Bullish or Bearish? Week of August 8, 2022

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Short-term trend (DAILY CHART) – FLAT. After a spectacular two-week rally, SPX stalled last week, rising from 4131 to only 4145, a mild 14-point rally. The jobs report was excellent last week but another rate hike is coming next month from the Federal Reserve (or so they are hinting). Nevertheless, SPX is still below its 200-day MA, and as long as it remains below, be cautious. Note: Futures are slightly lower on Sunday night (but that could change in the morning). 

Long-term trend (WEEKLY CHART) – POSITIVE. On the weekly, SPX is still above its 200-week MA (but below its 50-week and even with its 100-week), a mildly positive long-term development.

MACD (WEEKLY) = MIXED . The WEEKLY MACD rose above the 9-day signal line but is still below the zero line. Mixed Signals. 

RSI: (S&P 500) @64.48 (DAILY) SLIGHTLY OVERBOUGHT.  RSI is still overbought but not at extreme levels. 

Daily Intraday Volatility (VIX) = 21.15= COMPLACENT: The VIX is still low, which reflects the no-fear, What, Me Worry? market environment. 

Comment: After a three-week rally, the SPX is due for a rest, and perhaps a pullback. Even with the positive jobs numbers (it was a shocker to the upside), the rising interest rate environment “should” put a damper on stocks over the next month. In reality, no one knows how the market will react to the news.

If you’re a contrarian trader, you will either be in cash or looking to trade against the stock market (with put options, hedges, or inverse ETFs). If you’re a long-term investor, you just keep putting a set amount of money in an index fund (or stock) each month no matter if the market is up or down. Hint: No matter what strategy you use, be sure to “pay yourself first” by keeping an emergency cash fund. This is simple but very important advice.

I just read that Berkshire Hathaway, while operating profits jumped by 39 percent, Warren Buffett’s conglomerate lost $53 billion on its investments last quarter. Ouch! Even the Wizard of Wall Street can lose money in this market. (Source: CNBC).

I dislike repeating myself but this is going to be a tricky market environment at least until November, when we should learn the market’s true direction. Until then, volatility is low so it’s easy for certain hedge funds with high speed algos to “help” move the market higher or lower.

Bottom line: Be careful out there!

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