Mid-term: S&P 500 is 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. 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
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