Long-term: S&P 500 is above its 200-day moving average = Bullish
Short-term: S&P 500 is above its 50-day MA but trouble ahead = Neutral to Bullish
One-month trend: Trend still strong until further notice. This is a pivotal week.
RSI: (S&P 500) @ 65.87= overbought
MACD: Above Zero Line and Signal Line above MACD line = Bullish
Daily Intraday Volatility: 13.68 = Bearish
Comment: Futures are lower Monday night due to Apple’s warning (it won’t meet quarterly revenue target due to Coronavirus). Add in an overbought market as well as recessionary fears from Asia due to the virus, and you have the potential for a severe pullback.
The Chinese central bank and the Fed will do everything in their power to keep investors calm. If things take a turn for the worse, the Fed will lower interest rates, flood the market with more QE money, or do whatever it takes to reduce fears. It’s going to be quite a battle this week and in the near future.
The black swan that no one expected was the virus, and it’s unknown how much more damage it will cause. Investors are still in denial because of their full faith in the Fed’s ability to reverse any plunges. For 11 years, the Fed has been able to perform miracles, but at a price: The market is extremely overbought by almost every technical and fundamental indicator.
Whether the market goes up or down this week, one thing I am certain of: The easy days are over. Expect a lot of gyrations moving forward, of short-term rallies followed by short-term plunges. As I’ve written before, this is one of the most dangerous markets I’ve ever seen. It’s like an old, beat up car driving up a hill at full speed as pieces of the car keep falling off. Eventually, the car runs out of gas or falls apart. The warning from Apple, the most popular stock in America, is not a good omen.
Added to all these other problems, I am also seeing signs of a recession slowly creeping towards us. Obviously, the fallout from the virus have accelerated those fears. And yet, with all this bad news, the Fed might be able to pull a rabbit out of the hat and convince investors to “not sell.”
The analysts I follow, Lance Roberts, Sven Henrich, and Wolf Richter, have posted excellent pieces over the weekend. Here are links to a few of the best. In addition, read Bloomberg for the latest on the virus as well as Apple’s warning.
I recommend that you read the following pieces:
Sven Henrich (Northman Trader) on Apple risks: https://bit.ly/2uTvzFg
Sven Henrich (Northman Trader) on the market bubble: https://bit.ly/2UWHpJn
Lance Roberts (realinvestmentadvice) on how the market thinks it’s immune to risks: https://bit.ly/37w3BN2
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