Bullish or Bearish? Week of June 1, 2020

One-month trend = Uptrend. SPX has slowly climbed above its 200-day moving average = Bullish. Now the hard work begins: Can the bulls hold the 200-day?

Mid-term: The S&P 500 is in an uptrend after the March crash = Bullish. As mentioned above, the true test is if it can stay above.

RSI: (S&P 500) @ 63.34 = Overbought. As SPX rises, so does the overbought warnings. RSI is not extreme yet, but it will if it rises above 70.

MACD: MACD is above its zero line and slightly above its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 27.51 = Elevated but falling = Neutral. 

Comment: Although I tend to focus only on the stock market, and don’t let the news influence my trading, it’s impossible to ignore what is happening in the United States. With chaos in many cities, depression level unemployment, many businesses failing, and the income of millions plunging, it’s hard to find good news lately. And yet, the stock market keeps climbing.

Something has to give eventually. It’s as if we are trading in the Twilight Zone. Even though the market rises on some days, the rallies are unenthusiastic and weak, yet the numbers look good. There is a lack of institutional buying, so any rally is suspect. And yet, if you talk to retail investors, because the market keeps going higher, many believe the Fed has their back.

Many old-timers have never seen such a disconnect between the market and reality as now. Few seem to be buying, and few are selling. It’s a standoff, and no one knows who will win in the end. Personally, I think the market will be forced to accept reality, but so far, it has not.

The futures plunged early in the evening on Sunday night, but then recovered. It appears as if an algorithm buy program gobbled up stocks in the futures market. It’s too early to say how the market will open, but I would not be surprised to see a selloff during the week. And yet, I wouldn’t bet real money on it. Something just isn’t right.

As mentioned earlier, SPX has risen above its 200-day moving average, an amazing feat that few predicted. The hard work is if they can hold it there. Many bullish technicians already are proclaiming that the bear market is over and a new bull market has begun. I say, not so fast. This is the time to be patient and see what surprises the market has in store for us. In my opinion, it’s too early to declare victory if you are bullish.

Bottom line: These are dangerous and tricky times for the country, the world, and the stock market. Stay alert and be cautious this week and beyond.

Here is an excellent analysis of the current market environment from Lance Roberts:

Lance Roberts @ realinvestmentadvice.com on how a correction is likely with this overbought market: https://bit.ly/36O8gLv


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

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