Here is the link to Understanding Stocks (third edition): https://amzn.to/3wO761F (Amazon) or https://bit.ly/3udwAUf (Barnes and Noble). Here is the link to How to Profit in the Stock Market: https://amzn.to/35lnjQy
WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK
Short-term trend (DAILY CHART) – SHORT-TERM RALLY: SPX rallied strongly last week, rocketing by a phenomenal 222 SPX points during the week, from SPX 3770 to 3992 (more on this below). SPX has moved strongly above its 50- and 100-day moving averages, but is still below its 200-day MA. SPX futures are lower on Sunday night, but that could change in the morning.
Long-term trend (WEEKLY CHART) – SHORT-TERM RALLY. SPX is strongly above its 200-week moving average, which bodes well for the intermediate term. If and when SPX falls below its 200-week, that’s when it will get ugly. Until then, enjoy the rally. No one can predict how long the rally will last, but lately, they haven’t lasted long.
MACD (WEEKLY) = MIXED. The WEEKLY MACD is below the zero line and slightly above the 9-day signal line. To get an all-clear signal, MACD must rise above the zero line. We’re not there yet.
RSI: (S&P 500) @61.96 (DAILY) OVERBOUGHT. SPX went from neutral to overbought, according to RSI. It’s still not at extremely overbought (70 or higher) but it’s getting closer. RSI has been remarkably accurate in identifying potential reversals on both the long and short side.
Daily Intraday Volatility (VIX) = 22.52. LITTLE FEAR: According to VIX, fear is on vacation (by evaluating the number of S&P 500 put options purchased over a set time period).
Comment: Just when the bulls may have thought about giving up, the indexes had one of strongest rallies in recent memory (over 1000 Dow points in one day). This may be hard for many people to believe but this is typical of a bear market. A month ago, on a radio show, I said to the host that SPX could reach 4000 before the end of the year. Little did I know it would happen so fast!
If this is a bear market, although the market could move higher, the odds have increased that a major selloff will occur. Investors who are dollar cost averaging into index funds won’t be too concerned. If trading, however, be prepared for a reversal (as always, timing is the key to success).
Bottom line: There are many cross currents affecting the market, including the Fed, inflation, and interest rates. As a result, the market remains volatile. Proceed with caution.
Crypto News: The biggest news last week was the blowup of FTX, which reflected one of the dangers of cryptocurrencies. Trade in the crypto world with care, and don’t bet money you can’t afford to lose. At times, crypto trading is similar to playing the “whack-a-mole” game, when you never know which platform or currency will get smashed. Poor bitcoin fell to 16,594 (from 19,000 a few weeks ago and 60,000 last year). Ouch.