Bullish or Bearish? Week of Oct. 28, 2019

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is above its 50-day MA = Bullish

S&P 500 one-month trend: There is no clear trend at this time, but there is a double-top, so caution is advised.

RSI: (S&P 500) @ 60.57 = Slightly Overbought

MACD: Above Zero Line and Above Signal Line = Bullish

Daily Intraday Volatility: 12.65 = Extremely Low (Bearish)

Comment: SPX finally rose above 3000 last week with a last gasp push on Friday. But so much is going on behind the scenes, it’s hard to keep up. Here is a short list:

  1. The Fed is injecting over $60 billion a month into financial markets with the Dow and SPX near all-time highs, and economic conditions stable. The question is why.
  2. In addition, the Fed may cut interest rates, or say they will. Once again, why is the Fed taking these extreme measures with the market so high and economic conditions so tame?
  3. The indexes are rising but volume is extremely low, a negative divergence. It appears as if only the machines are trading, not people.
  4. The VIX is at 12.65, an extremely low reading and a warning sign. When I look at the 3-month chart of the VIX, it may still go lower, but typically it explodes higher, and quickly, when it hits at or near 12.

This is a difficult market to trade the indexes but there are good opportunities with individual stocks, long or short. Looking at the overall market, while we are flirting with all-time highs, and are still above SPX 3000, traders know that the QE the Fed has initiated combined with low interest rates is propping up the market. With all that help from the Fed, it’s not surprising that the indicators above are bullish.

Meanwhile, there are numerous technical and fundamental signs that all is not well in Denmark. Here is an excellent analysis of the current market from Sven Henrich (Northman Trader) that explains the dangers in depth: https://bit.ly/32SmwAc

Bottom line: These are weird times. Until the market makes up its mind, caution is advised. The Fed meets on Tuesday and Wednesday, so the Chairman’s words will be closely scrutinized. As you know, on Fed days, it can be tricky to trade, so be careful!

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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:www.wolfstreet.com


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