Bearish or Bullish? Week of Feb. 10, 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 could be forming a double-top: Neutral

One-month trend: After a brief pullback, SPX is trying to recapture its uptrend. It’s too early to say if it will be successful.

RSI: (S&P 500) @ 59.59= neutral

MACD: Above Zero Line but Signal Line is even with MACD line = Neutral

Daily Intraday Volatility: 15.47 = Neutral to Bearish.

Comment: Last week, we went from the edge of the abyss to a four-day rally that miraculously saved the indexes. The market was set to fall below its 50-day moving average last Monday when the bulls arrived in full force. Unfortunately, although the market looked bullish on the outside, underneath the surface it was not that pretty. Only a handful of stocks kept the indexes from falling, but the public doesn’t care. As long as the Dow is climbing, all is good.

Nevertheless, there are some disturbing signs that all is not normal. Obviously, we are watching the virus to see if it spreads farther and faster. The reality is that it is already causing financial pain in China, along with the human toll. It’s too early to say this is a “black swan,” but it does need to be watched closely.

The market has moved up too far and too fast in the last month or two, so caution is advised. A short-term double top formed in the SPX, which is a negative sign. However, it’s also possible the market could blast past resistance and move even higher (negating the double top). No one knows what is going to happen, but volatility has arrived, which is a double-edged sword.

Sign of a top? I have a neighbor who has been bearish on the market for the last 10 years. He hid out in cash and bonds. He told me yesterday that a month ago, he threw in the towel and put 50% of his money into the stock market. When the most adamant bears turn bullish, that is often a warning that a top is near. Not guaranteed but something to think about.

For a more detailed analysis of the current market environment, I once again turn to Lance Roberts and Sven Henrich, who wrote excellent pieces about the current market:

Sven Henrich (Northman Trader):

Lance Roberts (realinvestmentadvice):


For daily results of multiple indicators, read Yardeni Research:

For insightful analysis of the stock market, read Lance

For insightful analysis of economic conditions, read Wolf

I will notify you of my posts via twitter@michaelsincere

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