One-month trend = Stalled Uptrend. SPX is slightly above its 200-day moving average = Neutral. SPX was in a strong uptrend until Thursday’s 1800 point drop in the Dow. Reality finally returned.
Mid-term: The S&P 500 was in a strong uptrend until last week’s pullback = Neutral.
RSI: (S&P 500) @ 51.72 = Don’t ignore RSI. It went from over 70 early last week back to neutral = Neutral.
MACD: MACD is above its zero line and and is slightly below its 9-day Signal Line = Neutral
Daily Intraday Volatility (VIX): 35.09 = VIX spiked last week, signaling that a little bit of fear crept into the market.
Comment: The signals last week were flashing red. First, there was RSI, which went above 70. As I wrote last week, anytime RSI moves above 70 on SPX, it’s a danger sign.
In addition to RSI, all of the indexes were bullish while the economy was struggling and the virus was spreading. There was no warning for the Thursday selloff, which is typical for corrections. Another warning sign: The hosts on several financial programs were outright giddy, including one well-known tout who acted as if the market would never go down.
Sunday night, the futures are telling us the market may open lower, but wait until the opening before trading. The market could go either way.
The powers that be, including the Fed, does not want to see another big selloff, but I would not be surprised to see us hit the March lows in the next few months. And yet, the algos will do everything in their power to suppress volatility and keep the rally going.
The big question is whether SPX can hold the 200-day moving average this week. If it can, then all is well for the rest of the week. If it can’t, then it’s going to be a very unpleasant week if you are bullish.
Bottom line: it’s anyone’s guess which direction we are going this week except to say that we went up too fast, and too far. Thursday brought a dose of reality to the markets, so let’s see if that was enough to slow the momentum. Once again, be on guard as we could go either way, and no one but the market itself knows the winning side.
Here is a more detailed analysis of the current market:
Lance Roberts @ realinvestmentadvice.com analyzes the market from a realistic perspective: https://bit.ly/2YvnSzQ
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