This is what the technical indicators are telling us this week:
One-month trend = Flat to Bullish. Last week, the SPX drifted through the four-day holiday week on low volume and momentum. Neither the bulls or bears won decisively last week. SPX closed at 3703 on Friday night. On Sunday, the futures are relatively flat to slightly higher, but that could change in the morning. It’s another four-day week.
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) @ 61.28 (Daily) = Neutral to slightly overbought. RSI is in the neutral zone as we start the shortened week.
MACD = Neutral. MACD is above its zero line but is slightly below its 9-day Signal Line.
Daily Intraday Volatility (VIX): 21.53 = VIX is still saying there is no fear.
Comment: Last week was not very exciting as neither side made it to the Winner’s Circle. In fact, last week is a duplicate of two weeks ago. We have another four-day week but this week, news events could impact the market.
Breaking News: The president tweeted that he plans to sign the Covid Relief Bill, and he just did. It’s hard to predict how the market will react, but it leans towards bullish.
The overall market is still overbought, there is still a lot of anxiety in the country, and the virus appears out of control. And yet, we are near our all time highs.
Only you can decide what to do but playing it safe is not an unreasonable decision. Since the market is an auction, I’d rather wait and buy at more competitive prices than is being offered now. Obviously, astute investors and traders can find stocks with reasonable valuations, but you have to do your homework (i.e. search for good candidates).
Bottom line: Wait and see what happens this week. We could go in either direction. Have a great holiday and New Year! And please stay safe.
Note: I don’t usually promote myself but Forbes Magazine gave two of my books, Understanding Options 2E, and Understanding Stocks 2E, an excellent review. The link is here (I’m #5 on the list): https://bit.ly/34PCmi5
Lance Roberts (realinvestmentadvice.com) wrote another excellent piece on how the market may rally in the first week of January but then watch out below: https://bit.ly/3pthMfb