WHAT THE INDICATORS ARE TELLING US
This is what the technical indicators are telling us this week:
One-week trend = Sideways. The bears took control early in the week but were unable to defend against a late-week bull assault. SPX dropped from 4468 to 4441, a moderate 27-point decline. Futures are FLAT on Sunday night as the indexes flirt with all-time highs.
SPX 20-day moving average (WEEKLY): Uptrend. The SPX 20-day MA fits into our short-term weekly trading strategy. The 20-day is above its moving average, which is bullish.
RSI: (S&P 500) @69.64 (WEEKLY) = Extremely Overbought. SPX is extremely overbought according to a near-70 RSI. The algos will have to work overtime to prevent a major selloff.
MACD (WEEKLY) = Neutral. The weekly MACD is still giving mixed signals. MACD is above the zero line, which is bullish. The MACD line is even with its 9-day signal line, a neutral reading (although if you look closely it’s a smidgen below). As mentioned in the past, MACD does not work in a low-volatility environment.
Daily Intraday Volatility (VIX) = 18.56= The VIX jumped a few points on a little fear early in the week. VIX is still low but it climbed out of the basement. One of these days, volatility will return with a vengeance, but until then, be patient.
Comment: After RSI went above 70 last week, just as we warned, the market sold off hard for a couple of days. RSI even dropped to 65 during the week, still overbought but not at extreme levels. As predicted, the algos pounced later in the week, saving the SPX but also spiking RSI.
It is what it is: RSI is extremely overbought and VIX displayed a slight increase in fear as option traders initiated put protection hedges. We are still in the volatile season (August to October) for the stock market, but volatility hasn’t lasted longer than a day.
So where does that leave us? Until further notice, the algos are the main market mover. A touch of fear appears on occasion but the algos swoop in quickly to reverse the negativity. I’d hate to be a short seller right now, although their day is coming. No one knows when, but I wouldn’t be surprised if it’s soon.
Bottom line: We’re at a stalemate for now. The bulls are defending against a very weak bear team. The market could go in either direction this week so it’s a mistake to put much money on the outcome. If you’re an investor, the market is still in an uptrend. If you’re a trader, it’s better to wait and see which way the wind will blow.
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:www.realinvestmentadvice.com
For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com