Bullish or Bearish? Week of Nov. 4, 2019

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 an uptrend.

RSI: (S&P 500) @ 66.56 = Overbought (at 70 RSI it will be in the danger zone, i.e. extremely overbought).

MACD: Above Zero Line and above Signal Line = Bullish

Daily Intraday Volatility: 12.30 = Extremely Low (Bearish)

Comment: The Fed did its job, so in addition to starting QE again with $60B a month (although they say it’s not QE), they also cut interest rates, and injected additional liquidity via the repo market. As a result, the market is at all-time highs while debt levels have gone through the roof (trillion dollar deficits and $23 trillion in U.S. debt). Even with all this stimulus, GDP is mediocre at best at 1.9%, and Chicago PMI at 43.2 with 47 expected. Imagine where the stock market would be if the Fed wasn’t injecting billions into the financial markets.

The SPX three-month chart is a thing of beauty but the market has moved up too far and too fast recently. In my opinion, caution is advised at these levels. A sudden and severe pullback would not be surprising, in fact, it’s expected. Before that occurs, we could have one last “blow-off top” where RSI surpasses 70 as the market makes one last gasp higher.

Bottom line: These are dangerous and strange times. Old-timers tell me they have never seen a market this overbought with so little volume. Below are links to two excellent posts, one from a technical perspective, the other from an economic perspective. The conclusions are similar: The market is extremely overbought (and yet, it could get more overbought before retreating).

Link to Sven Henrich (Northman Trader): https://bit.ly/34ti2Ap

Link to Lance Roberts (realinvestmentadvice): https://bit.ly/2NAamWd


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

I will notify you of my posts via twitter@michaelsincere

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