This is what the technical indicators are telling us this week:
One-month trend = Neutral. As expected, the algos continued to push the indexes slightly above its 200-day MA, where it has remained. Note: SPX is at 3185 on Sunday night, slightly higher from a week ago. The 200-day is at 3027.18.
Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is above its 50- and 100-day MA.
RSI: (S&P 500) @ 59.34 = Neutral. Slightly overbought.
MACD = Neutral. MACD is above its zero line and and even with its 9-day Signal Line.
Daily Intraday Volatility (VIX): 27.29 = Neutral. VIX didn’t move much in the last week.
Comment: The futures on Sunday night are higher, following in the footsteps of its impressive Friday afternoon rally. Technicians are warning of a correction or worse as their signals say that certain stocks, especially Google, Amazon, Microsoft, Apple, and Facebook are overbought. Wolf Richter @WolfStreet.com (link below) also discusses how these stocks are holding the market together.
The market keeps pushing higher but the virus does not let up. I wish I could ignore the virus but it is really ravaging people’s lives and livelihood, causing havoc with the economy. For some reason, the stock market has ignored it, and continues to do so as I write this.
But one day, out of the blue, the market will react, and it won’t be pretty. The market is overbought and getting more overbought. As Wolf and others have said, these five stocks have become the market.
We also can’t ignore the power of the algos, who initiate bull raids during the day at the slightest hint of a selloff. It happened again on Friday.
No one can predict the future, and this market could keep going up all week. But to win the stock market game, you must look for any clues that the party is over and the guests have overstayed their visit. We are close, very close, I suspect.
Bottom line: Be cautious out there as bad news is still looming, which the market has conveniently ignored. No one knows how long there will be a disconnect between the real economy and the stock market. When the market eventually smells the coffee, it will not be a pretty sight.
Here is an excellent analysis of the current market by two professionals:
Lance Roberts @ realinvestmentadvice.com sums up the current market with a title, “This is nuts…Again”: https://bit.ly/3fp00F8
Sven Henrich @Northman Trader discusses the current overbought market in an interesting video: https://bit.ly/2AW7vEO
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