but Signal Line pointing lower = Neutral

Daily Intraday Volatility: 18.84 = Neutral

Comment: What a difference a week makes! A week ago, analysts were leapfrogging over each other, making bigger and bolder predictions of an unstoppable bull market (SPX 4000 and beyond, some predicted). And just like that, like a 2 x 4 in the face, investors got smacked. And now, some of those same analysts are backtracking, warning of a 10 percent correction or worse.

At this time, it’s unknown if the recent selloff is meaningful or a run-of-the mill, short-lived pullback. From my perspective, there are a lot of red flashing warning signs, but I’ve seen those signs for months, if not longer. At the same time, I’ve seen vicious pullbacks followed by rip-roaring rallies (such as in January 2018).

Therefore, it’s best to keep your wits about you and plan for any scenario. SPX is at its 50-day moving average, and it could go in either direction. If it falls below its 100-day moving average, be prepared to ride it out (or trade it if you have the skills). Eventually, the panic subsides and a rally emerges.

However, there is always the possibility we are entering a real bear market, but it’s too early to say (keep your eye on the 200-day moving average). It’s been over 10 years since the last bear market, so it wouldn’t be that surprising if one appeared. Nevertheless, there have been so many plunges and rallies in the last 10 years, no one can predict what will happen. Just be diversified, as I’ve repeatedly warned.

Bottom line: Don’t succumb to the fear if the markets plunge this week, and don’t let down your guard if they rally back to overbought levels.

Sunday Night: The Chinese stock market opened down by 9 percent at 8:30 pm.. ET, while the S&P futures are up strongly. Welcome to volatility, and there should be a lot of it this week as the world’s central banks take unprecedented steps to control stock market selloffs. (Maybe someone should forbid short selling this week. Oh, wait).

Once again, Lance Roberts and Sven Henrich wrote excellent pieces about the current market:

Sven Henrich (Northman Trader): https://bit.ly/2OkKmPV

Lance Roberts (realinvestmentadvice): https://bit.ly/2SfbMYj

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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:www.wolfstreet.com


Bullish or Bearish? Week of Jan. 27, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA = Bullish

One-month trend: SPX is still in a strong uptrend that halted on Friday. It remains to be seen if that was a one-day event or something more meaningful.

RSI: (S&P 500) @ 61.56 = As expected, SPX fell last week, and so did RSI (from 76.56, an extreme reading, to 61.56 (current). SPX still overbought but not extreme.

MACD: Above Zero Line but Signal Line pointing slightly lower = Neutral

Daily Intraday Volatility: 14.56 = Low (Bearish).

Comment: When RSI hit 76.56 last week, it was a warning sign that a reversal was imminent, and it happened on Friday. Although the market is still overbought, it’s backed off from extreme levels. Nevertheless, the intraday reversal on Friday was significant.

As I write this on Sunday night, the futures are down significantly. It’s not surprising as this overbought market smacked into a lot of increasingly bad news. What must be watched is how the market acts as the day progresses. It could go either way, but in the past, the algos have bought on the dip while suppressing volatility. That could happen again.

In addition, there is a Fed meeting this week. As you may know, volatility typically increases on the day the Fed minutes are released (Wednesday). After months of low volatility, it would not be surprising to see volatility spike this week.

It’s also possible that the bears, who have been punished for the last 10 years, might finally have a chance to shine. However, it’s still too early for the bears to celebrate, as we’ve seen this scenario before. A two-day pullback does not make a bear market, so until we see evidence of a trend change, any pullback should be considered as temporary.

How do you know there is a trend change? For starters, the indexes must drop below their 50-day and 100-day moving averages, and stay below. There have been a number of severe pullbacks in the past, but the market has always bounced back. Until the market fails to bounce back one day, stay cautiously bullish.

It will be interesting to see what the Fed does or says this week. Because of the nervousness surrounding Coronavirus, there is a negative bias. Perhaps the Fed can save the week once again.

Bottom line: Be on guard. As volatility increases, so does opportunities, but also mistakes.

Here are two excellent pieces that I recommend reading:

Sven Henrich (Northman Trader): Virus Fears: https://bit.ly/2tRXl4s

Lance Roberts (Real Investment Advice): Market Advance Stalls: https://bit.ly/38J5iaK

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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:www.wolfstreet.com


Bullish or Bearish? Week of Jan. 20, 2020

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX is still in a strong uptrend that is unsustainable for the long term.

RSI: (S&P 500) @ 76.57 = SPX is extremely overbought. It could go higher, but the clock is ticking.

MACD: Above Zero Line and slightly above Signal Line = Neutral to Bullish

Daily Intraday Volatility: 12.10 = Extremely Low (Bearish). Volatility has taken a temporary vacation.

Comment: RSI is telling us we’re extremely overbought, and although we could get more overbought this week, or next, a pullback is imminent. Everywhere you turn, investors are not only bullish about the future, but euphoric. Common sense has been thrown out the window as nearly everyone has high hopes for the stock market. Bears are in hiding, and the bulls are feeling invincible. The longer the market rises, the more extreme the greed, and the more dangerous it becomes.

You can’t short the indexes right now (too dangerous), but if you are a trader, you can make short-term bullish day trades, which works well on certain days. However, one day we’re going to wake up to a massive pullback, although I admit that predicting that day is impossible.

I’m in awe of the excessive bullishness (thanks primarily to the Fed) with cheerleading coming from many different quarters. You have to reach far back in history to duplicate this current environment. No, you don’t sell everything in a panic, but you try to be realistic while trimming where you can.

Bottom line: Anything is possible this week. The algos have successfully killed volatility, which is another reason the market is slowly melting up. However, let me be clear: There are flashing red warning signs. The stock market is playing a game of musical chairs and one day the music is going to stop.

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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:www.wolfstreet.com


Bullish or Bearish? Week of Jan. 13, 2020

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX is still in a strong uptrend that is unsustainable for the long term.

RSI: (S&P 500) @ 67.69 = SPX is still overbought. At 70 RSI, it will be extremely overbought.

MACD: Above Zero Line but equal to Signal Line = Neutral

Daily Intraday Volatility: 12.56 = Extremely Low (Bearish). Does anyone know where Volatility has gone? (You can hide but not forever).

Comment: The Middle East problems still remain, although war has been averted for now. Amid all of this turmoil, the market keeps climbing higher, and once again, we are extremely overbought.

No one can say how high the market indexes will go, but the signs of euphoria are everywhere. Even my risk adverse neighbors are panic buying, afraid they are going to miss out on the next leg higher. Apparently, the talking heads on TV are saying the market will go nowhere but up.

This reminds me of 1999. Back then, nearly everyone also thought the markets would go up indefinitely. Traders and investors plowed everything into the market, and it was very profitable, until it wasn’t.

I hate to be a party pooper but this is the time to be cautious, not euphoric. It doesn’t mean to sell everything but it does mean to lighten up. Those who fail to heed the topping signs will not be able to get out in time. Unfortunately, no one knows when the music stops and the party ends. This particular party has gone on a lot longer than anyone imagined, so the end is drawing closer.

The best summary of current market conditions (i.e. a bubble) comes again from Sven Henrich (Northman Trader), who says it a lot better than me and with the data to back it up. He also attached a video, which I recommend watching. Here is the link to his thoughtful analysis of the bubble: https://bit.ly/2sf9X4K

Bottom line: Although it’s tempting to panic buy into this market, disciplined traders are looking to sell, not buy. It’s always been a mistake throughout history to buy at or near a top, even if you do miss out on a few percentage point gains. Is this really “the” top? We won’t know until it’s over but the warning signs keep getting louder.

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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:www.wolfstreet.com


Bullish or Bearish? Week of Jan. 6, 2020

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX is still in a strong uptrend but Middle East problems could be a threat.

RSI: (S&P 500) @ 65.74 = SPX is still overbought, but not as much as last week.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 14.02 = Low (Bearish)

Comment: As I’ve warned for weeks, overbought markets cannot remain overbought indefinitely. At the moment, the Middle East could be the catalyst that causes a series of pullbacks. This week could determine market direction for weeks or months to come.

When RSI hit 78 last week, it was a flashing red warning sign that the market was due for a reversal, and on Friday we had one. The futures are lower on Sunday night but it is too early to say if that will continue into the market open.

As I and others have warned, it is still a good time to sell big winners as well as losers. It doesn’t mean sell everything in a panic, but to increase cash levels. Obviously, the world is a lot more dangerous now than it was last week, so be prepared for volatile conditions moving forward.

One of the best summaries I’ve seen of the current market and what goes on behind the scenes comes from Sven Henrich (Northman Trader). He talks about how Wall Street is always programmed to buy, and never to sell. I highly recommend it: https://bit.ly/2QPtWzb

Bottom line: It’s been years since we’ve had a bear market. There is no evidence we are headed towards one now but with an overbought market and a dangerous geopolitical environment, the odds have increased substantially.

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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:www.wolfstreet.com


Bullish or Bearish? Week of Dec. 30, 2019

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.

RSI: (S&P 500) @ 78.43 = SPX is extremely overbought. Caution is advised.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.43 = Low (Bearish)

Comment: It’s another shortened week so volume should be light early in the week but should pick up later in the week after we greet the New Year. The first week of January should be interesting, however, so pay close attention.

When you look at the indicators above, it’s hard to believe. RSI is the highest it’s been in many years at 78.43 (over 70. is overbought). The indicators are telling us the markets are extremely overbought. Could the indexes keep moving higher? Yes, they can, and many people believe they will. Some have even said the dreaded words, “This time it’s different.”

Unfortunately, this game of musical chairs is going to stop one day and anyone still holding the bag is going to be shocked. This is similar to 1999, a year when nothing could go wrong as we ushered in 2000, and then everything went wrong. It doesn’t mean we will follow the same scenario, but extremely overbought markets like this always come to an end eventually.

The Fed has fueled the rise in the indexes with low interest rates and QE , and unfortunately, to keep the bubble from popping, more and more QE is needed. Does it mean you should run out and sell everything? No, but it wouldn’t hurt to sell some of those huge winners along with any losers. After all, the game the Fed is playing could continue a while longer, longer than anyone expects, until the day of reckoning arrives. When that day is, no one knows.

Meanwhile, here are three articles that go into much more detail of how overbought this market has become, and what to do about it. It’s scary reading, so be prepared:

Sven Henrich (Northman Trader) on Apple and the similarities to 1999: https://bit.ly/2ZEr7VJ

Lance Roberts on the Market Meltup: https://bit.ly/2Q6iU9C

Sven Henrich(Northman Trader) on Microsoft: https://bit.ly/37lGB3M

Meanwhile, have a great New Year and stay safe. 2020 is guaranteed to be a fascinating year and in my opinion, it will be one for the history books.

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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:www.wolfstreet.com


Bullish or Bearish? Week of Dec. 23, 2019

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX is in a strong uptrend that appears unstoppable, but also unsustainable for the long term.

RSI: (S&P 500) @ 75.73 = SPX is extremely overbought. Caution is advised.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.51 = Low (Bearish)

Comment: It’s a shortened holiday week as the stock market closes early on Christmas Eve (1:00 p.m. ET), and all day on Christmas. Volume should be light unless there is unexpected breaking news.

This is the first time I’ve seen RSI this high (75.73) on the S&P 500, which signifies an extremely overbought market. Yes, SPX can remain overbought for a while longer, but the clock is ticking.

The Fed appears to be the main reason for the market’s mind altering rise. With low interest rates and QE4 (the Fed continues to pump liquidity into the market), the market has risen to levels that have many market veterans shaking their heads in disbelief. When this bubble unwinds eventually, it’s unlikely we’ll see numbers like this for many years.

Obviously, there is always the chance I’m wrong (along with others who are warning to be careful). Perhaps the bull market has much more room to run, as almost everyone in the financial media is predicting. It’s possible, which is why you don’t run out and sell everything. It’s also possible we have a blow-off top, which would be a signal to reduce positions dramatically before the market plunges.

In my opinion, the smartest choice is to stay diversified while reducing positions with large gains, and also selling losing positions. Obviously, that’s a choice only you can make.

Money manager Lance Roberts (realinvestmentadvice.com) wrote an excellent piece about the current market meltup and some of the steps you can take to reduce risk in an extremely overbought market: https://bit.ly/2ZcubbB

Meanwhile, have a great holiday and stay safe!

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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:www.wolfstreet.com