The Weekly Trader

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = The bears finally took control: SPX plunged by 81 points last week, falling from 4247 to 4166. The Bad News Bears finally found their footing, and during a week of a Fed meeting. Surprise, surprise: The stock market can go down, as many investors learned last week. Futures are lower on Sunday night.

Mid-term (50- and 100-day MA) = Neutral: While the daily chart of the SPX is dreadful, with SPX below its 50-day moving average, the weekly chart is less volatile. As I said last week, thunderstorms can appear out of nowhere, and one did. Nevertheless, until the weekly chart changes, there is no reason to take drastic action. But it would not hurt to take measured defensive actions, including hedging and diversifying.

RSI: (S&P 500) @62.85 (WEEKLY) = Neutral. RSI worked brilliantly last week, warning us that the market had become extremely overbought. When RSI rose above 70, it was a huge red flag. The weekly RSI is still overbought, but has pulled back from extreme levels. Caution is still suggested.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but slightly below its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 20.70 = VIX is still low but it is no longer in the basement. A little fear entered the market last week, as reflected in the VIX, which rose from 15.65 to 20.70.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 64 percent buy, while QQQ is a 100 percent strong buy (according to this indicator). 

Comment: The indicators, especially RSI and VIX, did an excellent job of warning us the market was in the danger zone. While most investors were all in last week, and many commentators on TV had forecast a strong uptrend, RSI and VIX said, “Buyer beware.” And they were right.

RSI is still saying the market is overbought and VIX is no longer in the basement, but storm clouds are still threatening to ruin the bull party. As always, no one can say when. It will be interesting if the bulls come roaring back this week. Often, after a rough week, bullish algos and retail investors buy on the dip. No one can predict if they will be successful.

The news item that made investors nervous last week was inflation, something that must be watched. We all see that prices are rising, and there is inflation, but is it temporary (as the Fed claims), or here to stay? If the Fed is right, then the market should continue on its merry way. If inflation rears its head, and the Fed is forced to raise interest rates, the party will end quickly.

Bottom line: It is unknown whether this is a good time to buy on the dip, although many will try. The market is still overbought but not as much as last week. The bulls will try to take control this week, and it’s possible they will succeed. After all, they have for the last 13 years!

_______________________________________________________

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:www.realinvestmentadvice.com

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

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls remain in control: SPX rose by a decent 18 points last week, rising from 4229 to 4247. The Bad New Bears have still failed to run with the ball but their luck may finally change in the near future. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages. If you look at a chart, it looks like “blue skies,” but thunderstorms can appear out of nowhere, especially during the summer. Don’t be surprised when that happens.

RSI: (S&P 500) @70.40 (WEEKLY) = Overbought. RSI is telling us the market is extremely overbought. In the past, RSI has done an excellent job of warning us of a reversal. Now that RSI is above 70, the odds of a selloff have increased substantially.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.65 = After falling to a low of 15.65 last week, VIX is low, but not at extreme levels. Along with RSI, the plunging VIX gave a warning sign last week.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 88 percent buy (according to this indicator). 

Comment: What, me worry? One glance at a chart and it’s not surprising why investors are feeling so euphoric. Some ultra-bullish financial commentators have even proclaimed that the market forecast is bullish as far as the eye can see, and all they see is blue skies.

It’s what you can’t see that should worry investors. With RSI at extreme overbought levels, and VIX in the basement, caution is recommended. The rallies have been weak and listless. All clues point to a correction in the coming weeks, or sooner.

Granted, no one can predict what will happen, but if you look at the clues, they are pointing to a market that is slowly running out of gas. It wouldn’t take much to send this market much, much lower. As the market struggles at these elevated levels, it is time to play defense, or at least diversify.

Bottom line: No, it doesn’t mean to run out and sell everything, but it means that the odds of a reversal are likely in the coming weeks. As the pros would say, “The upside is limited.” The Bad News Bears have been losing for so long it will be a shock when they finally hit a couple of home runs. Be ready.

_______________________________________________________

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:www.realinvestmentadvice.com

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

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls took control: SPX rose by a respectable 26 points last week, rising from 4203 to 4229. Although it’s not exciting, the bulls are in control and running the market higher. The Bad New Bears have failed to take advantage of any selloffs. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball. 

RSI: (S&P 500) @69.67 (WEEKLY) = Overbought. RSI is telling us the market is overbought. If it reaches 70 or above, it will be extremely overbought. In the past, RSI has done a good job of warning us of a reversal, so pay attention to the Weekly RSI if it rises above 70 (only .33 away).

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.42 = VIX is still ridiculously low, and could go even lower. 

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 72 percent buy (according to this indicator). 

Comment: Once again, the bulls took control and ran the market higher, although slowly and steadily. Every time the market showed intraday weakness, buy-on-the-dip algos and retail traders saved the day. The only losers were short sellers.

Speaking of shorting, shorting the indexes (or buying puts on the indexes) has been a losing strategy. If you can identify individual stocks that are weak, it might work. But betting against the overall market has been frustrating and difficult.

Selling covered call options on certain stocks has worked, and so has going long the indexes, especially the S&P 500. Of course this winning strategy won’t work forever, but until something unnerves the market, it’s up, up, and away. One day, however, the bubble will pop.

Many will argue that this market is not in a bubble, and that would be an interesting discussion. One aspect about bubbles is that you don’t know you’re in one until it pops. Based on my personal experience, and how many investors believe the market only goes up, my opinion is it’s probably a bubble. Of course I could be wrong, which is why I don’t dare bet against this market (right now). Another characteristic about bubbles: Trying to short a bubble is financial suicide. Don’t even try.

If this is a bubble, one day it will pop, and it won’t be pretty. If this is not a bubble, and in fact this is a continuation of the longest bull market in history, then buy and hold investors will continue to rake in the cash.

Bottom line: We’re going higher until we aren’t. Since I don’t do predictions, I cannot tell you when the bull market will end, only that it will one day. Just be diversified. Trade small, especially if trading volatile securities.

_______________________________________________________

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:www.realinvestmentadvice.com

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

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls took control: SPX rose by a healthy 48 points last week, rising from 4155 to 4203. This is a bullish development. The only question is if the momentum can be sustained. Futures are flat on Monday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball.

RSI: (S&P 500) @68.61 (WEEKLY) = Overbought. RSI is saying that SPX is overbought. At 70 or higher, it will reach extreme overbought levels.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.76 = VIX is ridiculously low, and could go lower.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 96 percent buy, while QQQ is a 72 percent buy (according to this indicator). Both are strong buys after a spectacular performance last week.

Comment: The bears keep huffing and puffing, and complaining, but the market defies logic and keeps moving higher. The trend is up for now but as readers of this blog know, that could change quickly. That is why it’s essential to be prepared for anything. It is also wise to have a diversified portfolio, i.e. don’t bet everything on one stock or other security.

It’s a four-day week and there isn’t much to say except let’s watch and see if the uptrend continues. The bears had a chance to take control two weeks ago but fumbled once again. And now the bulls are in control, along with their friends, the algos.

Bottom line: Wait for the market to make its move and then follow.

Note: I have a column coming out on MarketWatch this week, one that is worth reading.

_______________________________________________________

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:www.realinvestmentadvice.com

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

Here is a link to my most recent book, Make Money Trading Options, which introduces a new trading strategy for advanced beginners: Amazon link: https://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q Hint: I suggest you read my first book, Understanding Options, if you are an options beginner: https://amzn.to/2S04nQs

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = Still Volatile. It was a tug of war all week.  However, the end result was this: SPX fell by 18 points last week, dropping from 4173 to 4155. It could have been a lot worse, but the algos entered on almost every dip. Meanwhile, on Sunday night, the futures started off slow but now appear to be in rally mode. Obviously, that could change in the morning.

Mid-term (50- and 100-day MA) = Somewhat Bullish: SPX and the other indexes are above their 50- and 100-day moving averages but it’s a little shaky.

RSI: (S&P 500) @66.57 (WEEKLY) = Slightly overbought. RSI is still showing an overbought market but it has retreated from extreme levels.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is not giving a clear signal at this time.

Daily Intraday Volatility (VIX): 20.15 = VIX is still on the low side.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is an 72 percent buy, while QQQ is a 56 percent buy (according to this indicator). How the mighty have fallen: SPY is still a strong buy, but it’s fallen from a 100 percent buy two weeks ago.

Comment: Truthfully, everyone is watching cryptocurrencies right now, especially bitcoin. From a high of $64,000 per bitcoin only two weeks ago, it’s fallen to $34,000 as of Sunday night. There are many reasons: Elon Musk’s comments, the Chinese banning financial institutions from using cryptocurrencies, and an extremely overbought cryptocurrency market. No one knows where the cryptos will go this week, but be prepared for a rough ride. It’s like the Wild West if trading this product.

Anyone who has been trading for longer than 10 years knows that what crypto is going through can also happen to the stock market. We experienced a little taste of it a year ago after the pandemic first appeared. Since then, the market exceeded all expectations by rallying higher and faster than anyone predicted. And now we have a overbought market and a generation of investors who have never experienced a bear market.

Because I’m not a fortune teller, I can’t and don’t predict when a bear market will arrive. But I can guarantee with 100 percent certainty that there will be a bear market in the future. I also know that millions of investors and traders will be unprepared. Why? Because after 13 years, many believe the market “only goes up.” That’s what low interest rates do for the stock market.

Speaking of low interest rates, it’s a gift to home buyers and anyone refinancing or borrowing money. Unfortunately, once interest rates start to climb, stocks and housing prices will be negatively affected. Until then, however, enjoy these unprecedented times.

Regarding the stock market, the indexes are still overbought but as mentioned at the beginning, cryptocurrencies are the main attraction (for now). I have no idea which way either are going to go, but fasten your seatbelts. I assume the tug-of-war will continue.

_______________________________________________________

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:www.realinvestmentadvice.com

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