S&P 500 is slightly below its 200-day moving average = Bearish
S&P 500 is below its 100-day moving average = Bearish
S&P 500 one-month trend = Short-term Trend Reversal (Bearish)
RSI: (S&P 500) @30.84 = Oversold (Bullish)
MACD: Below zero line and below signal line (Bearish)
Daily Intraday Volatility: 18.71 (Subdued). Volatility is still on the low side, which means there are many opportunities for volatility spikes in the coming weeks.
Comment: If you’ve been reading this blog over the last few weeks, you’d know that the indicators above correctly forecast the trend change last week. We went from mildly bullish to bearish within days, and with help from the tariffs, the market plunged on Friday.
And just like that, everything has turned negative except RSI, which is telling us we are oversold. As expected, the futures are lower on Sunday night but there should be a brave attempt by the algos and their bullish friends to keep the indexes above their 200-day moving averages. Therefore, be prepared for a rally on Monday and at various times during the week. The key is whether the rally will continue, or fail. Another failed rally will be an extremely negative sign for the overall market.
As I wrote last week, investors are feeling a little anxious but there is no panic yet as they believe the Fed will bail them out. This is a very dangerous belief. There are many signs a recession is drawing closer, and although the market has been falling, we’re still near all-time highs.
What does this mean? Even though the market is short-term oversold, and even though we might have bounces, the market is in the danger zone. A massive correction or crash is possible, so be prepared. It’s been a long time since I’ve seen such a dangerous market. It’s possible we’ll get out of this unscathed but the odds are there will be a lot of pain in the near future.
Bottom line: Volatility should return to the market this week although the algos will do anything in their power to keep it subdued. This is a very important week to observe. Will the indexes stay above or below their 200-day moving averages? We will know the answer by the end of the week.
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