Here are the most recent market indicators:
S&P 500 one-month trend = Bearish (The uptrend is broken. Caution is advised).
S&P 500 is below its 50-day, 100-day, and 200-day moving averages = Bearish
RSI: (S&P 500) @43.64= Neutral
Intraday Volatility: High
Comment: Last week, the bulls needed to bring the indexes above their 200-day moving averages, and they did, at least for a day. It was quite impressive how the Dow went up by 900 points in three days (Tues., Wed., Thurs.). It was an incredible rally but unfortunately, the indexes were unable to stay above their 200-day moving averages.
All week, there was conflicting news from many sources, including from the White House. As a result, there were wild intraday swings. Volatility is a two-edged sword. On one hand, it can bring great profits if you time the trade correctly and get out quickly. On the other hand, you can lose money if your timing is wrong. It’s not easy to trade in this environment, which is why trading small is recommended.
With the election, the post-election, and the Fed meeting this week, it should be another wild and volatile week. Expect a lot of intraday reversals. Day traders will be pleased, but investors are going to feel a lot of heartburn.
My bearish view: When I put all of the clues together, I am entering this week with a bearish view (i.e. short the rallies). In addition to the election and the Fed, I am also concerned by the Apple news. I believe that investors have been shaken but are still too hopeful and unaware of the risks. The charts of the FAANG stocks are weak, and all I hear from investors is “the FAANG stocks will come back.”
In addition, the indexes went up too abnormally high and too abnormally fast with help from the algos. Even with my bearish short-term view, and this is important, the market is always right. Therefore, if the market rises above its 200-day moving averages (perhaps the Fed will say something positive), and if the trend is up, I will switch sides.
Recession Watch: I was at a mall in Fort Lauderdale, and although the mall was crowded, I found out from several store owners that sales were the “worst in 10 years,” as one owner told me. An owner of a candy store told me if sales don’t improve this Christmas, he won’t renew his lease. These are the type of clues that the great investor Peter Lynch looked for, and it could be an early warning sign of problems ahead. Add in the rising interest rates and stories that housing and auto sales are rolling over and you have the makings of a recession. It’s too early to say for sure but keep your ears and eyes open for clues.
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