Here are the latest indicators:
S&P 500 one-month trend = Pivot (Potential trend change)
S&P 500 is even with its 50-day moving average = Neutral
RSI: (S&P 500) @46.16 = Neutral to Near Oversold
Intraday Volatility: Moderate
Comment: As interest rates rose last week, the market fell. It wasn’t surprising since the indexes were overbought according to the RSI and sentiment indicators. Even with the slow selloff, there was little fear. There should be light trading on Monday, a perfect environment for the algos to run the market higher. Typically, after even a mild selloff, the algos take control. However, if interest rates keep rising, the selloff may continue into the week. That would be a huge red warning sign that a correction is underway.
My advice, as always: Wait and see which side is winning and join them. This week will give us important clues to see if we get a last gasp run-up into the end of the year, or if the underlying problems are so severe that the smart money is selling. If the market follows the same pattern as in the past, there will be a rally this week.
What to look for: Watch what happens if and when the SPX drops to its 50-day moving average at 2877.14. In the past, it would bounce off of it and rally. If it drops below its 50-day moving average and remains below all day or week, more pain will likely follow.
History lesson: The last time the SPX hit its 50-day MA was in July, where it bounced around that level for a few weeks before staging a strong three-month rally that ended last week.
Bottom line: This is going to be an interesting week, a “pivotal” week.
Note: Here is my latest column on MarketWatch, about how to get started trading options: https://on.mktw.net/2Nx6inI
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