This is what the technical indicators are telling us this week:
One-month trend = Bearish. SPX is above its 200-day MA but pointing lower as the market plunged last week. SPX closed at 3269 at the close on Friday, a huge drop from a week before. Note: SPX futures were lower earlier Sunday night, but are now higher. Wait until the premarket to be sure.
Mid-term (50- and 100-day MA) = Bearish. The S&P 500 sliced through the 50- and 100-day like it was butter.
RSI: (S&P 500) @ 37.05 (Daily) = Oversold. RSI went from slightly overbought to oversold in one week. The market could get more oversold or it could bounce. Anything is possible.
MACD = Bearish. MACD fell slightly below its zero line and is also below its 9-day Signal Line. MACD is reflecting the current bearishness.
Daily Intraday Volatility (VIX): 38.02 = Higher. VIX spiked higher, rising above its 200-day moving average as fear entered the market for the first time in months.
Comment: Last week brought us a lot of lessons as reality finally overwhelmed the market. Although traders and investors were hopeful, the stock market was no match for the virus and tough economic conditions. Market veterans saw this coming for weeks as the bull market finally ran out of steam all last week.
It is unknown if the bull market is over or if another rally is in the cards. Although the market looks dangerous and unstable at the moment (and futures are falling on Sunday night), the market has reached overbought levels. It is not at extreme levels yet, meaning the market has room to fall even more before reversing.
As I wrote last week, with an election looming and a virus spreading, it’s dangerous to take one side or the other, as anything can happen this week. Most pros will hedge (or hide) rather than commit to one side or the other. If you don’t know how to hedge, sitting on the sidelines is not a bad strategy as it’s easy to get chopped up.
Bottom line: No one can predict what is going to happen to the market this week, so don’t even try. I assume volatility will increase. These are historic times, and it will be a historic week. Be prepared for any scenario.
Here is a more detailed analysis about the market from Lance Roberts:
Lance Roberts @ realinvestmentadvice.com explores why the stock market plunged last week: https://bit.ly/3mJMJdO
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: https://wolfstreet.com