Bullish or Bearish? Week of September 26, 2022

MY TWO NEWEST BOOKS WERE 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) SELLOFF. The indexes plunged again last week, with SPX dropping from 3873 to 3693 during the week, another mind-boggling 180-point rout. There is a little good news mixed in with the sea of red. The daily chart is downright ugly, one of the worst in recent history. On Sunday night, futures are flat to slightly lower as the market tries to catch its breath. Futures could change direction in the morning, and they probably will.

Long-term trend (WEEKLY CHART) – DOWNTREND. Little did I know that SPX would plunge to its 200-week moving average in one week! The odds are good the indexes will hold at 3585. If not, then it will get uglier than anyone can imagine. My money is on support holding.

MACD (WEEKLY) = DOWNTURN. The WEEKLY MACD is reflecting trouble, as MACD breached both the 9-day signal line and zero line.

RSI: (S&P 500) @28.90 (DAILY) EXTREMELY OVERSOLD. The odds are very good there is going to be a monster rally in the near future (based on RSI). I haven’t seen RSI numbers this low in a long, long time. As always, you can’t use RSI to time the market but a snapback rally is coming, so be prepared. Yes, the indexes could keep falling a bit longer but one of these days the shorts are going to get smashed.

Daily Intraday Volatility (VIX) = 29.92 HIGHER: The VIX has been creeping up as the market has been falling. Option traders are finally waking up to the fact that it’s a bear market. When VIX is at 30 and higher, there is fear. At 40 and above, it’s panic. Note: VIX is a contrarian indicator but still should not be used to time the market, only to gauge its mood.

Comment: I don’t have to tell you how ugly the chart looks. Many traders are buying the dip on the way down, a dangerous strategy that should work eventually, as long as you trade or invest small.

Fed Chair Powell warned he was going to keep raising rates, and he kept his word. Many blame him for “juicing” the market by keeping interest rates too low for too long. Now they are blaming him for taking away “the punch bowl” too aggressively, causing pain in stocks, housing, and cryptocurrencies. It’s not a pretty picture.

As I wrote earlier, a snapback rally is coming, although no one knows when. We are in a bear market although the financial media doesn’t mention it much. (Technically,, we’re “almost” in a bear market.) Perhaps everyone is waiting for a bell to ring!

In the past, I’ve given advice about what to do — from staying on the sidelines to dollar cost averaging. Traders may try to buy the dip but this is a dangerous strategy. Inexperienced traders should trade small while investors should DCA into index funds. Eventually, bear markets end, but only after maximum pain has been inflicted.

If we do get a monster rally soon, the odds are good the rally won’t last long, so be prepared for a volatile market. The chart looks about as ugly as can be but once again, this is the time to think about buying rather than panic selling.

Good luck out there and be sure to follow your rules. Trading should be lighter on Monday due to the Jewish holiday. The Fed is running the show and Powell seems determined to raise rates ONE MORE TIME. (Eventually, Powell may get his wish and slow inflation, but it’s likely he’ll take stocks and housing down with him.)

Bullish or Bearish? Week of September 19, 2022

MY TWO NEWEST BOOKS WERE 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) SELLOFF. The indexes took a negative turn last week, especially SPX, which fell from 4067 to 3873, a disastrous 193-point rout. SPX is once again below its major moving averages, including a break below the important 4,000 support level. In two weeks, we went from hugely overbought to oversold (according to RSI). In a nutshell: it’s ugly. Futures are LOWER on Monday morning.

Long-term trend (WEEKLY CHART) – DOWNTREND. SPX is below its 50- and 100-week but still above its 200-week, the only ray of hope in a world of pain. The 200-week is at 3,579, and if that is violated sometime in the future, it will get even uglier. We have a ways to go before we hit those levels.

MACD (WEEKLY) = DOWNTURN. The WEEKLY MACD took a turn for the worse, as even the 9-day signal line reversed direction.

RSI: (S&P 500) @37.72 (DAILY) OVERSOLD. If you want a ray of hope, it will be found in RSI, which has been remarkably accurate in predicting overbought and oversold conditions (especially oversold). As RSI heads towards 30, be prepared for another snapback rally. Unfortunately, the snapback rallies haven’t lasted long, one of the reasons I am certain we are in a bear market.

Daily Intraday Volatility (VIX) = 26.30 HIGHER: The VIX rally reflects the increased purchases of put options, which means a touch of fear entered the hearts and minds of option traders.

Comment: Last week was an ugly one, and it was not a surprise. As you recall from last week’s comment, I recommended sitting and waiting. Those who bet against the market (or against any old stock) probably did well. This is no place for the inexperienced, and if you are, then trade cautiously.

As I wrote above, I am certain we are in a bear market, and it will take a long while to play out (bear markets typically last 14 to 18 months). I can make an educated guess that if this is a typical bear market, SPX and the other indexes will drop another 20 to 22 percent after the smoke has cleared. There will be many short-term rallies along the way, fooling those who know little about bear markets. Suggestion: Read my book, How to Profit in the Stock Market, to learn more about bear markets).

The Fed kept interest rates ridiculously low for years, and now they are warning they will continue to raise interest rates. According to a number of market professionals, if the Fed keeps raising rates as promised, they will crash the stock and housing market. I personally have no idea if this is true but I do know the higher interest rates will inflict more pain on investors and home buyers.

These are uncertain times so expect more trouble before it’s over. The old rules still apply, and that means trading or investing small, take the time to study bear markets, use dollar cost averaging tactics, and if you are losing money trading, stay on the sidelines. This is not an easy trading environment!

The Fed is meeting this week so it’s guaranteed to get volatile before and after the meeting. If the Fed makes an aggressive move with interest rates, it will get extremely volatile (and unpredictable depending on what Powell says).

Bullish or Bearish? Week of September 12, 2022

MY TWO NEWEST BOOKS WERE 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. The indexes had a relief rally last week, including SPX, which rose from 3924 to 4067, an impressive 143-point rally. Readers of this blog were not surprised because the market was extremely oversold (as revealed by RSI). SPX was able to rise above its 50-day moving average, but it has a long way to go before it’s out of the woods. Futures are flat on Sunday night.

Long-term trend (WEEKLY CHART) – IMPROVED. SPX improved a bit last week on the weekly chart but it’s still below its 50-week moving average.

MACD (WEEKLY) = IMPROVED. The WEEKLY MACD has improved but it’s still giving mixed signals.

RSI: (S&P 500) @50.94 (DAILY) NEUTRAL. RSI made the most dramatic improvement last week, rising from extremely oversold levels to neutral. As you know, when RSI drops to or below 30, a rally is typically coming, and RSI performed brilliantly. Indicators and oscillators aren’t perfect, but they are better than “playing it by ear” or relying on your “gut.” Last week, RSI warned us that a snapback rally was coming, and it did not disappoint.

Daily Intraday Volatility (VIX) = 22.79 LOWER: The low VIX reflects the complacency that has once again overtaken Wall Street.

Comment: I’ll keep this short and sweet. The Fed says it will be raising interest rates by another 75 basis points, which should be another blow to the housing and stock markets (if they do as they say). It appears the Fed wants a recession to help tackle inflation, and they will probably get their wish. As a result, the stock market is going to be volatile for the rest of this year.

It’s possible the rally that started last week will continue, but I wouldn’t bet money on it. In reality, we are waiting to see if the rally has legs or if there will be another failed rally. Right now, no one can say for sure, so the best advice is to SIT AND WAIT.

Bullish or Bearish? Week of September 5, 2022

MY TWO NEWEST BOOKS WERE 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) – SELLOFF. It was another dreadful week for the indexes, the third in a row. SPX fell from 4057 to 3924, a painful 133-point drop while breaking SPX 4,000. The previous month’s rally can be characterized as a “bear market rally,” which means we are still in a bear market (to be precise, SPX is 18 percent lower from its 52-week high). SPX is below all three moving averages on the daily chart, an ominous sign. Note: Futures are flat on Monday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – LOWER. SPX is well below its 50- and 100-week moving averages but still above its 200-week moving average.

MACD (WEEKLY) = MIXED. The WEEKLY MACD is above the 9-day signal line but turning lower. It remains well below the zero line, a negative reading.

RSI: (S&P 500) @35.23 (DAILY) OVERSOLD. RSI is telling us the market is oversold and is due for a snapback rally. Unfortunately, RSI cannot be used to time the market but RSI 35 is a strong clue the selling has reached strong oversold levels.

Daily Intraday Volatility (VIX) = 25.47 ELEVATED: The VIX remains elevated but not at extreme levels. The falling market has gotten the attention of option traders, who are slowly accumulating more put options.

Comment: The three-week selloff is a clue that we are still in a bear market, which means the previous rally last month was a “bear market rally.” The Fed made it clear it will be tightening in the near future (i.e., QT, or quantitive tightening). Inflation still remains, which affects company profits and consumer spending habits.

Even though a short-term rally is likely in the near term, 2022 is almost guaranteed to be a challenging year. Of course miracles do happen, but based on the odds (and previous bear markets), plan for a bear market environment.

Unfortunately, many investors, traders, and money managers have never experienced a bear market. That should cause volatile market environments as panicked traders, even many pros, make emotional trading decisions.

Bear markets are difficult to manage, one of the reasons I’ve stressed trading with less money or not at all. Continue dollar cost averaging if you own index funds. Some readers have written me to say they’ve done well selling covered calls (and taking their profits quickly).

Bottom line: Prepare for and expect a rocky, volatile trading environment. Based on RSI, a rally is likely, and if this is a true bear market, that rally will fail. This is a good time to study and learn while preparing to buy favorite stocks at much lower prices. This is a four-day week, which are historically tricky.

Bullish or Bearish? Week of August 29, 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  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – SELLOFF. As you probably know, After Fed Chair Powell spoke on Friday, SPX and the other indexes sold off strongly, falling from SPX 4228 to 4057, a painful 171-point drop, as well as a 1000-point Dow drop. Powell hinted that he was going to keep raising interest rates, and market participants were not pleased. Sunday night: Index futures are selling off strongly, but that could change in the morning.

Long-term trend (WEEKLY CHART) – SELLOFF. On the weekly chart, SPX stalled at its 50-week moving average and fell below its 100-week moving average.

MACD (WEEKLY) = MIXED. The WEEKLY MACD is well above the 9-day signal line but is still below the zero line. Once again, Mixed Signals. 

RSI: (S&P 500) @43.89 (DAILY) SLIGHTLY OVERSOLD. RSI was the hero last week as it gave the strongest signal the market was obscenely overbought. How things change! Now RSI is oversold, and if the negative futures hold in the morning, RSI could get even more oversold. Translation: It’s likely there will be a rally this week based on RSI, but no one can predict when it will occur or how long it will last.

Daily Intraday Volatility (VIX) = 25.56 ELEVATED: For weeks, the VIX was telegraphing that option buyers were unconcerned with the market. On Friday, they spilled their coffee and other things, as reflected in the higher VIX.

Comment: As I wrote above, RSI has been deadly accurate in its predictions although the timing is imperfect. If you follow RSI this week, it is telling us that the market will continue to sell off in the short term, but a rally is likely (as RSI moves towards 30). Note: RSI does not have to go below 30 for the market to reverse direction.

Federal Reserve Chairman Powell really shook things up by simply stating that interest rates may be raised as the Fed continues its rate hike course. Whether the Fed actually raises those rates is another issue, one that is unknown at this time.

As I’ve warned in the past, we are in for a volatile, rocky road environment for a few months, if not longer. If RSI is to be believed, a rally is extremely likely, but not immediately. Just be prepared for a reversal (and please don’t make large bets in this market environment).

Bottom line: It’s a trader’s market and an investor’s nightmare.

 

Bullish or Bullish? Week of August 22, 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  

Note: Check MarketWatch early in the week for an interview I did with a well-known TikTok influencer and financial author.

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – STALLED RALLY. Not surprisingly, the four-week rally stalled last week, falling from SPX 4280 to 4228, a 52-point pullback. The pullback took the other indexes lower, including crypto, which is below 22,000 again. As I’ll explain in more detail below, SPX went against the almighty 200-day moving average, and was repelled. Futures are lower on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – STALLED. On the weekly chart, SPX stalled at its 50-day moving average, and did not go higher.

MACD (WEEKLY) = MIXED . The WEEKLY MACD is well above the 9-day signal line but is still below the zero line. Mixed Signals. 

RSI: (S&P 500) @61.26 (DAILY) SLIGHTLY OVERBOUGHT. The hero of the week is RSI, which warned that the market moved up too far and fast. Last Monday, SPX rallied and RSI went as high as 73, an extremely overbought reading. Sure enough, SPX reversed direction the next day and the rest of the week, taking RSI to less extreme overbought levels.

Daily Intraday Volatility (VIX) = 20.08 COMPLACENT: The VIX is telling us that option buyers are not worried in the least about the market environment.

Comment: One of the reasons indicators are so useful is that they give you unbiased facts. As mentioned above, RSI was the hero because once again, it warned the market was extremely overbought. Add in the fact that on the daily chart, SPX smacked into its 200-day moving average, and couldn’t move higher. That tells me a rocky road is in the market’s future.

This week should be more volatile than usual (on certain days). Traders are waiting for Fed Chairman Powell’s comments at the annual Jackson Hole economic pow-wow. Powell may or may not give hints as to future rate hikes, which should affect the market.

Advice: It’s dangerous to make big financial trades when the Fed is going to speak. It’s akin to gambling, not trading, when taking large positions before a market-moving event.

Bottom line: Wait and see what the Fed has to say about interest rates, or if there is any other financial news.

Bullish or Bearish? Week of August 15, 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  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – HIGHER. There was another spectacular rally last week (four weeks in a row), from SPX 4145 all the way to 4280, a 135-point rise. It surprised a lot of traders, including many professionals. As a result, the short-term trend has shifted to strongly bullish. Sunday night futures are flat to slightly lower, but that could change in the morning.

Long-term trend (WEEKLY CHART) – HIGHER. On the weekly, SPX is making a play for its 50-week moving average, and if successful, we will have to re-evaluate whether this is still a bear market.

MACD (WEEKLY) = MIXED . The WEEKLY MACD is well above the 9-day signal line but is still below the zero line. Mixed Signals. 

RSI: (S&P 500) @71.67 (DAILY) EXTREMELY OVERBOUGHT.  There is a price to be paid for a months-long spectacular rally, and that is RSI. It is telling us that SPX is extremely overbought in the short term (RSI above 70). RSI has been remarkably accurate in the past for identifying overbought conditions and future selloffs. This is a warning sign.

Daily Intraday Volatility (VIX) = 19.53= COMPLACENT: The VIX is telling us that option buyers are not worried about a selloff, which is when you should be worried!

Comment: The last month has been amazingly bullish for the market, and especially for SPX. I wish I could say that all is well on Wall Street but I have learned the hard way to read the clues, and RSI is giving us a strong one. RSI is saying the market is extremely overbought and a reversal is likely, although no one can say when.

Bearish analysts are saying this rally is a “dead cat bounce,” i.e., a bear market bounce. On the other hand, bullish analysts are saying this is a “new bull market.” It’s too early to say who is right, so step right up and place your bets. It could go either way this week.

Some large retailers such as Target, WalMart, and Home Deport are reporting earnings this week. Their results should influence the market, at least for that day.

Bottom line: It’s too early to say whether we are still in a bear market or if a new bull market has evolved. As mentioned earlier, RSI is flashing a warning sign.

Bullish or Bearish? Week of August 8, 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  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – FLAT. After a spectacular two-week rally, SPX stalled last week, rising from 4131 to only 4145, a mild 14-point rally. The jobs report was excellent last week but another rate hike is coming next month from the Federal Reserve (or so they are hinting). Nevertheless, SPX is still below its 200-day MA, and as long as it remains below, be cautious. Note: Futures are slightly lower on Sunday night (but that could change in the morning). 

Long-term trend (WEEKLY CHART) – POSITIVE. On the weekly, SPX is still above its 200-week MA (but below its 50-week and even with its 100-week), a mildly positive long-term development.

MACD (WEEKLY) = MIXED . The WEEKLY MACD rose above the 9-day signal line but is still below the zero line. Mixed Signals. 

RSI: (S&P 500) @64.48 (DAILY) SLIGHTLY OVERBOUGHT.  RSI is still overbought but not at extreme levels. 

Daily Intraday Volatility (VIX) = 21.15= COMPLACENT: The VIX is still low, which reflects the no-fear, What, Me Worry? market environment. 

Comment: After a three-week rally, the SPX is due for a rest, and perhaps a pullback. Even with the positive jobs numbers (it was a shocker to the upside), the rising interest rate environment “should” put a damper on stocks over the next month. In reality, no one knows how the market will react to the news.

If you’re a contrarian trader, you will either be in cash or looking to trade against the stock market (with put options, hedges, or inverse ETFs). If you’re a long-term investor, you just keep putting a set amount of money in an index fund (or stock) each month no matter if the market is up or down. Hint: No matter what strategy you use, be sure to “pay yourself first” by keeping an emergency cash fund. This is simple but very important advice.

I just read that Berkshire Hathaway, while operating profits jumped by 39 percent, Warren Buffett’s conglomerate lost $53 billion on its investments last quarter. Ouch! Even the Wizard of Wall Street can lose money in this market. (Source: CNBC).

I dislike repeating myself but this is going to be a tricky market environment at least until November, when we should learn the market’s true direction. Until then, volatility is low so it’s easy for certain hedge funds with high speed algos to “help” move the market higher or lower.

Bottom line: Be careful out there!

Bullish or Bearish? Week of Aug. 1, 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  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – RALLY. SPX exploded higher, from 3961 to a mind-blowing 4131, a spectacular 170-point rally. This was the second huge rally in a row, but don’t get fooled: We are still in a bear market. SPX is above its 50-day MA, and even with the 100-day, but below its 200-day MA. It must rise above its 200-day before the coast is clear. Note: Futures are lower on Sunday night (but that could change in the morning).

Long-term trend (WEEKLY CHART) – STRUGGLING. On the weekly, SPX is above its 200-week but still below its 50-week but even with its 100-week. Opinion: We had an amazing two weeks but we are not out of the woods yet.

MACD (WEEKLY) = MIXED . The WEEKLY MACD is struggling to rise above the 9-day signal line and it’s still below the zero line. Mixed Signals.

RSI: (S&P 500) @65.90 (DAILY) SLIGHTLY OVERBOUGHT.  RSI is overbought but not at extreme levels.

Daily Intraday Volatility (VIX) = 21.33= COMPLACENT: The VIX keeps falling, which reflects the no-fear, What, Me Worry? market environment.

Comment: It was a spectacular two weeks, the best July since 2020. Considering that the Fed signaled that interest rates rising by another 75 basis points made the rally even more amazing. But now we are back to reality.

Many experts are predicting the two-week rally will have legs and last the rest of the summer. Be suspicious of predictions like this because no one knows what the market is going to do this week, let alone this month.

It’s true the rally caught a lot of people off guard as pessimism reached extreme levels. People are still worried about inflation, recession, and a falling stock market, as well as the crypto plunge. As often happens, the market does the opposite of what “everyone” thinks. In a bear market, it can get even more confusing.

If you believe the technical definition of a bear market (i.e., 20 percent below its recent high), then you may believe that the bear market is “over” (as some are proclaiming). Don’t believe them.

Until SPX and the other indexes rise above its 200-day MA, the bear market continues. Bear market are tricky animals so it’s easy to get fooled. This is not the time to plunge into the market but instead, use strategies such as dollar cost averaging or increase cash.

By the way, a few weeks ago, if you had read my interview and followed the advice from trader Howard Kornstein, you’d be looking at huge profits. All of the stocks he recommended made substantial gains over the last two weeks. Now, however, it’s a different ball game.

For example, RSI is saying the market is overbought after a spectacular two-week run. Is this the time to join the buying frenzy and buy after this rally? In my opinion, that would be a risky move. Sometimes you have to be contrarian to survive.

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.