Bullish or Bearish? Week of November 7, 2022

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 Markethttps://amzn.to/35lnjQy  

WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK

Short-term trend (DAILY CHART)  SHORT-TERM SELLOFF:  SPX retreated last week, plunging 131 SPX points during the week, from SPX 3901 to 3770. Basically, SPX gave up all of the gains it made the previous week, which is reflected in the daily chart. This is a dangerous topsy-turvy market, typical of a bear market. Futures are much lower on Sunday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – SHORT-TERM SELLOFF. Even with the selloff last week, SPX remains above its 200-week moving average, a hopeful sign. If it breaks below the 200-week, and stays below, that would be an ominous sign. We are not there yet.

MACD (WEEKLY) = MIXED. The WEEKLY MACD is below the zero line and even with the 9-day signal line. Anything is possible, according to MACD.

RSI: (S&P 500) @49.61 (DAILY) NEUTRAL. RSI was slightly overbought last week, and if on cue, the market retreated. Now RSI is back to neutral territory, so it’s anyone’s guess which direction the market will go.

Daily Intraday Volatility (VIX) = 24.55. SLIGHT PULLBACK: Even with the pullback last week, VIX retreated slightly. Fear is still not rampant, according to this indicator.

Comment: As promised, the Fed raised the benchmark Federal Funds rate by 75 basis points, causing another jump in interest rates. As a result, it will cost more to buy a car or house, and credit card rates will likely increase. Not good for borrowers, and the market took notice.

We’re in uncharted territory, but I stand by my opinion that we are in the early stages of a bear market. If I’m right, by the time the bear plays itself out, it will leave a trail of destruction that causes investor nightmares.

It’s essential to have a plan, or simply stay on the sidelines, rather than playing it by ear. As I wrote earlier, this is a dangerous market, more suited to short-term traders than long-term investors. Nevertheless, investors with a long-term plan can achieve success over the long term. Unfortunately, the short-term is likely to be dangerous.

Added to the market woes are the list of technology companies that announced layoffs. Some of the best and brightest will be let go, but hopefully they will find new jobs with more potential.

The Fed plans to keep raising rates until “something breaks,” as Lance Roberts put it. Roberts says that the Fed doesn’t care if it makes a policy mistake, as long as they can reduce inflation. A “hard landing” is very likely, he says, meaning we could experience a recession.

Bottom line: It’s a very difficult trading and investing environment so tread cautiously. Cash is king during these times, as is taking profits and heading.

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