Bullish or Bearish? Week of July 5, 2021

The following is a link to a column I wrote about the top 10 rules to follow if trading cryptocurrencies: https://on.mktw.net/3whLsit


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

One-week trend = Up, up, and away. The bulls continue to be in the driver’s seat, with the SPX rising by 72 points, moving from 4280 to 4352. There is only one problem: SPX is extremely overbought, and keeps getting more overbought. Except for that, the indexes appear unstoppable for the short-term. SPX futures are flat on Monday night.

RSI: (S&P 500) @70.81 (WEEKLY) = Extremely Overbought. RSI is over 70 and is in the danger zone. Do not be surprised if there is a major reversal. Nevertheless, RSI can remain overbought for long time periods, although it has reversed in the past after surpassing 70 on the weekly chart.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but still slightly below its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.07 = No Fear. VIX is once again telling us the only fear is the fear of missing out. Few traders are buying put protection since few believe the market will reverse. (That’s a danger sign!)

Barchart Stock Evaluator for SPY and QQQ (link below): SPY are both 100 percent strong buys (according to this indicator). 

Comment: The market is at all-time highs, investors are complacent and many believe the market will never go down (at least in the short term). And yet, RSI is telling us the market has reached extreme overbought levels.

This does not mean the market is going to reverse and plunge immediately, but RSI has been remarkably accurate in the past. Therefore, be prepared for some fireworks in the coming weeks (if not sooner).

Lance Roberts (link below) wrote a fascinating piece that included a CNBC interview with legendary investor Leon Cooperman. Cooperman said the “market structure is broken,” and he admitted that he was scared. And yet, he says he has to be invested. The CNBC interviewer, Becky Quick, called him a “fully invested bear.” And that’s where we are at: Even the bears are invested, because they can’t afford to miss out.

With the market at all time highs, with little or no fear, with a generation of investors who never experienced a bear market, the risks of a collapse have increased. And as I’ve said dozens of times before, no one can predict when the market will plunge. But it will plunge one of these days. We are in unprecedented times.

Bottom line: It’s a four day week so anything is possible.


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:www.realinvestmentadvice.com

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

I will notify you of my posts via twitter@michaelsincere

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