Bullish or Bearish? Week of November 8, 2021


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

One-week trend = WAY UP. The bulls ran the market higher all week. SPX rose from 4605 to 4697, an astounding 92-point rally. SPX is at its all-time highs and is obscenely overbought. The bears are in hibernation but they better wake up soon. Their day in the sun is coming. Futures are flat on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): UP. SPX has moved away from the 20-day in a strong uptrend. This is a powerful bull rally.

RSI: (S&P 500) @72.42 (WEEKLY) = RSI is telling us that SPX is ridiculously overbought. I haven’t seen overbought numbers like these in a very, very long time. RSI is flashing a WARNING sign. Yes, we could get even more overbought but we are in the danger zone.

MACD (WEEKLY) = LEANING BULLISH: MACD is above the zero line (bullish) and even with its signal line and pointing higher. It’s not a slam dunk bullish signal but it’s close.

Daily Intraday Volatility (VIX) = 16.48 = No put buying on Wall Street. All is well, according to professional option traders.

Comment: I am flabbergasted at the overbought readings, but perhaps I shouldn’t be. Last week was a Fed meeting after all (and 80 percent of the time the market rallies on Fed days (at least during a bull market)).

It’s possible we are seeing a blowoff top (can’t be sure until afterwards, however). I do know that anyone who doesn’t heed the signs of this extremely overbought market will regret it one day. If Mark D. Cook was alive, he’s be blowing a gasket right now. In fact, that’s what was his prediction a month ago: “The market is going to blow a gasket.”

I know it’s silly to warn anyone about the increased stock market risks when we’re ready to celebrate the upcoming holidays. That’s one of the reasons I got out of the prediction business. However, while I can’t predict when the market is going to give back a huge chunk of its gains, I know it will. I also can’t predict how bad it will be (correction or crash), but like a looming hurricane, be prepared.

The way to survive the coming volatility is to be diversified, know what you own, don’t go on margin, don’t take unnecessary risks, have cash on the side to go shopping for stocks that are on sale, and learn technical analysis (my new book coming out in March explores the top technical indicators and oscillators, among other things).

Bottom line: I am in awe how this market seems unstoppable. I have seen this story before, but not for a very long time.


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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