Bullish or Bearish? Week of Sept. 20, 2021


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

One-week trend = LOWER. The bears took control again last week. SPX fell from 4458 to 4432, an annoying 26 point drop. Futures are LOWER (and moving even lower) on Sunday night. However, in the morning anything is possible. 

SPX 20-day moving average (WEEKLY): Downtrend. SPX is slightly above its 20-day moving average but headed lower. The bulls are desperate to stop the indexes from falling further. The indexes are weaker than two weeks ago but not in imminent danger yet.

RSI: (S&P 500) @63.27 (WEEKLY) = Slightly Overbought. RSI fell dramatically from an extreme 73 reading two weeks ago to “normal” overbought levels. The bulls are bruised but they are still in the game.

MACD (WEEKLY) = Slightly bearish. For the first time in months, MACD fell from its neutral reading and is leaning bearish. It’s too early to proclaim anything except that MACD detected weakness. We will watch it for clues.

Daily Intraday Volatility (VIX) = 20.81 = VIX is still on the low side but a smidgen of fear creeped into the markets over the last two weeks. Nothing to write home about but interesting to watch.

Comment:  The reversal I warned about arrived last Tuesday. The market rallied hard last Monday but gave up its gains the rest of the week. In the past, the bulls typically took back control after even one bad week. This time they struggled.

The market is a little skittish but I looked at the calendar: The Fed is meeting this week and the bulls are looking for Fed Chair Powell to save them. Typically, the markets rally before and right after the Fed meeting, especially when Powell hints that everything is fine and low interest rates will continue as far as the eye can see.

The skunk at the party this week is inflation, and everyone is seeing it. The Fed is pretending there is no inflation and that everything is under control, and for his sake I hope it is. It is guaranteed that questions about inflation will be asked. Powell will have answers.

As you see at the top of this blog, RSI is slightly overbought, MACD dropped a little, and VIX is saying that traders are getting a tiny bit cautious (they are buying more put options for protection). Nothing to worry about yet but be on guard.

Bottom line: No one knows nothing, so don’t even try to guess. The market is not as bullish like in the old days, momentum is weakening slightly, and investors are cautiously optimistic. Jerome, the ball is in your court. We can’t wait to hear your soothing words.


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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