Bullish or Bearish? Week of January 10, 2022

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week: 

One-week trend = LOWER. The bears took back control and dropped SPX from 4766 to 4677 last week, an 89-point loss. The market rallied early in the week and then lost energy and points. Futures are SLIGHTLY LOWER on Sunday night, but check back in the morning to confirm.

SPX 20-day (WEEKLY) = NEUTRAL. SPX is pointing lower but it is still above its 20-day moving average. It’s a tossup.

RSI: (S&P 500) @59.16 (WEEKLY) SLIGHTLY OVERBOUGHT. RSI gave the clue last week the market was in the danger zone, and it was right. Now RSI is near neutral but still overbought.

MACD (WEEKLY) = NEUTRAL: MACD is above the zero line (bullish) and even with its 9-day signal line (neutral). MACD is not giving significant signals (with SPX). 

Daily Intraday Volatility (VIX) = 18.76 = ELEVATED: A little bit of fear entered the market last week but nothing to write home about yet.

Comment: As I wrote last week, although the market fell in the first week of January, it does not mean we will have a down year. Nevertheless, it’s obvious to market watchers that the market appears to lack energy and enthusiasm.

After another excellent year, 13 in a row, it would not be surprising if the market took a breather. At best, perhaps it could squeak out a gain after one year. At worst, the Bad News Bears could finally be right.

However, one thing is for sure: The market never follows the script. That is why I stopped making predictions and instead, follow the market. That’s also why I spend more time selling options (covered calls and cash-secured puts) than buying.

This is important: The investments that worked in the past may not work in the future. Be prepared for changes, one of the reasons it’s so important to be diversified. If one investment doesn’t perform, hopefully another one will.

I’m watching those rising interest rates to see how it affects market psychology. I also want to see if the Fed raises rates, as they have warned. If they don’t raise rates for whatever reason, the market will probably rally. Unfortunately, if they don’t raise rates, inflation could continue to heat up.

Bottom line: We are entering an entirely different market environment. Fasten your seatbelts!

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

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