WHAT THE INDICATORS ARE TELLING US
This is what the technical indicators are telling us this week:
One-month trend = The bulls took control: SPX rose by a respectable 26 points last week, rising from 4203 to 4229. Although it’s not exciting, the bulls are in control and running the market higher. The Bad New Bears have failed to take advantage of any selloffs. Futures are flat on Sunday night.
Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball.
RSI: (S&P 500) @69.67 (WEEKLY) = Overbought. RSI is telling us the market is overbought. If it reaches 70 or above, it will be extremely overbought. In the past, RSI has done a good job of warning us of a reversal, so pay attention to the Weekly RSI if it rises above 70 (only .33 away).
MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time.
Daily Intraday Volatility (VIX): 16.42 = VIX is still ridiculously low, and could go even lower.
Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 72 percent buy (according to this indicator).
Comment: Once again, the bulls took control and ran the market higher, although slowly and steadily. Every time the market showed intraday weakness, buy-on-the-dip algos and retail traders saved the day. The only losers were short sellers.
Speaking of shorting, shorting the indexes (or buying puts on the indexes) has been a losing strategy. If you can identify individual stocks that are weak, it might work. But betting against the overall market has been frustrating and difficult.
Selling covered call options on certain stocks has worked, and so has going long the indexes, especially the S&P 500. Of course this winning strategy won’t work forever, but until something unnerves the market, it’s up, up, and away. One day, however, the bubble will pop.
Many will argue that this market is not in a bubble, and that would be an interesting discussion. One aspect about bubbles is that you don’t know you’re in one until it pops. Based on my personal experience, and how many investors believe the market only goes up, my opinion is it’s probably a bubble. Of course I could be wrong, which is why I don’t dare bet against this market (right now). Another characteristic about bubbles: Trying to short a bubble is financial suicide. Don’t even try.
If this is a bubble, one day it will pop, and it won’t be pretty. If this is not a bubble, and in fact this is a continuation of the longest bull market in history, then buy and hold investors will continue to rake in the cash.
Bottom line: We’re going higher until we aren’t. Since I don’t do predictions, I cannot tell you when the bull market will end, only that it will one day. Just be diversified. Trade small, especially if trading volatile securities.
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