This is what the technical indicators are telling us this week:
One-month trend = Bullish. Last week, the indexes bounced off their 50-day moving average and rallied all week, closing at 3886, higher by 172 points, the best week since November. Futures are higher on Sunday night (but that could change at the open).
Mid-term (50- and 100-day MA) = Bullish. The S&P 500 reversed direction and rallied strongly from the 50-day MA. The trend is up.
RSI: (S&P 500) @ 66.31 (WEEKLY) = Slightly overbought. RSI rose to 66, which is slightly overbought. Note: I switched from following the daily RSI to the weekly RSI, which gives a more reliable signal. At over 70, that will be a strong overbought signal. At over 70, it is a red warning flag, not a trigger. *Edited on February 10, 2020.
MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. MACD gave the most accurate signal a week ago that the market was stronger than it appeared.
Daily Intraday Volatility (VIX): 20.87= VIX plunged back to the 20s as fear disappeared.
Comment: What a difference a week makes! After a severe plunge the week before, the market came roaring back with its best weekly return since November. Buying on the dip worked once again, and just in time.
Last week, the SPX was on the verge of falling below its 50-day moving average, the trend was broken, and it looked bleak. And just like that, the fear that had entered the market two weeks ago disappeared, and now all seems well. Many will blame the GME and AMC debacle on the selloff, but the manipulation goes deeper than that, at least according to analyst Wolf Richter, who wrote a brilliant piece on wolfstreet.com.
Richter explains how the markets have been manipulated, but this time, it blew up in the faces of some hedge funds, a kind of reverse manipulation. Here is the link to Richter’s piece, which shows how the market broke because of the “bull raid” on GMC and AMC: https://bit.ly/3aEvpCF
Also, here is a link to my latest MarketWatch column: https://on.mktw.net/39WHSCr
Back to the market indicators: After a dreadful week, the market came roaring back. Right now, all the indicators are positive except for RSI, which is showing a slightly overbought market. The shorts got creamed last week. However, let’s see how long this short-term rally lasts.
Bottom line: Don’t fight the weekly trend.
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