Bullish or Bearish? Week of Sept. 23, 2019

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

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

S&P 500 one-month trend: SPX uptrend is somewhat intact but hitting resistance at all-time highs.

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

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.35 = Extremely Low

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

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

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

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

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

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

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

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


Bullish or Bearish? Week of Sept. 16, 2019

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

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

S&P 500 one-month trend: SPX uptrend is up but hitting resistance at all-time highs.

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

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 13.74 = Low

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

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

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

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

Here are the two articles that I recommend reading:

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

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

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

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

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


Bullish or Bearish? Week of Sept. 9, 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

______________________________

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

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

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


Bullish or Bearish? Week of Sept. 1, 2019

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

S&P 500 is below its 50-day MA but above its 100- day moving average = Neutral

S&P 500 one-month trend: SPX broke its uptrend, went lower, and is now stalled in a sideways trend.

RSI: (S&P 500) @ 51.92 = Neutral

MACD: Below Zero Line but slightly above Signal Line = Neutral

Daily Intraday Volatility: 18.98 = Neutral. Volatility is elevated but not extreme.

Comment: As expected, the computer algos bought on the dip last week and brought the indexes close to the SPX 50-day moving average. How do I know it’s computer algos? Because volume was pitifully low all week. The latest algo game is gunning the futures market higher before the open. After the market opens, it often spikes higher, and then moves sideways the rest of the day. Bottom line: There has been little buying and selling by individuals and institutions. The good news for the bulls is there has been no panic. The bad news is there hasn’t been strong buying by individuals or institutions. (Note: S&P futures are lower on Monday night but nothing is certain until the open).

Right now, no one can predict which way the market will go. The indexes must rise above their 50-day moving averages (and stay above) for any hope of a strong bullish uptrend. Based on what I see on a three-month chart, this market is struggling. It’s as if most traders and investors are taking a “wait and see” approach to the market. That is reflected in the “neutral” settings on most of the indicators above.

For a more detailed and technical analysis of the current market, I’d like you to read the following piece by Sven Henrich (Northman Trader). He gives a bearish view of the market backed up with facts, and he could be right. Here is his excellent analysis: https://northmantrader.com/2019/08/31/thunderdome/

Jerome Powell speaks at 12:30 p.m. ET on Friday, and the jobs report will be released earlier that day. Obviously, this should be another volatile week, especially on Friday. One thing we can all agree on: this has been a difficult trading and investing environment, and that will continue for many months longer.

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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 Aug. 26, 2019

S&P 500 is above its 200-day moving average but pointing straight down = Neutral  

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

S&P 500 one-month trend: SPX broke its uptrend and is in a downtrend.

RSI: (S&P 500) @ = 40.78 = Slightly Oversold

MACD: Below Zero Line and below Signal Line = Bearish

Daily Intraday Volatility: 19.87 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has increased.

Comment: A lot of pundits and financial know-it-alls are going to tell you “why” the market went down last week. To tell you the truth, knowing “why” the market goes up or down is not helpful. What is helpful is knowing “what” the market is doing. That will be our focus today.

As I’m writing this on Sunday night, the SPX futures are lower, but there is no panic. As you know, we fell hard last week, especially on Friday, and we’re getting closer to the S&P 500 200-day moving average (at or around 2800). As SPX gets closer to this line-in-the sand support level, the algos will do anything possible to defend it. The odds are very good we will bounce at the 200-day moving average (assuming it gets there).

The only way SPX slices below the 200-day in the next few days is if there is panic selling. So far, all of the selling has been orderly and calm. In fact, if it wasn’t for the algos buying on every dip, the selloff last week would have been much worse.

But, based on the broken uptrend, the extreme negativity, the low PMI, and a struggling economy, the bull market appears to be over. However, the programmed buy-on-the-dip algos will keep defending until investors start panic selling, and that hasn’t happened yet.

This is a very dangerous market and difficult to navigate. If you’re a complacent investor, you will remind yourself that the “market always comes back,” which are dangerous words in a recession and bear market, especially if you own individual stocks. And if you are a trader, one tweet can cause the market to rocket higher or plunge. Yes, it’s dangerous for both investors and traders.

To survive, you must use hedges if you are a trader, and diversify if you are an investor. If you make an all-or-nothing bet on one side or the other, you are gambling, not trading. Nevertheless, as we enter the difficult months of September and October, the odds are with the bears (based on the indicators above and dire economic indicators such as PMI and the inverted yield curve). However, the algos will do everything in their power to run the market back to the 50-day moving averages. They might fail this time, but they will do their best.

Volatility is here to stay for a while, and no one can predict what the market will do in the near future. It’s times like these that I like to raise cash, but that is me.

Bottom line: Keep your eye on SPX 2800 and watch the algos defend it. If SPX slices below 2800 and stays below, it will get a lot uglier a lot faster. This week should be another wild ride (on some days), so be ready for anything.

Options Alert: There is a lot of option interest for the SPY October 280 put.

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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 Aug. 19, 2019

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

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

S&P 500 one-month trend: SPX broke its uptrend and is in a downtrend. The algos are going to have to bring the indexes back to the 50-day to save this market.

RSI: (S&P 500) @ = 44.87 = Neutral

MACD: Below Zero Line and below Signal Line and pointing lower = Bearish

Daily Intraday Volatility: 18.47 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has increased.

Comment: For the first time in years, many pundits were talking about a recession over the weekend, so the White House pushed back on Sunday. As I noted several weeks ago, the signs of a recession are coming closer, and for many, it was the inverted yield curve that confirmed the economy is struggling. The only thing holding the economy up are consumers, who are still buying online, and jobs (there haven’t been massive job losses). 

Last week was a wild and ugly week. If it wasn’t for the buy on the dip algos, it could have been a whole lot worse. The trend was broken as SPX dropped below its 50-day and 100-day moving averages. The 800-point Dow shellacking last week made a lot of people nervous (this is the second major one-day selloff in two weeks), and the indexes only recovered some of its losses. And yet, there is still no panic. This tells me there is plenty of room for the indexes to fall as we enter September and October. 

With all of the danger signs swirling about, do not forget that the buy on the dip algos will do almost anything to keep this market propped up by any means possible. If it means a tweet in the middle of the day, a tax cut, a 50 basis point cut by the Fed, or QE, it will be done.

We are going through very, very dangerous and unprecedented times. The tug of war between the algos vs nervous sellers will continue into the fall. The good news: Retail investors are still holding tight and are not panicked at this time. 

For the next three or four months, you must be on high alert for some very crazy times. If you make money with puts (or shorting), take profits fast. For the last 11 years, the buy and hold strategy has been a winner. In my opinion, in the future this strategy will not work like it did before (perhaps for years, but this is pure speculation on my part). 

Keep in mind that Jerome Powell is in Jackson Hole this week and will be speaking next Friday at 10:00 a.m. ET, so prepare for occasional volatility spikes all week, and especially on Friday.

If you want to read some very thoughtful but scary analysis, click on the following links. These analysts say it a lot better than me (be sure to also read the links from Wolf Street and Lance Roberts below) for additional insights. This is not the time to panic, but to get educated.

From Northman Trader: https://bit.ly/2Z095jT

From Victor Dergunov (Seeking Alpha): https://bit.ly/30gedN5

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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 Aug. 12, 2019

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

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

S&P 500 one-month trend: SPX broke its uptrend during the week, a bearish signal. However, there should be attempts to bring SPX back above its 50-day moving average.

RSI: (S&P 500) @ = 44.73 = Neutral

MACD: Below Zero Line and below Signal Line = Bearish

Daily Intraday Volatility: 17.97 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has been spiking.

Comment: What a wild week! To refresh your memory, Monday started off with a 700 point Dow shellacking, followed by rallies and selloffs the rest of the week. On Wednesday, the indexes were crashing when the algos came in for a rescue, and turned the indexes positive in the afternoon.

The volatility should continue as we enter the volatile months of September and October. It will give investors indigestion (but so far there has been little panic) as the indexes gyrate. Traders can do well but it’s extremely dangerous, especially if buying puts. Why? Because the algos constantly pounce to keep volatility low and run the market higher. The reality is that buyers were mostly absent, but the algos were ready and waiting to bring the market higher at every opportunity. That is one of the reasons it’s so risky to buy puts, so if you do make a profit, sell quickly.

Expect volatile days in the coming days and weeks. There are many signs of a recession except that consumers are still buying (mostly online), and there haven’t been job losses. If these two take a hit, then the recession will have arrived.

Bottom line: Navigating this market is very difficult right now, and there are many crosscurrents. Investors would be wise to increase cash (but not sell everything). There is a chance the indexes could rally strongly from here, but the odds are not good right now. As I wrote last week, every bull market is followed by a bear market. After the longest bull market in history, what do you think is going to happen next? Unfortunately, based on stock market history, individual retail investors will hold their darlings right until the bitter end.

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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 Aug. 5, 2019

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

S&P 500 is equal to its 50-day moving average = Neutral

S&P 500 one-month trend: SPX fell back to its 50-day moving average = SPY hit all-time highs and reversed direction.

RSI: (S&P 500) @39 = Oversold

MACD: Above Zero Line but below Signal Line and pointing lower (Neutral to Bearish)

Daily Intraday Volatility: 17.61 (Neutral). Volatility spiked last week, as expected. It was in the basement for far too long.

Comment: If you’ve been following my blog for the last few weeks, you know that last week’s pullback was expected. With RSI so high, the VIX so low, sentiment so bullish, and SPX at all-time highs, a pullback was bound to happen, and it did. Wall Street wasn’t pleased with the quarter point cut, nor was the President, who fueled the downside with additional tariff threats against China.

As I wrote several weeks ago, there are signs we are in or headed towards a recession. There are so many warning signs and indicators it’s hard to keep track. At the moment, the only positive sign is that consumers are still buying, and job losses are minimal. Keep an eye out for clues, because if there are layoffs, it will confirm what many other indicators are reflecting.

Because we went down so hard and fast last week, a bounce is expected this week, but it may not last long. We are coming into the volatile months of September and October with a confused Fed, trade wars, overall nervousness, and near all-time highs in the stock market. A lot could go wrong.

What to do? Let me pass the baton to Lance Roberts’ latest piece, which gives excellent advice plus sobering statistics. Here is his latest: https://bit.ly/31g6FtT

In addition, read Wolf Richter’s latest (click on link below) for a frightening look at heavy truck sale orders (they have plunged by 81%).

Bottom line: Expect a more volatile few weeks and months as nervous investors hope for the best in a very difficult market environment. After a 11-year bull market, does anyone really expect it to continue indefinitely? Those who have never experienced a bear market are going to get a wakeup call and many lessons. Knowing investors the way I do, they won’t be selling their favorite stocks anytime soon no matter how low the market goes.

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

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

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


Bullish or Bearish? Week of July 29, 2019

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

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

S&P 500 one-month trend: SPX is at all-time highs = The trend is up but it could reverse depending on what the Fed says and does this week.

RSI: (S&P 500) @64.29 = Slightly Overbought

MACD: Above Zero Line and below Signal Line (Neutral)

Daily Intraday Volatility: 12.16 (Extremely Low). Volatility is in the basement, which cannot last for too long.

Comment: This week it’s all about the Fed, in particular, on Wednesday at 2:00 p.m. ET. That’s when we’ll find out if the Fed will cut interest rates by .50% (unlikely), .25% (likely), or not at all (unlikely).

The strange part is that, if the Fed cuts, it will be the Fed’s first rate cut in over a decade, at the same time that the S&P just hit an all-time high. You almost have to read that twice: The Fed is cutting interest rates while the indexes are at all-time highs. Either the Fed knows something we don’t, or they are succumbing to political pressure, or both.

All I know is that when, not if, the next recession comes (and there are signs it’s getting closer), the Fed will have less tools than in the past to reduce the pain. I imagine they will cut to 0% if they panic.

Although the Fed may or may not give the markets a boost this week depending on what they do, with indexes at all-time highs, with VIX in the basement, and RSI climbing towards 70 again, a major pullback is coming soon (no one can predict when but it’s coming). Add in the fact that because September and October are typically rough months for the market, a dislocation is extremely likely.

Bottom line: The Fed controls the market this week, so follow the leader. Even if the Fed gives Wall Street what it wants, a pullback is coming. The unknown question is how overbought we’ll get before we reverse 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 July 22, 2019

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

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

S&P 500 one-month trend: SPX stalled and reversed at all-time highs. The indexes are hitting major resistance at all-time highs.

RSI: (S&P 500) @55.81 = Neutral

MACD: Above Zero Line and below Signal Line (Neutral)

Daily Intraday Volatility: 14.45 (Subdued). Volatility is still extremely low.

Comment: Unless there is an unexpected geopolitical or financial catastrophe, the only game in town is the July 30-31 Fed meeting. The market is expecting a 50 basis point cut (.50%), and anything less will be a disappointment to Wall Street. The word on the Street is a .25% cut is the most probable.

For the Fed to lower interest rates when the market is at all time highs means either the economy is in much worse shape than they are letting on, or they are succumbing to political pressure. Neither scenario is bullish for the market.

Investors are hoping the Fed can prevent a recession or bear market by lowering interest rates. The Fed can distract investors, and perhaps delay the inevitable, but when the next bear market arrives, it’s going to be vicious. It will also damage millions of investors’ portfolios.

After looking at the clues and indicators, I am convinced that a short-term pullback is extremely likely. In addition, a bear market is drawing ever closer. And yet, the best advice I can give you is to sit tight and do nothing…for now. I went back and re-read the writings of an expert on bear markets, Jesse Livermore, who lost several fortunes by shorting too early. He finally got it right in 1929 but before then he was always plunging on the short side too early and losing money. None of us want to make that mistake.

Bottom line: A huge dislocation is coming but do not act too early. There is plenty of time to profit from a falling market. Now is the time to learn about buying put options (less risky than shorting individual stocks). And if you are new to buying puts or shorting, start small, very very small. Trading a bear market is extremely challenging, and for many, moving primarily (not all) to cash is the easiest and most prudent solution in these uncertain times.

Caveat: There is always the chance that Jerome Powell will please Wall Street with a .50% cut next week, so in that case, the bubble will grow even larger, and get even more dangerous.

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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