Bullish or Bearish? Week of Jan. 13, 2020

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: SPX is still in a strong uptrend that is unsustainable for the long term.

RSI: (S&P 500) @ 67.69 = SPX is still overbought. At 70 RSI, it will be extremely overbought.

MACD: Above Zero Line but equal to Signal Line = Neutral

Daily Intraday Volatility: 12.56 = Extremely Low (Bearish). Does anyone know where Volatility has gone? (You can hide but not forever).

Comment: The Middle East problems still remain, although war has been averted for now. Amid all of this turmoil, the market keeps climbing higher, and once again, we are extremely overbought.

No one can say how high the market indexes will go, but the signs of euphoria are everywhere. Even my risk adverse neighbors are panic buying, afraid they are going to miss out on the next leg higher. Apparently, the talking heads on TV are saying the market will go nowhere but up.

This reminds me of 1999. Back then, nearly everyone also thought the markets would go up indefinitely. Traders and investors plowed everything into the market, and it was very profitable, until it wasn’t.

I hate to be a party pooper but this is the time to be cautious, not euphoric. It doesn’t mean to sell everything but it does mean to lighten up. Those who fail to heed the topping signs will not be able to get out in time. Unfortunately, no one knows when the music stops and the party ends. This particular party has gone on a lot longer than anyone imagined, so the end is drawing closer.

The best summary of current market conditions (i.e. a bubble) comes again from Sven Henrich (Northman Trader), who says it a lot better than me and with the data to back it up. He also attached a video, which I recommend watching. Here is the link to his thoughtful analysis of the bubble: https://bit.ly/2sf9X4K

Bottom line: Although it’s tempting to panic buy into this market, disciplined traders are looking to sell, not buy. It’s always been a mistake throughout history to buy at or near a top, even if you do miss out on a few percentage point gains. Is this really “the” top? We won’t know until it’s over but the warning signs keep getting louder.


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

I will notify you of my posts via twitter@michaelsincere

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