Here are the most recent market indicators:
S&P 500 is below its 200-day moving average = Bearish
S&P 500 one-month trend = Downtrend (with major pivots)
RSI: (S&P 500) @46.77= Neutral
Daily Intraday Volatility: Moderate to High
Comment: In the first week of the year the Dow plunged by over 600 points, then rallied by over 700 points. What a way to start the New Year! There is no evidence the volatility will end anytime soon.
Even with encouraging words from the Fed, and even though they will likely stop raising interest rates, this alleged bear market should continue to wreak havoc on investor’s portfolios. Never forget that in a bear market, even the stocks of great companies (like several of the FAANG stocks) go down.
If you are a long-term investor and can take the pain, and believe the stock of your company will be stronger after the bear market is over, then you will grit your teeth and hold. I still recommend hedging with inverse ETFs, put options, or cash, but that is a decision only you can make. By the way, another hedge in a bear market is gold, which has suddenly come to life. Gold tends to do well in bear markets.
There is always the possibility this is not a bear market but only a correction, and in that case, the indexes will rise above their 50-, 100-, and 200-day moving averages. If that happens, then put away the bear strategies and power on. But the evidence seems clear from numerous sources that this is going to be a difficult, volatile year.
The futures are pointing higher on Sunday night, so let’s watch and see if the indexes can rally higher this week, and whether the rallies can last more than a day or two. If the rallies fail spectacularly, that is more evidence the bear is breathing down our necks. I will wait for the market to make up its mind before I commit heavily to one side or the other.
Note: According to my analysis, the S&P 500 is currently overbought, but it could become more overbought before reversing direction.
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