Bullish or Bearish? Week of May 3, 2021

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This is what the technical indicators are telling us this week: 

One-month trend = Flat to Slightly Bullish. The market ended exactly where it started last week.  To be precise, SPX rose by 1 point, from 4180 to 4181. Typically, when the Fed meets, the market rallies, so a flat market was unusual. The Dow futures are higher on Sunday night, but that could change in the morning. 

Mid-term (50- and 100-day MA) = Bullish: The indexes are well above their 50- and 100-day moving averages.

RSI: (S&P 500) @ 71.45 (WEEKLY) = Still extremely overbought. RSI is in the danger zone (above 70 on the weekly), however, indexes and stocks can get more overbought before reversing. 

MACD (WEEKLY) = Bullish. MACD is above its zero line and above its 9-day Signal Line. Until MACD gives a sell signal, the bull market is intact. 

Daily Intraday Volatility (VIX): 18.61 = The VIX is still on the low side, only rising slightly due to a couple of selloffs.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY and QQQ are both 100 percent buys (according to this indicator).

Comment: Everyone wants to know if they should sell in May and go away until November. No one can answer that. The market has exhibited a lack of energy, volatility, and volume. Rallies have been muted, and so have selloffs. Some market veterans shake their heads: Many have never seen anything like it.

Jesse Livermore wrote about a market like this a hundred years ago. When “even a skunk can’t make a scent,” he said, he’d take a break and go on vacation. While investors have the luxury of time, traders trying to make their daily bread can fall into the trap of forcing a trade. If the market is not giving you good trade setups, you can scalp for pennies (as some are doing), or just step away and wait for better opportunities. No one can tell you when the market will recover from this recent malaise.

Should you sell in May and go away (and come back in November)? Hint: Often, volatility picks up in September and October, but not in a good way if you are long. With an overbought market, a selloff would not be a huge surprise.

Nevertheless, don’t count the bulls out of the game. They have been in charge for years, and I doubt they will go down without a huge fight (and help from the Fed).

Bottom line: Wait and see if the bulls can take the market higher this week.


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

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