Bullish or Bearish? Week of July 22, 2019

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day moving average = Bullish

S&P 500 one-month trend: SPX stalled and reversed at all-time highs. The indexes are hitting major resistance at all-time highs.

RSI: (S&P 500) @55.81 = Neutral

MACD: Above Zero Line and below Signal Line (Neutral)

Daily Intraday Volatility: 14.45 (Subdued). Volatility is still extremely low.

Comment: Unless there is an unexpected geopolitical or financial catastrophe, the only game in town is the July 30-31 Fed meeting. The market is expecting a 50 basis point cut (.50%), and anything less will be a disappointment to Wall Street. The word on the Street is a .25% cut is the most probable.

For the Fed to lower interest rates when the market is at all time highs means either the economy is in much worse shape than they are letting on, or they are succumbing to political pressure. Neither scenario is bullish for the market.

Investors are hoping the Fed can prevent a recession or bear market by lowering interest rates. The Fed can distract investors, and perhaps delay the inevitable, but when the next bear market arrives, it’s going to be vicious. It will also damage millions of investors’ portfolios.

After looking at the clues and indicators, I am convinced that a short-term pullback is extremely likely. In addition, a bear market is drawing ever closer. And yet, the best advice I can give you is to sit tight and do nothing…for now. I went back and re-read the writings of an expert on bear markets, Jesse Livermore, who lost several fortunes by shorting too early. He finally got it right in 1929 but before then he was always plunging on the short side too early and losing money. None of us want to make that mistake.

Bottom line: A huge dislocation is coming but do not act too early. There is plenty of time to profit from a falling market. Now is the time to learn about buying put options (less risky than shorting individual stocks). And if you are new to buying puts or shorting, start small, very very small. Trading a bear market is extremely challenging, and for many, moving primarily (not all) to cash is the easiest and most prudent solution in these uncertain times.

Caveat: There is always the chance that Jerome Powell will please Wall Street with a .50% cut next week, so in that case, the bubble will grow even larger, and get even more dangerous.


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

I will notify you of my posts via twitter@michaelsincere

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