WHAT THE INDICATORS ARE SAYING
This is what the technical indicators are telling us this week:
One-week trend = FLAT. The bears and bulls fought it out all week, and that should continue this week. SPX rose from 4432 to 4455 in the last week, a measly 23 point rally. Nevertheless, it was a vicious, back-and-forth battle for investment control. Futures are HIGHER on Sunday night. As always, direction could change in the morning.
SPX 20-day moving average (WEEKLY): FLAT. SPX is resting slightly above its 20-day moving average on a weekly chart. The bulls saved the indexes from falling further, but the market is still vulnerable. We are watching the 20-day MA closely for clues. If SPX breaches the 20-day, that would be a red flag.
RSI: (S&P 500) @64.51 (WEEKLY) = Slightly Overbought. RSI has returned to a “normal” overbought level. It could get more overbought (above 70), or swing in an entirely different direction. We must wait and see.
MACD (WEEKLY) = MIXED. MACD is leaning bearish but it’s still above the zero line (i.e., a bullish signal). While MACD is more bearish than in the past, it has not given a sell signal.
Daily Intraday Volatility (VIX) = 17.75 = VIX is still on the low side but a smidgen of fear creeped into the markets over the last two weeks. Still nothing to write home about.
Comment: The market played out exactly as we anticipated last week. SPX began the week on a sour note, but that only lasted a day. Before, during, and after the Fed meeting, the market miraculously went higher and higher. At the Fed meeting, Fed Chairman Powell said that inflation was under control and they are watching. Nothing to see here…so move on.
Now that the Fed meeting is behind us, the true market sentiment may appear. There are reasons for optimism and also reasons for nervousness. The bears and bulls have been fighting it out for months and that should continue. There is no way we can predict what the market will do in the near future.
I suggest relying on the indicators and oscillators for clues, and not opinion. Although it appears as if the bull market is on its last legs, it keeps coming back to surprise nearly everyone. Until the major moving averages are broken, shorting is too risky. And yet, I wouldn’t bet the house on a rally (at least now).
Bottom line: This week is a coin toss.
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