This is what the technical indicators are telling us this week:
One-month trend = Bullish. SPX broke out of its sideways pattern and is well above its 200-day MA. Note: SPX is at 3351 on Sunday night, higher from a week ago. The 200-day is at 3056.
Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA.
RSI: (S&P 500) @ 68.90= Overbought. A few more points higher and we’re in the danger zone.
MACD = Neutral. MACD is above its zero line and and still even with its 9-day Signal Line.
Daily Intraday Volatility (VIX): 22.21 = Danger Zone. VIX got crushed last week thanks to the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is no fear. That’s not good.
Comment: This is really something to see. The overbought market has gotten more overbought. The RSI and VIX are flashing warning signs, so be prepared for a sudden reversal in the near future.
Ask any stock market veteran: They’ve never seen anything like this. I have my suspicions about what is happening, but the facts are that volatility has gotten crushed since March. That means buy and hold investors are celebrating while many speculators are sitting on the sidelines, waiting for better opportunities.
The economic and virus news continues to be dreadful as the market comes close to hitting all time highs. Either the economy is not really in bad shape or the stock market is lying. But the stock market and economy can’t both be right. Something has to give…eventually.
Bottom line: I’m speechless. I’m on the sidelines waiting for better trading opportunities.
Meanwhile, Lance Roberts will try to make sense of this very unusual market with his latest blog entry:
Lance Roberts @ realinvestmentadvice.com says the bulls have a very loud megaphone: https://bit.ly/3ivkcql
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