Bullish or Bearish? Week of July 3, 2017

Here are the latest technical and sentiment indicators:

 Technical Indicators (daily chart)

S&P 500 is slightly above its 50-day MA = Bullish

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is below its signal line = Bearish

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (June 27): 54.9% Bulls; 18.6% Bears = Bearish

AAII survey: (June 28): 29.7% Bulls; 26.9% Bears = Neutral

VIX: @ 10.40 = Bearish

RSI: (S&P 500) @ 49.36 = Neutral

Comment: Although this is a shortened week, it could give us clues as to market direction. The S&P is near support, and it’s anyone’s guess what it will do. Previously, when the S&P came near support levels, it typically bounced. Based on past behavior, the odds are good we will get a short-term bounce. Nevertheless, if the S&P keeps falling, it could slice below support levels (2400) and keep going. Anything is possible so observe what happens if and when the S&P reaches the 50-day moving average.

I’m also watching the FANG stocks, Facebook, Apple, Netflix, and Google, which got beat up pretty badly the last few weeks. If these stocks keep struggling, it would not be positive for the overall market.

 

 

Bullish or Bearish? Week of June 26, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is slightly below its signal line = Bearish

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (June 20): 51.5% Bulls; 19.4% Bears = Bearish

AAII survey: (June 21): 32.7% Bulls; 28.9% Bears = Neutral

VIX: @ 10.02 = Bearish

RSI: (S&P 500) @ 58.74 = Neutral

 

Comment: After a strong Monday (June 19), the S&P petered out and went sideways the rest of the week. The lack of follow-through is not healthy, so the bulls are on warning. And yet, the bears were unable to take advantage. Last week was the kind of environment where “even a skunk couldn’t make a scent.”

There are times to be in the market, but wise traders also know when to be out. Obviously, the market environment could change on a dime, and it will one day. In fact, veteran traders warn that when a market moves this slowly and with so little volatility, it builds up energy, which will result in a huge market explosion, either up or down. If they are right, volatility should violently increase (no one knows when, however). 

Bottom line: As long as the sideways market continues, cash is your friend. Don’t forget that the indexes are at all-time highs, so it’s about time the market “puts up or shuts up.” Until then, remain on guard. There are too many people holding index funds on margin who believe that the market will never go down. History tells us that never ends well. 

 

Bullish or Bearish? Week of June 19, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is even with its signal line = Neutral

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (June 13): 50.0% Bulls; 18.6% Bears = Bearish

AAII survey: (June 14): 32.3% Bulls; 29.5% Bears = Neutral

VIX: @ 10.38 = Bearish

RSI: (S&P 500) @ 60.93 = Neutral

Comment: The market is in a sideways range with an occasional intraday rally or selloff that typically deflates by the next day. The Nasdaq did take a beating but the S&P and Dow are holding near all-time highs. Although this market is dangerous, there is still room for it to go higher. No one is able to predict when the day of reckoning is coming (except that it always comes). You can ride the uptrend a bit longer knowing the party will end quickly and viciously one day. Or you can play it safe and sit on the sidelines primarily in cash.

I’m amazed that so many investors are blindly buying index funds at these levels. What happened to buy low and sell high? And yet, it’s possible that we could hit S&P 2500, or higher. As for me, the risk of catching those last few pennies on the upside is not worth the reward. That’s why I’m using very, very short-term trading strategies, both long and short. Most of the time, however, I am just watching and waiting, and not trading at all. I learned the hard way that it’s usually not profitable to trade during a sideways market. 

 

Bullish or Bearish? Week of June 12, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (June 6): 55.8% Bulls; 18.3% Bears = Bearish

AAII survey: (June 7): 35.4% Bulls; 29.5% Bears = Neutral

VIX: @ 10.70 = Bearish

RSI: (S&P 500) @ 63.64 = Overbought

Comment: This week should be interesting because of the Fed meeting. At first glance, the market went nowhere last week, but underneath the surface it was volatile. I couldn’t explain the current market any better than analyst Lance Roberts, who backs up his opinion with frightening charts. His weekend column is here: https://goo.gl/F5IY2X and another gem on meltups: https://goo.gl/EcFOuM

Bottom line: The market is still in an uptrend but be very, very cautious. 

 

Bullish or Bearish? Week of June 5, 2017

My latest MarketWatch column: https://goo.gl/AKTldp

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is slightly above its signal line = Bullish

Observe: S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (May 30): 50.0% Bulls; 19.2% Bears = Bearish

AAII survey: (May 31): 26.9% Bulls; 31.5% Bears = Neutral

VIX: @ 9.58= Bearish

RSI: (S&P 500) @ 69.56 = Overbought

Comment: As this unloved bull market continues to rise, there’s a chance we could have a eurphoric breakout over the next few months, and yet, the higher the market goes, the riskier it gets. The current market reminds me of 1999, when exuberance reached extreme levels. Shorting at this level is not advised as any pullback should be an opportunity to “buy on the dip.” Because markets move in cycles, what goes up must come down, but no one can predict when. The inevitable smash will come one day but don’t fight the herd or you will get trampled. Just be ready to get out of the way when the herd goes over the cliff one day. 

Bottom line: The technical indicators are flashing buy while the sentiment indicators are flashing caution. Sentiment can get even more extreme (look at bitcoin, for example) before it eventually sours. Follow the uptrend if you wish but be careful not to get trapped. When millions of investors try to get out of their index funds at once, it will not be a pretty sight. (But don’t expect this to happen for a while.) 

Bullish or Bearish? Week of May 29, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is slightly above its signal line = Bullish

Observe: S&P 500 support @ 2400

 

Sentiment Indicators (+RSI)

II survey: (May 23): 51.9% Bulls; 18.3% Bears = Bearish

AAII survey: (May 24): 32.9% Bulls; 30.0% Bears = Neutral

VIX: @ 9.81= Bearish

RSI: (S&P 500) @ 63.05 = Near overbought

Comment: The bull market continues as the S&P surpassed 2400, although not with strong volume or conviction. Nevertheless, the market is in an uptrend, and if there is a pullback, the only strategy that is working is “buy the dip.” One day buying the dip won’t work, but until that day comes, you follow the trend. It’s true we’re getting ever closer to a correction (and bear market), but the inevitable smash could be months away, and perhaps even next year. Meanwhile, every pullback has been a buying opportunity. The ridiculously low VIX is a warning sign, and RSI is near overbought. Otherwise, it looks like blue skies ahead…….(for now).

Bullish or Bearish? Week of May 22, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is below its signal line = Bearish

Observe: S&P 500 resistance @ 2400

 

Sentiment Indicators (+RSI)

II survey: (May 16): 58.1% Bulls; 17.1% Bears = Bearish

AAII survey: (May 17): 23.9% Bulls; 34.3% Bears = Neutral

VIX: @ 12.04 = Bearish

RSI: (S&P 500) @ 51.05 = Neutral

Comment: Last week was quite interesting as volatility appeared, if only for a day or two. This week I have my eye on the S&P 500. There is major resistance at 2400. If the S&P can blow past 2400 on heavy volume, it would be bullish. On the other hand, if the S&P is unable to surpass 2400 for any length of time, the chances are good there will be a major “topping out” reversal, likely within the next one to two weeks. This kind of market is dangerous because sudden reversals often occur in either direction. Nevertheless, my opinion is meaningless. Only the market is right so be alert. As I recommended over the last few weeks and months, have a healthy amount of cash on the side.

Bottom line: Now is the time to pay close attention to the market.

Bullish or Bearish? Week of May 15, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is even with its signal line = Neutral

S&P 500 support @ 2368 (50-day moving average)

 

Sentiment Indicators (+RSI)

II survey: (May 9): 58.7% Bulls; 17.3% Bears = Bearish

AAII survey: (May 10): 32.7% Bulls; 30.2% Bears = Neutral

VIX: @ 10.40 = Bearish

RSI: (S&P 500) @ 58.16 = Neutral

Comment: The market has been flat and boring, and very deceiving. The VIX has been in the basement, breaking a number of records for being so low for so long. If you are trading, all you can do is wait for volatility to appear, and it will one day. It could be days or weeks, or longer, but when volatility appears, traders will get back to work again.

Many investors, however, are feeling pretty confident. Margin levels are at all-time highs and index funds are more popular than ever. So far, the strategy is working. A few experts have warned that the market is in the danger zone, but few are listening. 

When I look at the overall market, I see the danger signs, which is why I like holding a healthy amount of cash. I am also patient enough to wait for the market to make up its mind which way it will go, and for volatility to return. In fact, I’m curious how long this low-volatility environment can continue. Hint: Not indefinitely. Until then, be careful out there.

Bullish or Bearish? Week of May 8, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is above its signal line = Bullish

S&P 500 support @ 2366 (50-day moving average)

 

Sentiment Indicators (+RSI)

II survey: (May 2): 58.5% Bulls; 17.9% Bears = Bearish

AAII survey: (May 3): 38.1% Bulls; 29.9% Bears = Neutral

VIX: @ 10.57 = Bearish

RSI: (S&P 500) @ 65.55 = Bearish

Comment: The S&P 500 is at the upper range with resistance at 2400, a few points away. Many technical indicators are bullish while sentiment indicators are warning that the crowd has become overconfident. Nevertheless, if the S&P breaks through resistance, the bulls remain in control. However, the odds are that the market retreats, and will either move sideways or down during the week. Last week, volatility was crushed as the market moved sideways. In a challenging market like this, it’s suggested you keep money on the side to take advantage of extreme conditions, if any.

Bullish or Bearish? Week of May 1, 2017

Here are the latest technical and sentiment indicators:

Technical Indicators (daily chart)

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

MACD (S&P 500; 19,39,9) is above its zero line = Bullish

MACD (S&P 500; 19,39,9) is slightly above its signal line = Neutral

S&P 500 support @ 2363 (50-day moving average)

 

Sentiment Indicators (+RSI)

II survey: (April 25): 54.7% Bulls; 17.9% Bears = Bearish

AAII survey: (April 26): 38.1% Bulls; 31.7% Bears = Neutral

VIX: @ 10.82 = Bearish

RSI: (S&P 500) @ 60.57 = Neutral

Comment: Last week, we had a two-day rally, which ran out of gas midweek. With the Fed on tap to speak this week, we might get increased volatility. For an excellent, detailed analysis of the current market, read Lance Robert’s most recent column here: goo.gl/4A1eWq