S&P 500 is above its 200-day moving average = Bullish
S&P 500 is above its 50-day MA = Bullish
S&P 500 one-month trend: SPX is in a strong uptrend that seems unstoppable at the moment.
RSI: (S&P 500) @ 74.11 = Extremely Overbought. SPX is in the danger zone, and although it can keep moving higher, caution is advised.
MACD: Above Zero Line and above Signal Line = Bullish
Daily Intraday Volatility: 12.05 = Extremely Low (Bearish)
Comment: It’s extremely rare to see such an overbought market. The indexes hit all-time highs on Friday with the Dow surpassing 28,000 for the first time ever. RSI is extremely overbought at 74.11, and although the indexes can still scream higher, a day of reckoning will come (eventually). Other sentiment warnings: The VIX is in the basement, and the Investors Intelligence sentiment survey (II) is at 57, near a screaming sell. It’s been many years since I’ve seen extreme sentiment numbers like these.
As I warned last week, it’s dangerous to short an uptrend, and that advice still stands. This market has all the makings of a blow-off top, so caution is still advised if trading the indexes.
There is still money to be made if trading individual stocks. The risk-reward of trading the indexes is poor, but there are still excellent opportunities, both bullish and bearish, with stocks.
Regarding the overall market, institutions are mostly on the sidelines with the algos (and the Fed’s QE) fueling the rally. It’s quite remarkable to see the market rising on low volume and low volatility. Buy and holders are delighted while anyone shorting the indexes (not recommended at this time) is pulling his or her hair out.
Where do we go from here? I’m watching in awe as the market gets more overbought, knowing we are experiencing a rare blow-off top. I’m watching RSI to see how high it can go, and am amazed it’s near 75 without any meaningful pullback. No one can predict how high the indexes will go but when it eventually reverses, it will be frightening.
Bottom line: Enjoy this rare market event while it lasts because this is one for the history books. Meanwhile, I recommend reading the following two articles, which will give you additional insights into the current market:
Sven Henrich (Northman Trader): https://bit.ly/2OknkYy
Lance Roberts (realinvestmentadvice.com): https://bit.ly/2KqpdSn
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