Bullish or Bearish? Week of Feb. 13, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

S&P 500 is above its 50-, 100-, and 200-day MA = Bullish

MACD (S&P 500; 19,39,9) is above the zero line = Bullish

MACD (S&P 500; 19,39,9) is even with its signal line = Neutral

S&P 500 support @ 2280


Sentiment Indicators (+RSI)

II survey: (Feb. 7): 62.7% Bulls; 16.7% Bears = Bearish

AAII survey: (Feb. 8): 35.8% Bulls; 27.7% Bears = Neutral

VIX: @ 10.85 = Bearish

RSI: (S&P 500) @ 69.32 = Bearish

Comment: There was little change in the indicators: in general, technical indicators are bullish while sentiment indicators (and RSI) are overbought. If this is a bubble, and I personally believe it is, the market can still go higher from here. Eventually, the market gets exhausted and reverses direction, or there is a catalyst that sends everyone to the exits. As I’ve repeatedly said, although no one can predict the arrival of the next correction, wise traders and investors are increasing cash positions. That’s how you survive corrections, bear markets, and crashes.

It was reported that Vanguard has $4 trillion in index ETF assets as investors flee managed mutual funds. Imagine what will happen to that money when the next bear market arrives, when everyone tries to get out at once. By the way, bear markets always arrive…eventually. 

Note: I sometimes buy calls for short-term trades even though I believe the party will be ending one of these weeks or months. 

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