WHAT THE INDICATORS ARE SAYING
This is what the technical indicators are telling us this week.
Short-term trend (DAILY CHART) – HIGHER. SPX skyrocketed from 4204 to 4463 last week, a 259-point explosion. SPX shot back above its 50-DAY moving average, catching many short-sellers off guard after a one-month selloff. What was the good news that helped bring the indexes higher? The Fed raised interest rates by a quarter point and the war in Ukraine continues. In other words, the news was not good, and yet, the market went way, way higher. Futures are LOWER on Sunday night but that could change in the morning.
Long-term trend (WEEKLY CHART) – HIGHER. SPX rose back above its 50-WEEK moving average last week.
RSI: (S&P 500) @57.09 (WEEKLY) NEUTRAL. RSI on the weekly chart went to neutral, which means SPX could go in either direction this week.
MACD (WEEKLY) = BEARISH: The daily MACD is below the 9-day signal line and below the zero line.
Daily Intraday Volatility (VIX) = 23.87 = NEUTRAL: After a month of selloffs, option buyers went back to buying call options, which lowered the VIX to “reasonable” levels. Fear took a holiday last week.
Comment: As mentioned above, after a month of selloffs, in one week SPX rose back above its 50-day moving average, and on less than positive news. It just goes to show that the market is not logical, one of the reasons why trading is such a challenging strategy.
It’s possible that a bottom is in for this month, so if you are betting on a selloff, be careful. I’ve seen this setup before, and it’s not good for the bears. The one-month selloff was stopped in its tracks and support held. The odds are now with the bulls unless there is an unexpected bearish event this week.
Nevertheless, many experts believe that rising interest rates will eventually lead us into a recession. With inflation spiking, rising interest rates is the solution, even if it causes a slowdown. As you know, rising interest rates puts a damper on housing (eventually), and increases consumer debt. And yet, the market ignored all of these problems and went way higher last week.
Bottom line: There is no way to predict which direction the market will go this week. If the market pays attention to reality, it will fall. If it ignores all of the current and future problems swirling about, it will move higher.