This is what the technical indicators are telling us this week:
One-month trend = Broken and hurt but prepared to recover. SPX is above its 200-day MA (bullish) but the uptrend is still broken (bearish). Note: SPX closed at 3298 at the close on Friday, lower from a week ago, and below its 50-day MA, which is at 3350. On Sunday night, the major index futures are slightly higher.
Mid-term (50- and 100-day MA) = Bearish. The S&P 500 is still below its 50-day MA but is making a recovery attempt. Let’s see if the indexes can fight their way above the 50-day, and stay there.
RSI: (S&P 500) @ 44.62 (Daily) = Slightly oversold. The RSI hardly moved in the last week. There was some institutional selling during the week.
MACD = Slightly Bearish. MACD is slightly below its zero line and has dropped below its 9-day Signal Line.
Daily Intraday Volatility (VIX): 26.38 = Neutral. VIX is slightly below its 200-day moving average, which tells me there is little fear.
Comments: The indexes were in serious trouble last week until a strong save on Friday. Although the SPX is still below its 50-day moving average, it will make an attempt to regain its former glory. You can count on it. The key is whether the expected rally will be successful. It is essential you pay close attention to the rally. As most traders know, you always learn more from rallies than selloffs.
The indexes are still slightly damaged from a slow selloff that has lasted several weeks. And yet, the wimpy bears have not fully taken control. That is why I am certain the bulls will do whatever they can to bring the indexes well above their 50-day moving averages this week.
This is a watch and see week. No one knows who has the upper hand yet. I believe we are transitioning from a bull to a bear market, but I can’t prove it, and even if I’m right, this transition takes time. Be patient, and try not to get caught on the wrong side of a strong trend. As you know, on some days it’s been pretty wild.
Bottom line: Don’t feel compelled to trade everyday. During volatile days like last week, sometimes it’s best to move to the sidelines and wait for better opportunities.
Lance Roberts @ realinvestmentadvice.com suggests you are prepared for both an overdone selloff (short-term) and a deeper correction (medium-term): https://bit.ly/3cE2RJK
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