Bullish or Bearish? Week of October 26, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Neutral to Bullish. SPX is well above its 200-day MA, a bullish signal, but the rally is still treading water after making all-time highs a few weeks ago. SPX closed at 3465 at the close on Friday, a slight drop from a week ago. Note: SPX futures are lower on Sunday night.

Mid-term (50- and 100-day MA) = Neutral. The S&P 500 is slightly above its 50-day MA and moving sideways.

RSI: (S&P 500) @ 55.75 (Daily) = Slightly Overbought. RSI is overbought but not at extreme levels. 

MACD = Neutral. MACD is above its zero line but even with its 9-day Signal Line. MACD fell from its bullish position and is moving sideways.

Daily Intraday Volatility (VIX): 27.55 = Low. VIX is still below its 200-day moving average, indicating that volatility is low, and that fear is nowhere to be found.

Comment: Expect an unpredictable market as the election looms. The algos are aggressively defending any selloffs, but reality is getting in the way. On one hand, the virus is ruining the lives and livelihoods of millions. The economy is teetering over a cliff with too many suffering.

On the other hand, the market is near its all time highs. They can’t both be right. As a trend trader, I’m finding it difficult to find good trades. Therefore, I’m on the sidelines and waiting. I assume there will be more opportunities after the election.

Although it’s a challenge, most investors are holding. I have to give investors a lot of credit. They did not flinch for the last decade, especially during the last year, and it paid off well for them. No one, and I mean no one, can predict what is going to happen in the near future. Many will guess, but no one knows for sure.

My advice: Wait and watch until after the election. I’m not comfortable with the market being at all time highs with so many problems in the economy, and in the world. Then again, logic and common sense didn’t win out over the last year, or even the last four years. That’s why trying to guess what the market will do in the next few weeks or months is a parlor game, one that I will not participate in.

Here is a more detailed analysis about the market from Lance Roberts: 

Lance Roberts @ realinvestmentadvice.com focuses on the stimulus package to make sense of a nonsensical market: https://bit.ly/35rdGf2

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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: https://wolfstreet.com

Bullish or Bearish? Week of October 19, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Neutral to Bullish. SPX is well above its 200-day MA, a bullish signal, but the rally stalled last week after making all-time highs. SPX closed at 3483.81 at the close on Friday. Note: SPX futures are higher on Sunday night. Let’s see if the bulls can take control.

Mid-term (50- and 100-day MA) = Neutral to Bullish. The S&P 500 is still above its 50-day MA. So far, it has remained above.

RSI: (S&P 500) @ 58.64 (Daily) = Slightly Overbought. RSI fell back a little. It is overbought but not at extreme levels.

MACD = Bullish. MACD is above its zero line and is above its 9-day Signal Line. MACD came out of the doldrums and is pointing to a more bullish scenario.

Daily Intraday Volatility (VIX): 27.41 = Low. VIX is still below its 200-day moving average, indicating that volatility is low, and that fear is still missing.

Comment: These are strange times and a strange market. Market veterans complained that they’ve never seen anything like it. Some have suggested there is an invisible hand (i.e. algos backed by the Fed) that is keeping the market propped up. I don’t have evidence of that but admittedly, the market refuses to fall for very long even as the economy shows signs of despair.

All bets are off when it comes to predicting what is going to happen two weeks before an election. I won’t even try. The facts: SPX is slightly higher on Sunday night. That means the odds are a little better than even that we will rally at the open. If we don’t, that would be significant. Oh, there are rumors of a stimulus deal. Perhaps that is raising hopes, but I follow the market, not the news.

Bottom line: It’s not easy following the trend two weeks before an election!

Here is a more detailed analysis about the market from Lance Roberts: 

Lance Roberts @ realinvestmentadvice.com wrote how the market stumbled last week on the failed stimulus talks. (This week could be a different story): https://bit.ly/3o7m24m

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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: https://wolfstreet.com

Bullish or Bearish? Week of October 12, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX moved well above its 200-day MA, a bullish signal. Although the trend was broken a week ago, SPX reversed direction and is making a play for all time highs.

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 made a strong move above its 50-day MA. We are watching to see if it can remain above. Note: SPX 50-day MA is at 3380 on Sunday night (20 points higher than last week). Futures are slightly lower (on Sunday night).

RSI: (S&P 500) @ 60.72 (Daily) = Slightly Overbought. RSI has risen in the last week but is not at extreme levels (yet).

MACD = Bullish. MACD is slightly above its zero line and is above its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 25 = Low. VIX is below its 200-day moving average, indicating that volatility is low, and that fear is nowhere to be seen.

Comments: A week ago, the indexes were struggling, the uptrend was broken, and there was a real risk the market was going to plunge. And just like that, SPX and the other indexes rallied back above their 50-day moving averages, and the all-time highs are within reach.

It goes to show how difficult it is to make predictions about the market.

The reasons people give for the rally are all over the map. To me, all that matters is that the market rallied. Now we need to see if this was a temporary blip or the real deal. Monday is a Federal holiday but the market is open, so it’s possible volume will be light.

The closer we get to the election, the more difficult it will be to make predictions. I also believe volatility will increase from now until the election, and so far I have been right.

Bottom line: Look for opportunities to go long when possible, but be prepared for some violent selloffs at times. It’s not an easy trading environment.

Here is a more detailed analysis about the market from Lance Roberts:

Lance Roberts @ realinvestmentadvice.com explains why the market rallied last week: https://bit.ly/30SfRqE

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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: https://wolfstreet.com

Bullish or Bearish? Week of October 5, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Broken and still damaged. SPX is above its 200-day MA (bullish) but the uptrend remains broken (bearish). On Sunday night, the major index futures are higher. 

Mid-term (50- and 100-day MA) = Bearish. The S&P 500 climbed out of the basement last week but is still below its 50-day MA. It tried hard but failed to rise above its 50-day. Note: SPX 50-day MA is at 3361 on Sunday night.

RSI: (S&P 500) @ 49.68 (Daily) = Neutral. RSI rose slightly in the last week.

MACD = Neutral. MACD is slightly below its zero line but rose slightly above its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 27.63 = Neutral. VIX rose slightly during the week. It is even with its 200-day moving average.

Comments: The indexes made a valiant attempt to rally above their 50-day moving averages, and although they tried hard, they failed to move above. It was a rather wild week, with strong rallies at the open, and several that failed. Technology stocks struggled during the week.

As market observers, all we can do is look at the clues and indicators and make educated decisions what to do. I follow the market rather than try to guess its direction. Admittedly, it’s difficult to follow a market like this, i.e. a market that is not trending.

These are dangerous times, and it’s easy to get on the wrong side of a trend. When the market is this unstable, staying on the sidelines is often a wise move. The other choice is day trading, but take profits fast. Hint: I have found that counter-trend day trades are working, but you have to be nimble.

Bottom line: Most institutions are not buying, but most are also not selling. The algos are pushing the market higher during the day, but the rallies often do not last. These are strange and dangerous times, so trade cautiously.

Extra: SPX is at the bottom of the Darvis box. If SPX fails to rally this week, and falls lower, it can get ugly, and fast. Be on your toes. If you follow the Nicholas Darvis strategy, you will not go long the indexes.

Here are comments from market analyst Lance Roberts:

Lance Roberts @ realinvestmentadvice.com questions whether the bounce last week will last: https://bit.ly/30x2mfX

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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: https://wolfstreet.com

Bullish or Bearish? Week of Sept. 28, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Broken and hurt but prepared to recover. SPX is above its 200-day MA (bullish) but the uptrend is still broken (bearish). Note: SPX closed at 3298 at the close on Friday, lower from a week ago, and below its 50-day MA, which is at 3350. On Sunday night, the major index futures are slightly higher.

Mid-term (50- and 100-day MA) = Bearish. The S&P 500 is still below its 50-day MA but is making a recovery attempt. Let’s see if the indexes can fight their way above the 50-day, and stay there. 

RSI: (S&P 500) @ 44.62 (Daily) = Slightly oversold. The RSI hardly moved in the last week. There was some institutional selling during the week. 

MACD = Slightly Bearish. MACD is slightly below its zero line and has dropped below its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 26.38 = Neutral. VIX is slightly below its 200-day moving average, which tells me there is little fear. 

Comments: The indexes were in serious trouble last week until a strong save on Friday. Although the SPX is still below its 50-day moving average, it will make an attempt to regain its former glory. You can count on it. The key is whether the expected rally will be successful. It is essential you pay close attention to the rally. As most traders know, you always learn more from rallies than selloffs.

The indexes are still slightly damaged from a slow selloff that has lasted several weeks. And yet, the wimpy bears have not fully taken control. That is why I am certain the bulls will do whatever they can to bring the indexes well above their 50-day moving averages this week.

This is a watch and see week. No one knows who has the upper hand yet. I believe we are transitioning from a bull to a bear market, but I can’t prove it, and even if I’m right, this transition takes time. Be patient, and try not to get caught on the wrong side of a strong trend. As you know, on some days it’s been pretty wild.

Bottom line: Don’t feel compelled to trade everyday. During volatile days like last week, sometimes it’s best to move to the sidelines and wait for better opportunities.

Lance Roberts @ realinvestmentadvice.com suggests you are prepared for both an overdone selloff (short-term) and a deeper correction (medium-term): https://bit.ly/3cE2RJK

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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 Sept. 21, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Broken and Bearish. SPX is above its 200-day MA but the broken uptrend has not recovered yet. Note: SPX closed at 3319 at the close on Friday, lower from a week ago, and below its 50-day MA, which is at 3342. On Sunday night, all the major index futures are flat, but that could change in the morning.

Mid-term (50- and 100-day MA) = Bearish. The S&P 500 fell below its 50-day MA last week. Let’s see if the indexes can fight their way above the 50-day, and stay there.

RSI: (S&P 500) @ 42.74 (Daily) = Slightly oversold. The RSI hardly moved in the last week. There was some institutional selling during the week.

MACD = Neutral to Bearish. MACD is barely above its zero line and has dropped below its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 25.83 = Neutral. VIX is slightly below its 200-day moving average, which tells me there is still little fear.

Comments: The market played out just as we anticipated last week with an attempt to rally on the Fed meeting days. But on the other days, the bulls were holding on for dear life. The market has definitely taken a turn for the worse, with a big caveat.

The bulls need to take control this week or it could be a slippery slope downward. As usual, no one can predict the future, but I can tell you last week was brutal, especially for the FAANG stocks, including crowd favorites Amazon and Apple.

If you study market history, you know when the market leaders fall, that often signals the end of a bull market. I’m not saying we’re there yet, but watch the leaders closely over the next few weeks and months to see how they act.

Bottom line: The market has turned treacherous with a lot of twists and turns waiting to confuse and distract unsuspecting bulls and bears.

Below is further market analysis by Lance Roberts:

Lance Roberts @ realinvestmentadvice.com says the correction may continue as the election looms, so take steps to reduce risk (good advice): https://bit.ly/3cflAv4

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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 Sept. 14, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Broken. SPX is above its 200-day MA but the broken uptrend has not recovered yet. Note: SPX closed at 3340 at the close on Friday, lower from a week ago. The 200-day is at 3097. On Sunday night, all the major index futures are higher.

Mid-term (50- and 100-day MA) = Neutral to Bearish. The S&P 500 fell to its 50-day MA last week. Let’s see how it reacts at the 50-day, which is now acting as resistance.

RSI: (S&P 500) @ 44.78 (Daily) = Slightly oversold. The RSI fell from a high of 80 a week ago to 44.78. It reflects institutional selling last week.

MACD = Neutral. MACD is above its zero line and and below its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 26.87 = Neutral. VIX is slightly below its 200-day moving average, which tells me there is little fear even after last week’s pullback.

Comments: Last week was a rough one for the markets. After the holiday, the Dow fell by over 600 points, tried to recover, and fell again. The worst day was Thursday, when the market rallied at the open and plunged later in the day. You always learn more from rallies, and a failed rally telegraphed trouble.

This week, the Fed is meeting. Typically, the markets move higher on the day before and during the Fed meeting. Usually, the Fed has nice things to say, and many promises to make. As usual, no one knows how the market will react, so trying to guess market direction this week is risky.

SPX is at the lower end of the Nicholas Darvis box. Few follow the Darvis box but I do. It tells me that the market is at risk of falling further, but I also know the algos will aggressively defend the 50-day moving average. If SPX and the other indexes fell below the 50-day, that would be significant and surprising.

Bottom line: We have an injured market that is slightly above its 50-day moving average. The Fed is meeting so they will do whatever it takes to instill confidence. It’s a gamble to guess market direction this week as it could go either way. After the Fed meeting, we will have a better idea which side (bull or bear) is winning. Be prepared for anything.

Below is further market analysis by Lance Roberts:

Lance Roberts @ realinvestmentadvice.com says speculators are getting even more speculative: https://bit.ly/3ivT0YL

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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 Sept. 7, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Neutral. SPX is above its 200-day MA but the uptrend was broken last week, at least temporarily. Note: SPX is at 3426 on Sunday night, lower from a week ago. The 200-day is at 3092. On Monday night, SPX futures are slightly higher while the Nasdaq futures are flat.

Mid-term (50 and 100-day MA) = Neutral. The S&P 500 is above its 50- and 100-day MA but pointing down.

RSI: (S&P 500) @ 53.38 (Daily) = Neutral. The RSI on SPX and the other indexes have returned to neutral.

MACD = Neutral. MACD is above its zero line and is even to slightly below its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 30.75 = Neutral. VIX is above its 200-day moving average, which reflects that some fear appeared last week.

Comments: I hope that you put in your trading diary that when RSI gets in the danger zone (above 70 or below 30), pay attention. RSI zoomed over 80 early last week, and the next day, the market sold off fast and furiously. Although RSI doesn’t always react so quickly, it worked perfectly this time. The indexes were extremely overbought and a severe selloff was the result.

Now that the indicators have returned to neutral levels, many believe that all is well. All is not well. First, the futures market is indicating a mixed market, which is always a warning sign. Second, it’s possible the selloff is not over.

The market was damaged last week, and it needs time to repair. It’s unknown what is going to happen this week, so be on guard for anything.

The charts do not look pretty at the moment, so keep your eye on the 50-day moving average. If that is breached, the selloff could continue. If the bulls can hold the 50-day, then the damage can be repaired.

The lesson is that the market can change from blue skies to a thunderstorm in seconds. Many bullish investors got too overconfident and fearless, as reflected in RSI and the VIX. And now we’ll see if the bears can take advantage or not.

Bottom line: Be on guard as anything is possible. The bulls need a calm market this week, while the bears want to take advantage of the increased volatility. Let’s see who makes it to the Winner’s Circle.

Below is further market analysis by Lance Roberts and Sven Henrich:

Lance Roberts @ realinvestmentadvice.com was right about the market decline, and now wonders if the market rally is over: https://bit.ly/33dvDwS

Sven Henrich @ Northman Trader discusses the intense selloff last week, and the damage that was done: https://bit.ly/3h9dkOj

__________________________________________________________

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 August 31, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3484 on Sunday night, higher from a week ago. The 200-day is at 3083. SPX futures are edging higher. 

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 79.26 (Daily) and 67.59 (Weekly) = Extremely Overbought. SPX and the other indexes are in the danger zone. More on this below.

MACD = Neutral. MACD is above its zero line and is still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.96 = Danger Zone. VIX is getting crushed by the volatility-killing algos. VIX is below its 200-day moving average, which tells me there is still no fear. 

Comments: Last week I remarked that you should wake me up when something happens. Something happened. All the major indexes are extremely overbought and in the danger zone. The RSI of SPX is near 80 on the daily chart. This is equal to the readings in February, right before the March 35% selloff. Lance Roberts referred to it as exhibiting “technical extremes,” and he is correct.

In non-technical terms, I would refer to the market as being in the Twilight Zone.

As every technician knows, indexes and stocks can remain overbought for long time periods, especially individual stocks. I have seen stocks that had an RSI of 90 and above but remained overbought for weeks before coming back to Earth.

This does not mean that the market is going to crash, or that a correction is imminent, but it does say the bulls are playing with fire right now. Any spark could send the market reeling downwards.

Some technicians are predicting a “blow-off top,” and that’s also possible. That means the indexes could have one final push higher, a last hurrah, before the ultimate downfall. Shorting a blow-off top is not recommended, as Tesla shorts learned the hard way.

On the other hand, investors are feeling invincible right now as the bears got mauled. Anyone who knows market history knows the markets are at rarified levels right now. It has moved too high and too fast under less than ideal economic conditions. Something just isn’t right.

This is not going to end well, but no one can say when it will reverse or what the cause will be. Just be on the lookout for clues. This is not the time to take on large positions. This is the time to manage risk.

Bottom line: The market has my attention now. I’m watching RSI closely to see how overbought we get this week. Be prepared for anything, including a major market selloff in the near future.

Below is further market analysis by Lance Roberts via his blog:

Lance Roberts @ realinvestmentadvice.com says you better be ready, as a major market decline is possible: https://bit.ly/3hDvgl3

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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 August 24, 2020

This is what the technical indicators are telling us this week: 

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3397 on Sunday night, slightly higher from a week ago. The 200-day is at 3073. The futures market is edging higher.

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 68.30= Overbought. A few more points higher and we’re in the danger zone. 

MACD = Neutral. MACD is above its zero line and is still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.54 = Danger Zone. VIX is still getting crushed by the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is still no fear.

Comments: Records are made to be broken because we’re at all-time highs for the major indexes. Only a handful of stocks are pushing the indexes higher, and if you’re fortunate enough to own one of these stocks, happy days are here again.

If you look at the indicators above, nothing has changed. The indexes are overbought but the market keeps climbing higher. Sadly, the economy is in deep trouble and the virus still isn’t done with us.

It’s likely that volatility will be suppressed for a while longer, perhaps until after the election. That is the most likely scenario, but then again, Mr. Market sometimes surprises everyone, but not often, and not lately.

The odds are also good we will inch higher this week and beyond but that is based on the clues, not facts. The facts are the market indexes are extremely overbought, and yet, they can get more overbought.

I know that investors are playing with fire right now, like playing a game of musical chairs, but how can you argue with success? Few are buying, and few are selling. Right now it’s a waiting game.

Bottom line: Wake me up when something changes.

I’m going to turn it over to Lance Roberts and Sven Henrich, who have more to say about the market than I do:

Sven Henrich @ NorthmanTrader does a “reality check” and includes a video: https://bit.ly/3aX5DZV

Lance Roberts @ realinvestmentadvice.com compares the market to a garden, and says that winter is coming so you better prepare: https://bit.ly/3j8Aplk

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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