The Weekly Trader

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = LOWER. SPX plunged from 4328 to 4204 last week, a 124-point shellacking. SPX is still well BELOW its 50-day moving average on the weekly but above its 100-day MA. After five losing weeks in a row, the bulls need to win one. Futures are higher on Sunday night but that could change in the morning.

SPX 50-day (WEEKLY) = LOWER. As mentioned above, as long as SPX is below its 50-day MA, it’s temporarily unsafe to go long in the short term. Long term investors are holding on for dear life (HODL), hoping the selloff will end soon.

RSI: (S&P 500) @37.14 (WEEKLY) OVERSOLD. RSI is strongly oversold and close to being extremely oversold. A snapback rally is likely, which is good news for the battered bulls.

MACD (WEEKLY) = BEARISH: The weekly MACD is below the 9-day signal line and below the zero line. MACD is firmly bearish.

Daily Intraday Volatility (VIX) = 30.75 = ELEVATED: Option traders are still gobbling put options for protection and speculation. The VIX is high but not at extreme levels (i.e., over 50).

Comment: It’s been many years since we’ve had a market environment like this. My concern is that we will have a drip-drip-drip correction (or worse), which is what has happened during the last month. Under this scenario, we will get a few days down, followed by one day up. By the end of the week, however, the market will be lower.

A slow-moving downtrend (as outlined above) would be the worst-case scenario because volatility will be subdued, rallies will fail, and it’s difficult for anyone to make money.

Traders thrive on volatility so a subdued selloff is a difficult environment. Also, investors simply hate a selloff that slowly erodes the value of their portfolio. Even some of the great stocks will fall along with everything else. I truly hope this slow selloff doesn’t continue for very long.

Bottom line: SPX broke below its 50-day MA. If it breaks below its 100-day, investors will be in a world of pain. It is too early to declare a correction or a bear market, but red flags are everywhere. It’s time to make a plan of what to do.

Hint: Watch the rallies for clues. For the last month, every strong rally has been followed by a strong selloff. That is not a good sign at all. On a positive note, on Sunday night there were signs of a peace agreement between Russia and Ukraine. Let’s hope it is the real deal.

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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 = LOWER. SPX fell from 4384 to 4328, a 56-point retreat. SPX is well BELOW its 50-day moving average, not a good sign at all. Futures are sinking on Sunday night (Dow futures are lower by approximately 400 points), but that could change in the morning. 

SPX 50-day (WEEKLY) = LOWER. The daily chart is horrendous, but when we look at the weekly chart, we get a longer-term view of the overall market. As you already know from reading the news, the market is in trouble. In the short term, it needs to climb back above the 50-day if it has any chance of a recovery.

RSI: (S&P 500) @42.16 (WEEKLY) OVERSOLD. RSI is on the oversold side but still not at extreme levels yet. 

MACD (WEEKLY) = BEARISH: The weekly MACD is below the 9-day signal line and slightly below the zero line. It’s not a pretty sight.

Daily Intraday Volatility (VIX) = 31.99 = ELEVATED: Fear has permeated the hearts and minds of option traders as they continue to gobble put options for protection.

Comment: If you’ve been reading this blog for a while, you will not be surprised that the market is struggling. There were clues of problems for several weeks, and recently, things got worse, not better.

After a 13-year bull market, a correction (or worse) was inevitable. Unfortunately, we’re getting hit with a lot of negative economic news, as well as a steady drumbeat of awful news in the war between Russia and Ukraine.

When you add in spiking oil ($125 a barrel reported on Sunday night), higher interest rates, a humanitarian disaster with no immediate solutions — it’s negative news as far as the eye can see.

As traders, all we can do is try to get clues from the cold, hard indicators and oscillators. In the short-term, the market is struggling. It must retake its 50-day MA if it has any chance of a recovery. If it fails, then the next stop is the 100-day MA on the weekly chart. SPX will have to break 4,000 for that to happen, which appears to be a long way off.

Bottom line: Let’s hope that this war ends soon so that Ukraine is free to pursue its own destiny. Until then, there are no winners.

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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 = WILD. SPX was headed to the abyss last week when it made an astonishing 2.24% rally on Friday, ending the week higher. SPX rose from 4348 to 4384, a 36-point advance. SPX is still BELOW its 20-day and 50-day moving averages, a red flag. Futures are sinking on Sunday night, but that could change in the morning.

SPX 20-day (WEEKLY) = LOWER. As mentioned above, SPX remains below its 20-day and 50-day moving averages. The Friday blow-your-socks-off rally lasted one day, typical of a bear market environment. As long as SPX and the other indexes are below their 20-day and 50-day on the weekly, caution is advised.

RSI: (S&P 500) @44.67 (WEEKLY) OVERSOLD. RSI is on the oversold side but not at extreme levels yet. 

MACD (WEEKLY) = BEARISH: The weekly MACD is below the 9-day signal line and almost touching the zero line. If there is a selloff on Monday, then MACD will be below the zero line, a bearish signal.

Daily Intraday Volatility (VIX) = 27.59 = ELEVATED: Fear is still in the hearts and minds of option buyers.

Comment: Before I give an overview of the market, I want to point out what happened on Thursday and Friday. On Thursday, the market was headed into the abyss, and was lower by nearly 900 Dow points. Around midday, the market staged a spectacular recovery and ended the day higher by approximately 90 Dow points.

This intraday reversal, one of the strongest in memory, was a clue the selloff was temporarily over. It was the time to go long, and sure enough, the rally carried over into the next day. Any hapless short seller who misread the signals would have been blown out on Friday. Lesson: Always be on the lookout for intraday reversals, and don’t fight the signals no matter what you “think” is going to happen.

Friday was absolutely stunning, what I refer to as a “Steamroller.” Anyone who tried to short on Friday may not have an account right now. It was one of the strongest rallies in years.

As it turned out, that rally may only last a day, what Mark D. Cook used to call a “one-day wonder.” If the selloff on Monday continues, it would be more evidence that a bear market may be near or here. Again, it’s time to be on your toes.

There is a lot of bad news swirling around, as you are well aware. Geopolitical, inflation, rising oil, the list goes on and on. It will be interesting to see how the market reacts to all the bad news this week. In a bull market, the market tends to shrug off bad news and move higher. In a bear market, the market shrugs off good news.

I’m not saying that it’s a bear market. Perhaps we’ll get lucky and only experience a correction. I certainly hope so. Meanwhile, reduce trading size and be alert. The easy days are over for now. It’s time to bring your “A” game to the trading floor.

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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 = LOWER. Once again, SPX retreated, falling from 4418 to 4348, a 70-point pullback. The bears have been dominating the bulls since January. The uncertainty about Russia and Ukraine hasn’t helped. The futures are LOWER on Monday night (but that could change in the morning).

SPX 20-day (WEEKLY) = LOWER. SPX is still BELOW its 20-day moving average and now below its 50-day MA. And yet, when this happened in the past, a rally was not far behind. Although it looks bleak, an unexpected rally is always possible.

RSI: (S&P 500) @42.63 (WEEKLY) OVERSOLD. RSI is on the oversold side but not at extreme levels yet.

MACD (WEEKLY) = BEARISH: The weekly MACD is below the 9-day signal line and headed directly for the zero line. It’s leaning bearish but it’s not there yet. Wait and see.

Daily Intraday Volatility (VIX) = 27.75 = ELEVATED: There is an elevated level of fear, which means option traders are gobbling up puts for protection. That also means the cost of put and call options are rising. Fear is creeping back into the hearts and minds of option traders.

Comment: The market started the year weak and it’s gotten even weaker. Add in the Russia-Ukraine mess and you have a recipe for trouble. This is not the time to panic, but to plan. Review what you own, make sure you are properly diversified, and decide if you are a short-term trader or long-term investor.

Investors with a long-term view who are comfortable with their holdings will likely stay the course. This is the advice given by market gurus such as Peter Lynch and the late John Bogle. Know what you own.

On the other hand, if you are a short-term trader, this will be a challenging environment. Volatile markets are not easy to manage but those who have learned how can profit from corrections and short-term pullbacks.

As I wrote earlier, although things look bleak right now, a mind-blowing rally is always possible. Therefore, don’t get too comfortable with the bear side as the market has been known to fool most of the people most of the time. Just when short-sellers believe they are in the Winner’s Circle, something often comes out of left field to wreck their hopes and dreams. Be on your toes no matter which side you are on.

It’s too early to declare a correction (let alone a bear market). SPX has fallen below its 50-day moving average, and that is a red flag. We have to see whether it can rise back above it during the week.

Obviously,, with the uncertain geopolitical situation and rising interest rates, it’s probably going to be an unpleasant week, at least at first. However, the market is always full of surprises, so be prepared for anything.

As I wrote in an earlier blog, the worst scenario for the stock market, one that I hope does not happen, is that we get a long, drawn-out, drip, drip, drip market that moves lower for months. No one is expecting that but it would be the most damaging. If that awful scenario comes true, we could see, for example, three days down, then one day up. It would not be fun (or profitable) for most people.

Bottom line: The odds are good we are entering a very unpleasant market environment. Have a plan, evaluate what you own, and raise cash if needed. Good luck out there, we are all going to need it.

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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 = LOWER. Last week was a sad one for the indexes, culminating in a selloff for SPX, which FELL from 4500 to 4418, an 82-point shellacking. Back and forth we go between the bulls and bears until someone dominates. Futures are FLAT on Sunday night.

SPX 20-day (WEEKLY) = BELOW. SPX is still BELOW its 20-day moving average but ABOVE its 50-day MA. It’s still a red flag on the weekly but there is no reason to worry too much until the 50-day is breached.

RSI: (S&P 500) @45.67 (WEEKLY) NEUTRAL TO SLIGHTLY OVERSOLD. RSI could go in either direction. It’s in the neutral zone where most traders get chopped up. No significant signals at this time.

MACD (WEEKLY) = BEARISH: The weekly MACD is below the 9-day signal line and headed directly for the zero line. Unless the market can be saved this week, MACD “could” reach the zero line. That would be a strong bearish signal. Right now it’s slightly bearish with room to reverse direction.

Daily Intraday Volatility (VIX) = 27.36 = ELEVATED: Volatility is back, which means option traders are gobbling up puts for protection. That also means the cost of options is rising (along with everything else). The warning signs are there – this should be an interesting week.

Comment: When I put all of the clues together, I see a bearish picture. VIX is elevated, MACD is headed towards the basement, SPX is below its 20-day and the weekly trend is down. On the plus side, we have seen this scenario in the past, and in the past the market staged a remarkable recovery. It could happen again.

On the other hand, this is not the same market as a year ago. Inflation is heating up, the Fed is warning they will raise interest rates (they may be forced to), there are geo-political concerns, and oil has spiked (probably because of the threat of war). Add in a 13-year bull market and it looks bleak.

No one can tell you what is going to happen this week. Most investors have been trained to “stay the course” and that has worked. The market is hanging on for dear life right now but anything is possible. That’s why it’s a waste of time to make a prediction.

I know some readers don’t want to hear it but there is always the possibility of a bear market. That would be the worst scenario, especially if it lasted a long time. The best scenario would be a short-lived correction. With that scenario, the indexes would drop by less than 20 percent, and bounce back relatively soon. Corrections are necessary on occasion to remind over-confident investors that markets do go down sometimes.

Bottom line: It’s been an unpleasant few weeks, especially for those holding technology stocks. It appears as if many fund managers are moving into recession proof stocks while dumping technology. Keep that in mind as you attempt to maneuver in an extremely treacherous trading environment. Not many are going to make it to the Winner’s Circle this year.

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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