Mid-term: S&P 500 is still 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. 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
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