Bullish or Bearish? Week of March 30, 2020

Mid-term: S&P 500 is still well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market. Until SPX rallies back above, assume we are in a bear market.

One-month trend = Bearish. After a strong downtrend, SPX and the other indexes bounced back last week the fastest since 1931. Consider it a bear market rally until SPX rises above its 200-day moving average.

RSI: (S&P 500) @ 43.58 = Slightly oversold. The market could go in either direction this week so be careful.

MACD: MACD is below its Zero Line but rose slightly above its 9-day Signal Line) = Bearish to Neutral

Daily Intraday Volatility (VIX): 65.54 (Extremely High) = Volatility has skyrocketed as fears increased. Expect volatile trading days until panic and fear subsides.

Comment: It’s going to be another volatile week as the Fed’s infusion of capital into the market competes with bad news about the virus and economy. Even with the rally, we are still oversold (the crash was the fastest and strongest in history).

In a typical bear market, the markets will have a severe plunge like we just experienced, then rally strongly, followed by a longer, more severe pullback that can last months if not years. No one can predict if we will follow this model, but it’s possible.

Unfortunately, many people are still in denial, and are hoping we will return to the old time highs (one financial publication even proclaimed that the bear market was over). Don’t be surprised if we rally strongly on some days but be suspicious.

If you are trading or investing, you must be brutally honest. You may have noticed that many traders are “selling the rally,” which is typical in a bear market. In a bull market, investors and traders will “buy the dip,” but do the opposite in a bear market. Again, the bear market rally could continue into this week (it’s possible although the futures are lower on Sunday night).

Bottom line: No one can predict what is going to happen so all you can do is sit back and be ready for any scenario. With the virus taking up all of the news coverage, which will soon be followed by dreadful employment news, it’s going to be a struggle in the near future. Expect rough times before we see a light at the end of the tunnel.

Bottom line: These are difficult times for everyone. It’s distressing how quickly the economy collapsed, and how so many jobs were lost. I truly hope that the Fed knows what it is doing.

Read the excellent analysis below for a more detailed take on the future.

Sven Henrich (Northman Trader) on the future of the stock market: https://bit.ly/3acjfiH . Be sure to watch the video at the end of the commentary.

Lance Roberts, money manager at (realinvestmentadvice.com), on how the bear market may play out: https://bit.ly/33UPTmE

Finally, although the following video is not related to the stock market, it is worth watching (57 minutes). It’s from a New York doctor who tells exactly how to protect you and your family from the virus by following some basic rules. It will actually reduce your fears as he tells the facts.

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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


Bullish or Bearish? Week of March 23, 2020

Mid-term: S&P 500 is well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market. Until SPX rallies back, assume we are in a bear market.

One-month trend = Bearish. We are in a strong downtrend due to a pandemic, which has decimated our economy in the short-term.

RSI: (S&P 500) @ 31.57 = Extremely Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.

MACD: MACD still in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish

Daily Intraday Volatility (VIX): 60.54 (Extremely High) = Volatility has skyrocketed as fears increased. Expect volatile trading days until panic and fear subsides.

Comment: Futures are plunging again on Sunday night as investors watch their 401k profits disappear. Eventually, the selling stops and there’s a tradeable bottom. These are not easy times.

We are in uncharted territory as the virus takes a physical and financial toll on the world. Last week was particularly brutal, especially last Monday when the Dow fell by over 3,000 points. I’ve never seen numbers that large, which reflects the fear and panic many investors are feeling.

I can’t prove it but I believe a lot of the selling is due to forced liquidations and margin calls by hedge funds, at least five that blew up last week. From anecdotal evidence, it appears as if many buy and hold investors are sitting tight with their stocks and mutual funds, perhaps because they remember how quickly the market bounced back after 2008.

At this time, I do not know which model the market will follow. If it’s the 1987 bear market model, we will bounce back fairly quickly, within months. The 2008 bear market model was longer and more painful, but the market bounced back after a year or so. The worst case example is the 1929 crash and bear market. I truly hope we don’t follow that model, when the market not only crashed, but continued to fall for the next three years. No one can predict when the current market will “bounce back,” so until then, selling stocks on rallies is not a bad strategy (Lance Roberts has specific advice in the link below).

These are scary times but you must remain calm and clear-headed. Hopefully, you have a sizable amount in cash that will allow you to buy at the “bottom.” Do not be fooled into buying too early, however, as many have tried and failed. Trying to time the “dip” is nearly impossible, so be patient and wait to see how this plays out.

Unfortunately, we are in for rough times ahead in the coming days, weeks, and months. If you can afford it, it would not be wrong to sit this out and wait until the selling stops. Those who want to trade can find opportunities, but trade small.

Bottom line: No one can predict the future, especially during times like this. Your money can always be replaced, but not your lives. Take steps to protect you and your family. Once this virus is eradicated, and our economy is repaired, there should be excellent opportunities to buy stocks at low prices in the future.

Read the following pieces from two analysts who have been warning us of the dangers for months. They continue to give excellent advice:

Sven Henrich (Northman Trader) on stock market fears: https://bit.ly/3acjfiH

Lance Roberts, money manager at (realinvestmentadvice.com), on how the bear market will be with us for a while: https://bit.ly/2U9Fz6Y

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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


Bullish or Bearish? Week of March 16, 2020

Mid-term: S&P 500 is well below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market.

One-month trend = Bearish. We are in a strong downtrend and it’s still as ugly as I’ve ever seen. I’m not sure what the Fed can do to reverse this crash-like plunge.

RSI: (S&P 500) @ 37.67 = Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.

MACD: MACD in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish

Daily Intraday Volatility (VIX): 57.83 (High) = Volatility has skyrocketed as fears over the virus and the market plunges have increased. Eventually, fear subsides, but for now, VIX is at extreme levels = Bearish.

Comment: Sunday night, futures are limit down after the Fed cut interest rates to near 0. I don’t ever remember a situation like this. Although the futures will likely plunge at the open, there is a chance there could be a reversal in the near future, but I wouldn’t bet on when it will happen. Beginners should stay far away from this dangerous market.

This is a trader’s market, and in the short-term, buy and holders could get crushed. I only hope you aren’t on margin, or didn’t bet everything on a dip. Although I don’t make predictions, I do study market history. As long as the indexes are below the 200-day moving average, it’s a bear market, and I will treat it as such.

Bear markets are not easy to trade. One day you’re plunging, the next day there’s a rally. As you can tell from the extreme volatility, you have a confused market with the added uncertainty of a pandemic ravaging the globe. It could get worse before it gets better, financially as well as physically. This is the time to study bear markets, and to make a trading or investment plan not only for the stock market but also for you and your family.

You can grit your teeth and hold, which I’m sure many will do, knowing that after 2008 we started a 10-year bull market. There is no evidence that will be repeated, however. You can also reduce what you own on every bounce. It would not be wrong to increase cash positions on rallies.

No one can tell you what is going to happen in the near future, but at the moment, it doesn’t look good. How long the bear market and coming recession lasts is unknown. One day the virus will be eradicated, and when that happens, we will focus on building our economy again. Until then, it could be a very rough road.

Bottom line: This is not the time to panic, but to prepare and plan for the future. Although I’m not surprised that the market bubble popped, I am surprised by the actions of the Fed, which have increased uncertainty and confusion. I truly hope they know what they are doing.

Read the following pieces from two analysts who have been warning us of the dangers for months. They continue to give excellent advice:

Sven Henrich (Northman Trader) on the most recent market collapse: https://bit.ly/39ReACQ

Lance Roberts, a money manager at (realinvestmentadvice.com), on how to invest during a bear market: https://bit.ly/2Qyg6Cj

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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


Bullish or Bearish? Week of March 9, 2020

Mid-term: S&P 500 remains below its 200-day moving average = Bearish. The longer it remains below its 200-day MA, the more bearish it is for the stock market.

One-month trend = Bearish. We are in a strong downtrend and it’s about as ugly as I’ve seen since 2008.

RSI: (S&P 500) @ 35.62 = Oversold. Unfortunately, there is still room for the market to fall more before another dead-cat bounce.

MACD: MACD in a free-fall. (MACD plunged below its Zero Line and plunged below its 9-day Signal Line) = Bearish

Daily Intraday Volatility: 41.94 (High) = Volatility skyrocketed to as high as 54 before pulling back = Bearish. Although fear and volatility doesn’t last forever, the extreme volatility the markets are experiencing is similar to a car traveling at 100 miles an hour while falling apart. Sven Henrich explains it better than me (link at end of this piece).

Comment: The Sunday night futures are plunging to extreme levels at this writing. I don’t remember seeing the market plunge this often since 2008. As long as the SPX remains below the 200-day moving average, we are in a correction, and perhaps a bear market (we will have to see how low the markets go).

As I wrote a few weeks ago, although we still have a ways to go before we bottom, for many stockholders, it will feel like a crash. As you probably know, oil is crashing along with airlines and the travel industry. The Black Swan was the virus, and it is just getting started in the U.S.

If we do enter a bear market, remember that there are often strong one-day rallies like last week that can blow your socks off. If you’ve been following my advice for the last few months, you’ve built up a cash position and will be ready to buy when we hit bottom.

One thing for sure: Trading in a bear market is not easy. For many, it’s easier to diversify into cash and wait (it doesn’t mean to sell all in a panic). I interviewed Peter Lynch a few years ago and when I asked him how he handled bear markets, he said that although they are not fun, you grit your teeth and wait until it’s over. He said if you know what stocks you own, then you should be in good shape when the bear market ends.

We are going through rough times and there is no playbook right now. One day they will make a vaccine for the virus, and we will all celebrate. The market, unfortunately, may feel the effects of a popped bubble for many years. There will be a lot of blame to go around. The Fed gets a lot of the blame for cutting interest rates during the good times (after being pressured by President Trump). Now that we need emergency measures, the Fed has limited tools. In other words, it’s a perfect storm.

I hope a bottom is reached soon, but you cannot trade or invest based on hope. Keep your eye on the 200-day moving average. If we’re fortunate, and the central bankers devise a coordinated response, the markets will recover in the near future. Unfortunately, added to the economy’s woes are oil, which is crashing to $30 a barrel on Sunday night.

If this is truly a bear market, and it’s too early to proclaim it is, the old strategies won’t work. Buying on the dip will be difficult, and although there will be dead cat bounces, the market will keep falling until it hits bottom. The good news, as investors have repeatedly said, is that the “market always comes back.” That is true, but if you own the wrong stocks, your portfolio might not.

Note: I wish that everyone stays safe as this virus spreads across the world. We are in uncharted times right now so trying to predict what will happen in the future is useless. Stay calm and make plans for yourself, your family, and your portfolio.

Read the following excellent pieces from two analysts who have been warning us of the dangers for months:

Sven Henrich (Northman Trader) on the spiking VIX, which is telling us the worse is yet to come: https://bit.ly/3340Kdr

Lance Roberts, a money manager at (realinvestmentadvice.com), on navigating the unknown: https://bit.ly/333xTX2

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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


Bullish or Bearish? Week of March 2, 2020

Mid-term: S&P 500 fell below its 200-day moving average = Bearish  

Short-term: S&P 500 sliced below its 50-day MA early in the week = Bearish

One-month trend: Uptrend has been broken and SPX is below its 200-day moving average. The Fed will step in with lower interest rates and perhaps QE4. Will that be enough to bring the indexes above the 200-day moving average? No one knows.

RSI: (S&P 500) @ 19.16= Extremely Oversold. I don’t ever remember seeing the RSI this low. Expect a snap-back rally, and soon.

MACD: MACD plunged below its Zero Line and plunged below its 9-day Signal Line = Bearish

Daily Intraday Volatility: 40.11 = Volatility skyrocketed = Bullish (Fear doesn’t last forever).

Comment: In retrospect, the warnings were everywhere. For example:

  1. A few weeks ago, the number of call buyers skyrocketed (i.e. they went long the SPX), the most call contracts in history.
  2. Market made all time highs a few weeks ago.
  3. Brokerage commissions went to $0, causing retail investors to pile into the market during the last month.
  4. Long-time bears that I knew threw in the towel and went long.
  5. Speculative stocks like SPCE and TSLA made all time highs while FAANG stocks struggled.

Now that the market plunged the most in a week in history, it’s easy to look back and see the signs. In retrospect, it really was a melt-up top, and retail investors,, as well as many pros, got caught holding the bag. It was a brutal week, and although I expected a pullback, I didn’t believe it would plunge that much.

And now, the market went from being overbought to oversold. At this writing, Sunday night, the futures are falling. I remember in December 2018 when the indexes plunged, and by January 2019 the Fed entered with their tools and brought the market higher and higher all year long.

The difference this time is the virus. That is the black swan that no one expected. Half the country is scared, the other half doesn’t seem to care. Because of the virus, the Chinese economy looks bleak, but the United States nor the rest of the world will be able to avoid financial damage.

However, the market is so oversold right now that I do expect the Fed to enter at some point on Monday or Tuesday and cut interest rates. I’d be shocked if they didn’t do something. That is why I expect a bounce that could last at least a day, and likely longer. Volatility has returned to the market and the Fed is going to do their best to calm the markets down.

Unfortunately, if the virus spreads to other states (in the U.S.) and to more countries, all bets are off. I do know that fear and panic don’t usually last long, but these are unusual times.

Sadly, there are too many unknowns right now, mostly dealing with the virus. That is why making predictions right now is difficult if not impossible. If we do rally, observe how long it lasts. If that rally fails, it’s going to get worse before it gets better.

Investors remember the previous pullbacks and know how fast the market recovered, and even went higher. “I’m in it for the long haul,” I have heard. “The market always comes back.” I truly hope they are right.

I also am a student of stock market history, and I know that the market doesn’t always follow the script. After 11 years of the greatest bull market in history, the market once again taught investors and traders a very hard lesson. It does that every 10 years or so.

Bottom line: We are in uncharted territory right now with a virus looming in the air. Although I expect a snap-back rally (we are obscenely oversold right now), I have no idea how long the rally will last. Keep your eye on the 200-day moving average. In the past, the market bounced back quickly from rough times, but this time we have a black swan, so anything is possible. Take care and good luck, we are in for a rough ride.

Read the following excellent pieces from two analysts who had been warning us of the dangers:

Sven Henrich (Northman Trader), who has been spot on with his analysis the last few months. He discusses the 2020 crash: https://bit.ly/38fMnnv

Lance Roberts (realinvestmentadvice.com), who has warned for months to take money off the table and increase cash. Lance discusses what to do next: https://bit.ly/39h7Ttw

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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


Bullish or Bearish? Week of Feb. 24th, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA but pointing lower = Bearish to Neutral

One-month trend: Uptrend has been broken. Watch what happens when SPX hits its 50-day moving average. Will it bounce or slice through like butter?

RSI: (S&P 500) @ 53.66= Neutral

MACD: MACD is above Zero Line but moving below 9-day Signal Line = Neutral

Daily Intraday Volatility: 17.08 = Neutral to Bearish. Volatility appears ready to rise even more.

Comment: It shouldn’t be a huge surprise that the futures market is showing an ugly opening Sunday night (-1.5% and falling). As I and others have warned for weeks, if not months, an extremely overbought market, recessionary signs, a Fed that has pumped liquidity into the market, extremely low interest rates, and high levels of consumer and government debt is a dangerous cocktail.

The sad part is that a virus could be the pin that pops the bubble. The cost to humans is already a tragedy, and it appears as if it could get worse. More than likely, this will cause a short-term or long-term recession. No one knows how long this disaster will last, or if the virus spreads even farther. There are too many unknowns.

Many investors, who have been spoiled by an 11-year bull market, will likely grit their teeth and hope that the Fed protects them. I’m not saying we are definitely headed to a bear market. I’m saying that the market is dangerous and if it did fall by a significant amount in the weeks and months to come, I would not be surprised.

I would also not be surprised if SPX dropped to its 200-day moving average in the future. That would seem like a crash to many investors, but it would be a run of the mill pullback.

The main point is that, as I’ve warned before, it’s a good time to sell some of those winners and raise some cash (but wait until the panic subsides). Evaluate what you own and be prepared for some rocky times ahead. The Fed will do whatever it takes to keep the markets calm, and prevent mass selling, but unfortunately they don’t have a lot of tools to work with. (Perhaps they will announce QE5 while also lowering interest rates).

Bottom line: As I wrote last week, the easy days are over and expect a more difficult trading and investing environment in the future. Don’t panic, but prepare for a market correction as well as for a possible pandemic (that would be a worst case scenario).

I really wish the best for everyone, and again, I wished that it wasn’t a virus that might pop the market bubble. All we can do is hope for the best while making preparations to be physically and financially safe.

I recommend that you read the following from Sven Henrich (Northman Trader) about the market’s turn for the worse on Friday: https://bit.ly/2HQT7xe

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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


Bullish or Bearish? Week of Feb. 17, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA but trouble ahead = Neutral to Bullish

One-month trend: Trend still strong until further notice. This is a pivotal week.

RSI: (S&P 500) @ 65.87= overbought

MACD: Above Zero Line and Signal Line above MACD line = Bullish

Daily Intraday Volatility: 13.68 = Bearish

Comment: Futures are lower Monday night due to Apple’s warning (it won’t meet quarterly revenue target due to Coronavirus). Add in an overbought market as well as recessionary fears from Asia due to the virus, and you have the potential for a severe pullback.

The Chinese central bank and the Fed will do everything in their power to keep investors calm. If things take a turn for the worse, the Fed will lower interest rates, flood the market with more QE money, or do whatever it takes to reduce fears. It’s going to be quite a battle this week and in the near future.

The black swan that no one expected was the virus, and it’s unknown how much more damage it will cause. Investors are still in denial because of their full faith in the Fed’s ability to reverse any plunges. For 11 years, the Fed has been able to perform miracles, but at a price: The market is extremely overbought by almost every technical and fundamental indicator.

Whether the market goes up or down this week, one thing I am certain of: The easy days are over. Expect a lot of gyrations moving forward, of short-term rallies followed by short-term plunges. As I’ve written before, this is one of the most dangerous markets I’ve ever seen. It’s like an old, beat up car driving up a hill at full speed as pieces of the car keep falling off. Eventually, the car runs out of gas or falls apart. The warning from Apple, the most popular stock in America, is not a good omen.

Added to all these other problems, I am also seeing signs of a recession slowly creeping towards us. Obviously, the fallout from the virus have accelerated those fears. And yet, with all this bad news, the Fed might be able to pull a rabbit out of the hat and convince investors to “not sell.”

The analysts I follow, Lance Roberts, Sven Henrich, and Wolf Richter, have posted excellent pieces over the weekend. Here are links to a few of the best. In addition, read Bloomberg for the latest on the virus as well as Apple’s warning.

I recommend that you read the following pieces:

Sven Henrich (Northman Trader) on Apple risks: https://bit.ly/2uTvzFg

Sven Henrich (Northman Trader) on the market bubble: https://bit.ly/2UWHpJn

Lance Roberts (realinvestmentadvice) on how the market thinks it’s immune to risks: https://bit.ly/37w3BN2

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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


Bearish or Bullish? Week of Feb. 10, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA but could be forming a double-top: Neutral

One-month trend: After a brief pullback, SPX is trying to recapture its uptrend. It’s too early to say if it will be successful.

RSI: (S&P 500) @ 59.59= neutral

MACD: Above Zero Line but Signal Line is even with MACD line = Neutral

Daily Intraday Volatility: 15.47 = Neutral to Bearish.

Comment: Last week, we went from the edge of the abyss to a four-day rally that miraculously saved the indexes. The market was set to fall below its 50-day moving average last Monday when the bulls arrived in full force. Unfortunately, although the market looked bullish on the outside, underneath the surface it was not that pretty. Only a handful of stocks kept the indexes from falling, but the public doesn’t care. As long as the Dow is climbing, all is good.

Nevertheless, there are some disturbing signs that all is not normal. Obviously, we are watching the virus to see if it spreads farther and faster. The reality is that it is already causing financial pain in China, along with the human toll. It’s too early to say this is a “black swan,” but it does need to be watched closely.

The market has moved up too far and too fast in the last month or two, so caution is advised. A short-term double top formed in the SPX, which is a negative sign. However, it’s also possible the market could blast past resistance and move even higher (negating the double top). No one knows what is going to happen, but volatility has arrived, which is a double-edged sword.

Sign of a top? I have a neighbor who has been bearish on the market for the last 10 years. He hid out in cash and bonds. He told me yesterday that a month ago, he threw in the towel and put 50% of his money into the stock market. When the most adamant bears turn bullish, that is often a warning that a top is near. Not guaranteed but something to think about.

For a more detailed analysis of the current market environment, I once again turn to Lance Roberts and Sven Henrich, who wrote excellent pieces about the current market:

Sven Henrich (Northman Trader): https://bit.ly/38pAwUA

Lance Roberts (realinvestmentadvice): https://bit.ly/2OFZMy5

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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


Bullish or Bearish? Week of Feb. 3, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is at its 50-day MA and pointing down = Neutral to Bearish

One-month trend: The uptrend in SPX has been broken and should be watched closely. It’s too early to know which direction the indexes will go this week.

RSI: (S&P 500) @ 43.44= RSI plunged from a high of 76.56 two weeks ago to 43.44, a neutral reading.

MACD: Above Zero Line but Signal Line pointing lower = Neutral

Daily Intraday Volatility: 18.84 = Neutral

Comment: What a difference a week makes! A week ago, analysts were leapfrogging over each other, making bigger and bolder predictions of an unstoppable bull market (SPX 4000 and beyond, some predicted). And just like that, like a 2 x 4 in the face, investors got smacked. And now, some of those same analysts are backtracking, warning of a 10 percent correction or worse.

At this time, it’s unknown if the recent selloff is meaningful or a run-of-the mill, short-lived pullback. From my perspective, there are a lot of red flashing warning signs, but I’ve seen those signs for months, if not longer. At the same time, I’ve seen vicious pullbacks followed by rip-roaring rallies (such as in January 2018).

Therefore, it’s best to keep your wits about you and plan for any scenario. SPX is at its 50-day moving average, and it could go in either direction. If it falls below its 100-day moving average, be prepared to ride it out (or trade it if you have the skills). Eventually, the panic subsides and a rally emerges.

However, there is always the possibility we are entering a real bear market, but it’s too early to say (keep your eye on the 200-day moving average). It’s been over 10 years since the last bear market, so it wouldn’t be that surprising if one appeared. Nevertheless, there have been so many plunges and rallies in the last 10 years, no one can predict what will happen. Just be diversified, as I’ve repeatedly warned.

Bottom line: Don’t succumb to the fear if the markets plunge this week, and don’t let down your guard if they rally back to overbought levels.

Sunday Night: The Chinese stock market opened down by 9 percent at 8:30 pm.. ET, while the S&P futures are up strongly. Welcome to volatility, and there should be a lot of it this week as the world’s central banks take unprecedented steps to control stock market selloffs. (Maybe someone should forbid short selling this week. Oh, wait).

Once again, Lance Roberts and Sven Henrich wrote excellent pieces about the current market:

Sven Henrich (Northman Trader): https://bit.ly/2OkKmPV

Lance Roberts (realinvestmentadvice): https://bit.ly/2SfbMYj

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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


Bullish or Bearish? Week of Jan. 27, 2020

Long-term: S&P 500 is above its 200-day moving average = Bullish  

Short-term: S&P 500 is above its 50-day MA = Bullish

One-month trend: SPX is still in a strong uptrend that halted on Friday. It remains to be seen if that was a one-day event or something more meaningful.

RSI: (S&P 500) @ 61.56 = As expected, SPX fell last week, and so did RSI (from 76.56, an extreme reading, to 61.56 (current). SPX still overbought but not extreme.

MACD: Above Zero Line but Signal Line pointing slightly lower = Neutral

Daily Intraday Volatility: 14.56 = Low (Bearish).

Comment: When RSI hit 76.56 last week, it was a warning sign that a reversal was imminent, and it happened on Friday. Although the market is still overbought, it’s backed off from extreme levels. Nevertheless, the intraday reversal on Friday was significant.

As I write this on Sunday night, the futures are down significantly. It’s not surprising as this overbought market smacked into a lot of increasingly bad news. What must be watched is how the market acts as the day progresses. It could go either way, but in the past, the algos have bought on the dip while suppressing volatility. That could happen again.

In addition, there is a Fed meeting this week. As you may know, volatility typically increases on the day the Fed minutes are released (Wednesday). After months of low volatility, it would not be surprising to see volatility spike this week.

It’s also possible that the bears, who have been punished for the last 10 years, might finally have a chance to shine. However, it’s still too early for the bears to celebrate, as we’ve seen this scenario before. A two-day pullback does not make a bear market, so until we see evidence of a trend change, any pullback should be considered as temporary.

How do you know there is a trend change? For starters, the indexes must drop below their 50-day and 100-day moving averages, and stay below. There have been a number of severe pullbacks in the past, but the market has always bounced back. Until the market fails to bounce back one day, stay cautiously bullish.

It will be interesting to see what the Fed does or says this week. Because of the nervousness surrounding Coronavirus, there is a negative bias. Perhaps the Fed can save the week once again.

Bottom line: Be on guard. As volatility increases, so does opportunities, but also mistakes.

Here are two excellent pieces that I recommend reading:

Sven Henrich (Northman Trader): Virus Fears: https://bit.ly/2tRXl4s

Lance Roberts (Real Investment Advice): Market Advance Stalls: https://bit.ly/38J5iaK

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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