Bullish or Bearish? Week of July 15, 2019

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

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

S&P 500 one-month trend: “V” Shaped Rally and Triple Top (one year) at Resistance. It could go in either direction but is hitting major resistance at all-time highs.

RSI: (S&P 500) @70.86 = Overbought

MACD: Above Zero Line and above Signal Line (Bullish)

Daily Intraday Volatility: 12.28 (Subdued). Volatility is still in the basement, which cannot last forever.

Comment: It’s been a while since I’ve seen such an overbought market (over 70 RSI is overbought and it could still go higher), and the VIX so low (at 12.28, volatility is crushed).

Last week, the market was headed lower early in the week, that is, until Fed Chair Jerome Powell gave the market hints that a rate cut is coming (he didn’t actually say that, but the market believes he will cut rates).

Something doesn’t make sense: On one hand, the indexes have just reached all-time highs (SPX 3000), and yet, the Fed wants to cut rates due to the trade wars and other disturbing data (my opinion: such as the hints a recession is looming, and less than spectacular earnings). Nevertheless, something has to give, and if not, this market bubble is going to expand even more. If Powell cuts rates, and the market zooms even higher, be prepared for the short of the year (if not the decade in the intermediate) before the end of the year.

As I said last week, do not short while the market screams higher (as no one knows how high a bubble can expand), but if I’m right, there should be fantastic shorting opportunities in the near future.

In two weeks, the Fed has their formal meeting, and they better not disappoint, or look out below. Although all of the indicators are bullish (with RSI the only exception), it wouldn’t take much for the market to plunge. And yet, although the Fed is playing with fire, it’s very possible they can keep the bull party going a bit longer.

With the VIX so low, it’s difficult for most traders to make money. On the other hand, buy-and-hold investors in indexes are pleased with their profits, and believe the Fed will save them if there is a sudden reversal. Although volatility has been suppressed over the last four months (thanks to the algos), it can’t last forever.

Bottom line: It’s a confused and dangerous market that looks pretty on the outside and weak on the inside. With the RSI so high, a dislocation would not be surprising, but the Fed will do whatever it can to support the indexes. Be alert to any possibility this week and beyond.

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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 July 8, 2019

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

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

S&P 500 one-month trend: “V” Shaped Rally and Triple Top (one year) at Resistance. It could go in either direction but is hitting major resistance at all-time highs.

RSI: (S&P 500) @69.13 = Overbought

MACD: Above Zero Line and above Signal Line (Bullish)

Daily Intraday Volatility: 13.28 (Subdued). Volatility is in the basement, which will not last forever.

Comment: The shortened holiday week is disorientating, but now it’s back to business. The algos were able to keep volatility subdued last week, in fact, the VIX is ridiculously low once again. Also, RSI is in the overbought zone (over 70 is overbought). Investors are feeling giddy right now but I get the feeling there could be sand beneath their feet.

Although the market could squeak higher this week, with an overbought market, sky-high investor sentiment, and extremely low volatility, the odds are good we are headed lower. Sunday night futures aren’t telling us much (slightly lower), but do not be surprised if there is a selloff this week. It’s not a prediction, but based on the clues and indicators above, a selloff is likely. The real question is how fast it bounces back if I’m right.

Bottom line: The algos will try to keep the party going longer but the indicators and clues are pointing to trouble ahead. Be prepared for any scenario, and if you are shorting, do it AFTER the market breaks, not before. Look and see if the algos save the day once again. One thing for sure: Until investors feel true fear, the algos remain in control.

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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 July 1, 2019

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

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

S&P 500 one-month trend: “V” Shaped Rally and Triple Top (one year) at Resistance. It could go in either direction but the odds are higher based on Sunday night futures.

RSI: (S&P 500) @62.37 = Slightly overbought

MACD: Above Zero Line and above Signal Line (Bullish)

Daily Intraday Volatility: 15.08 (Subdued). Volatility remains on the low side.

Last week, I thought it was going to be a wild and unpredictable week, but it was subdued with low volatility. This holiday week is starting off with a bang as the market attempts to hit its all time highs. It might do it this week, but next week could be a different story. I’ll be looking to see if the opening rally holds all day, which would be bullish.

Bottom line: Don’t fight a strong rally, and although we are overbought and in a market bubble, it can get bigger before it eventually pops. That’s why you never short a rally while it’s moving higher.

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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 June 24, 2019

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

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

S&P 500 one-month trend: “V” Shaped Rally and Triple Top (one year) at Resistance. It could go in either direction.

RSI: (S&P 500) @67.53 = Overbought (Bearish)

MACD: Above Zero Line and above Signal Line (Bullish)

Daily Intraday Volatility: 15.40 (Subdued). Volatility is still on the low side.

Comment: As expected, Fed Chair Powell did not cut rates but gave hope to the bulls by insinuating that he might cut rates. The bulls ran with it, running the market higher on low volume. The Dow just had the best June in 80 years. Unfortunately, we are also overbought on the indexes as SPX hit resistance, creating a V-shaped rally and triple top (one year). What could possibly go wrong?

Well, a lot of things could go wrong, which is why this is going to be an interesting week. Powell speaks on Tuesday, and the Group of Seven meet on Friday and Saturday, with the highlight being the Trump-Xi meeting. There is pressure from all sides for Powell to cut rates, although he never promised anything. The algos will try to keep the markets calm but there will be a lot of cross currents, and volatility should increase (it might even explode one day). Powell has the power to disappoint the markets if he so desires, and obviously everyone will be watching the Trump-Xi meeting closely.

Bottom line: It should be a wild and unpredictable week. The market is overbought so if something goes wrong, the markets will fall swiftly. The market is at resistance so it will need a strong push to surpass the all-time highs. Get out the popcorn because we could go in either direction, and more than likely, we will!

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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 June 17, 2019

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

S&P 500 is slightly above its 50-day moving average = Neutral

S&P 500 one-month trend = Multiple Short-term Trend Reversals (Inconclusive)

RSI: (S&P 500) @57.65 = Neutral

MACD: Below zero line but slightly above signal line (Neutral)

Daily Intraday Volatility: 15.28 (Subdued). Volatility is still on the low side.

Comment: The Fed has their two-day FOMC meeting on Tuesday and Wednesday, followed by a press conference on Wednesday afternoon. The consensus is there will be NO rate cut at this meeting, but Powell’s words will be closely scrutinized. No one can predict what Powell is going to say, or how the market will react. It really could go either way, so expect volatility during the week, and especially after he speaks.

My prediction: He won’t cut rates but he will say that he will in the future depending on market conditions.

Meanwhile, the best analysis I’ve seen on how to manage the current market environment comes from a piece that Lance Roberts wrote: https://bit.ly/2WIp3cq

Bottom line: It is going to be a tricky week for traders and investors, so stay alert, or wait until the dust clears. Wall Street really wants Powell to cut rates, and if he doesn’t deliver now or in the future, Wall Street won’t be pleased.

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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 June 10, 2019

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

S&P 500 is even with its 50-day moving average = Neutral

S&P 500 one-month trend = Multiple Short-term Trend Reversals (Neutral)

RSI: (S&P 500) @56.31 = Neutral

MACD: Below zero line but slightly above signal line (Neutral)

Daily Intraday Volatility: 16.30 (Subdued). Volatility is on the low side.

Comment: So now we know what happens when the indexes fall below their 200-day moving averages! The next time the 200-day is breached, expect to see Jerome Powell or others appear on TV to say something sweet about interest rates. Voila! The market suddenly reversed direction and rallied strongly not just the day Powell spoke, but all week. Wow!

As you know from reading my blog, I expected a strong rally during the week. But even the most bullish analyst (nor I) could have predicted the rally would last the entire week. That was extremely impressive, but also brings us back to even more dangerous territory.

Now investors know that if the market falls by too much (below the 200-day moving average), the Fed has got their back. One of these days the market will fall, the Fed will appear with soothing promises, and the market will keep falling. That is when we’ll know it’s going to go from bad to worse.

Meanwhile, looking at the indicators above, in one week we went from bearish to neutral (RSI gave us an oversold reading last week which correctly hinted there would be a rally). Now RSI is back to neutral. SPX is well above its 200-day moving average and a couple of points above its 50-day moving average.

If I had to guess, I’d say we went too far too fast last week, and that the indexes will struggle to move much higher this week. Since I don’t like to guess, all we can do is watch and see if this market has the power to stay above its 50-day moving average. The futures are slightly higher Sunday night but that should change by the opening bell.

Bottom line: It’s going to take extraordinary strength to bring this market much higher, but anything is possible. Investors have an extremely distorted view of the world thanks to the Fed. One of these days this game the Fed is playing is going to backfire and bullish investors are going to pay the price. That day is drawing nearer. Oh, I forgot to mention that the jobs numbers was very disappointing on Friday and there are other signs that a recession is near or already here.

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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 June 3, 2019

S&P 500 is slightly below its 200-day moving average = Bearish 

S&P 500 is below its 100-day moving average = Bearish

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @30.84 = Oversold (Bullish)

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 18.71 (Subdued). Volatility is still on the low side, which means there are many opportunities for volatility spikes in the coming weeks.

Comment: If you’ve been reading this blog over the last few weeks, you’d know that the indicators above correctly forecast the trend change last week. We went from mildly bullish to bearish within days, and with help from the tariffs, the market plunged on Friday.

And just like that, everything has turned negative except RSI, which is telling us we are oversold. As expected, the futures are lower on Sunday night but there should be a brave attempt by the algos and their bullish friends to keep the indexes above their 200-day moving averages. Therefore, be prepared for a rally on Monday and at various times during the week. The key is whether the rally will continue, or fail. Another failed rally will be an extremely negative sign for the overall market.

As I wrote last week, investors are feeling a little anxious but there is no panic yet as they believe the Fed will bail them out. This is a very dangerous belief. There are many signs a recession is drawing closer, and although the market has been falling, we’re still near all-time highs.

What does this mean? Even though the market is short-term oversold, and even though we might have bounces, the market is in the danger zone. A massive correction or crash is possible, so be prepared. It’s been a long time since I’ve seen such a dangerous market. It’s possible we’ll get out of this unscathed but the odds are there will be a lot of pain in the near future.

Bottom line: Volatility should return to the market this week although the algos will do anything in their power to keep it subdued. This is a very important week to observe. Will the indexes stay above or below their 200-day moving averages? We will know the answer by the end of the week.

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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 May 27, 2019

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

S&P 500 is below its 50-day moving average = Bearish

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @40.93 = Neutral

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 15.52 (Bearish). Volatility is still in the basement even as the indexes fell. This divergence will be resolved soon.

Comment: The S&P 500 fell below its 50-day moving average during the week, a bearish development, and yet, volatility was very subdued. In the near future, volatility is going to spike or the markets are going to rally, but this divergence can’t last for long.

The indicators above are telling us that winter could be coming to the stock market in the next few weeks, if not sooner, so be prepared. The drop below the 50-day moving average is an early warning sign. In addition, the trade war, multiple geopolitical problems, and economic warning signs (car sales and real estate slowdown) need to be watched closely. 

I have also observed that some of the strategies that worked in the past (such as chasing momentum stocks) have stopped working over the last few months. This is a clue to me that the market is going through a transition. I am guessing that the bull market is coming to an end, but I won’t be sure until I see further deterioration of the indexes. The next two weeks should give important clues. 

It is also a concern that so many investors are expecting a pullback but almost no one is selling. The Fed has convinced investors that no matter what happens in the market, the Fed will use their tools to reverse any correction or crash. It is very risky to believe that the Fed always has your back, and that the market will “always go up.” Yes, people are saying that a lot lately, and that is very scary because it’s not true. Markets do not “always go up.”

Bottom line: Once again, be prepared for anything. For now, use hedge strategies if you’re a trader, diversify if you’re an investor, and keep a healthy supply of cash in case a worst case scenario occurs. Futures are flat to higher on Monday night, which could be the calm before the storm.

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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 May 20, 2019

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

S&P 500 is slightly below its 50-day moving average = Neutral

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @45.59 = Neutral

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 15.96 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators turned slightly negative last week, with MACD turning down and SPX falling slightly below its 50-day moving average. In addition, investor sentiment is at sky-high levels, and few investors feel anything but overconfident. If the market does pull back, investors are certain it will “come back” as it’s done several times in the past. What a recipe for trouble!

In reality, no one can predict what the market will do this week except to say that volatility has returned. With a number of geopolitical events swirling around, and a number of Fed members speaking on Monday night, anything can happen. With the market at all time highs, it’s not a bad idea to increase cash levels (no, it does not mean to sell everything).

A number of analysts I follow did turn short-term bearish over the weekend, and although the market could test all-time highs, the odds are good we’ll go lower during the week, but I wouldn’t bet the mortgage or rent on it.

Bottom line: The increased volatility has made predicting extremely difficult, especially intraday. I’ll be watching to see if the Fed says something sweet on Monday night to rally the markets higher on Tuesday (or so investors hope). I’ll also be watching to see if the 50-day moving average can hold. If not, it could get ugly very fast.

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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 May 13, 2019

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

S&P 500 is slightly above its 50-day moving average = Neutral

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @46.24 = Neutral

MACD: Above zero line but below signal line (Bearish)

Daily Intraday Volatility: 16.04 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators above turned from bullish to neutral or bearish, which is reflected in the Sunday night futures market (-1%). Last week was not pleasant for the bulls, and would have been worse except for a last-minute save by the White House (who said the talks with China are going well) on Friday afternoon.

So now we have an overbought market, conflicts with China, Iran, and Venuzuela, and a lack of buyers. At the very least, we should have a volatile week. At worst, it could get ugly. The bulls will be hoping for an afternoon save on Monday, but it’s unlikely anything but a true agreement with China will appease the global markets.

What to look for: See if the S&P 500 can remain above its 50-day moving average this week. If it can’t, the 100- and 200- are within reach in the coming weeks.

Bottom line: Prepare for higher volatility and a potential selloff, if only for a week. This is not necessarily the start of a bear market, but it’s obvious the bull market is nearing an end (but it likely has a few more moves left before it finally says goodbye).

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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