Bullish or Bearish? Week of November 29, 2021

ALERT: I wrote the following column about Mark D. Cook for MarketWatch that includes his advice on the clues to look for before a bear market arrives: https://on.mktw.net/3xRRHvW


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

One-week trend = LOWER. The Bad News Bears finally hit a home run. The question is: Was it a one-day wonder? Last week, SPX fell from 4697 to 4594, a 103-point shellacking, all of it coming on Friday. Futures are higher on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): NEUTRAL.  SPX is above its 20-day moving average but pointing lower, which means there is no meaningful signal.

RSI: (S&P 500) @61.99 (WEEKLY) SLIGHTLY OVERBOUGHT. RSI plunged on Friday from extreme levels but is still overbought.

MACD (WEEKLY) = NEUTRAL: MACD is above the zero line (bullish) and is even with its 9-day signal line. MACD is not giving significant signals. 

Daily Intraday Volatility (VIX) = 28.62 = VIX skyrocketed on Friday as put-buyers gobbled up puts for protection. For the first time in a long time, fear entered the hearts and minds of option traders.

Comment: Anyone who has followed this blog knows how unusual it was for RSI to be above 70 for more than a few days on SPX. Sure enough, SPX came back to earth on Friday, which they are blaming it on the new COVID variant. I don’t completely buy that story. I believe that a large institution with huge positions got spooked (for reasons we will never know) and sold, and the herd followed.

Why the market sold off is not important, but that it did sell off is significant. It is also significant that the futures are rallying on Sunday night. Tomorrow (Monday), watch the rally and see if it continues all day. Even more importantly, see if the rally tomorrow can carry over into Tuesday. If the rally cannot be sustained for long, that is a clue this bull market is struggling.

Friday’s selloff was a surprise but then again, it wasn’t. In the future, if RSI rises above 70 on SPX, pay attention as an extremely overbought index usually doesn’t last long.

On Monday, the buy on the dippers are going to be entering the market with everything they’ve got. I can’t wait to see how long the rally lasts. My suspicion is there are more problems underneath the surface than anyone realizes, and if I am right, expect a lot more fireworks in the weeks and months ahead.

Bottom line: Trade cautiously during these uncertain times. Nothing is as it appears, and that is dangerous.


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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