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This is what the technical indicators are telling us this week:
One-month trend = Sideways to Bullish. Last week, the S&P 500 drifted slightly lower during the week, closing at 3906, lower by 28 points from a week before. The S&P 500 futures are slightly higher on Sunday night (although that could change at the open). The market is near all-time highs. Does it have the strength to power higher? For now, it appears to be consolidating.
Mid-term (50- and 100-day MA) = Bullish. The S&P 500 has moved sideways, but is still way above the 50- and 100-day MA.
RSI: (S&P 500) @ 65.26 (WEEKLY) = Overbought. The market is still overbought although it pulled back a little from extreme levels.
MACD (WEEKLY) = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD is still signaling a bullish trend.
Daily Intraday Volatility (VIX): 22.05= VIX is still in the “no fear” zone. There is no fear, which is a huge red flag.
Comment: Not surprisingly, the market pulled back last week. It had reached overbought levels and was in danger of becoming extremely overbought. With the current retreat, the market is not out of danger but is at more reasonable levels.
It’s anyone’s guess what the market will do this week. Based on the Sunday night futures, it appears SPX will continue to drift a little higher. A correction is likely within a short time-period according to technicians who follow indicators. Some have told me they have never seen such an overbought market in their lives.
And yet, the market can continue moving higher. Markets that are at these levels can continue moving higher far longer than anyone expects. That is what makes short-selling such a difficult strategy during these times. On the other hand, the higher the market goes, the more people think the market “will never go down.” I’ve heard it before, and it never ends well.
Bitcoin at $50,000, real estate prices in some parts of the country are going through the roof, and interest rates are in the basement (an acquaintance of mine got just rates on a 30-year mortgage at 2.1 percent. 2.1 percent? I’m speechless).
Back to the stock market: I thought the market would push to SPX 4000 last week but it didn’t. So now it’s wait and see what happens. I honestly have no clue which direction the market is going this week, although I do believe a 10 percent correction (or more) is highly likely in the future (I cannot say when, and anyone who can is guessing).
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: https://wolfstreet.com