Bullish or Bearish? Week of Nov. 11, 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.

RSI: (S&P 500) @ 70.22 = Extremely Overbought. SPX is in the danger zone, and although it can keep moving higher, a pullback is imminent.

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.07 = Extremely Low (Bearish)

Comment: It’s rare to see such overbought conditions. With positive news regarding China, the Fed’s continuation of QE ($60 billion+ a month), and low interest rates, the market appears to be headed to the moon. But anyone who studies the stock market knows we’re in the danger zone. With a RSI of 70 and a VIX at 12, it won’t take much to reverse this market. Also add in the fact that my investor friends are bragging again, always a sign we are at or near a top.

Can the market go higher from here? Yes, it can, which is why you never short an uptrend. But wise traders and investors are on the lookout for signs of a stall and reversal. Typically, that first pullback will catch most people by surprise. Don’t waste your time figuring out “why” the market pulled back (after it occurs). But do spend your time evaluating whether the pullback is short-term (buy on the dip) event, or a longer-term selloff.

Why am I so confident there will be a pullback? Because we’ve gone too far and too fast, investors are giddy, and some of the technical indicators I follow are flashing warning signs. The algos are doing everything possible to keep this market propped up with help from the Fed, and so far they’ve been successful. But when investors and institutions get spooked one day, and they should in the near future, the pullback will be intense.

Investors who don’t read the clues or indicators are perhaps afraid to miss out on the so-called “Christmas rally.” This is what happens at market tops: the ones who resisted buying until now throw caution to the wind and jump in, almost always at the wrong time. As I said, the markets could go higher from here, but the risks are too great and the rewards too small at these overbought levels.

Bottom line: You have to make your own decisions what to do, but I personally have not seen such extreme overbought conditions in many years. Traders with more experience than me have made similar observations. Therefore, go long if you must but tread cautiously.

Note: Monday is Veteran’s Day but the markets are open. To all veterans: Thank you for your service.

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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 Nov. 4, 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 an uptrend.

RSI: (S&P 500) @ 66.56 = Overbought (at 70 RSI it will be in the danger zone, i.e. extremely overbought).

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.30 = Extremely Low (Bearish)

Comment: The Fed did its job, so in addition to starting QE again with $60B a month (although they say it’s not QE), they also cut interest rates, and injected additional liquidity via the repo market. As a result, the market is at all-time highs while debt levels have gone through the roof (trillion dollar deficits and $23 trillion in U.S. debt). Even with all this stimulus, GDP is mediocre at best at 1.9%, and Chicago PMI at 43.2 with 47 expected. Imagine where the stock market would be if the Fed wasn’t injecting billions into the financial markets.

The SPX three-month chart is a thing of beauty but the market has moved up too far and too fast recently. In my opinion, caution is advised at these levels. A sudden and severe pullback would not be surprising, in fact, it’s expected. Before that occurs, we could have one last “blow-off top” where RSI surpasses 70 as the market makes one last gasp higher.

Bottom line: These are dangerous and strange times. Old-timers tell me they have never seen a market this overbought with so little volume. Below are links to two excellent posts, one from a technical perspective, the other from an economic perspective. The conclusions are similar: The market is extremely overbought (and yet, it could get more overbought before retreating).

Link to Sven Henrich (Northman Trader): https://bit.ly/34ti2Ap

Link to Lance Roberts (realinvestmentadvice): https://bit.ly/2NAamWd

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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 Oct. 28, 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: There is no clear trend at this time, but there is a double-top, so caution is advised.

RSI: (S&P 500) @ 60.57 = Slightly Overbought

MACD: Above Zero Line and Above Signal Line = Bullish

Daily Intraday Volatility: 12.65 = Extremely Low (Bearish)

Comment: SPX finally rose above 3000 last week with a last gasp push on Friday. But so much is going on behind the scenes, it’s hard to keep up. Here is a short list:

  1. The Fed is injecting over $60 billion a month into financial markets with the Dow and SPX near all-time highs, and economic conditions stable. The question is why.
  2. In addition, the Fed may cut interest rates, or say they will. Once again, why is the Fed taking these extreme measures with the market so high and economic conditions so tame?
  3. The indexes are rising but volume is extremely low, a negative divergence. It appears as if only the machines are trading, not people.
  4. The VIX is at 12.65, an extremely low reading and a warning sign. When I look at the 3-month chart of the VIX, it may still go lower, but typically it explodes higher, and quickly, when it hits at or near 12.

This is a difficult market to trade the indexes but there are good opportunities with individual stocks, long or short. Looking at the overall market, while we are flirting with all-time highs, and are still above SPX 3000, traders know that the QE the Fed has initiated combined with low interest rates is propping up the market. With all that help from the Fed, it’s not surprising that the indicators above are bullish.

Meanwhile, there are numerous technical and fundamental signs that all is not well in Denmark. Here is an excellent analysis of the current market from Sven Henrich (Northman Trader) that explains the dangers in depth: https://bit.ly/32SmwAc

Bottom line: These are weird times. Until the market makes up its mind, caution is advised. The Fed meets on Tuesday and Wednesday, so the Chairman’s words will be closely scrutinized. As you know, on Fed days, it can be tricky to trade, so be careful!

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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 Oct. 21, 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: There is no clear trend at this time. SPX retested 3,000 but failed to seal the deal on Friday.

RSI: (S&P 500) @ 54.93 = Neutral

MACD: At Zero Line and at Signal Line = Neutral

Daily Intraday Volatility: 14.25 = Low (Bearish)

Look at the awful charts of a few of the stocks I’ve been following: JNJ, NOW, COUP, AYX, WDAY, BA

Comment: I had been waiting for a failed rally all week and it came true on Friday. Many individual stocks got crushed as the day wore on, and even the indexes slowly succumbed to the selling pressure. Looking at the bigger picture, however, the indexes are holding up while certain stocks (look at the list above) are getting savaged.

As Lance Roberts wrote in his latest piece (link to his site at bottom), the bulls got everything they wanted, but they still couldn’t bring SPX above 3000 for long. According to Lance, here is the bull’s wish list (paraphrased), which has been fulfilled:

  1. ECB announced more QE
  2. Fed reduced capital requirements on banks
  3. Fed initiated QE of $60 billion in monthly Treasury purchases (but they are not calling it QE).
  4. The Fed is cutting rates.
  5. There are hints we could be exiting the China trade war
  6. Economic data is improving in the short term.

Even with all that help from the Fed, there is also a lot of negative news, as listed by Doug Kass (paraphrased):

  1. Untenable debt loads
  2. Unresolved trade war with China
  3. Global manufacturing recession is seeping into services sector
  4. Market structure is “frightening”
  5. We are in an earnings recession
  6. Valuations on traditional metrics are sky high (i.e. it’s bearish)
  7. Few expect the market to “undergo a meaningful drawdown”
  8. Private equity market crashing and burning
  9. WeWork’s problems are contagious

So there you have the bull and the bear case, which leaves us stuck in the middle again (surrounded by clowns and jokers, as the song says). The SPX rose above 3000 for a few minutes during the week before retreating, so if the bulls want to win this battle, they will have to find a way to move well above SPX 3000, and stay there.

The bears, on the other hand, have had multiple chances to take control, but they failed every time. The bulls are still in control and until proven otherwise, the ball is in their court. In fact, every time there was a meaningful selloff, the algos jumped in to either suppress volatility, or spike the market higher (or both).

That leaves us with this week, when we should have a better idea who will win. SPX must be watched closely to see if the bulls can finally rally the market for a final blow off top, or whether the bears can finally take control. Another worry for the bulls: a double top has formed on the SPX.

Bottom line: We could go either way this week, but the clues and indicators are still not clear enough to predict which direction. Just watch and react quickly when one side or the other takes control. Otherwise, we could continue with this tug of war for a while longer until someone is victorious.

Here is a link from Sven Henrich (Northman Trader), which includes an excellent video of the current state of the market: https://bit.ly/31Ct5Wg

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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 Oct. 14, 2019

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

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

S&P 500 one-month trend: SPX’s uptrend stalled at 3000, retreated, and is retesting 3000 again.

RSI: (S&P 500) @ 53.51 = Neutral

MACD: On Zero Line and at Signal Line = Neutral

Daily Intraday Volatility: 15.48 = On the Low Side

The trade I’m waiting for this week: Failed Rally

Comment: It might seem like a long time ago but last week started in the red, and by Friday we were off to the races again, coming near to SPX 3000. A positive tweet about China, a $60 billion a month Treasury “buying operation” from the Fed plus soothing words from Fed Speakers = a rip-your-face-off rally on Friday.

I have no idea how long these daily selloffs and rallies will continue, but it’s very unusual. One thing for sure: With all the stimulus (QE by any other name), positive tweets, and low interest rates, a year-end rally is possible. In fact, if there is not a year-end rally, it means things are worse than we realize.

Meanwhile, one of these days the market is going to fall off the cliff, and keep falling into a bear market, but until that day comes, it’s wise to stay nimble, and follow the market.

Bottom line: I am unable to determine, based on the clues and indicators, which direction the market will go this week. Once again, be ready for anything. I’m curious if the Friday rally continues into Monday or reverses direction. All the powers that be want a strong end of year rally. Don’t get caught on the wrong side of reality.

Here is an excellent analysis of the current market from Northman Trader: https://bit.ly/2VC1zqk

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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 Oct. 7, 2019

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

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

S&P 500 one-month trend: SPX’s uptrend stalled at 3000 and retreated, and is now attempting to retest.

RSI: (S&P 500) @ 49.21 = Neutral

MACD: Above Zero Line and below Signal Line = Neutral

Daily Intraday Volatility: 17.04 = Neutral

Comment: As I pointed out last week, the VIX couldn’t remain at 13 forever, and sure enough, we had a vicious two-day selloff during the week followed by a head-turning two-day rally. Unfortunately, there was a lot of bad economic news around the world that appears to be spreading to the U.S. For now, the market chose to focus on lower interest rates rather than deteriorating economic conditions.

Once again, it’s anyone’s guess which way the market will go this week. Neither the bulls or the bears have made a strong case. It’s a treacherous environment for investors and traders (the intraday reversals can cause havoc with your stop losses). On one hand, it appears as if the SPX uptrend has stalled out at 3000 (with a triple top, I might add). On the other hand, there hasn’t been mass selling by institutions, so the bears have been unable to take control. If anything, we’re in this weird no-man’s land where no one wins, and almost everyone loses.

Bottom line: Until the trend is established, staying away from the indexes is a wise choice. There are still opportunities with individual stocks, but be careful. Many stock holders have woken up to vicious 20 percent plunges (i.e. Roku, Netflix, to name a few).

For a technical view of the current market, I recommend the following post from Northman Trader: https://bit.ly/2AMxWZI

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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 Sept. 30, 2019

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

S&P 500 is at its 50-day MA = Neutral

S&P 500 one-month trend: SPX’s uptrend stalled at 3000 and retreated.

RSI: (S&P 500) @ 48.66 = Neutral

MACD: Above Zero Line and below Signal Line = Neutral

Daily Intraday Volatility: 17.22 = Low to Neutral

Comment: Last week, as expected, SPX rose above 3000, stalled, and reversed. The bragging of my investor friends, the extremely low VIX (13), and mixed economic news all combined to reverse the rally. And yet, there was no panic selling. We enter this week’s market at a standoff: The bulls were unable to push the markets above SPX 3000 for longer than a day. And the bears were unable to send SPX below its 50-day moving average. We can only sit and watch to see if one side is able to break above SPX 3000 or lower than SPX 2950.

The indicators above moved from bullish to mostly neutral as the indexes retreated last week. However, a number of individual stocks got slammed, including Roku and Netflix, to name only a few. It’s impossible to predict what is going to happen this week as we enter the typically volatile month of October.

Bottom line: Watch the indexes for clues and be prepared for any scenario. It’s impossible to predict market direction right now but that could change as the week progresses.

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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 Sept. 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 uptrend is somewhat intact but hitting resistance at all-time highs.

RSI: (S&P 500) @ 57.07 = Neutral

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.35 = Extremely Low

Comment: These are some very interesting times. SPX hit all-time highs last week, and then retreated slightly. The bulls, with help from the algos, are going to work extremely hard to push the indexes higher this week. Because the algos are there to keep volatility low and the indexes high, shorting indexes has been a challenge.

However, just look at what’s happening to individual stocks! ROKU (-19.2% on Friday) and Netflix (-5% on Friday) got slaughtered last week, and there are many others. In fact, it’s been challenging to find stocks that are in an uptrend, which is a clue the bottom could fall out of this market in the near future.

Other clues include investors who are bragging to me about how much money they made in the market with indexes, and the VIX at 13.35. If the VIX goes much lower, there is going to be a snapback rally (i.e. if VIX rallies, stocks go down) that will blow your socks off. So be prepared.

Bottom line: The indexes are headed lower in the next few weeks, perhaps in a month. The only unknown is if there is another last gasp higher, or if we go directly lower. No one can answer that, so just be ready for either scenario. The next few weeks should be exciting as volatility explodes (it can’t stay at 13 forever).

Here is an article from portfolio manager Lance Roberts (realinvestmentadvice.com) that I recommend reading: https://bit.ly/2l095gT

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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 Sept. 16, 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 uptrend is up but hitting resistance at all-time highs.

RSI: (S&P 500) @ 61.93 = Slightly Overbought

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.74 = Low

Comment: This is one of those rare times when the indicators above are screaming bullish but the sentiment indicators are screaming, “Be careful!” If you look at the chart, everything looks wonderful with a few potential problems:

  1. We are hitting resistance at all-time highs in SPX (3007), and twice in the past, the indexes retreated at these levels.
  2. The drone attack on the Saudi oil processing facility is causing havoc on oil around the world. Futures are lower Sunday night, which should continue into the open. However, the buy-on-the-dip algos will be buying at the open to attempt to calm volatility.
  3. Most concerning of all is investor sentiment. From my conversations with investors, they are pleased with their portfolios, their profits have increased beyond their wildest expectations, they will “never” sell no matter how low the indexes go, and they are now strong believers in buy-and-hold. With the markets at all time highs and investor sentiment so complacent with a belief the markets can only go higher, I see a major break in the near future. Investors are relying on the Fed to save them from any downturns. To me, this is similar to what happened when bitcoin hit $20,000 before collapsing. Bitcoin investors were also buying at the top. If anything goes wrong with the bullish scenario in the stock market, all hell is going to break loose.

To give you a different perspectives (although slanting to the “be cautious” side) are the following two must-read columns. They go into much deeper detail than I have.

Bottom line: The indicators are flashing “Go Go Go” but the sentiment and resistance levels are flashing “Watch out below!” Let’s see if the Fed can once again prop up the market (Fed meeting on Tuesday and Wednesday). I agree with Sven, who says that investors are “playing with fire.”

Here are the two articles that I recommend reading:

Sven Henrich (Northman Trader): https://bit.ly/2lP4C0G

Avi Gilburt using Elliott Wave (Seeking Alpha): https://bit.ly/2kKHlN5

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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 Sept. 9, 2019

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

S&P 500 spurted above its 50-day MA last week on low volume = Neutral

S&P 500 one-month trend: SPX uptrend is still broken but indexes are making a run for all-time highs at SPX 3000.

RSI: (S&P 500) @ 58.33 = Slightly Overbought

MACD: Slightly Above Zero Line and strongly above Signal Line = Neutral

Daily Intraday Volatility: 15.03 = Neutral. Volatility is on the low side.

Comment: After a poor start early in the week, the algos got their mojo back and ran the market higher on low volume, bringing the SPX back above its 50-day moving average. We are very close to our all-time highs so it’s going to get interesting. In addition, the Fed will have their FOMC meeting in a week (Sept. 17 and 18), which almost always attracts volatility. Soon we will learn whether the latest rally to all-time highs is the real deal or a head fake. Everyone will be listening closely to the Fed chairman’s words.

There are signs of a slowdown in manufacturing, car sales, and house sales, and yet the market moves higher. Volatility has been suppressed and most investors are complacent about the market (“It goes up and down, what can you do?”).

I’m taking a wait-and-see approach as the market is rallying on light volume and numerous warning signs. With the Fed ready to speak about lowering interest rates, if they please Wall Street, the market could rally to SPX 3000. If the Fed disappoints, then we could fall to SPX 2800 or lower.

Bottom line: It’s all about the Fed for the next two weeks, so be cautious. It’s not a bad time to increase cash during these turbulent times (it doesn’t mean sell everything), or to diversify into less-risky investments.

For a more detailed analysis of technical and economic indicators, I will refer you below to two excellent columns from market technician Sven Henrich (Northman Trader), and money manager Lance Roberts (realinvestmentadvice.com). Both are excellent reads.

Northman Trader: https://bit.ly/2k6BSjk

Lance Roberts: https://bit.ly/2lFvVdA

______________________________

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