WHAT THE INDICATORS ARE SAYING
This is what the technical indicators are telling us this week:
One-week trend = LOWER. SPX struggled to stay above water last week, culminating in a severe Friday selloff. SPX fell from 4712 to 4620 last week, a 92-point shellacking, giving back some of the 172 points from the week before. FUTURES are much lower on Monday morning, which should continue through the day. SPX 4500 will be defended by the algos.
SPX 20-day (and 50-day moving averages) (WEEKLY): SPX will FALL below its 20-day moving average on Monday morning. The 50-day MA is at 4265 and will be defended (if 4500 is breached).
RSI: (S&P 500) @59.22 (WEEKLY) SLIGHTLY OVERBOUGHT. RSI has worked off most of its extreme overbought conditions. Nevertheless, it is still mildly overbought.
MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and even with its 9-day signal line (neutral). MACD is still not giving a strong signal.
Daily Intraday Volatility (VIX) = 21.57 = ON THE LOW SIDE: VIX is still on the low side, meaning that fear is still on holiday, at least for now. As some of the old-timers might say, “You ain’t seen nothing yet!”
Comment: It was an interesting week. Although the Fed weaved a tall tale that they have everything under control, for one of the rare times in memory, the market didn’t buy it. There was selling before and after the Fed meeting, a very unusual occurrence, and not in a good way.
Two main events are interfering with the Fed’s plans: First, the Fed admitted it could have an inflation problem, and they would solve it by raising rates in 2022. The market doesn’t like higher rates, nor does it like inflation. Second, the new virus variant is rampaging through the world, causing economic upheaval as well as increased infections and shutdowns. Investors don’t like uncertainty, and there is plenty of that going around.
While it’s too early to declare a bear market, it would not be wrong to prepare for the possibility. One thing is for sure: It’s been an extremely difficult trading environment. Investors are HODL (holding on for dear life) and hoping for the best. Others, obviously, are selling.
I am pretty certain that in 2022 we will have a different market environment than we’ve had for the last 13 years. That means more volatility, more down days, and the possibility of a full-fledged bear market (this is not a prediction, only that the odds have increased).
I’m not the only one who realizes this. On his weekend blog, Lance Roberts explains that a bear market is likely. Here is the link: https://bit.ly/3GYyETK
Although the holidays are approaching, and investors are hoping for a Santa Claus rally, we only look at the facts. The facts tell us that this long bull market is gasping for air right now, and although it is probably too early to take heavy short positions, the clock is ticking.
Note: It’s a shortened week as the market is closed on Christmas Eve, December 24th. Volume should be light later in the week. Have a great holiday and see you next Monday.
Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G
For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA
For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com
For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com