TWO NEW BOOKS COMING: On May 24th, 2022, my two newest stock market books will be released. Here is the link to Understanding Stocks (3rd edition): https://amzn.to/3wO761F . Here is the link to How to Profit in the Stock Market: https://amzn.to/35lnjQy . Both are excellent books.
WHAT THE INDICATORS ARE SAYING
This is what the technical indicators are telling us this week:
Short-term trend (DAILY CHART) – LOWER. SPX retreated for the second week in a row, from 4488 to 4392, a 96-point pullback. The “Death Cross” is still displayed on the daily chart (when the 50-day crosses below the 200-day). Even more ominous, SPX is below its 50-, 100-, and 200-day moving averages on the daily chart. Futures are lower on Sunday night, but that could change in the morning.
Long-term trend (WEEKLY CHART) – FLAT. On the weekly chart, SPX is below its 50-day moving average, which is a red flag. On the longer-term weekly chart, SPX is still above its 100- and 200-day, which is a positive. We are watching these important support levels closely.
MACD (WEEKLY) = FLAT. The WEEKLY MACD is still flat with no clue as to which direction it will go next.
RSI: (S&P 500) @44.53 (DAILY) SLIGHTLY OVERSOLD. RSI on the DAILY chart is slightly oversold but not at extreme levels.
Daily Intraday Volatility (VIX) = 22.70 = NEUTRAL: Option traders remain calm, as reflected in a low VIX.
Comment: The biggest financial news last week was that mortgage interest rates for Freddie Mac surpassed 5 percent. That should gradually slow down the housing market. Also, as many people know, inflation has risen sharply, especially food and gas. Only a few months ago, the Fed claimed that inflation was “under control.” That talking point is no longer valid.
The war in Ukraine is causing economic disruptions (and a humanitarian disaster), and it could get worse. Although the stock market is trying to ignore the bad news, it’s not working in the short term.
This week is leaning bearish because of all of the bad news swirling around, but the bulls could still take back control. In the short term, it’s not a pretty picture. The longer-term weekly chart tells us that the market has retreated temporarily although it could recover this week.
Watch to see if SPX can take back its 50-day MA on the weekly chart. If it can do that, then the bulls can win the week. If SPX cannot recapture its 50-day this week, it could get a lot uglier. Be prepared for any scenario.