Bullish or Bearish? Week of November 1, 2021

I am sad to announce that Mark D. Cook, my friend and mentor, passed away last week at age 67. He was an extremely successful self-taught options trader and an expert on bear markets. I had planned to interview him this weekend for my new stock market book, something he was looking forward to. He told me he was convinced a bear market was closer than ever, within months or in 2022, and he was eager to share his thoughts. He was astounded by how far and fast the stock market had risen, and he warned there would be dire consequences. He was extremely concerned about inflation and warned that if anything could kill the market, it was inflation.

I miss his sharp wit, honesty, and daily market commentary. He always told you where he stood.

WHAT THE INDICATORS ARE SAYING 

This is what the technical indicators are telling us this week: 

One-week trend = UP. The bulls continue to run with the ball as SPX rose from 4533 to 4605, another remarkable 72-point advance. SPX is near its all-time highs and is overbought again. Meanwhile, the Bad News Bears have gone into hiding. On the other hand, many bulls are getting overconfident and giddy (and some well-known touts are publicly feasting on their good fortune). This is not a good sign. Futures are HIGHER on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): UP. SPX has moved away from its 20-day MA and is in a strong uptrend. The bull run continues. 

RSI: (S&P 500) @68.82 (WEEKLY) = RSI is telling us that SPX is a whisker away from extremely overbought.

MACD (WEEKLY) = LEANING BULLISH: MACD is above the zero line (bullish) but below its signal line (bearish) but it is pointing higher. It’s not a slam dunk bullish signal (until it crosses the signal line).

Daily Intraday Volatility (VIX) = 16.26 = All is well on Wall Street, says the VIX. Nothing to see here. 

Comment: The market is in a strong uptrend and is also overbought. It’s been so long since the markets have had even a 10 percent correction that when one occurs, it will seem like a disaster. Many investors will be caught off guard one of these days (but don’t try to predict when).

Shorting has been extremely difficult unless you’re day trading. The trend is up, up, and away. Until there are signs of exhaustion or a black swan event, we appear to be going even higher. Don’t fight the trend (at least right now). Being early is the same as being wrong.

Those who are long, especially index investors, have never had it so good. Don’t forget these seemingly unstoppable bullish days as no strategy works forever. However, no one knows when they end, either.

PS: As I wrote in the commentary above, some overconfident bullish touts are acting like the market will never go down, one of the reasons I believe that Mark D. Cook may be right about the coming bear market.

Note: There is a Fed meeting this week — typically a bullish affair, especially if they can convince investors that inflation is transitory.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

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