Bullish or Bearish? Week of Nov. 19, 2018

Here are the most recent market indicators:

S&P 500 one-month trend = Variable  (Bearish) The uptrend is still broken, but that could change if the indexes move firmly above their 200-day moving averages and beyond. 

S&P 500 is below its 50-, 100-day and 200-day moving averages= Bearish

RSI: (S&P 500) @46.75 = Neutral 

Intraday Volatility: Moderate 

Comment: This week will be shortened because of the Thanksgiving holidays. Be careful about trading on holiday weeks as it’s easy to get chopped up if you’re not careful. The uptrend has been broken and the FAANG stocks, which were on a nonstop ride to the moon, have been damaged. Investors are still not afraid, and in fact, many are buying on the dip.

I’m going to refrain from calling the current market a bear (or bull) market. Instead, I will call this market dangerous and deceptive. One of the most deceptive parts is that you will often get monster rallies that keep investors hopeful and in the game. It’s very possible we’ll have a Thanksgiving-Christmas rally (if we don’t, it means things are worse than anyone realizes). For the bulls to win this week, they will need to bring the indexes above their 200-day moving averages, and stay above. If they are unable to do this, it would be a danger signal.

Even with the likely rally this week, this is a damaged market and caution is advised moving forward. 

As I’ve repeatedly suggested, this is the time to learn how to buy put options (shorting is for the pros). Some people will buy inverse ETFs, which must be monitored closely. If betting against the market is not in your comfort zone, increasing cash is suggested for diversification and safety. Last week, shorting the rallies worked very well for the first three days. By Friday, the algos took control again and kept the markets calm. 

Bottom line: A holiday rally is possible for Monday and Tuesday (but not guaranteed). Holidays are often tricky to trade, so sometimes the best strategy is to not trade at all (especially from Wednesday to Friday). Have a great Thanksgiving!


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

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