Bullish or Bearish? Week of Jan. 21, 2019

Here are the most recent market indicators:

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

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

S&P 500 one-month trend = Uptrend (with pivots)

RSI: (S&P 500) @61.98 = Overbought (Bearish)

Daily Intraday Volatility: Moderate to High 

Comment: The market fooled nearly everyone by ripping higher for the last two weeks with help from the algos. Nevertheless, volume was light and the bad news swirling around was ignored. It was quite a performance, and short-sellers felt the pain. We are now reaching overbought levels which means that a shorting opportunity is drawing closer.

That being said, never short a market in a strong uptrend (like now). Wait for an intraday reversal or other clues before attempting to short (or buy puts or inverse ETFs).

Futures are lower on Sunday night so we’ll have to wait and see what this market is made of. If the bulls are right, we’ll keep moving higher for the next few days. But the odds are good that within the next week or so, a major shorting opportunity will appear. After all, at the rate the market is rising, unless you believe the indexes can rise by 150% a year, a pullback is coming.

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter:www.wolfstreet.com

Bullish or Bearish? Week of Jan. 14, 2019

Here are the most recent market indicators:

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

S&P 500 one-month trend = Major Pivot Points

RSI: (S&P 500) @53.52 = Neutral to Slightly Overbought

Daily Intraday Volatility: Moderate to High 

Comment: With help from the algos and kind words from Chairman Powell, last week the market bounced back from last month’s low and is now in overbought territory.

This is a very pivotal week for the market. This week will help us determine if last week’s rally is the real deal or another manufactured, and unsustainable, head fake. Although the market is short-term overbought, it could get more overbought this week and move beyond SPX 2600. It could also move sideways in a low volatile environment, which is exactly what the financial world wants. Those are the best case scenarios.

In a worst-case scenario, the market will once again fail to surpass SPX 2600, and begin to retreat. If SPX reverses direction and plunges hard, bringing the other indexes along for the ride, that will confirm we are in a bear market. (Note: Sunday night futures are lower, so Monday could be volatile. Nevertheless, it’s the rest of the week that matters.)

There is a lot of bad news swirling around but the market ignored it recently, at least so far. Soon, earnings will be released and if many companies disappoint, reality will once again hit the market like a 2×4 across the face.

No one can predict how the market will react this week, but one thing is for sure: No one agrees what is going to happen. Therefore, avoid guessing and let the market be your guide. Another piece of advice: be sure to have a healthy amount of cash on the side in case of a worst-case scenario.

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter:www.wolfstreet.com

Bullish or Bearish? Week of Jan. 7, 2019


Here are the most recent market indicators:

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

S&P 500 one-month trend = Downtrend (with major pivots)

RSI: (S&P 500) @46.77= Neutral

Daily Intraday Volatility: Moderate to High 

Comment: In the first week of the year the Dow plunged by over 600 points, then rallied by over 700 points. What a way to start the New Year! There is no evidence the volatility will end anytime soon.

Even with encouraging words from the Fed, and even though they will likely stop raising interest rates, this alleged bear market should continue to wreak havoc on investor’s portfolios. Never forget that in a bear market, even the stocks of great companies (like several of the FAANG stocks) go down.

If you are a long-term investor and can take the pain, and believe the stock of your company will be stronger after the bear market is over, then you will grit your teeth and hold. I still recommend hedging with inverse ETFs, put options, or cash, but that is a decision only you can make. By the way, another hedge in a bear market is gold, which has suddenly come to life. Gold tends to do well in bear markets.

There is always the possibility this is not a bear market but only a correction, and in that case, the indexes will rise above their 50-, 100-, and 200-day moving averages. If that happens, then put away the bear strategies and power on. But the evidence seems clear from numerous sources that this is going to be a difficult, volatile year.

The futures are pointing higher on Sunday night, so let’s watch and see if the indexes can rally higher this week, and whether the rallies can last more than a day or two. If the rallies fail spectacularly, that is more evidence the bear is breathing down our necks. I will wait for the market to make up its mind before I commit heavily to one side or the other.

Note: According to my analysis, the S&P 500 is currently overbought, but it could become more overbought before reversing direction.

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter:www.wolfstreet.com

Bullish or Bearish? Week of Dec. 31, 2018

Here are the most recent market indicators:

S&P 500 is well below its 200-day moving averages = Bearish 

S&P 500 one-month trend = Downtrend (with a major pivot)

RSI: (S&P 500) @38.99= Mildly Oversold = Bullish 

Daily Intraday Volatility: Moderate to High 

I’ll try and keep this short because of the shortened trading week.

First, as expected, the market bounced back strongly last week, although no one predicted a 1000 point Dow rally in one day. That was amazing. Because RSI had dropped as low as 19.29 on Monday, I was waiting for the monster rally, and the bulls got their wish, at least for a day.

Unfortunately, the rally only bought back 2 days of losses (Source: Lance Roberts), so the downtrend is alive and well with occasional pivots to the upside. In fact, it will be fascinating to watch this week to see if the market can rally higher. As I wrote in my MarketWatch article, watch the rallies, not the declines. If the rallies are weak, and then fail, that is a clue this is more than a correction but a bear market.

Investors are still too hopeful, especially those that own the FAANG stocks. Even though the companies might be excellent, the stocks can still go down much further, and that’s a lesson investors learn the hard way. (I remember in 2007 when everyone owned and loved Citicorp. Investors were in shock when it fell from the 50’s into single digits. Yes, many strong companies fall hard in bear markets).

Bottom line: Until proven otherwise (the indexes will have to rise above their 200-day moving averages), treat this current market as a bear market. Short or sell into rallies, and increase cash positions on rallies. Don’t forget that some of the strongest rallies occur within bear markets, so trade accordingly.

Have a great New Year!

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter:www.wolfstreet.com

Bullish or Bearish? Week of Dec. 24, 2018

Here are the most recent market indicators:

S&P 500 is well below its 200-day moving averages = Bearish 

S&P 500 one-month trend = Downtrend

RSI: (S&P 500) @22.44= Extremely Oversold = Bullish 

Daily Intraday Volatility: Moderate to High 

Comments:  Because of the shortened week, this will be a bit shorter than usual. This week, I”m publishing a piece on MarketWatch, which I’ll post here in a few days.

The market rallied into the Fed meeting, as expected, but it did not take kindly to the Fed Chairman’s words or actions. I was thinking that if the market can’t handle a minuscule .25% raise in interest rates, then the problems must be deeper than anyone can imagine. In fact, they are.

That being said, because the market is so oversold (RSI at 22.67 is the lowest in a decade), and sentiment is so bearish, don’t be surprised to see a huge rally, perhaps (this week). Unfortunately, because this is a bear market, the rallies will eventually fail.

If you’re an investor, you should use the rallies to reduce risk by selling losing stocks and increasing cash positions. I’ve made many mistakes as a trader and as an investor, but I survived because I always had healthy cash positions. For me, cash is true diversification, and is also an insurance policy.

If you are a trader, then you should be familiar with hedges such as buying put options to offset long positions, or buying inverse ETFs.

I’ll have a lot more to say on this topic in my MarketWatch article. Have a great holiday!

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter:www.wolfstreet.com

Bullish or Bearish? Week of Dec. 17, 2018

Here are the most recent market indicators:

S&P 500 one-month trend = Downtrend (major Pivot Point)

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

RSI: (S&P 500) @36.43 = Oversold = Bullish 

Daily Intraday Volatility: Moderate to High 

Comment:  Now you know what a bear market feels like! Judging by the chart and the action from last week, the market is in a downtrend. Sentiment is awful: Investors Intelligence has the most bearish readings in five years. Mutual fund outflows were the highest in years. Everywhere you turn, there is negativity. In addition, this is the worst December for the S&P since 1980. The investor chatrooms are overwhelmingly negative. Adding to the doom and gloom, the Fed seems to be indecisive and nervous.

Believe it or not, because sentiment is so negative, it would not surprise me to see a huge rally this week, so be prepared. RSI is also telling us the market is oversold (another reason a rally is likely). 

The Fed has a difficult balancing act at their meeting (Dec. 18 and 19th) this week. If they raise rates too high, the market will protest (as it is doing now). If they stop raising rates, people will wonder if the economy is worse than they are admitting. More than likely, the Fed will raise rates by a quarter point this week but signal they will ease next year. If all goes according to plan, the market will rally strongly on their comments.  (If the market doesn’t rally on the Fed’s comments, then the problems are more serious than anyone realizes, or the Fed has lost credibility. Either scenario is not good).

No matter what happens this week, you have to change with the market. It is not easy to trade a treacherous bear market. Unfortunately, we could be in the 2nd inning of a 9-inning game. That means we have a long way to fall, but it probably won’t happen in a few days or weeks (i.e. crash). The most difficult market environment is a long and slow downward trend with occasional rallies. It is not easy to trade, or invest. On the way down, investors remind themselves to hold even though the pain from losses become excruciating (believe me, I’ve been there). They correctly remind themselves that Warren Buffett holds in bull and bear markets. For traders, the increased volatility is a double-edged sword. On one hand, profits can be made on the way down but it’s extremely difficult. Millions of nervous investors threw in the towel and moved to cash last week to ride out the storm from the sidelines.

Bottom line: The easy days of a bull market uptrend are over, so be ready. You will have to decide if you are a long term investor, trader, or in cash.  (Some will manage all three simultaneously.)

 

 

 

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts: www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: www.wolfstreet.com

Bullish or Bearish? Week of Dec. 10, 2018

Here are the most recent market indicators:

S&P 500 one-month trend = Downtrend (with multiple Pivot Points)

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

RSI: (S&P 500) @39.32 = Near oversold = Moderately Bullish 

Daily Intraday Volatility: Moderate to High 

Comment: As expected, last week’s Monday rally was a short-term blow off top, and the market plunged for the rest of the week. The market fell so fast in the last two days that we’re nearly oversold. Because no one wants to see a major selloff two weeks before Christmas, prepare for an upcoming rally, at least for a few days. Soon, the Fed, the White House, and Wall Street will make positive comments. The Fed has a meeting on Dec. 18th and 19th, so it’s extremely likely they will say something positive to instill confidence. 

However, after the Fed makes positive comments, if the markets keep falling, then it’s much worse than anyone imagines. For now, the Fed is feeling pressured and perhaps is unnerved by recent market action. In addition, they probably know that earnings are not going to be as strong as expected. They’re in a real quandary: If they don’t raise rates, it would scare the market. If they raise rates too much, it could break the market. So they are going to have to talk a good game to avoid a major selloff. For investors’ sake, I hope they succeed.

Bottom line: The easy days of a slow, uptrending market are over for now as volatility has returned in full force. The algos were Wall Street’s friend on the way up, and they will be their opponent on the way down.

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For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts: www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: www.wolfstreet.com

Bullish or Bearish? Week of Dec. 3, 2018

Here are the most recent market indicators:

S&P 500 one-month trend = Major Pivot (Possible Blow-off Top)

S&P 500 has moved above its 200-day moving average, and above its 50-day MA (on Monday): Bullish

RSI: (S&P 500) @54.68+= Near Overbought (likely to become overbought on Monday morning)

Daily Intraday Volatility: High (to Moderate)

Comment: Fortunately, we were prepared for the monster rally last week. Two weeks ago, it was mostly doom and gloom. 

It was surprising that Fed Chairman Powell completely changed the wording about interest rates, fueling an even bigger than normal rally. The futures are telling us the extreme rally will continue on Monday (Dow should open over 400 points). This is not the time to get greedy, and in fact, this is the time to reduce losing positions. 

In reality, not much has changed. Nevertheless, Wall Street and the government wanted a positive year, and they could get their wish. Unfortunately, eventually there will be a price to pay for financial engineering. It is still going to be quite a feat to keep the indexes elevated until January 1, but it’s very possible. Judging from the past, it would not be surprising if we limp into the end of the year with low to moderate volatility (that’s what Wall Street wants). However, we have a slew of economic data that will be released this week, so any negative surprises could send the market in reverse. 

When the selloff returns (don’t forget it’s only been a week since the last one), and it will eventually, investors will wish they had sold some of their stocks. 

What if the current rally continues into next year? In that case, you stay cautiously long while preparing for an even bigger correction. Eventually, all of these financial bubbles are going to pop.

One week does not change a dangerous market environment. The FAANG stocks are still in trouble, debt levels are sky high, the credit markets are showing signs of stress, and the snapback rally appears to be a bear market rally rather than a true trend change. 

Bottom line: Be careful out there whether you are short or long. If you’re not experienced, trade small. One thing for sure: When the selloff does come, it’s going to be one of the most profitable shorting opportunities in many years. As I’ve said in the past, this is the time to learn how to short, buy put options, or get out of the way. 

Reminder: The markets are closed on Wednesday because of the memorial to George HW Bush.

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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. 26, 2018

Here are the most recent market indicators:

S&P 500 one-month trend = Down  (Bearish) The uptrend is broken and the trend is down. Nevertheless, rallies are still likely. 

S&P 500 is below its 50-, 100-day and 200-day moving averages= Bearish

RSI: (S&P 500) @35.50 = Near Oversold. A rally is likely. 

Intraday Volatility: Moderate 

Comment: You already know that last week was the worst since 2011, and the third worst in history for the indexes during Thanksgiving . The FAANG stocks got slaughtered (along with oil and bitcoin), losing over $1 trillion dollars in value. A month ago, investors were giddy about how much money they had been making, and now they’re anxious, but hopeful. As long as the indexes stay below its 200-day moving average, the bears are in control. That being said, we are near oversold (RSI), so a snapback rally is likely.  When that rally occurs (it could be on Monday), wise investors will take the opportunity to reduce positions on losing stocks. 

More than likely, and this is important, most rallies may fail to rise above its 200-day moving average. If the indexes are unable to rise above its 200-day MA, that will confirm we remain in a downtrend. Nevertheless, keep in mind that even in a downtrend, there will be these monster rallies (such as the 900-point Dow rally a few weeks ago). 

I can’t stress how important it is to learn and read about bear market environments, about shorting, and about the 1929 crash. Many investors are going to ride it out, and more than likely, there will be opportunities to get out with relatively small losses. But if this downtrend continues, and it gets worse, many of the most beloved stocks will reach levels that seem unimaginable at the moment. Last week, the FAANG stocks such as Apple lost a year’s worth of gains. If the downtrend continues, it could get worse.

In life, everything changes and so does the stock market. It is obvious to anyone who is paying attention that the market has changed, and that the “easy days” of the last 10 years are over. It is highly unlikely we will return to those days anytime soon. The sooner you realize that we have entered a new phase, and that increased volatility and whipsaws will be the norm, the better prepared you will be.

This is the time to reduce size if trading or increase cash if investing. They say that no one can time the market perfectly, and that is true, but if I see a speeding locomotive heading towards me, I will get out of the way. The flashing warning signs are everywhere, and although there will be still be rallies along the way, the market has entered a dangerous phase that should not be ignored. Here’s something else to think about: Just as we overshot on the upside, it’s possible we will do the same on the downside (not immediately, but in the future). Keep an open mind for any scenario and most important, be prepared.

Other: Wolf Richter wrote a fascinating piece on the bitcoin crash this weekend. It’s an excellent read: https://bit.ly/2AknCYo

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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. 19, 2018

Here are the most recent market indicators:

S&P 500 one-month trend = Variable  (Bearish) The uptrend is still broken, but that could change if the indexes move firmly above their 200-day moving averages and beyond. 

S&P 500 is below its 50-, 100-day and 200-day moving averages= Bearish

RSI: (S&P 500) @46.75 = Neutral 

Intraday Volatility: Moderate 

Comment: This week will be shortened because of the Thanksgiving holidays. Be careful about trading on holiday weeks as it’s easy to get chopped up if you’re not careful. The uptrend has been broken and the FAANG stocks, which were on a nonstop ride to the moon, have been damaged. Investors are still not afraid, and in fact, many are buying on the dip.

I’m going to refrain from calling the current market a bear (or bull) market. Instead, I will call this market dangerous and deceptive. One of the most deceptive parts is that you will often get monster rallies that keep investors hopeful and in the game. It’s very possible we’ll have a Thanksgiving-Christmas rally (if we don’t, it means things are worse than anyone realizes). For the bulls to win this week, they will need to bring the indexes above their 200-day moving averages, and stay above. If they are unable to do this, it would be a danger signal.

Even with the likely rally this week, this is a damaged market and caution is advised moving forward. 

As I’ve repeatedly suggested, this is the time to learn how to buy put options (shorting is for the pros). Some people will buy inverse ETFs, which must be monitored closely. If betting against the market is not in your comfort zone, increasing cash is suggested for diversification and safety. Last week, shorting the rallies worked very well for the first three days. By Friday, the algos took control again and kept the markets calm. 

Bottom line: A holiday rally is possible for Monday and Tuesday (but not guaranteed). Holidays are often tricky to trade, so sometimes the best strategy is to not trade at all (especially from Wednesday to Friday). Have a great Thanksgiving!

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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