The Weekly Trader

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = WAY UP. The bulls ran the market higher all week. SPX rose from 4605 to 4697, an astounding 92-point rally. SPX is at its all-time highs and is obscenely overbought. The bears are in hibernation but they better wake up soon. Their day in the sun is coming. Futures are flat on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): UP. SPX has moved away from the 20-day in a strong uptrend. This is a powerful bull rally.

RSI: (S&P 500) @72.42 (WEEKLY) = RSI is telling us that SPX is ridiculously overbought. I haven’t seen overbought numbers like these in a very, very long time. RSI is flashing a WARNING sign. Yes, we could get even more overbought but we are in the danger zone.

MACD (WEEKLY) = LEANING BULLISH: MACD is above the zero line (bullish) and even with its signal line and pointing higher. It’s not a slam dunk bullish signal but it’s close.

Daily Intraday Volatility (VIX) = 16.48 = No put buying on Wall Street. All is well, according to professional option traders.

Comment: I am flabbergasted at the overbought readings, but perhaps I shouldn’t be. Last week was a Fed meeting after all (and 80 percent of the time the market rallies on Fed days (at least during a bull market)).

It’s possible we are seeing a blowoff top (can’t be sure until afterwards, however). I do know that anyone who doesn’t heed the signs of this extremely overbought market will regret it one day. If Mark D. Cook was alive, he’s be blowing a gasket right now. In fact, that’s what was his prediction a month ago: “The market is going to blow a gasket.”

I know it’s silly to warn anyone about the increased stock market risks when we’re ready to celebrate the upcoming holidays. That’s one of the reasons I got out of the prediction business. However, while I can’t predict when the market is going to give back a huge chunk of its gains, I know it will. I also can’t predict how bad it will be (correction or crash), but like a looming hurricane, be prepared.

The way to survive the coming volatility is to be diversified, know what you own, don’t go on margin, don’t take unnecessary risks, have cash on the side to go shopping for stocks that are on sale, and learn technical analysis (my new book coming out in March explores the top technical indicators and oscillators, among other things).

Bottom line: I am in awe how this market seems unstoppable. I have seen this story before, but not for a very long time.

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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

I am sad to announce that Mark D. Cook, my friend and mentor, passed away last week at age 67. He was an extremely successful self-taught options trader and an expert on bear markets. I had planned to interview him this weekend for my new stock market book, something he was looking forward to. He told me he was convinced a bear market was closer than ever, within months or in 2022, and he was eager to share his thoughts. He was astounded by how far and fast the stock market had risen, and he warned there would be dire consequences. He was extremely concerned about inflation and warned that if anything could kill the market, it was inflation.

I miss his sharp wit, honesty, and daily market commentary. He always told you where he stood.

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = UP. The bulls continue to run with the ball as SPX rose from 4533 to 4605, another remarkable 72-point advance. SPX is near its all-time highs and is overbought again. Meanwhile, the Bad News Bears have gone into hiding. On the other hand, many bulls are getting overconfident and giddy (and some well-known touts are publicly feasting on their good fortune). This is not a good sign. Futures are HIGHER on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): UP. SPX has moved away from its 20-day MA and is in a strong uptrend. The bull run continues. 

RSI: (S&P 500) @68.82 (WEEKLY) = RSI is telling us that SPX is a whisker away from extremely overbought.

MACD (WEEKLY) = LEANING BULLISH: MACD is above the zero line (bullish) but below its signal line (bearish) but it is pointing higher. It’s not a slam dunk bullish signal (until it crosses the signal line).

Daily Intraday Volatility (VIX) = 16.26 = All is well on Wall Street, says the VIX. Nothing to see here. 

Comment: The market is in a strong uptrend and is also overbought. It’s been so long since the markets have had even a 10 percent correction that when one occurs, it will seem like a disaster. Many investors will be caught off guard one of these days (but don’t try to predict when).

Shorting has been extremely difficult unless you’re day trading. The trend is up, up, and away. Until there are signs of exhaustion or a black swan event, we appear to be going even higher. Don’t fight the trend (at least right now). Being early is the same as being wrong.

Those who are long, especially index investors, have never had it so good. Don’t forget these seemingly unstoppable bullish days as no strategy works forever. However, no one knows when they end, either.

PS: As I wrote in the commentary above, some overconfident bullish touts are acting like the market will never go down, one of the reasons I believe that Mark D. Cook may be right about the coming bear market.

Note: There is a Fed meeting this week — typically a bullish affair, especially if they can convince investors that inflation is transitory.

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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

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = UP. The bulls continue to run with the ball as SPX rose from 4471 to 4533, another healthy 73-point advance. SPX is getting close to its all-time highs. Futures are slightly LOWER on Sunday night but that could change in the morning. 

SPX 20-day moving average (WEEKLY): UP. SPX is moving farther away from its 20-day MA. The bull run continues. 

RSI: (S&P 500) @66.12 (WEEKLY) = Slightly overbought but not in the danger zone. RSI is elevated but not at extreme levels. 

MACD (WEEKLY) = MIXED. Once again, the weekly MACD is giving mixed signals: The MACD line is below its signal line (bearish) but above the zero line (bullish). However, the signal line is pointing lower but not sure if that is significant. 

Comment:  The Bad News Bears just can’t catch a break. Until the moving averages break support, it may be financial malpractice to short the indexes (my apologies to any professional short-sellers). On the other hand, it’s always possible that a black swan will unexpectedly appear. In 13 years, I think I saw it twice. 

Strong earnings was the reason for the advance, or so I’ve been told. While several indicators show the market as having a “lack of conviction,” the bulls keep scoring points. 

Futures are slightly lower on Sunday night but the only number that counts is the opening. It’s been a very long time since we’ve had a deep correction, as Lance Roberts correctly mentions in his blog. Here’s another one for the record books: From Lance: There is another streak that is also just as problematic. Currently, the S&P 500 index has gone 344-days without violating the 200-dma. Such is the sixth-longest streak going back to 1960.” Wow. 

Wake me up when something happens. Like everyone else, I’m feeling very complacent. (FYI: In reality, complacency is a dangerous emotion, especially if you’re a trader. That’s when the market comes up and bites you when you least expect it!) 

Bottom line: Sit and wait. 

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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

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = UP. The bulls decisively won the week, no questions asked. SPX rose from 4391 to 4471 last week, a healthy 80-point advance. The bulls are back in control. Futures are FLAT on Sunday night but that could change in the morning.

SPX 20-day moving average (WEEKLY): UP. SPX rose strongly above its 20-day moving average as the bulls successfully defended. All systems are go this week unless something changes the narrative.

RSI: (S&P 500) @62.45 (WEEKLY) = Neutral to slightly overbought. RSI is still slightly elevated but not at extreme levels. It’s not giving a strong signal in either direction.

MACD (WEEKLY) = MIXED. The weekly MACD is giving mixed signals: The MACD line is below its signal line (bearish) but above the zero line (bullish). Translation: Nothing to see here.

Daily Intraday Volatility (VIX) = 16.30 = VIX has fallen a bit in the last week, reflecting calm and a lack of fear even as inflation rears its ugly head. All is well on Wall Street, says the VIX.

Comment:  The sell-off from a couple of weeks ago has been forgotten. The bulls took control last week and now almost everyone appears bullish again. What can I say? It’s the reason I don’t make predictions: No one can tell you what the market is going to do day-to-day, but at least the indicators give us clues.

Right now the indicators are saying that the trend is up and SPX is only slightly overbought. According to technical analysis, unless something comes out of left field (like a unexpected negative economic report), the market is headed higher.

Eventually, inflation is going to affect the market, especially if the Fed has to raise interest rates. That would be a game-changer. For now, however, sit back and enjoy the bull party. As I said last week, this could be the calm before the storm, or just the calm. Enjoy these up trending days as one day it will end. Until it does, however, full spead ahead!

Bottom line: I don’t see any red flags this week. The market could drift all week in either direction but there are no clues (yet) or a major event that could affect the market. (Then again, I don’t have a crystal ball so anything is possible.)

___________________________________________________________

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 won the week because they were able to stop the market from declining further. SPX rose from 4357 to 4391 last week, a 34 point advance. It was a vicious back and forth battle, making some investors dizzy. Futures are LOWER on Sunday night (but that could change in the morning).

SPX 20-day moving average (WEEKLY): FLAT. SPX rose slightly above its 20-day moving average (i.e., now it’s a support level), repairing some of the damage from last week. It’s too early for the bulls to declare victory, but retaking the 20-day was a good start.

RSI: (S&P 500) @57.84 (WEEKLY) = Neutral to slightly overbought. RSI is still slightly elevated but not at extreme levels. All one can do is wait and watch.

MACD (WEEKLY) = MIXED. The weekly MACD is giving mixed signals: The MACD line is below its signal line (bearish) but above the zero line (bullish). MACD on the daily chart is below the zero line but moving higher.

Daily Intraday Volatility (VIX) = 18.77 = VIX reflects the sigh of relief the bulls feel, with the VIX barely dropping.

Comment:  The bulls want to forget the selloff of a week ago but the market is still vulnerable. With the indexes still at all-time highs, it wouldn’t take much to send the markets lower. Suggestion: More than ever, have a plan of what to do in a worst-case scenario. Don’t leave yourself vulnerable to a severe selloff.

Meanwhile, the bulls did a good job of stopping the damage, at least temporarily. This week we will have a better idea of who is in control. A lot of outside forces are swirling around, including inflation, which could upset the bullish narrative. That’s why I’m not ready to proclaim that the bulls are out of the woods yet. (Don’t forget we’re still in the historically dangerous month of October).

I don’t see much of a trend nor strong momentum. It could either be the calm before the storm, or just calm (i.e., consolidation). It’s too early to know which.

Bottom line: Another trendless, impossible-to-predict market that can chop you up if you’re not careful…so be careful.

___________________________________________________________

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