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 pointing lower = Bearish to Neutral
One-month trend: Uptrend has been broken. Watch what happens when SPX hits its 50-day moving average. Will it bounce or slice through like butter?
RSI: (S&P 500) @ 53.66= Neutral
MACD: MACD is above Zero Line but moving below 9-day Signal Line = Neutral
Daily Intraday Volatility: 17.08 = Neutral to Bearish. Volatility appears ready to rise even more.
Comment: It shouldn’t be a huge surprise that the futures market is showing an ugly opening Sunday night (-1.5% and falling). As I and others have warned for weeks, if not months, an extremely overbought market, recessionary signs, a Fed that has pumped liquidity into the market, extremely low interest rates, and high levels of consumer and government debt is a dangerous cocktail.
The sad part is that a virus could be the pin that pops the bubble. The cost to humans is already a tragedy, and it appears as if it could get worse. More than likely, this will cause a short-term or long-term recession. No one knows how long this disaster will last, or if the virus spreads even farther. There are too many unknowns.
Many investors, who have been spoiled by an 11-year bull market, will likely grit their teeth and hope that the Fed protects them. I’m not saying we are definitely headed to a bear market. I’m saying that the market is dangerous and if it did fall by a significant amount in the weeks and months to come, I would not be surprised.
I would also not be surprised if SPX dropped to its 200-day moving average in the future. That would seem like a crash to many investors, but it would be a run of the mill pullback.
The main point is that, as I’ve warned before, it’s a good time to sell some of those winners and raise some cash (but wait until the panic subsides). Evaluate what you own and be prepared for some rocky times ahead. The Fed will do whatever it takes to keep the markets calm, and prevent mass selling, but unfortunately they don’t have a lot of tools to work with. (Perhaps they will announce QE5 while also lowering interest rates).
Bottom line: As I wrote last week, the easy days are over and expect a more difficult trading and investing environment in the future. Don’t panic, but prepare for a market correction as well as for a possible pandemic (that would be a worst case scenario).
I really wish the best for everyone, and again, I wished that it wasn’t a virus that might pop the market bubble. All we can do is hope for the best while making preparations to be physically and financially safe.
I recommend that you read the following from Sven Henrich (Northman Trader) about the market’s turn for the worse on Friday: https://bit.ly/2HQT7xe
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