Bullish or Bearish? Week of December 21, 2020

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

One-month trend = Flat to Bullish. SPX drifted through the week, ending almost where it started. Neither the bulls or bears won decisively last week. SPX closed at 3709 on Friday night. On Sunday, the futures are relatively flat.

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) @ 63.53 (Daily) = Neutral to slightly overbought. RSI is in the neutral zone as we start the shortened week.

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

Daily Intraday Volatility (VIX): 21.57 = VIX is saying there is no fear.

Comment: It’s a four-day week because of the Christmas holiday. Often, there is a “Santa Claus rally” before the holidays, and with the stimulus, along with the vaccine, there is reason to be optimistic. In fact, a lot of investors are extremely optimistic.

I don’t want to sound like a party pooper but as I said last week, when nearly “everyone” is bullish, I get cautious. And judging by my analysis of both professionals and retail investors, it appears as if the majority are extremely bullish. The low VIX confirms the lack of fear.

No one can predict with certainty what is going to happen this week or next, but we can read the clues. After studying the indicators, however, neither side is dominant yet. We could go in either direction.

The market is only sightly overbought but the VIX is on the low side. Although there is reason to be bullish, there is still a lot of financial uncertainty and pain, along with the deadly virus that seems to get worse each week.

These two competing forces have given us the market you see before you: A battle between the bulls and bears. So far, the bulls have a slight edge as every selloff is met with buying. 4000 on the S&P 500 is the goal of the bulls by the end of the year.

Bottom line: More time is needed before making a huge commitment to either side. Keep in mind that the majority of traders and investors are bullish. They could be right, but I’d still be on guard.

The following is an excellent piece by Lance Roberts (realinvestmentadvice.com) on the overly bullish environment, which confirms what I am also seeing: https://bit.ly/3peRKwf

Bullish or Bearish? Week of December 14, 2020

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

One-month trend = Flat to Bullish. As expected, (due to overbought signals from RSI), SPX drifted lower last week, closing at 3633 on Friday. Now: Futures are substantially higher on Sunday night, but as always, wait until the morning for confirmation. 

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) @ 60.22 (Daily) = Neutral to slightly overbought. RSI warned us last week that the market was getting “too big for its britches” (i.e. overbought), and sure enough, RSI dropped from near 70 to 60. Now you know that RSI often gives reliable warning signals as it creeps closer to 70 (visa versa on 30).

MACD = Neutral. MACD is above its zero line but crossed below its 9-day Signal LineMACD reversed direction with the market and signaled there could be trouble, and there was.

Daily Intraday Volatility (VIX): 23.31 = VIX is still telling me that investors have little or no fear. 

Comment: Last week, the market got too overbought, as reflected in the RSI readings (near 70). Sure enough, the market was unable to move higher, which was not a surprise, and then fell almost all week. Volume and momentum were absent.

On Sunday night (as I’m writing this), the positive vaccine news and a Fed meeting are leading to a positive futures market. RSI has moved to neutral (a little overbought at 60) but VIX is signaling extreme complacency. With the holidays approaching, and investors dreaming of a Christmas rally, caution is still advised.

It always makes me cautious when “everyone” is on the same side. It’s true that the market often rallies during Fed meetings, and perhaps the optimism over the vaccine will take the market into the stratosphere. That is quite possible.

On the other hand, I have seen this scenario before. In 1999, the market was going to the moon (thanks to bullishness over dot.com), and with the Fed’s help over the Y2k fears, the market went even higher in January 2000. The market seemed unstoppable. By March, however, the party ended as the market began a long descent into the abyss. It was not a pretty picture as many investors and traders lost everything.

I’m not saying this will end the same way. What I do know is that all bull markets, and bubbles, end. No one can say when, or what the catalyst will be, but one day this bull market ends. Right now, the biggest worry for me is the low VIX and that so few traders and investors think anything is wrong. Every decade or so the market teaches these people painful lessons.

I’m not saying to sell everything and move to cash, but it wouldn’t be a bad idea to evaluate how much risk you are taking with stocks, and to reduce risk if necessary. It’s a decision only you can make.

Meanwhile, with the vaccine on its way, the Fed meeting, and a recent pullback, the market appears ready to rock and roll. Let’s see how high it can go, and most importantly, if any rallies fail. As I’ve said in the past, watch the rallies for clues. A failed rally would be a warning signal.

Bullish or Bearish? Week of December 7, 2020

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

One-month trend = Bullish. SPX drifted higher during the week. Volume and momentum was on the light side all week. Futures are flat to lower on Sunday night, but once again, wait until the morning for confirmation. 

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) @ 67.96 (Daily) = Overbought. As SPX creeps higher, so does RSI. It’s near the 70 RSI overbought level, so be on guard. I would not be surprised to see a severe reversal based on RSI alone, but no one can predict when.

MACD = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD is signally that the uptrend will continue. Look for any signs of a reversal.  

Daily Intraday Volatility (VIX): 20.79 = How low can we go? VIX tells me that bullish investors have little or no fear.

Comment: The overbought market has become more overbought. Throw the fundamentals out the window because no one seems to cares. Just like in 1999, and 2008, all that matters is that the market is going higher.

Wise traders, however, know that extreme overbought markets can reverse on a dime, and at anytime. I can’t predict when that will happen, but I am certain it will happen. There is a point when there just aren’t enough buyers to keep lifting the market higher.

Trying to time a reversal is difficult for most traders. That is why it’s a good idea to trade less often and with smaller positions as the market gets more overbought. If the RSI of SPX rises above 70, that is a flashing warning signal.

Most investors are waiting for a Christmas rally, fueled by the positive vaccine news. And yet, the jobs number was disappointing, and there are other signs of economic problems.

Bottom line: It’s unknown which direction the market will go this week, but the overbought signals should not be ignored. Markets can reverse without warning before investors have a chance to react. Watch the rallies closely for clues of a struggle to move higher.

Here is the latest from Lance Roberts (realinvestmentadvice.com), who notes that investors are ignoring the rising risks: https://bit.ly/3osdAvI

Sven Henrich (Northman Trader) observes how momentum is weakening while the market moves ever higher: https://bit.ly/39K4Vkh

Bullish or Bearish? Week of November 30, 2020

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

One-month trend = Neutral. SPX moved higher early in the week and then flat-lined before and after Thanksgiving. Volume was thin all week. Perhaps participants will return to the market this week. Futures are slightly lower on Sunday night, but wait until the morning for confirmation.

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) @ 63.72 (Daily) = Overbought. As SPX creeps higher, so does RSI. It’s not extreme yet but it’s getting closer. RSI has given some remarkably accurate readings in the last few months, so pay attention if it spikes during the week.

MACD = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD will give an early signal of a faltering market. It hasn’t given that signal…..yet.  

Daily Intraday Volatility (VIX): 20.84 = Very Low. How low can we go? VIX tells me that bullish investors have little or no fear, and are high on hopium.

Comment: SPX touched all time highs last week before falling back and then moving sideways. As the virus explodes higher (although half the country thinks the dangers are overblown), as the economy gets shredded, as more people lose jobs and benefits, we are pinning our hopes on the vaccines. If the vaccines work as advertised, that could be a big time game changer. Let’s hope it’s as good as advertised.

Meanwhile, with the market near all time highs, fear has evaporated, and optimism is in the air. The bulls got their wish when Dow 30,000 was hit, before falling back. Investors might get their wish a second time. This is really something: an all-time high of Dow 30,000 during the second worst pandemic in world history. (Powell better not raise interest rates or there will be dire consequences.)

Meanwhile, the thin volume and wait and see actions by the pros have me concerned. There isn’t mass selling, but there isn’t mass buying either. It feels like a game of chicken, one that I’m not not willing to play. A Christmas rally is always possible, especially if the vaccine is successful.

Some pros are recommending gold (see below), which is not a bad idea in these uncertain times. We’re in uncharted territory, one that I can’t compare to any other period in U.S history, except 1918.

Bottom line: Be careful out there as anything is possible. Investors are shockingly bullish (according to the VIX), and hope is on the way with the vaccine. Unfortunately, I just can’t shake the feeling that an unexpected nasty surprise is waiting for the bulls. Since I don’t trade on feelings, I’m sitting this one out for now.

Here is the latest from Lance Roberts (realinvestmentadvice.com), who wisely warns that risks are increasing: https://bit.ly/36kc4p9

Here is a piece from Sven Henrich (Northman Trader), who says it’s time to buy gold: https://bit.ly/39rg7Cc

Bullish or Bearish? Week of November 23, 2020

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

One-month trend = Neutral. SPX started off bullish early the first day but ended the week at the lows. Even the announcement of a vaccine couldn’t prop up the market for longer than a day. SPX closed at 3557 at Friday’s close, lower than a week ago. Futures are slightly higher on Sunday night. 

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) @ 57.08 (Daily) = Slightly overbought. RSI fell from extremely overbought to slightly overbought.

MACD = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD will give an early signal of a faltering market. 

Daily Intraday Volatility (VIX): 23.70 = Low. What me, worry? 

Comment: Last week, the indicators warned that the indexes were overbought, and sure enough, it was a rough week for the bulls. The rallies failed, and yet, there is little fear. 

Once again, pay attention to the rallies for clues. If the rallies fail again this week, it will not be pleasant for the bulls. With the pandemic spreading and the economy faltering, I’m amazed the market is still near its all time highs. The Fed is keeping interest rates low, and the algos are working overtime to keep the market stabilized. 

I would not be surprised to see a major pullback or plunge in the next few months. I don’t trade off of predictions, but I do prepare for any scenario. Trend trading has been difficult for quite a while. Scalpers and day traders have probably found more opportunities, but it’s not easy. Indexers are just holding and hoping for the best. 

At the moment, it’s impossible to predict market direction. My gut tells me the market is vulnerable (but I don’t trade off of my gut, my feelings, or predictions). Since the market is unpredictable at this time, I am personally on the sidelines, waiting for better setups. Perhaps others have found better opportunities, and if so, you should be commended. This is not an easy trading environment. 

Bottom line: Unpredictable market, unpredictable trading setups, and unpredictable world.

Here is the latest from Lance Roberts, who wisely took profits last week: https://bit.ly/35ZqqeJ

Bullish or Bearish? Week of November 16, 2020

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

One-month trend = Bullish. SPX started off strong last week, but then plunged the next day, taking quite a few stocks with it. SPX drifted the rest of the week but is still near all-time highs. However, I see a triple top. The futures are higher on Sunday night, but that could change in the morning. SPX was at 3585 on Friday’s close.

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) @ 63.57 (Daily) = Overbought. RSI is creeping higher, but not at extreme levels (yet).

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

Daily Intraday Volatility (VIX): 23.10 = Low. VIX is well below its 200-day moving average, reflecting a lack of fear (unless you are shorting indexes). 

Comment: The market broke higher last week before pulling back from overbought levels. A triple top has developed, but it does not mean the market will plunge anytime soon. Possible, but impossible to predict.

The market is still in an uptrend while the virus rages out of control, and the economy suffers. No one can say when reality returns to the market (it’s been a long time), but as I’ve repeatedly said, trade cautiously.

This week, watch the rallies closely. If the rallies have “legs,” and continue to move higher, that is bullish. However, if the rallies reverse direction or fail to make new highs, that would be bearish. In particular, see if the indexes can break through resistance.

Anyone holding indexes long should be pleased. Those who own individual stocks have had a rougher ride in the last few weeks. It’s an unpredictable environment, especially if you own individual stocks.

Bottom line: Let’s see if the indexes can break through resistance and make new highs. If not, it could be dangerous for the bulls.

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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.comEdit

Bullish or Bearish? Week of November 9, 2020

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

One-month trend = Bullish. SPX rallied much higher last week, rising above all moving averages and retesting all time highs. SPX is spiking higher on Sunday night, wiping out traders who are heavily shorting the indexes. SPX is at 3509 on Sunday night, but the futures market is pointing to a 50 point rally at the open. 

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

RSI: (S&P 500) @ 60.03 (Daily) = Slightly Overbought. RSI went from oversold to overbought in one week. 

MACD = Bearish. MACD is at its zero line but pointing higher. It is also above its 9-day Signal Line

Daily Intraday Volatility (VIX): 24.86 = Lower. VIX plunged below its 200-day moving average, reflecting a lack of fear (unless you are shorting). 

Comment: As I repeatedly warned last week, this is a dangerous, unpredictable market. If you’re on the wrong side, you can get shredded. It was impossible to predict market direction last week. As it turned out, the market rallied all last week, and is expected to rally strongly on Monday at the open. 

I wish I could proclaim the bull market is back but the indexes have moved up too high and too fast, making it a very dangerous market. A reversal can occur at anytime, so trade at your own risk. Trade small if you participate. 

Bottom line: The market is going to rally strongly at the Monday morning open, with strong volume. Don’t dare short this market at first, although shorting opportunities will appear in the near future. In my opinion, it’s dangerous on both sides, so be careful if you are trading. 

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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.comEdit

Bullish or Bearish? Week of November 2, 2020

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

One-month trend = Bearish. SPX is above its 200-day MA but pointing lower as the market plunged last week. SPX closed at 3269 at the close on Friday, a huge drop from a week before. Note: SPX futures were lower earlier Sunday night, but are now higher. Wait until the premarket to be sure.

Mid-term (50- and 100-day MA) = Bearish. The S&P 500 sliced through the 50- and 100-day like it was butter.

RSI: (S&P 500) @ 37.05 (Daily) = Oversold. RSI went from slightly overbought to oversold in one week. The market could get more oversold or it could bounce. Anything is possible.

MACD = Bearish. MACD fell slightly below its zero line and is also below its 9-day Signal Line. MACD is reflecting the current bearishness.

Daily Intraday Volatility (VIX): 38.02 = Higher. VIX spiked higher, rising above its 200-day moving average as fear entered the market for the first time in months.

Comment: Last week brought us a lot of lessons as reality finally overwhelmed the market. Although traders and investors were hopeful, the stock market was no match for the virus and tough economic conditions. Market veterans saw this coming for weeks as the bull market finally ran out of steam all last week.

It is unknown if the bull market is over or if another rally is in the cards. Although the market looks dangerous and unstable at the moment (and futures are falling on Sunday night), the market has reached overbought levels. It is not at extreme levels yet, meaning the market has room to fall even more before reversing.

As I wrote last week, with an election looming and a virus spreading, it’s dangerous to take one side or the other, as anything can happen this week. Most pros will hedge (or hide) rather than commit to one side or the other. If you don’t know how to hedge, sitting on the sidelines is not a bad strategy as it’s easy to get chopped up.

Bottom line: No one can predict what is going to happen to the market this week, so don’t even try. I assume volatility will increase. These are historic times, and it will be a historic week. Be prepared for any scenario.

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

Lance Roberts @ realinvestmentadvice.com explores why the stock market plunged last week: https://bit.ly/3mJMJdO

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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 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

__________________________________________________________

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