Bullish or Bearish? Week of July 18, 2022

MY TWO NEWEST BOOKS WERE RECENTLY RELEASED: Here is the link to Understanding Stocks (third edition): https://amzn.to/3wO761F (Amazon) or https://bit.ly/3udwAUf (Barnes and Noble). Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy  

I wrote a column for MarketWatch on the strategies of one professional trader. It’s a must-read: https://on.mktw.net/3cq5Cmh

I was also quoted in an article on bear markets by Joseph Toppe for Capital.com: https://bit.ly/3cfJ47r


Short-term trend (DAILY CHART) – LOWER. Last week could have been a lot worse, even though SPX fell from 3899 to 3863, a mild 36-point pullback. (The 72-point Friday rally saved the day.) The bear market continues as the major indexes are below their moving averages on the daily chart. Futures are HIGHER on Monday morning.

Long-term trend (WEEKLY CHART) – SIDEWAYS. The major indexes on the weekly chart are still below their 50- and 100-day MA but above its 200-day MA (and not moving much in either direction).

MACD (WEEKLY) = LOWER . The WEEKLY MACD is a lagging indicator, so it is reflecting the negative market environment. 

RSI: (S&P 500) @49.10 (DAILY) NEUTRAL.  RSI is neutral, and until it moves to extreme levels, it’s best to wait for a better trading opportunity.

Daily Intraday Volatility (VIX) = 24.23= COMPLACENT: The VIX is still in the doldrums. We’re in a bear market but option traders are not nervous or panicked (as reflected by a low VIX).

Comment: Bear markets are not much fun for most people. As professional trader Kornstein said in my article for MarketWatch, until the Fed stops raising rates in December, the bear market continues.

From a trading or investing stand point, this bear market is not easy. One day the indexes and many stocks are sinking. The next day, we get a 700-point Dow rally. This market is impossible to predict, one of the reasons why it’s important to have a strategy. In the MarketWatch column, Kornstein suggests buying at 52-week lows and selling at 52-week highs.

Most importantly, you need a buy and sell target price before taking a position. In fact, after buying, know the price you will sell. Selling at the 52-week high is distasteful to some traders who try to capture even more profits. The problem with buy and hold forever is investors sometimes get trapped, as many recently did when many major stocks (and indexes) plunged. It may take months or years (or never in a few cases) for some beaten-down stocks to revisit their all-time highs.

Even in a bear market, there are trading opportunities. It takes patience and skill and an ability to find stocks that fit your criteria (such as dividend paying stocks that make tangible products.

In closing, no one can predict which way the market will go this week, but at least until December, it’s going to a wild and wacky journey. Hold on for dear life (HODL)!

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