Long-term: S&P 500 is above its 200-day moving average = Bullish
Short-term: S&P 500 is at its 50-day MA and pointing down = Neutral to Bearish
One-month trend: The uptrend in SPX has been broken and should be watched closely. It’s too early to know which direction the indexes will go this week.
RSI: (S&P 500) @ 43.44= RSI plunged from a high of 76.56 two weeks ago to 43.44, a neutral reading.
MACD: Above Zero Line but Signal Line pointing lower = Neutral
Daily Intraday Volatility: 18.84 = Neutral
Comment: What a difference a week makes! A week ago, analysts were leapfrogging over each other, making bigger and bolder predictions of an unstoppable bull market (SPX 4000 and beyond, some predicted). And just like that, like a 2 x 4 in the face, investors got smacked. And now, some of those same analysts are backtracking, warning of a 10 percent correction or worse.
At this time, it’s unknown if the recent selloff is meaningful or a run-of-the mill, short-lived pullback. From my perspective, there are a lot of red flashing warning signs, but I’ve seen those signs for months, if not longer. At the same time, I’ve seen vicious pullbacks followed by rip-roaring rallies (such as in January 2018).
Therefore, it’s best to keep your wits about you and plan for any scenario. SPX is at its 50-day moving average, and it could go in either direction. If it falls below its 100-day moving average, be prepared to ride it out (or trade it if you have the skills). Eventually, the panic subsides and a rally emerges.
However, there is always the possibility we are entering a real bear market, but it’s too early to say (keep your eye on the 200-day moving average). It’s been over 10 years since the last bear market, so it wouldn’t be that surprising if one appeared. Nevertheless, there have been so many plunges and rallies in the last 10 years, no one can predict what will happen. Just be diversified, as I’ve repeatedly warned.
Bottom line: Don’t succumb to the fear if the markets plunge this week, and don’t let down your guard if they rally back to overbought levels.
Sunday Night: The Chinese stock market opened down by 9 percent at 8:30 pm.. ET, while the S&P futures are up strongly. Welcome to volatility, and there should be a lot of it this week as the world’s central banks take unprecedented steps to control stock market selloffs. (Maybe someone should forbid short selling this week. Oh, wait).
Once again, Lance Roberts and Sven Henrich wrote excellent pieces about the current market:
Sven Henrich (Northman Trader): https://bit.ly/2OkKmPV
Lance Roberts (realinvestmentadvice): https://bit.ly/2SfbMYj
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