Bullish or Bearish? Week of October 18, 2021


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

One-week trend = UP. The bulls decisively won the week, no questions asked. SPX rose from 4391 to 4471 last week, a healthy 80-point advance. The bulls are back in control. Futures are FLAT on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): UP. SPX rose strongly above its 20-day moving average as the bulls successfully defended. All systems are go this week unless something changes the narrative.

RSI: (S&P 500) @62.45 (WEEKLY) = Neutral to slightly overbought. RSI is still slightly elevated but not at extreme levels. It’s not giving a strong signal in either direction.

MACD (WEEKLY) = MIXED. The weekly MACD is giving mixed signals: The MACD line is below its signal line (bearish) but above the zero line (bullish). Translation: Nothing to see here.

Daily Intraday Volatility (VIX) = 16.30 = VIX has fallen a bit in the last week, reflecting calm and a lack of fear even as inflation rears its ugly head. All is well on Wall Street, says the VIX.

Comment:  The sell-off from a couple of weeks ago has been forgotten. The bulls took control last week and now almost everyone appears bullish again. What can I say? It’s the reason I don’t make predictions: No one can tell you what the market is going to do day-to-day, but at least the indicators give us clues.

Right now the indicators are saying that the trend is up and SPX is only slightly overbought. According to technical analysis, unless something comes out of left field (like a unexpected negative economic report), the market is headed higher.

Eventually, inflation is going to affect the market, especially if the Fed has to raise interest rates. That would be a game-changer. For now, however, sit back and enjoy the bull party. As I said last week, this could be the calm before the storm, or just the calm. Enjoy these up trending days as one day it will end. Until it does, however, full spead ahead!

Bottom line: I don’t see any red flags this week. The market could drift all week in either direction but there are no clues (yet) or a major event that could affect the market. (Then again, I don’t have a crystal ball so anything is possible.)


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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