MY TWO NEWEST BOOKS WERE RECENTLY RELEASED: Here is the link to Understanding Stocks (third edition): https://amzn.to/3wO761F (Amazon) or https://bit.ly/3udwAUf (Barnes and Noble). Here is the link to How to Profit in the Stock Market: https://amzn.to/35lnjQy
Note: Check MarketWatch early in the week for an interview I did with a well-known TikTok influencer and financial author.
WHAT THE TECHNICAL INDICATORS ARE TELLING US THIS WEEK
Short-term trend (DAILY CHART) – STALLED RALLY. Not surprisingly, the four-week rally stalled last week, falling from SPX 4280 to 4228, a 52-point pullback. The pullback took the other indexes lower, including crypto, which is below 22,000 again. As I’ll explain in more detail below, SPX went against the almighty 200-day moving average, and was repelled. Futures are lower on Sunday night, but that could change in the morning.
Long-term trend (WEEKLY CHART) – STALLED. On the weekly chart, SPX stalled at its 50-day moving average, and did not go higher.
MACD (WEEKLY) = MIXED . The WEEKLY MACD is well above the 9-day signal line but is still below the zero line. Mixed Signals.
RSI: (S&P 500) @61.26 (DAILY) SLIGHTLY OVERBOUGHT. The hero of the week is RSI, which warned that the market moved up too far and fast. Last Monday, SPX rallied and RSI went as high as 73, an extremely overbought reading. Sure enough, SPX reversed direction the next day and the rest of the week, taking RSI to less extreme overbought levels.
Daily Intraday Volatility (VIX) = 20.08 COMPLACENT: The VIX is telling us that option buyers are not worried in the least about the market environment.
Comment: One of the reasons indicators are so useful is that they give you unbiased facts. As mentioned above, RSI was the hero because once again, it warned the market was extremely overbought. Add in the fact that on the daily chart, SPX smacked into its 200-day moving average, and couldn’t move higher. That tells me a rocky road is in the market’s future.
This week should be more volatile than usual (on certain days). Traders are waiting for Fed Chairman Powell’s comments at the annual Jackson Hole economic pow-wow. Powell may or may not give hints as to future rate hikes, which should affect the market.
Advice: It’s dangerous to make big financial trades when the Fed is going to speak. It’s akin to gambling, not trading, when taking large positions before a market-moving event.
Bottom line: Wait and see what the Fed has to say about interest rates, or if there is any other financial news.