Bullish or Bearish? Week of April 27, 2020

Mid-term: S&P 500 is still below its 200-day moving average = BearishThe longer it remains below its 200-day MA, the more bearish it is for the market. Nevertheless, SPX did make it to its 50-day moving average, so it’s best to stand back and see how high (or low) it can go this week.

One-month trend = Bullish. SPX has worked hard, with the Fed’s help, to rally back to its 50-day moving average. Let’s see if it’s a bear market rally (most likely) or a continuation of the bull market (unlikely).

RSI: (S&P 500) @ 55.01 = Neutral. The market could go in either direction this week. The Fed is meeting on Tuesday and Wednesday, so anything is possible.

MACD: MACD is even with its zero line and even with its 9-day Signal Line) = Neutral

Daily Intraday Volatility (VIX): 35.93 = Relatively High. Volatility remains elevated. Expect volatile trading days. 

Comment: The Fed meets this week so there should a number of crosscurrents. The market has made a brave attempt to rally back to its 200-day moving average (SPX 3007). With the Fed throwing gobs of money at the stock market, anything is possible.

However, the bad news keeps piling up. Unemployment is at all-time highs, the virus is still swirling around, most businesses are closed, the economy is in shambles, and most people are still hunkered down in their homes.

Maybe the Fed can pull a rabbit out of a hat and convince people that all is well, but I have my doubts. Unless there is a vaccine or some other good virus news, the bears could take control. However, the Fed will do anything possible to keep the market levitated.

Bottom line: Expect a tug-of-war this week between the bulls and the bears.

The two pieces below are brilliantly written. Sven Henrich approaches the market from a technical perspective, while Lance Roberts discusses the fundamental case (with some technical analysis). Be sure to watch the videos in the Henrich blog. Highly recommended:

Sven Henrich @ Northman Trader on the current market environment. He is leaning bearish: https://bit.ly/2Ya47iK

Lance Roberts @ realinvestmentadvice.com on whether the bear market is over: https://bit.ly/2KB6Vxx

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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 April 20, 2020

Mid-term: S&P 500 is still below its 200-day moving average = BearishThe longer it remains below its 200-day MA, the more bearish it is for the stock market. The strong rally continued last week as SPX attempts to reach the 200-day moving average.

One-month trend = Bearish. After a strong downtrend, SPX bounced back strongly. It could be a typical bear market rally, but let’s wait and see if the rally fails.

RSI: (S&P 500) @ 57.36 = Neutral. The market could go in either direction this week so be careful. 

MACD: MACD is slightly below its Zero Line but rose above its 9-day Signal Line) = Neutral to Bullish

Daily Intraday Volatility (VIX): 38.15 = High. Volatility remains elevated. Expect volatile trading days. 

The market has rallied so quickly and strongly that it surprised almost everyone. A number of bullish investors have proclaimed that the bear market is already over. Hmmm.

There is a disconnect between the stock market and the economy. As I’ve often said, the market is the news, and that is true. With the Fed’s help, the market has recovered much of its losses, and is acting as if the economy is strong and all is well.

Unfortunately, reality is going to smack the market like a 2 x 4 in the face. I would be very very cautious about being long at these elevated levels. With the economy in shambles, with millions out of work, with the virus still ravaging the world, and with bad news as far as the eye can see, eventually reality will win.

I wish I had better news but in the short-term, we are going to be in a world of pain. Eventually many of our problems will be solved, but not quickly. Many people are too impatient. They want the bear market to end, for the economy to recover, and for everyone to return back to work. In reality, we are in for a longer term process that will take time a lot of time to play out.

My advice: Be very cautious and defensive in these dangerous times. I would not be surprised to see the indexes fall well below the March lows in the next few weeks or months. It might be hard to believe we could crash again but that is typical of a failed bear market rally.

Once again, here are two pieces that I recommend reading:

Sven Henrich @ Northman Trader on how you should look at one chart to see the truth about the current market: https://bit.ly/2VmnmnB

Lance Roberts, money manager @ realinvestmentadvice.com on how the market has moved into the resistance zone: https://bit.ly/2XMyM5p

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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 April 13, 2020

Mid-term: S&P 500 is below its 200-day moving average = BearishThe longer it remains below its 200-day MA, the more bearish it is for the stock market. Last week was the strongest rally in 45 years but it wasn’t enough to bring the indexes above the 200-day.

One-month trend = Bearish. After a strong downtrend, SPX bounced back strongly. It could be a typical bear market rally, but let’s wait and see.

RSI: (S&P 500) @ 54.62 = Neutral. The market could go in either direction this week so be careful. 

MACD: MACD is below its Zero Line but rose above its 9-day Signal Line) = Bearish to Neutral

Daily Intraday Volatility (VIX): 41.67 = High. Volatility remains elevated. Expect volatile trading days.

Comment: Last week was the strongest rally in 45 years. I wish we could celebrate but the odds are good it is a bear market rally, which typically doesn’t last for long. The futures are lower on Sunday night and so is oil.

The Fed has thrown huge sums of money at every asset class, including the stock market. Meanwhile, the real economy is in deep, deep trouble.

Until the indexes rise above their 200-day moving averages, I would treat every rally with deep suspicion. And until I see evidence of a strong uptrend, I will treat this is a bear market.

Wall Street and Main Street want the bear market to be over quickly, but it’s going to take time to repair the damage. Sadly, we are still suffering from the effects of the virus, and most businesses are still shuttered. Until that changes, I would not be in a rush to be going long right now.

I wish I had more positive news but bear markets are not fun for most people, and this is going to be a bad one. I don’t believe the cheerleaders on TV, or those who proclaim the bear market is over, or those who say we’re going to bounce back soon. I hope they’re right, but I doubt it.

Cash is not a bad place to be until we start solving our financial and health problems. It’s heartbreaking to see the thousands of people lining up to get food from the food banks. A lot of people are hurting.

I can’t remember where I read this but I’m paraphrasing: When things are going good, they go really good. And when things are going bad, they go really bad. Be prepared for some very tough times ahead.

The good news is that one day they will find a cure for the virus, the economy will recover, and the bear market will end. The key is surviving the tough times in the short term, which will be challenging for almost everyone.

I have an article coming out on Tuesday on MarketWatch on the bear market.

The following are much more detailed analysis of the current stock market:

Sven Henrich @ Northman Trader on how the Fed cannot buy its way out of this crisis: https://bit.ly/3cewCzD

Lance Roberts, money manager @ realinvestmentadvice.com on how the bear market is still prowling: https://bit.ly/2VlYhYI

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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 April 6, 2020

Mid-term: S&P 500 is well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market. Until SPX rallies back above, assume we are in a bear market.

One-month trend = Bearish. After a strong downtrend, SPX recently bounced back, but only briefly.

RSI: (S&P 500) @ 42.92 = Slightly oversold. The market could go in either direction this week so be careful.

MACD: MACD is below its Zero Line but rose above its 9-day Signal Line) = Bearish to Neutral

Daily Intraday Volatility (VIX): 46.80 = High. Volatility has skyrocketed as fears increased, but fell last week. Expect volatile trading days until fear subsides.

Comment: It has been hard for many people to believe how quickly our lives, and the world, has changed. Those who can adjust to the changes even under adverse conditions will ultimately thrive. I am hoping that the millions of people whose lives have been upended will find a way to succeed. It will take time, but I am really hoping for the best.

Meanwhile, as long as the indexes are below their 200-day moving averages, I will treat this as a bear market. This is going to be very hard for many people to believe, especially on the days the market rallies.

For over 10 years, we were in a strong bull market, and now it’s over. Many are hoping the bear market will end quickly, and some actually think it already ended. The reality is that if this bear market follows a traditional path, the bear will last anywhere from 6 to 18 months. Judging by the economy and the impact of the virus, I believe it could last longer than most investors realize.

Therefore, if you want to face reality, then rallies should be viewed with suspicion. Although there will be amazing, mind-blowing rallies on occasion, as the bear market continues, the indexes will ultimately grind lower. Those who don’t want to believe or don’t see will keep buying on the dip as the indexes fall. Traders call it “trying to catch a falling knife.” Because the market will drop so slowly at first, bullish investors will feel like a frog being boiled in hot water.

Yes, some stocks will outperform, and if you continue to have a bullish mindset, you might find stocks that are going up. But if this is a traditional bear market, many stocks will continue to drop until the last ones, the Generals, remain. The Generals, the so-called FAANG stocks, will be the last to fall. This will not play out over weeks but over months if not a year or longer.

It’s possible that there will be a cure for the virus in a few months and the economy will come back strong. I hope that happens for the world’s sake. But as long as the indexes are below the 200-day moving average, then it is too risky to go long.

If you are unable to devote the time to trade in a bear market or are frozen in fear, you have several choices. For example, you can hold what stocks or indexes you own until the worst is over. If you own excellent stocks, they may come back in the future. That’s what happened in 2008.

You can also move some or a portion of your money to cash (hopefully on rallies). And finally, you can trade, but trading a bear market is difficult, so trade small if you choose this route. I do not recommend shorting individual stocks if you are a beginner.

Bottom line: It’s a tug of war between an awful economy and the Fed. As a result, each day is a new surprise. If I am right and this is a true bear market, selling into rallies is the strategy of choice. Warning: This is not easy to do! Most important, follow the market. Right now, Mr. Market is confused and injured, so anything is possible. Please be careful out there.

Note: Futures are screaming higher on Sunday night. Let’s see how long the rally lasts. Remember, this is a four-day trading week.

Finally, this is worth reading: Lance Roberts, money manager at (realinvestmentadvice.com), gives an excellent analysis on how the odds are good this is a bear market: https://bit.ly/3aLhZ6H

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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 March 30, 2020

Mid-term: S&P 500 is still well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market. Until SPX rallies back above, assume we are in a bear market.

One-month trend = Bearish. After a strong downtrend, SPX and the other indexes bounced back last week the fastest since 1931. Consider it a bear market rally until SPX rises above its 200-day moving average.

RSI: (S&P 500) @ 43.58 = Slightly oversold. The market could go in either direction this week so be careful.

MACD: MACD is below its Zero Line but rose slightly above its 9-day Signal Line) = Bearish to Neutral

Daily Intraday Volatility (VIX): 65.54 (Extremely High) = Volatility has skyrocketed as fears increased. Expect volatile trading days until panic and fear subsides.

Comment: It’s going to be another volatile week as the Fed’s infusion of capital into the market competes with bad news about the virus and economy. Even with the rally, we are still oversold (the crash was the fastest and strongest in history).

In a typical bear market, the markets will have a severe plunge like we just experienced, then rally strongly, followed by a longer, more severe pullback that can last months if not years. No one can predict if we will follow this model, but it’s possible.

Unfortunately, many people are still in denial, and are hoping we will return to the old time highs (one financial publication even proclaimed that the bear market was over). Don’t be surprised if we rally strongly on some days but be suspicious.

If you are trading or investing, you must be brutally honest. You may have noticed that many traders are “selling the rally,” which is typical in a bear market. In a bull market, investors and traders will “buy the dip,” but do the opposite in a bear market. Again, the bear market rally could continue into this week (it’s possible although the futures are lower on Sunday night).

Bottom line: No one can predict what is going to happen so all you can do is sit back and be ready for any scenario. With the virus taking up all of the news coverage, which will soon be followed by dreadful employment news, it’s going to be a struggle in the near future. Expect rough times before we see a light at the end of the tunnel.

Bottom line: These are difficult times for everyone. It’s distressing how quickly the economy collapsed, and how so many jobs were lost. I truly hope that the Fed knows what it is doing.

Read the excellent analysis below for a more detailed take on the future.

Sven Henrich (Northman Trader) on the future of the stock market: https://bit.ly/3acjfiH . Be sure to watch the video at the end of the commentary.

Lance Roberts, money manager at (realinvestmentadvice.com), on how the bear market may play out: https://bit.ly/33UPTmE

Finally, although the following video is not related to the stock market, it is worth watching (57 minutes). It’s from a New York doctor who tells exactly how to protect you and your family from the virus by following some basic rules. It will actually reduce your fears as he tells the facts.

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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 March 23, 2020

Mid-term: S&P 500 is well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market. Until SPX rallies back, assume we are in a bear market.

One-month trend = Bearish. We are in a strong downtrend due to a pandemic, which has decimated our economy in the short-term.

RSI: (S&P 500) @ 31.57 = Extremely Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.

MACD: MACD still in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish

Daily Intraday Volatility (VIX): 60.54 (Extremely High) = Volatility has skyrocketed as fears increased. Expect volatile trading days until panic and fear subsides.

Comment: Futures are plunging again on Sunday night as investors watch their 401k profits disappear. Eventually, the selling stops and there’s a tradeable bottom. These are not easy times.

We are in uncharted territory as the virus takes a physical and financial toll on the world. Last week was particularly brutal, especially last Monday when the Dow fell by over 3,000 points. I’ve never seen numbers that large, which reflects the fear and panic many investors are feeling.

I can’t prove it but I believe a lot of the selling is due to forced liquidations and margin calls by hedge funds, at least five that blew up last week. From anecdotal evidence, it appears as if many buy and hold investors are sitting tight with their stocks and mutual funds, perhaps because they remember how quickly the market bounced back after 2008.

At this time, I do not know which model the market will follow. If it’s the 1987 bear market model, we will bounce back fairly quickly, within months. The 2008 bear market model was longer and more painful, but the market bounced back after a year or so. The worst case example is the 1929 crash and bear market. I truly hope we don’t follow that model, when the market not only crashed, but continued to fall for the next three years. No one can predict when the current market will “bounce back,” so until then, selling stocks on rallies is not a bad strategy (Lance Roberts has specific advice in the link below).

These are scary times but you must remain calm and clear-headed. Hopefully, you have a sizable amount in cash that will allow you to buy at the “bottom.” Do not be fooled into buying too early, however, as many have tried and failed. Trying to time the “dip” is nearly impossible, so be patient and wait to see how this plays out.

Unfortunately, we are in for rough times ahead in the coming days, weeks, and months. If you can afford it, it would not be wrong to sit this out and wait until the selling stops. Those who want to trade can find opportunities, but trade small.

Bottom line: No one can predict the future, especially during times like this. Your money can always be replaced, but not your lives. Take steps to protect you and your family. Once this virus is eradicated, and our economy is repaired, there should be excellent opportunities to buy stocks at low prices in the future.

Read the following pieces from two analysts who have been warning us of the dangers for months. They continue to give excellent advice:

Sven Henrich (Northman Trader) on stock market fears: https://bit.ly/3acjfiH

Lance Roberts, money manager at (realinvestmentadvice.com), on how the bear market will be with us for a while: https://bit.ly/2U9Fz6Y

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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 March 16, 2020

Mid-term: S&P 500 is well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market.

One-month trend = Bearish. We are in a strong downtrend and it’s still as ugly as I’ve ever seen. I’m not sure what the Fed can do to reverse this crash-like plunge.

RSI: (S&P 500) @ 37.67 = Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.

MACD: MACD in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish

Daily Intraday Volatility (VIX): 57.83 (High) = Volatility has skyrocketed as fears over the virus and the market plunges have increased. Eventually, fear subsides, but for now, VIX is at extreme levels = Bearish.

Comment: Sunday night, futures are limit down after the Fed cut interest rates to near 0. I don’t ever remember a situation like this. Although the futures will likely plunge at the open, there is a chance there could be a reversal in the near future, but I wouldn’t bet on when it will happen. Beginners should stay far away from this dangerous market.

This is a trader’s market, and in the short-term, buy and holders could get crushed. I only hope you aren’t on margin, or didn’t bet everything on a dip. Although I don’t make predictions, I do study market history. As long as the indexes are below the 200-day moving average, it’s a bear market, and I will treat it as such.

Bear markets are not easy to trade. One day you’re plunging, the next day there’s a rally. As you can tell from the extreme volatility, you have a confused market with the added uncertainty of a pandemic ravaging the globe. It could get worse before it gets better, financially as well as physically. This is the time to study bear markets, and to make a trading or investment plan not only for the stock market but also for you and your family.

You can grit your teeth and hold, which I’m sure many will do, knowing that after 2008 we started a 10-year bull market. There is no evidence that will be repeated, however. You can also reduce what you own on every bounce. It would not be wrong to increase cash positions on rallies.

No one can tell you what is going to happen in the near future, but at the moment, it doesn’t look good. How long the bear market and coming recession lasts is unknown. One day the virus will be eradicated, and when that happens, we will focus on building our economy again. Until then, it could be a very rough road.

Bottom line: This is not the time to panic, but to prepare and plan for the future. Although I’m not surprised that the market bubble popped, I am surprised by the actions of the Fed, which have increased uncertainty and confusion. I truly hope they know what they are doing.

Read the following pieces from two analysts who have been warning us of the dangers for months. They continue to give excellent advice:

Sven Henrich (Northman Trader) on the most recent market collapse: https://bit.ly/39ReACQ

Lance Roberts, a money manager at (realinvestmentadvice.com), on how to invest during a bear market: https://bit.ly/2Qyg6Cj

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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 March 9, 2020

Mid-term: S&P 500 remains below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market.

One-month trend = Bearish. We are in a strong downtrend and it’s about as ugly as I’ve seen since 2008.

RSI: (S&P 500) @ 35.62 = Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.

MACD: MACD in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish

Daily Intraday Volatility: 41.94 (High) = Volatility skyrocketed to as high as 54 before pulling back = Bearish. Although fear and volatility doesn’t last forever, the extreme volatility the markets are experiencing is similar to a car traveling at 100 miles an hour while falling apart. Sven Henrich explains it better than me (link at end of this piece).

Comment: The Sunday night futures are plunging to extreme levels at this writing. I don’t remember seeing the market plunge this often since 2008. As long as the SPX remains below the 200-day moving average, we are in a correction, and perhaps a bear market (we will have to see how low the markets go).

As I wrote a few weeks ago, although we still have a ways to go before we bottom, for many stockholders, it will feel like a crash. As you probably know, oil is crashing along with airlines and the travel industry. The Black Swan was the virus, and it is just getting started in the U.S.

If we do enter a bear market, remember that there are often strong one-day rallies like last week that can blow your socks off. If you’ve been following my advice for the last few months, you’ve built up a cash position and will be ready to buy when we hit bottom.

One thing for sure: Trading in a bear market is not easy. For many, it’s easier to diversify into cash and wait (it doesn’t mean to sell all in a panic). I interviewed Peter Lynch a few years ago and when I asked him how he handled bear markets, he said that although they are not fun, you grit your teeth and wait until it’s over. He said if you know what stocks you own, then you should be in good shape when the bear market ends.

We are going through rough times and there is no playbook right now. One day they will make a vaccine for the virus, and we will all celebrate. The market, unfortunately, may feel the effects of a popped bubble for many years. There will be a lot of blame to go around. The Fed gets a lot of the blame for cutting interest rates during the good times (after being pressured by President Trump). Now that we need emergency measures, the Fed has limited tools. In other words, it’s a perfect storm.

I hope a bottom is reached soon, but you cannot trade or invest based on hope. Keep your eye on the 200-day moving average. If we’re fortunate, and the central bankers devise a coordinated response, the markets will recover in the near future. Unfortunately, added to the economy’s woes are oil, which is crashing to $30 a barrel on Sunday night.

If this is truly a bear market, and it’s too early to proclaim it is, the old strategies won’t work. Buying on the dip will be difficult, and although there will be dead cat bounces, the market will keep falling until it hits bottom. The good news, as investors have repeatedly said, is that the “market always comes back.” That is true, but if you own the wrong stocks, your portfolio might not.

Note: I wish that everyone stays safe as this virus spreads across the world. We are in uncharted times right now so trying to predict what will happen in the future is useless. Stay calm and make plans for yourself, your family, and your portfolio.

Read the following excellent pieces from two analysts who have been warning us of the dangers for months:

Sven Henrich (Northman Trader) on the spiking VIX, which is telling us the worse is yet to come: https://bit.ly/3340Kdr

Lance Roberts, a money manager at (realinvestmentadvice.com), on navigating the unknown: https://bit.ly/333xTX2

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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 March 2, 2020

Mid-term: S&P 500 fell below its 200-day moving average = Bearish  

Short-term: S&P 500 sliced below its 50-day MA early in the week = Bearish

One-month trend: Uptrend has been broken and SPX is below its 200-day moving average. The Fed will step in with lower interest rates and perhaps QE4. Will that be enough to bring the indexes above the 200-day moving average? No one knows.

RSI: (S&P 500) @ 19.16= Extremely Oversold. I don’t ever remember seeing the RSI this low. Expect a snap-back rally, and soon.

MACD: MACD plunged below its Zero Line and plunged below its 9-day Signal Line = Bearish

Daily Intraday Volatility: 40.11 = Volatility skyrocketed = Bullish (Fear doesn’t last forever).

Comment: In retrospect, the warnings were everywhere. For example:

  1. A few weeks ago, the number of call buyers skyrocketed (i.e. they went long the SPX), the most call contracts in history.
  2. Market made all time highs a few weeks ago.
  3. Brokerage commissions went to $0, causing retail investors to pile into the market during the last month.
  4. Long-time bears that I knew threw in the towel and went long.
  5. Speculative stocks like SPCE and TSLA made all time highs while FAANG stocks struggled.

Now that the market plunged the most in a week in history, it’s easy to look back and see the signs. In retrospect, it really was a melt-up top, and retail investors,, as well as many pros, got caught holding the bag. It was a brutal week, and although I expected a pullback, I didn’t believe it would plunge that much.

And now, the market went from being overbought to oversold. At this writing, Sunday night, the futures are falling. I remember in December 2018 when the indexes plunged, and by January 2019 the Fed entered with their tools and brought the market higher and higher all year long.

The difference this time is the virus. That is the black swan that no one expected. Half the country is scared, the other half doesn’t seem to care. Because of the virus, the Chinese economy looks bleak, but the United States nor the rest of the world will be able to avoid financial damage.

However, the market is so oversold right now that I do expect the Fed to enter at some point on Monday or Tuesday and cut interest rates. I’d be shocked if they didn’t do something. That is why I expect a bounce that could last at least a day, and likely longer. Volatility has returned to the market and the Fed is going to do their best to calm the markets down.

Unfortunately, if the virus spreads to other states (in the U.S.) and to more countries, all bets are off. I do know that fear and panic don’t usually last long, but these are unusual times.

Sadly, there are too many unknowns right now, mostly dealing with the virus. That is why making predictions right now is difficult if not impossible. If we do rally, observe how long it lasts. If that rally fails, it’s going to get worse before it gets better.

Investors remember the previous pullbacks and know how fast the market recovered, and even went higher. “I’m in it for the long haul,” I have heard. “The market always comes back.” I truly hope they are right.

I also am a student of stock market history, and I know that the market doesn’t always follow the script. After 11 years of the greatest bull market in history, the market once again taught investors and traders a very hard lesson. It does that every 10 years or so.

Bottom line: We are in uncharted territory right now with a virus looming in the air. Although I expect a snap-back rally (we are obscenely oversold right now), I have no idea how long the rally will last. Keep your eye on the 200-day moving average. In the past, the market bounced back quickly from rough times, but this time we have a black swan, so anything is possible. Take care and good luck, we are in for a rough ride.

Read the following excellent pieces from two analysts who had been warning us of the dangers:

Sven Henrich (Northman Trader), who has been spot on with his analysis the last few months. He discusses the 2020 crash: https://bit.ly/38fMnnv

Lance Roberts (realinvestmentadvice.com), who has warned for months to take money off the table and increase cash. Lance discusses what to do next: https://bit.ly/39h7Ttw

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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 Feb. 24th, 2020

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

Short-term: S&P 500 is above its 50-day MA but pointing lower = Bearish to Neutral

One-month trend: Uptrend has been broken. Watch what happens when SPX hits its 50-day moving average. Will it bounce or slice through like butter?

RSI: (S&P 500) @ 53.66= Neutral

MACD: MACD is above Zero Line but moving below 9-day Signal Line = Neutral

Daily Intraday Volatility: 17.08 = Neutral to Bearish. Volatility appears ready to rise even more.

Comment: It shouldn’t be a huge surprise that the futures market is showing an ugly opening Sunday night (-1.5% and falling). As I and others have warned for weeks, if not months, an extremely overbought market, recessionary signs, a Fed that has pumped liquidity into the market, extremely low interest rates, and high levels of consumer and government debt is a dangerous cocktail.

The sad part is that a virus could be the pin that pops the bubble. The cost to humans is already a tragedy, and it appears as if it could get worse. More than likely, this will cause a short-term or long-term recession. No one knows how long this disaster will last, or if the virus spreads even farther. There are too many unknowns.

Many investors, who have been spoiled by an 11-year bull market, will likely grit their teeth and hope that the Fed protects them. I’m not saying we are definitely headed to a bear market. I’m saying that the market is dangerous and if it did fall by a significant amount in the weeks and months to come, I would not be surprised.

I would also not be surprised if SPX dropped to its 200-day moving average in the future. That would seem like a crash to many investors, but it would be a run of the mill pullback.

The main point is that, as I’ve warned before, it’s a good time to sell some of those winners and raise some cash (but wait until the panic subsides). Evaluate what you own and be prepared for some rocky times ahead. The Fed will do whatever it takes to keep the markets calm, and prevent mass selling, but unfortunately they don’t have a lot of tools to work with. (Perhaps they will announce QE5 while also lowering interest rates).

Bottom line: As I wrote last week, the easy days are over and expect a more difficult trading and investing environment in the future. Don’t panic, but prepare for a market correction as well as for a possible pandemic (that would be a worst case scenario).

I really wish the best for everyone, and again, I wished that it wasn’t a virus that might pop the market bubble. All we can do is hope for the best while making preparations to be physically and financially safe.

I recommend that you read the following from Sven Henrich (Northman Trader) about the market’s turn for the worse on Friday: https://bit.ly/2HQT7xe

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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