The Weekly Trader

S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is below its 50-day moving average = Bearish

S&P 500 one-month trend: SPX broke its uptrend during the week, a bearish signal. However, there should be attempts to bring SPX back above its 50-day moving average.

RSI: (S&P 500) @ = 44.73 = Neutral

MACD: Below Zero Line and below Signal Line = Bearish

Daily Intraday Volatility: 17.97 (Neutral). The algos are doing everything in their power to suppress volatility. Nevertheless, volatility has been spiking.

Comment: What a wild week! To refresh your memory, Monday started off with a 700 point Dow shellacking, followed by rallies and selloffs the rest of the week. On Wednesday, the indexes were crashing when the algos came in for a rescue, and turned the indexes positive in the afternoon.

The volatility should continue as we enter the volatile months of September and October. It will give investors indigestion (but so far there has been little panic) as the indexes gyrate. Traders can do well but it’s extremely dangerous, especially if buying puts. Why? Because the algos constantly pounce to keep volatility low and run the market higher. The reality is that buyers were mostly absent, but the algos were ready and waiting to bring the market higher at every opportunity. That is one of the reasons it’s so risky to buy puts, so if you do make a profit, sell quickly.

Expect volatile days in the coming days and weeks. There are many signs of a recession except that consumers are still buying (mostly online), and there haven’t been job losses. If these two take a hit, then the recession will have arrived.

Bottom line: Navigating this market is very difficult right now, and there are many crosscurrents. Investors would be wise to increase cash (but not sell everything). There is a chance the indexes could rally strongly from here, but the odds are not good right now. As I wrote last week, every bull market is followed by a bear market. After the longest bull market in history, what do you think is going to happen next? Unfortunately, based on stock market history, individual retail investors will hold their darlings right until the bitter end.

_____________________________________________________

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:www.wolfstreet.com


S&P 500 is above its 200-day moving average = Bullish  

S&P 500 is equal to its 50-day moving average = Neutral

S&P 500 one-month trend: SPX fell back to its 50-day moving average = SPY hit all-time highs and reversed direction.

RSI: (S&P 500) @39 = Oversold

MACD: Above Zero Line but below Signal Line and pointing lower (Neutral to Bearish)

Daily Intraday Volatility: 17.61 (Neutral). Volatility spiked last week, as expected. It was in the basement for far too long.

Comment: If you’ve been following my blog for the last few weeks, you know that last week’s pullback was expected. With RSI so high, the VIX so low, sentiment so bullish, and SPX at all-time highs, a pullback was bound to happen, and it did. Wall Street wasn’t pleased with the quarter point cut, nor was the President, who fueled the downside with additional tariff threats against China.

As I wrote several weeks ago, there are signs we are in or headed towards a recession. There are so many warning signs and indicators it’s hard to keep track. At the moment, the only positive sign is that consumers are still buying, and job losses are minimal. Keep an eye out for clues, because if there are layoffs, it will confirm what many other indicators are reflecting.

Because we went down so hard and fast last week, a bounce is expected this week, but it may not last long. We are coming into the volatile months of September and October with a confused Fed, trade wars, overall nervousness, and near all-time highs in the stock market. A lot could go wrong.

What to do? Let me pass the baton to Lance Roberts’ latest piece, which gives excellent advice plus sobering statistics. Here is his latest: https://bit.ly/31g6FtT

In addition, read Wolf Richter’s latest (click on link below) for a frightening look at heavy truck sale orders (they have plunged by 81%).

Bottom line: Expect a more volatile few weeks and months as nervous investors hope for the best in a very difficult market environment. After a 11-year bull market, does anyone really expect it to continue indefinitely? Those who have never experienced a bear market are going to get a wakeup call and many lessons. Knowing investors the way I do, they won’t be selling their favorite stocks anytime soon no matter how low the market goes.

_____________________________________________________

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:www.wolfstreet.com


S&P 500 is above its 200-day moving average = Bullish  

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

S&P 500 one-month trend: SPX is at all-time highs = The trend is up but it could reverse depending on what the Fed says and does this week.

RSI: (S&P 500) @64.29 = Slightly Overbought

MACD: Above Zero Line and below Signal Line (Neutral)

Daily Intraday Volatility: 12.16 (Extremely Low). Volatility is in the basement, which cannot last for too long.

Comment: This week it’s all about the Fed, in particular, on Wednesday at 2:00 p.m. ET. That’s when we’ll find out if the Fed will cut interest rates by .50% (unlikely), .25% (likely), or not at all (unlikely).

The strange part is that, if the Fed cuts, it will be the Fed’s first rate cut in over a decade, at the same time that the S&P just hit an all-time high. You almost have to read that twice: The Fed is cutting interest rates while the indexes are at all-time highs. Either the Fed knows something we don’t, or they are succumbing to political pressure, or both.

All I know is that when, not if, the next recession comes (and there are signs it’s getting closer), the Fed will have less tools than in the past to reduce the pain. I imagine they will cut to 0% if they panic.

Although the Fed may or may not give the markets a boost this week depending on what they do, with indexes at all-time highs, with VIX in the basement, and RSI climbing towards 70 again, a major pullback is coming soon (no one can predict when but it’s coming). Add in the fact that because September and October are typically rough months for the market, a dislocation is extremely likely.

Bottom line: The Fed controls the market this week, so follow the leader. Even if the Fed gives Wall Street what it wants, a pullback is coming. The unknown question is how overbought we’ll get before we reverse direction.

_____________________________________________________

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:www.wolfstreet.com


S&P 500 is above its 200-day moving average = Bullish  

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

S&P 500 one-month trend: SPX stalled and reversed at all-time highs. The indexes are hitting major resistance at all-time highs.

RSI: (S&P 500) @55.81 = Neutral

MACD: Above Zero Line and below Signal Line (Neutral)

Daily Intraday Volatility: 14.45 (Subdued). Volatility is still extremely low.

Comment: Unless there is an unexpected geopolitical or financial catastrophe, the only game in town is the July 30-31 Fed meeting. The market is expecting a 50 basis point cut (.50%), and anything less will be a disappointment to Wall Street. The word on the Street is a .25% cut is the most probable.

For the Fed to lower interest rates when the market is at all time highs means either the economy is in much worse shape than they are letting on, or they are succumbing to political pressure. Neither scenario is bullish for the market.

Investors are hoping the Fed can prevent a recession or bear market by lowering interest rates. The Fed can distract investors, and perhaps delay the inevitable, but when the next bear market arrives, it’s going to be vicious. It will also damage millions of investors’ portfolios.

After looking at the clues and indicators, I am convinced that a short-term pullback is extremely likely. In addition, a bear market is drawing ever closer. And yet, the best advice I can give you is to sit tight and do nothing…for now. I went back and re-read the writings of an expert on bear markets, Jesse Livermore, who lost several fortunes by shorting too early. He finally got it right in 1929 but before then he was always plunging on the short side too early and losing money. None of us want to make that mistake.

Bottom line: A huge dislocation is coming but do not act too early. There is plenty of time to profit from a falling market. Now is the time to learn about buying put options (less risky than shorting individual stocks). And if you are new to buying puts or shorting, start small, very very small. Trading a bear market is extremely challenging, and for many, moving primarily (not all) to cash is the easiest and most prudent solution in these uncertain times.

Caveat: There is always the chance that Jerome Powell will please Wall Street with a .50% cut next week, so in that case, the bubble will grow even larger, and get even more dangerous.

_____________________________________________________

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:www.wolfstreet.com


S&P 500 is above its 200-day moving average = Bullish  

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

S&P 500 one-month trend: “V” Shaped Rally and Triple Top (one year) at Resistance. It could go in either direction but is hitting major resistance at all-time highs.

RSI: (S&P 500) @70.86 = Overbought

MACD: Above Zero Line and above Signal Line (Bullish)

Daily Intraday Volatility: 12.28 (Subdued). Volatility is still in the basement, which cannot last forever.

Comment: It’s been a while since I’ve seen such an overbought market (over 70 RSI is overbought and it could still go higher), and the VIX so low (at 12.28, volatility is crushed).

Last week, the market was headed lower early in the week, that is, until Fed Chair Jerome Powell gave the market hints that a rate cut is coming (he didn’t actually say that, but the market believes he will cut rates).

Something doesn’t make sense: On one hand, the indexes have just reached all-time highs (SPX 3000), and yet, the Fed wants to cut rates due to the trade wars and other disturbing data (my opinion: such as the hints a recession is looming, and less than spectacular earnings). Nevertheless, something has to give, and if not, this market bubble is going to expand even more. If Powell cuts rates, and the market zooms even higher, be prepared for the short of the year (if not the decade in the intermediate) before the end of the year.

As I said last week, do not short while the market screams higher (as no one knows how high a bubble can expand), but if I’m right, there should be fantastic shorting opportunities in the near future.

In two weeks, the Fed has their formal meeting, and they better not disappoint, or look out below. Although all of the indicators are bullish (with RSI the only exception), it wouldn’t take much for the market to plunge. And yet, although the Fed is playing with fire, it’s very possible they can keep the bull party going a bit longer.

With the VIX so low, it’s difficult for most traders to make money. On the other hand, buy-and-hold investors in indexes are pleased with their profits, and believe the Fed will save them if there is a sudden reversal. Although volatility has been suppressed over the last four months (thanks to the algos), it can’t last forever.

Bottom line: It’s a confused and dangerous market that looks pretty on the outside and weak on the inside. With the RSI so high, a dislocation would not be surprising, but the Fed will do whatever it can to support the indexes. Be alert to any possibility this week and beyond.

_____________________________________________________

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:www.wolfstreet.com