Bullish or Bearish? Week of January 25, 2021

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

One-month trend = Uptrend. The indexes drifted higher last week, closing at 3841 on the SPX, higher by 73 points from a week ago. On Friday, the indexes dropped, disrupting a low-volume uptrend. Futures are slightly higher on Sunday night.

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 65.00 (Daily) = Overbought. If RSI moves above 70, that is a strong overbought signal, so buyer beware. With the Fed in control this week, we could easily move into extreme overbought levels.

MACD (Weekly) = Bullish. MACD is above its zero line and above its 9-day Signal Line

Daily Intraday Volatility (VIX): 21.91= How low can we go? VIX is saying there is no fear.

Comment: Last week, a four-day week, the indexes drifted higher until Friday. With the Fed meeting this week, the odds are good the uptrend will continue early in the week.

On the other hand, the market is overbought, VIX is in the basement, and there is no fear. These are the ingredients for a severe plunge in the near future, although no one can predict when it will occur, or how bad it will get.

Professional traders smarter than me (i.e. Paul Singer) are warning of a major pullback, saying this is the “end game.” As you already know, most bearish predictions have not worked out very well. Nevertheless, it would not be a mistake to take money off the table, and trade or invest cautiously. That’s a decision only you can make.

Bottom line: Based on historical trends, the market typically moves higher right before and during the Fed meeting. I would not be surprised to see an uptrend early in the week. After that, the market will move depending on what the Fed says, or doesn’t say.


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

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