S&P 500 is above its 200-day moving average = Bullish
S&P 500 is below its 50-day and 100- day moving averages = Bearish
S&P 500 one-month trend: SPX broke its uptrend and is in a downtrend. The algos are going to have to bring the indexes back to the 50-day to save this market.
RSI: (S&P 500) @ = 44.87 = Neutral
MACD: Below Zero Line and below Signal Line and pointing lower = Bearish
Daily Intraday Volatility: 18.47 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has increased.
Comment: For the first time in years, many pundits were talking about a recession over the weekend, so the White House pushed back on Sunday (“I don’t see a recession at all,” Larry Kudlow proclaimed). As I wrote several weeks ago, the signs of a recession are coming closer, and for many, it was the inverted yield curve that confirmed the economy is struggling. The only thing holding the economy up are consumers, who are still buying online, and jobs (there haven’t been massive job losses).
Last week was a wild and ugly week. If it wasn’t for the buy on the dip algos, it could have been a whole lot worse. The trend was broken as SPX dropped below its 50-day and 100-day moving averages. The 800-point Dow shellacking last week made a lot of people nervous (this is the second major one-day selloff in two weeks), and the indexes only recovered some of its losses. And yet, there is still no panic. This tells me there is plenty of room for the indexes to fall as we enter September and October.
With all of the danger signs swirling about, do not forget that the Fed, the White House, and the buy on the dip algos will do almost anything to keep this market propped up by any means possible. If it means a presidential tweet in the middle of the day, a tax cut, a 50 basis point cut by the Fed, or QE, it will be done. With a presidential election coming in a year and a half, there is no doubt that the three amigos above will work to keep volatility low and the markets high.
We are going through very, very dangerous and unprecedented times. The tug of war between the algos and the government vs nervous sellers will continue into the fall. The good news: Retail investors are still holding tight and are not panicked at this time.
For the next three or four months, you must be on high alert for some very crazy times. If you make money with puts (or shorting), take profits fast. For the last 11 years, the buy and hold strategy has been a winner. In my opinion, in the future this strategy will not work like it did before (perhaps for years, but this is pure speculation on my part).
Keep in mind that Jerome Powell is in Jackson Hole this week and will be speaking next Friday at 10:00 a.m. ET, so prepare for occasional volatility spikes all week, and especially on Friday.
If you want to read some very thoughtful but scary analysis, click on the following links. These analysts say it a lot better than me (be sure to also read the links from Wolf Street and Lance Roberts below) for additional insights. This is not the time to panic, but to get educated.
From Northman Trader: https://bit.ly/2Z095jT
From Victor Dergunov (Seeking Alpha): https://bit.ly/30gedN5
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