The Weekly Trader

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = HIGHER. The Bulls took firm control last week. In fact, SPX rose from 4538 to 4712, an astounding 174 point rally (wow!). After an earlier two-week selloff, the bulls came back stronger than ever right in time for the holidays. Futures are higher on Sunday night and as usual, that could change in the morning.

SPX 20-day moving average (WEEKLY): HIGHER.  SPX bounced off of its 20-day MA and rocketed higher.

RSI: (S&P 500) @65.78 (WEEKLY) OVERBOUGHT. Not surprisingly, RSI is overbought but not at extreme levels yet. If SPX continues moving higher this week, watch RSI for signs of extreme overbought levels.

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and is even with its 9-day signal line (neutral). MACD is not giving a strong signal. 

Daily Intraday Volatility (VIX) = 18.69 = LOW: VIX plunged from 30 to 18.69 as fear took a leave of absence last week. There is no fear as we head towards the holidays with an upcoming Fed meeting.

Comment: If there was any fear remaining from a few weeks ago because of COVID or higher inflation, it’s nearly gone. The market made a spectacular recovery last week, making investors happy and just in time for the New Year.

With a Fed meeting on Tuesday and Wednesday, it’s likely that Fed Chairman Powell will tell everyone that all is well and they have everything under control, including inflation and anything else that may or may not appear.

Therefore, the odds are high that this will be another positive week as Powell will not do anything to upset the apple cart. Obviously, something could come out of left field but if all goes according to plan, there will be lots of smiles on Wall Street this week.

You’ve heard my warnings before, so take heed. While all looks bright at the moment, and this could be another excellent year for the indexes, there are enough looming problems to put a scare into any investor who cares to look. Unfortunately, few are looking.

Bottom line: It’s up, up, and away unless something unexpected happens. With a Fed meeting and plenty of good cheer, investors want to party hard this year and not worry about the future. (And who can blame them?) Unfortunately, the future has a funny way of moving in a direction that no one expects or was able to predict. As I’ve said before, enjoy the fun while it lasts because nothing lasts forever.

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Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

ALERT: I wrote the following column about Mark D. Cook for MarketWatch that includes the clues to look for before a bear market arrives (and what to do about it): https://on.mktw.net/3xRRHvW

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = LOWER. The Bad News Bears hit another home run; that’s two weeks in a row. Once again, SPX fell — this time from 4594 to 4538, a 56-point pullback. SPX futures are HIGHER on Sunday night but that could change in the morning. Nasdaq futures are FLAT.  If there is a rally in the morning, I am looking to see how long it lasts and if it carries over into the next day.

SPX 20-day moving average (WEEKLY): NEUTRAL.  SPX is above its 20-day moving average but pointing lower, a mixed signal.

RSI: (S&P 500) @57.47 (WEEKLY) NEUTRAL. RSI fell again last week, working off almost all of the extreme overbought readings of the last two weeks.

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and is only slightly below its 9-day signal line (neutral). MACD is not giving a strong signal.

Daily Intraday Volatility (VIX) = 30.67 = VIX is elevated once again, meaning that professional option traders gobbled up puts for protection. Finally, a little volatility entered the market to the delight of traders and the annoyance of investors. VIX was in the basement for so many years it’s almost a shock to see it at 30 (and also above its moving averages).

Comment: After a two-week selloff, with fear and some anxiety on the rise, it may be a good time add to long positions. After all, there is a likelihood of a Santa Claus rally. It seems like everyone wants to end the year on a positive note, and they “should” get their wish. I’m sure the Fed will be very accommodative to make sure Wall Street gets a gift and not a lump of coal.

On the other hand, after 13 years of sugarplums and lollypops, it’s always possible that something comes out of nowhere and surprises nearly everyone. These black swan events cannot be predicted but traders must be on guard for the anything because when it comes to the market, anything is possible.

It’s true that very few want to end this year on a negative note, so expect a concerted effort to let investors know they should “stay the course.” There is no need to upset the apple cart and remind investors that risks have increased.

Unfortunately, some of the technical indicators and clues are telling us that problems have creeped into the market. As money manager Lance Roberts correctly concluded in his blog: “While the market is now very oversold, volume remains relatively weak along with money flows. Such suggests there is a risk of more selling pressure following any short-term bounce. So, as is always the case, be sure to manage your risk exposures accordingly.”

On one hand, after a two-week selloff, there is a strong possibility of a rally. On the other hand, the bull market is struggling to move higher. Add in a dose of inflation, the cryptocurrency shellacking, certain stocks getting creamed, and the spreading virus and you have a recipe for risk.

In a bull market, however, all of these problems are ignored as the market powers higher. The question we all want to know is: Is this still a bull market? (Answer: Only time will tell.)

Bottom line: The market could go in either direction this week so be prepared for anything. The odds favor the bulls simply because traders and investors want their money back after a 2-week pullback.

___________________________________________________________

Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

ALERT: I wrote the following column about Mark D. Cook for MarketWatch that includes his advice on the clues to look for before a bear market arrives: https://on.mktw.net/3xRRHvW

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = LOWER. The Bad News Bears finally hit a home run. The question is: Was it a one-day wonder? Last week, SPX fell from 4697 to 4594, a 103-point shellacking, all of it coming on Friday. Futures are higher on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): NEUTRAL.  SPX is above its 20-day moving average but pointing lower, which means there is no meaningful signal.

RSI: (S&P 500) @61.99 (WEEKLY) SLIGHTLY OVERBOUGHT. RSI plunged on Friday from extreme levels but is still overbought.

MACD (WEEKLY) = NEUTRAL: MACD is above the zero line (bullish) and is even with its 9-day signal line. MACD is not giving significant signals. 

Daily Intraday Volatility (VIX) = 28.62 = VIX skyrocketed on Friday as put-buyers gobbled up puts for protection. For the first time in a long time, fear entered the hearts and minds of option traders.

Comment: Anyone who has followed this blog knows how unusual it was for RSI to be above 70 for more than a few days on SPX. Sure enough, SPX came back to earth on Friday, which they are blaming it on the new COVID variant. I don’t completely buy that story. I believe that a large institution with huge positions got spooked (for reasons we will never know) and sold, and the herd followed.

Why the market sold off is not important, but that it did sell off is significant. It is also significant that the futures are rallying on Sunday night. Tomorrow (Monday), watch the rally and see if it continues all day. Even more importantly, see if the rally tomorrow can carry over into Tuesday. If the rally cannot be sustained for long, that is a clue this bull market is struggling.

Friday’s selloff was a surprise but then again, it wasn’t. In the future, if RSI rises above 70 on SPX, pay attention as an extremely overbought index usually doesn’t last long.

On Monday, the buy on the dippers are going to be entering the market with everything they’ve got. I can’t wait to see how long the rally lasts. My suspicion is there are more problems underneath the surface than anyone realizes, and if I am right, expect a lot more fireworks in the weeks and months ahead.

Bottom line: Trade cautiously during these uncertain times. Nothing is as it appears, and that is dangerous.

___________________________________________________________

Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = FLAT. The bulls took back control during the week. SPX rallied from 4682 to 4697, landing at the exact spot as a week ago (a 15-point gain). Very odd! SPX is still near its all-time highs. Futures are flat on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): HIGHER. SPX is above its 20-day moving average and is still in an uptrend. 

RSI: (S&P 500) @71.63 (WEEKLY) OVERBOUGHT = RSI says that SPX is extremely overbought (above 70), and can’t seem to budge.

MACD (WEEKLY) = SLIGHTLY BULLISH: MACD is above the zero line (bullish) and slightly above its 9-day signal line. MACD is not giving significant signals.

Daily Intraday Volatility (VIX) = 17.91 = Still no worries on Wall Street as VIX remains on the low side.

Comment: It’s a shortened week so I’ll keep it short. Thanksgiving is Thursday and there is a half day of trading on Friday. Last week, SPX gained back the 15 points it had lost.

There isn’t much to say about the market. Inflation has appeared but the Fed acts like they have it under control. We shall see.

In past years, the market tended to rally before holidays, but there is no guarantee that will happen this week. Enjoy the three trading days but be careful as strange things can happen to the market before holidays (i.e., lots of head fakes). On Friday, volatility should be subdued. It’s usually not a great trading day.

Have a great Thanksgiving and I’ll see you next Monday.

___________________________________________________________

Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = FLAT. The bears tried to take over early in the week but failed once again. SPX fell from 4697 to 4682, a mild 15-point pullback. SPX is still near its all-time highs. Futures are flat on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): HIGHER. SPX is above its 20-day moving average and is still in an uptrend.

RSI: (S&P 500) @71.01 (WEEKLY) OVERBOUGHT = RSI is telling us that SPX is overbought. Although SPX and the other indexes pulled back a little last week, the indexes are firmly in overbought territory.

MACD (WEEKLY) = BULLISH: MACD is above the zero line (bullish) and slightly above its 9-day signal line. The slope of MACD is pointing higher, a bullish sign.

Daily Intraday Volatility (VIX) = 16.29 = No worries on Wall Street as VIX remains in the basement.

Comment: Although the indexes are overbought and the bears are still in hiding, we’re coming closer to the holidays. No one can predict if we’ll get a Santa Claus rally but it’s possible. Anything is possible, even a blow-off top. It’s still too risky to short this market no matter how overbought it is.

With the indexes so overbought, the Bad New Bears had a chance to take over early in the week, but they couldn’t finish the job. (Are there any shorts left?)

At this point, the market seems to have stalled out and few are expecting any fireworks as we get closer to the holidays. I also know from experience that sometimes when you least expect it, the market can come up and bite you. This could be one of those times. After all, no one is expecting anything out of the ordinary until next year. That’s the consensus. However, the market is an independent entity that does what it wants when it wants.

Bottom line: No one knows anything so wait and watch. It feels quiet out there, maybe too quiet.

___________________________________________________________

Stock evaluation program from Barchart: https://bit.ly/3v9Nj9G 

For daily results of multiple indicators, read Yardeni Research: https://goo.gl/eT3fzA

For insightful analysis of the stock market, read Lance Roberts’ latest newsletter:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com