This is what the technical indicators are telling us this week:
One-month trend = Broken. SPX is above its 200-day MA but the broken uptrend has not recovered yet. Note: SPX closed at 3340 at the close on Friday, lower from a week ago. The 200-day is at 3097. On Sunday night, all the major index futures are higher.
Mid-term (50- and 100-day MA) = Neutral to Bearish. The S&P 500 fell to its 50-day MA last week. Let’s see how it reacts at the 50-day, which is now acting as resistance.
RSI: (S&P 500) @ 44.78 (Daily) = Slightly oversold. The RSI fell from a high of 80 a week ago to 44.78. It reflects institutional selling last week.
MACD = Neutral. MACD is above its zero line and and below its 9-day Signal Line.
Daily Intraday Volatility (VIX): 26.87 = Neutral. VIX is slightly below its 200-day moving average, which tells me there is little fear even after last week’s pullback.
Comments: Last week was a rough one for the markets. After the holiday, the Dow fell by over 600 points, tried to recover, and fell again. The worst day was Thursday, when the market rallied at the open and plunged later in the day. You always learn more from rallies, and a failed rally telegraphed trouble.
This week, the Fed is meeting. Typically, the markets move higher on the day before and during the Fed meeting. Usually, the Fed has nice things to say, and many promises to make. As usual, no one knows how the market will react, so trying to guess market direction this week is risky.
SPX is at the lower end of the Nicholas Darvis box. Few follow the Darvis box but I do. It tells me that the market is at risk of falling further, but I also know the algos will aggressively defend the 50-day moving average. If SPX and the other indexes fell below the 50-day, that would be significant and surprising.
Bottom line: We have an injured market that is slightly above its 50-day moving average. The Fed is meeting so they will do whatever it takes to instill confidence. It’s a gamble to guess market direction this week as it could go either way. After the Fed meeting, we will have a better idea which side (bull or bear) is winning. Be prepared for anything.
Below is further market analysis by Lance Roberts:
Lance Roberts @ realinvestmentadvice.com says speculators are getting even more speculative: https://bit.ly/3ivT0YL
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