Bullish or Bearish? Week of May 23, 2022

MY TWO NEW BOOKS WILL BE RELEASED IN TWO DAYS: My two newest stock market books will be released on Tuesday. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy  — I discuss how to manage corrections and bear markets — and examine the most important indicators and oscillators. 

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. The falling market has become big news in the financial media. For the eighth week in a row, SPX plunged, this time from 4023 to 3901, a painful 122-point drop. It could have been a lot worse but we had another “turn-around” Friday. On Friday, the Dow and SPX fell by 20 percent from its recent high, which triggered a technical bear market definition. It also triggered short-term buy programs, allowing both indexes to narrowly escape the bear market designation. That is little satisfaction to long-only investors, who are nursing huge losses. Futures are HIGHER on Sunday night. It is possible this rally will have legs (i.e., it may last longer than one day).

Long-term trend (WEEKLY CHART) – LOWER. On the weekly chart, SPX is still below its 50- and 100-week moving averages, but remains above its 200-week MA. The long-term outlook is not great, but there is room for a strong rally this week. (Note: Always watch the rallies for signs of strength.)

MACD (WEEKLY) = LOWER . The WEEKLY MACD is below the zero line and the 9-day signal line. It’s a lagging indicator, which reflects the damage the indexes have experienced in the past. It may take a while, but we will use MACD to help us find an eventual (and tradeable) bottom.

RSI: (S&P 500) @35.47 (DAILY) OVERSOLD.  Once again, RSI fell to near-30 (on Friday), and bounced. If there is any good news, it’s that the indexes are oversold in the short term, so a relief rally is likely this week or in the near future.

Daily Intraday Volatility (VIX) = 29.43 = ELEVATED: VIX is higher than 20 (typically a normal reading), but the higher VIX reading does not reflect extreme fear. Prognosis: The VIX is high, but it’s not at panic levels.

Comment: Because the market has sold off for so many weeks, and because there is so much doom and gloom on Wall Street, and because RSI is oversold, the odds of a strong rally is likely. Futures are higher on Sunday night but the question is: Can it carry over to Tuesday and beyond? That would be a relief to investors, the reason it’s called a “relief rally.”

We are not predicting a rally, but in past bear markets, strong rallies often lured the bulls back into the market. Then the bottom really fell out! Since every bear market is different, no one can predict how this potential bear market will develop.

Technically, the Dow and SPX are not in a bear market, but that could change in the future. One of the clues that a rally is possible is the 500-point Dow reversal on Friday. Obviously, enough institutional buyers entered the market (along with algos) to keep the market afloat. That was a positive sign (within a sea of bad news).

Eventually, investors will have to deal with a strong likelihood of a bear market (the Nasdaq is already in one by definition). It’s a good idea to have a plan of what to do if all three indexes keep plunging. For now, be prepared for any scenario, and don’t panic (easier said than done).

If we do get that rally, and if it lasts a while, many investors may consider selling some, not all, of their positions, a decision only you can make.

One thing for sure: Bear markets and corrections are difficult to manage, as millions of investors and traders have discovered the hard way.

Bullish or Bearish? Week of May 16, 2022

MY NEW BOOKS: My two newest stock market books will be released on May 24th (although books are available at most Barnes and Noble bookstores. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy  — I discuss how to manage corrections and bear markets — and examine the most important indicators and oscillators. Sample pages are available on the above websites.  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. SPX fell from 4123 to 4023 last week, a 100-point drop. On the daily chart, all of the indexes are below their 50-, 100-. and 200-day moving averages. It could have been even worse but Friday’s rally reduced the damage somewhat. This will be the 7th weekly selloff in a row. The only good news is that the markets are getting oversold, so a monster rally is likely in the near future.

Long-term trend (WEEKLY CHART) – LOWER. Unfortunately, SPX fell below its 50- and 100-week moving averages on the weekly chart, not a good sign for long term investors. Fortunately, all of the indexes are still above their 200-week MA, even though the Nasdaq is in a bear market. (Take a look at the Nasdaq on the daily chart to see why).

MACD (WEEKLY) = LOWER . The WEEKLY MACD remains below the zero line and the 9-day signal line. Because MACD is a lagging indicator, this is not surprising.

RSI: (S&P 500) @38.73 (DAILY) OVERSOLD.  RSI fell below 30 last week, an extremely oversold reading, and right on cue, the indexes rallied the next day. Recently, I have found RSI to be remarkably accurate with indexes when extreme readings are hit.

Daily Intraday Volatility (VIX) = 28.87 = ELEVATED: VIX is still higher than it’s “normal” reading of 20 but it’s not even close to reaching a top (at 40 or 50, when the markets appear to be crashing, many counter-trend traders go long). A VIX in the 20’s tells me that option traders are only slightly concerned but not afraid (maybe they know something we don’t!).

Comment: It’s been a rough 7 weeks for investors and crypto traders (some of the stories of losses that I heard from bitcoin traders are frightening). It’s terrible for the ego and investment account when winners turn to losers. As mentioned earlier, the Nasdaq is already in a bear market, and the odds are good that the Dow and SPX will follow it. Not guaranteed, but likely.

Because the indexes are so oversold, a monster rally is likely. That will lure many previously bullish investors back into the market, and many will believe the worst is over. This is not a prediction but based on previous bear markets, this scenario is likely. Bear markets are very tricky animals: In the middle of these awful selloffs, there are these huge “blow-your-socks-off” rallies, although they typically fail.

The Bad News: If the other indexes fall into a bear market, this event “could” last as long as a year, testing the patience and emotions of many investors and traders, especially rookies.

The Good News: As Lance Roberts said in his blog, “It’s so bearish it’s bullish,” and he’s right. Most investors have lost money, and are exceedingly bearish, which is actually a bullish sign. As I said earlier, a rally is likely.

Bottom line: These are unusually treacherous times so it’s essential to be alert to any possibility. The FAANG stocks are reflecting some of the worst losses. It would not be surprising if many other stocks followed the Nasdaq into the abyss (but not right away).

Bullish or Bearish? Week of May 9, 2022

MY NEW BOOKS: My two newest stock market books will be released on May 24th. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy  — I discuss how to manage corrections and bear markets — and examine the most important indicators and oscillators. 

Today’s MarketWatch column: https://on.mktw.net/3vWhQdC

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. SPX retreated for the sixth week in a row, from 4131 to 4123, a mild 8-point drop. The problem is that after a monster 1000-point Dow rally, the next day the market gave up all its gains. The lack of a follow-through was very negative. The charts are awful: SPX is below all its moving averages on the daily chart. Futures are LOWER on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – LOWER. SPX is below its 50-week moving average and barely above its 100-week. From a longer-term perspective, this is not good for the bulls.

MACD (WEEKLY) = LOWER . The WEEKLY MACD is below the zero line and the 9-day signal line. Not good for the bulls. 

RSI: (S&P 500) @38.77 (DAILY) OVERSOLD.  Unfortunately, RSI is oversold but not at extreme levels yet. Investors are feeling pain, but there is room for the market to keep falling. At 30 RSI or below, SPX will be extremely oversold.

Daily Intraday Volatility (VIX) = 30.19 = ELEVATED: VIX is higher than in the old days of 20 and below, but it is not at extreme levels yet. Option traders are buying puts for protection but few are panicking yet. This tells me we have a long way to go before we hit a bottom on the indexes.

Comment: I know from my neighbors how bad it is. One of my neighbors owns the ARK fund, managed by Cathie Wood, and is getting creamed. My other neighbors own the MAANG stocks (Meta, Apple, Amazon, Netflix, and Google). Netflix caused the most financial pain, plunging from $700 per share six months ago to $180 on Friday. As I wrote in today’s MarketWatch column ( https://on.mktw.net/3vWhQdC ), that’s not a bear market, that’s a crash. 

Speaking of bear markets, the odds are good that the S&P 500 and the Dow will follow the Nasdaq into bear market territory. Based on technical analysis and historical trends, do not be surprised if the S&P 500 falls to 3200 to 3400 (this is an educated guess, not a prediction). 

Bear markets typically develop over a short (one to three months) or a long (one year or longer) time period. That means that it will likely be a painful journey lower over many months or a year. 

Many investors won’t look at their accounts or will avoid discussing the stock market. Some stocks will recover in the future (it may take a long time), while other stocks may not ever return to their old highs. No one can predict which stocks will succeed and which will fail. The only thing we know for sure is this is going to be painful emotionally and financially for many investors. 

My newest book, How to Profit in the Stock Market, discusses bear markets, corrections, and crashes. As I was writing this book, the market continued to move higher and higher into year end. Because I saw clues that the market was topping out, I was able to include a lengthy discussion on all three market events.

What were some of the clues? One TV host in particular continued to brag about how much money he and his followers had made in the market. He showed photos of his lavish lifestyle on Twitter, including an extravagant Christmas dinner. That was the top! 

Other clues: RSI was overbought, MACD had flattened, and the rallies were losing strength. Investors were exuberant, few were selling (because of a fear of missing the next rally), and no one believed a pullback would last longer than a few weeks. 

In December, I wrote a column about the predictions of the late Mark D. Cook, who warned that this overbought market was on its last legs. Cook always told me that prices are always the last to fall, and he was right. The bear market was already developing in December before most people realized it. It’s similar to a bridge that looks solid on the outside but rotting underneath.

The good news is that if you are patient, there will be fantastic opportunities to make money when the “bottom” is reached. How do you know there is a bottom? If SPX and the Dow enter bear market territory, we will use our indicators, oscillators, and clues to identify a good entry point. The goal is not to catch the exact bottom (as that is nearly impossible) but to buy at much lower prices than now. 

It was a lot more fun making money on the way up. On the way down, it will test the emotional fortitude of many investors who say they are in it for the long term. Unfortunately, as history has shown us, in the deepest depths of a bear market, many panic sell (when losses are at 50 percent or more), just when the market hits bottom. 

No matter what happens in the future, this is guaranteed to be an educational experience for many. 

Bullish or Bearish? Week of May 2, 2022

MY TWO NEW BOOKS: My two newest stock market books will be released on May 24th. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy  — I discuss how to manage corrections and bear markets — and examine the most important indicators and oscillators. 

Until my limited supplies last, I am offering a signed copy of my book for $24 (list price) plus $3 shipping (in the U.S.). Email me if you want a copy of one or both books. 

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. SPX retreated for the fifth week in a row, from 4271 to 4131, an excruciating 140-point pullback. Once again, the Dow fell by nearly 1000 points on Friday (this was the second 1000-point Friday selloff in a row). The SPX daily chart is horrendous as SPX is below all three moving averages. Futures are SLIGHTLY HIGHER on Monday morning.

Long-term trend (WEEKLY CHART) – LOWER. SPX has fallen below its 50-week MA on the longer-term weekly chart (a red flag), and is now threatening to drop below its 100-week average. From a technical side, it’s not looking good (if long).

MACD (WEEKLY) = LOWER . The WEEKLY MACD has fallen below the zero line and the 9-day signal line. Not good for the bulls. 

RSI: (S&P 500) @34.98 (DAILY) OVERSOLD.  If there is any bit of good news, it’s with RSI, which is oversold and close to extreme oversold conditions (below 30). If we drop below 30 on the daily RSI, expect a monster snapback rally in the near future.

Daily Intraday Volatility (VIX) = 33.40 = HIGHER: We went from “What me, worry?” to “The Sky is Falling” in a month. The VIX is reflecting the fear and anxiety option traders are feeling as they gobble up puts to protect long positions.

Comment: It was another awful week for the major indexes as well as individual stocks. Netflix continues to fall after a mind-boggling 36 percent gap-down selloff, and the great company, Amazon, took a 15 percent beating last week. Even Apple took a hit. The charts on all of the FAANG stocks are dreadful — all below their moving averages on the daily chart.

Many investors are not used to this kind of price action as most selloffs in the past have rebounded fairly quickly. Perhaps that is why so many people are holding on for dear life (HODL), and refuse to sell. That strategy makes sense if you a very long-term investor, if you know what you own, and you are diversified.

On the other hand, if you can’t take the pain (it could last several months to a year), or you are holding a losing stock, you will be in for a rough time in the short term.

This is the time to evaluate what you own, determine how much risk you are willing to take, decide on whether you are a long-term investor or a short-term trader. If you are a long-term investor and you own a solid stock, then buy and hold should work. However, as I write in my books above, a better strategy is Buy and Hold Until Something Changes.

The person who actually helped create that strategy is Lance Roberts from realinvestmentadvice.com. FYI: Here is a link to his latest commentary, which is another excellent read: https://bit.ly/3LElu1c

Lance had warned investors months ago that the market was getting more dangerous, and he was right. In the blog commentary (above), he warns that a recession is likely.

A bear market has not officially been declared, and even if it was, not many want to talk about it. The best advice is the same advice I have given in the past including diversifying into cash (not in a lump-sum panic but scaling in), and dollar cost averaging into stock or index funds.

If we do enter a bear market and/or a recession, there will be many opportunities to buy some of your favorite stocks at much, much lower prices. Unfortunately, no one can time the bottom but we can get clues from watching the indicators and oscillators.

Right now, as long as SPX and the other indexes are below their moving averages, going long in the short-term is fraught with danger. However, the market is so oversold, a massive rally is likely. This is important: During a bear market, strong rallies are common. Typically, they don’t last longer than a day.

Bottom line: The market is entering dangerous waters. This is not the time to run and hide but to evaluate what you own. It’s been 13 years since we had a market this dangerous, so be prepared emotionally for a rocky market environment.

Bullish or Bearish? Week of April 25, 2022

MY TWO NEW BOOKS: My two newest stock market books will be released on May 24th. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy  — I discuss how to manage corrections and bear markets — and examine the most important indicators and oscillators.

For a limited time, I am offering a signed copy of my books for $24 (list price) plus $3 shipping (in the U.S.). Email me if you want a copy of one or both books.

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART) – LOWER. SPX retreated for the fourth week in a row, this time from 4392 to 4271, a painful 121-point pullback. Friday was especially harsh as the Dow fell by nearly 1000 points (the biggest daily loss since 2020). The SPX daily chart is downright ugly as SPX plunged below its 50-, 100-, and 200-day moving averages. Futures are lower on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – LOWER. Those with a longer-term perspective may seek some solace in the weekly chart. On the weekly, SPX remains below its 50-day moving average (a red flag), but has not dropped below its 100- or 200-day. The bulls still have a chance to recover this week, but it may be volatile over the short term.

MACD (WEEKLY) = LOWER TO FLAT. The WEEKLY MACD has fallen slightly below the zero line and the 9-day signal line. Not pretty.

RSI: (S&P 500) @44.53 (DAILY) OVERSOLD.  RSI on the DAILY chart is oversold but not at extreme levels (below 30). If the indexes keep falling, expect a snapback rally at some point (but no one knows when).

Daily Intraday Volatility (VIX) = 28.21 = HIGHER: Option traders woke up to a selloff on Friday and bought loads of put options. The pop in the VIX reflects that a touch of fear has entered into the hearts and minds of option traders.

Comment: For the fourth week in a row, the indexes have fallen. Although there was a one-day wonder rally during the week, the bulls could not hold their gains. Even more ominous, the indexes rallied in the morning on some days, but reversed direction by the end of the day. Failed rallies are a negative sign.

It is too early to say where the market is headed but it is safe to say we are entering treacherous waters. Many experts believe the spike in interest rates (over 5 percent) helped to punish the bulls, and maybe the experts are right. It’s not helping that the Fed is hinting that interest rates may move much, much higher next month (i.e., 50 to 75 basis points). 75 basis points?

Perhaps Fed Chairman Powell is just “jawboning,” because a 75 basis point increase would shock the financial markets. (Maybe next month Powell will change his mind (“I was just kidding!”) Then there should be a relief rally.

It didn’t help market sentiment when Netflix fell by over 36 percent in one day. Less than a year ago, Netflix was trading at $700 per share. Now it’s at $215. That hurts.

After a one-month pullback, expect to hear a lot of complaints and concerns from investors. No one is panicking yet because they “expect” the market to rally back. All we can do is watch, wait, and observe the technical indicators and other clues. The indicators are telling us that it’s been an ugly month but there is still a chance for the bulls to win back the week.

Bottom line: Unfortunately, the easy days are over for now. You will have to work for your money if you are in this market.

Bullish or Bearish? Week of April 18, 2022

TWO NEW BOOKS COMING: On May 24th, 2022, my two newest stock market books will be released. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy . Both are excellent books. 

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week

Short-term trend (DAILY CHART) – LOWER. SPX retreated for the second week in a row, from 4488 to 4392, a 96-point pullback. The “Death Cross” is still displayed on the daily chart (when the 50-day crosses below the 200-day). Even more ominous, SPX is below its 50-, 100-, and 200-day moving averages on the daily chart. Futures are lower on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – FLAT. On the weekly chart, SPX is below its 50-day moving average, which is a red flag. On the longer-term weekly chart, SPX is still above its 100- and 200-day, which is a positive. We are watching these important support levels closely.

MACD (WEEKLY) = FLAT. The WEEKLY MACD is still flat with no clue as to which direction it will go next.

RSI: (S&P 500) @44.53 (DAILY) SLIGHTLY OVERSOLD.  RSI on the DAILY chart is slightly oversold but not at extreme levels.

Daily Intraday Volatility (VIX) = 22.70 = NEUTRAL: Option traders remain calm, as reflected in a low VIX.

Comment: The biggest financial news last week was that mortgage interest rates for Freddie Mac surpassed 5 percent. That should gradually slow down the housing market. Also, as many people know, inflation has risen sharply, especially food and gas. Only a few months ago, the Fed claimed that inflation was “under control.” That talking point is no longer valid.

The war in Ukraine is causing economic disruptions (and a humanitarian disaster), and it could get worse. Although the stock market is trying to ignore the bad news, it’s not working in the short term.

This week is leaning bearish because of all of the bad news swirling around, but the bulls could still take back control. In the short term, it’s not a pretty picture. The longer-term weekly chart tells us that the market has retreated temporarily although it could recover this week.

Watch to see if SPX can take back its 50-day MA on the weekly chart. If it can do that, then the bulls can win the week. If SPX cannot recapture its 50-day this week, it could get a lot uglier. Be prepared for any scenario.

Bullish or Bearish? Week of April 11, 2022

TWO NEW BOOKS COMING: On May 24th, 2022, my two newest stock market books will be released. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy . Both are excellent books. 

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week

Short-term trend (DAILY CHART) – LOWER. SPX fell back last week, retreating from 4545 to 4488, a 57-point pullback. SPX is slightly above its 50-day moving average on the daily chart, which is a positive in the short term. FUTURES are slightly lower on Sunday night, but that could change in the morning. 

NOTE: On the daily chart, the 50-day MA has crossed below the 200-day, another name for the Death Cross. So far this has not been significant, but we are watching it closely.

Long-term trend (WEEKLY CHART) – HIGHER. On the weekly chart, SPX remains above its moving averages. This longer-term chart is telling us SPX is still consolidating with no clue as to its future direction.

MACD (WEEKLY) = FLAT. The WEEKLY MACD is still “walking” the line (the zero line) with no hint as to which direction it plans to go.

RSI: (S&P 500) @51.45 (DAILY) NEUTRAL.  RSI on the DAILY chart is neutral after the selloff last week. SPX is neither overbought or oversold.

Daily Intraday Volatility (VIX) = 21.26 = NEUTRAL: Option traders are calm, as reflected in the low VIX. Fear has taken a holiday for now.

Comment: I wish I had more insights but the markets are calm and volatility is on the low side. Although SPX and the other indexes fell last week, it went from slightly overbought to neutral. At this time, the indicators are not giving strong signals in either direction.

This could be the calm before the storm, or it could just be calm. There is a lot of negative news swirling about, especially inflation and rising interest rates, but the market’s attitude is “What me, worry?” That’s a negative.

On the other hand, the indexes are generally ignoring the bad news. That’s a positive.

Bottom line: Stay the course. Traders will be hard-pressed to find many trading opportunities, at least until volatility returns.

Bullish or Bearish? Week of April 4, 2022

TWO NEW BOOKS COMING: On May 24th, 2022, my two newest stock market books will be released. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy . Both are excellent books.

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week:

Short-term trend (DAILY CHART) – FLAT. SPX was as flat as a pancake last week, moving from 4543 to 4545. In the trading world, that is consolidation. On the daily chart, the short-term sell-off was stalled as the market catches its breath. On the daily, SPX is above its 50-day moving average, which is positive. FUTURES are flat to lower on Sunday night, but that could change in the morning.

NOTE: On the daily chart, the 50-day crossed below the 200-day, another name for the Death Cross. There are pros and cons to this lagging indicator, which will be explored in a future column. 

Long-term trend (WEEKLY CHART) – HIGHER. On the weekly chart, SPX remains above its moving averages. The longer-term weekly chart gives us a broader view of the market (50-week, 100-week, 200-week, etc.). While the short-term chart is volatile, the long-term view is positive.

MACD (WEEKLY) = FLAT: The WEEKLY MACD has stopped retreating and is stalled at the zero line. It could go in either direction but the worst may be over (for now). 

RSI: (S&P 500) @57.27 (DAILY) SLIGHTLY OVERBOUGHT. RSI on the DAILY chart is pointing to a short-term overbought condition but it’s not at extreme levels. 

Daily Intraday Volatility (VIX) = 19.63= NEUTRAL: Calm has returned to the options market as option speculators have stopped gobbling up put options for protection. As a result, the VIX continues moving to more “normal” volatility levels. Result: The nervousness of a few weeks ago has been forgotten.

Comment: SPX appears to be consolidating in the short-term, while still pointing higher in the long term. Market participants are being lulled into a feeling that “everything is okay.” Until there is evidence of a reversal, most investors are going to stay the course.

Last week could have been a whole lot worse but “window dressing” saved the day. Window dressing refers to the last few days of the month when fund managers dump their losers and buy winners. As a result, certain stocks go to the moon during the end of the month while losers are severely punished.

It is unclear which direction the market will go this week. After a two-week rally followed by consolidation, the market could go in either direction. Bad news is swirling around including higher interest rates, inflation, higher gas prices, and a war. Even though Friday’s job numbers were fantastic, inflation is making many people feel broke. It’s a very mixed bag.

Bottom line: No one can predict which direction the market will go this week, and I won’t even try. It’s a very tricky trading environment, and anything is possible. If trading, be extra careful as it’s easy to get whip-sawed.

Bullish or Bearish? Week of March 28, 2022

TWO NEW BOOKS COMING: On May 24th, 2022, my two newest stock market books will be released. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Market: https://amzn.to/35lnjQy . These are two of my best books.

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week (Note: I am using both the daily and weekly chart to analyze the market.)

Short-term trend (DAILY CHART) – HIGHER. SPX made a decent 80-point gain last week, spiking from 4463 to 4543. That’s two big up weeks in a row. On the daily chart, SPX made a remarkable recovery even with interest rates moving higher and the war in Ukraine raging. Futures are flat to lower on Sunday night but that could change in the morning.

WARNING: On the daily chart, the 50-day crossed below the 200-day, another name for the Death Cross. There are pros and cons to this lagging indicator, which will be explored in a future column.

Long-term trend (WEEKLY CHART) – HIGHER. SPX rose back above its 50-WEEK moving average last week. The longer-term weekly chart gives us a broader view of the market (50-week, 100-week, 200-week, etc.). On the weekly chart, SPX is back above its 20-week and 50-week moving averages, so for the long-term, the uptrend is intact.

MACD (WEEKLY) = STALLED: The WEEKLY MACD has stopped retreating and is stalled at the zero line. It could go in either direction but the worst may be over (for now).

RSI: (S&P 500) @57.09 (DAILY) OVERBOUGHT. RSI on the DAILY chart is pointing to a short-term overbought condition but it’s not at extreme levels.

Daily Intraday Volatility (VIX) = 20.81= NEUTRAL: Calm has returned to the options market as option speculators have stopped gobbling up put options for protection. As a result, the VIX has fallen to more “normal” volatility levels.

Comment: Even with interest rates spiking and the war in Ukraine continuing, the market has staged a remarkable two-week recovery. Short sellers who expected the worst got smashed. As always, the market has the final word.

It’s true that the algos may have helped the indexes behind the scenes, but that is irrelevant. All that matters is reality, and reality is that the market is moving higher in the short and long term. However, after clawing its way back above its moving averages, can the market continue moving higher? That is the question.

Too many traders who think logically expect the market to be logical, but the market rarely is. I sometimes think of the market as someone with manic-depressive tendencies whose behavior cannot be predicted. That is one of the reasons why short-term trading is so challenging for most people. It’s also the reason why dollar cost averaging into index funds is a sensible strategy for those unwilling or unable to trade for a living.

Don’t get me wrong: I am a trader and investor. However, it’s not easy to make consistent profits as a trader. If you are able to make money trading, that is excellent, and keep doing what works. But if you are losing money, or sleep, as a trader, consider switching strategies, especially when the market is so unpredictable. Right now, it’s more unpredictable than usual!

Based on the indicators, the market is learning towards the bullish side but it could easily stall out again with a failed rally.

Bottom line: The market clawed its way back out of the basement. Based on the indicators, it is impossible to predict which direction it will go this week. On one hand, don’t forget about that scary-looking Death Cross. On the other hand, the trend is higher in the short term.

Bullish or Bearish? Week of March 21, 2022

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week.

Short-term trend (DAILY CHART) HIGHER. SPX skyrocketed from 4204 to 4463 last week, a 259-point explosion. SPX shot back above its 50-DAY moving average, catching many short-sellers off guard after a one-month selloff. What was the good news that helped bring the indexes higher? The Fed raised interest rates by a quarter point and the war in Ukraine continues. In other words, the news was not good, and yet, the market went way, way higher. Futures are LOWER on Sunday night but that could change in the morning.

Long-term trend (WEEKLY CHART) – HIGHER. SPX rose back above its 50-WEEK moving average last week.

RSI: (S&P 500) @57.09 (WEEKLY) NEUTRAL. RSI on the weekly chart went to neutral, which means SPX could go in either direction this week.

MACD (WEEKLY) = BEARISH: The daily MACD is below the 9-day signal line and below the zero line.

Daily Intraday Volatility (VIX) = 23.87 = NEUTRAL: After a month of selloffs, option buyers went back to buying call options, which lowered the VIX to “reasonable” levels. Fear took a holiday last week.

Comment: As mentioned above, after a month of selloffs, in one week SPX rose back above its 50-day moving average, and on less than positive news. It just goes to show that the market is not logical, one of the reasons why trading is such a challenging strategy.

It’s possible that a bottom is in for this month, so if you are betting on a selloff, be careful. I’ve seen this setup before, and it’s not good for the bears. The one-month selloff was stopped in its tracks and support held. The odds are now with the bulls unless there is an unexpected bearish event this week.

Nevertheless, many experts believe that rising interest rates will eventually lead us into a recession. With inflation spiking, rising interest rates is the solution, even if it causes a slowdown. As you know, rising interest rates puts a damper on housing (eventually), and increases consumer debt. And yet, the market ignored all of these problems and went way higher last week.

Bottom line: There is no way to predict which direction the market will go this week. If the market pays attention to reality, it will fall. If it ignores all of the current and future problems swirling about, it will move higher.