Bullish or Bearish? Week of September 12, 2022

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Short-term trend (DAILY CHART) – RALLY. The indexes had a relief rally last week, including SPX, which rose from 3924 to 4067, an impressive 143-point rally. Readers of this blog were not surprised because the market was extremely oversold (as revealed by RSI). SPX was able to rise above its 50-day moving average, but it has a long way to go before it’s out of the woods. Futures are flat on Sunday night.

Long-term trend (WEEKLY CHART) – IMPROVED. SPX improved a bit last week on the weekly chart but it’s still below its 50-week moving average.

MACD (WEEKLY) = IMPROVED. The WEEKLY MACD has improved but it’s still giving mixed signals.

RSI: (S&P 500) @50.94 (DAILY) NEUTRAL. RSI made the most dramatic improvement last week, rising from extremely oversold levels to neutral. As you know, when RSI drops to or below 30, a rally is typically coming, and RSI performed brilliantly. Indicators and oscillators aren’t perfect, but they are better than “playing it by ear” or relying on your “gut.” Last week, RSI warned us that a snapback rally was coming, and it did not disappoint.

Daily Intraday Volatility (VIX) = 22.79 LOWER: The low VIX reflects the complacency that has once again overtaken Wall Street.

Comment: I’ll keep this short and sweet. The Fed says it will be raising interest rates by another 75 basis points, which should be another blow to the housing and stock markets (if they do as they say). It appears the Fed wants a recession to help tackle inflation, and they will probably get their wish. As a result, the stock market is going to be volatile for the rest of this year.

It’s possible the rally that started last week will continue, but I wouldn’t bet money on it. In reality, we are waiting to see if the rally has legs or if there will be another failed rally. Right now, no one can say for sure, so the best advice is to SIT AND WAIT.

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