This is what the technical indicators are telling us this week:
One-month trend = Neutral. SPX started off bullish early the first day but ended the week at the lows. Even the announcement of a vaccine couldn’t prop up the market for longer than a day. SPX closed at 3557 at Friday’s close, lower than a week ago. Futures are slightly higher on Sunday night.
Mid-term (50- and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA.
RSI: (S&P 500) @ 57.08 (Daily) = Slightly overbought. RSI fell from extremely overbought to slightly overbought.
MACD = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD will give an early signal of a faltering market.
Daily Intraday Volatility (VIX): 23.70 = Low. What me, worry?
Comment: Last week, the indicators warned that the indexes were overbought, and sure enough, it was a rough week for the bulls. The rallies failed, and yet, there is little fear.
Once again, pay attention to the rallies for clues. If the rallies fail again this week, it will not be pleasant for the bulls. With the pandemic spreading and the economy faltering, I’m amazed the market is still near its all time highs. The Fed is keeping interest rates low, and the algos are working overtime to keep the market stabilized.
I would not be surprised to see a major pullback or plunge in the next few months. I don’t trade off of predictions, but I do prepare for any scenario. Trend trading has been difficult for quite a while. Scalpers and day traders have probably found more opportunities, but it’s not easy. Indexers are just holding and hoping for the best.
At the moment, it’s impossible to predict market direction. My gut tells me the market is vulnerable (but I don’t trade off of my gut, my feelings, or predictions). Since the market is unpredictable at this time, I am personally on the sidelines, waiting for better setups. Perhaps others have found better opportunities, and if so, you should be commended. This is not an easy trading environment.
Bottom line: Unpredictable market, unpredictable trading setups, and unpredictable world.
Here is the latest from Lance Roberts, who wisely took profits last week: https://bit.ly/35ZqqeJ