The Weekly Trader

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

One-month trend = Broken. SPX is above its 200-day MA but the broken uptrend has not recovered yet. Note: SPX closed at 3340 at the close on Friday, lower from a week ago. The 200-day is at 3097. On Sunday night, all the major index futures are higher.

Mid-term (50- and 100-day MA) = Neutral to Bearish. The S&P 500 fell to its 50-day MA last week. Let’s see how it reacts at the 50-day, which is now acting as resistance.

RSI: (S&P 500) @ 44.78 (Daily) = Slightly oversold. The RSI fell from a high of 80 a week ago to 44.78. It reflects institutional selling last week.

MACD = Neutral. MACD is above its zero line and and below its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 26.87 = Neutral. VIX is slightly below its 200-day moving average, which tells me there is little fear even after last week’s pullback.

Comments: Last week was a rough one for the markets. After the holiday, the Dow fell by over 600 points, tried to recover, and fell again. The worst day was Thursday, when the market rallied at the open and plunged later in the day. You always learn more from rallies, and a failed rally telegraphed trouble.

This week, the Fed is meeting. Typically, the markets move higher on the day before and during the Fed meeting. Usually, the Fed has nice things to say, and many promises to make. As usual, no one knows how the market will react, so trying to guess market direction this week is risky.

SPX is at the lower end of the Nicholas Darvis box. Few follow the Darvis box but I do. It tells me that the market is at risk of falling further, but I also know the algos will aggressively defend the 50-day moving average. If SPX and the other indexes fell below the 50-day, that would be significant and surprising.

Bottom line: We have an injured market that is slightly above its 50-day moving average. The Fed is meeting so they will do whatever it takes to instill confidence. It’s a gamble to guess market direction this week as it could go either way. After the Fed meeting, we will have a better idea which side (bull or bear) is winning. Be prepared for anything.

Below is further market analysis by Lance Roberts:

Lance Roberts @ realinvestmentadvice.com says speculators are getting even more speculative: https://bit.ly/3ivT0YL

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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

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

One-month trend = Neutral. SPX is above its 200-day MA but the uptrend was broken last week, at least temporarily. Note: SPX is at 3426 on Sunday night, lower from a week ago. The 200-day is at 3092. On Monday night, SPX futures are slightly higher while the Nasdaq futures are flat.

Mid-term (50 and 100-day MA) = Neutral. The S&P 500 is above its 50- and 100-day MA but pointing down.

RSI: (S&P 500) @ 53.38 (Daily) = Neutral. The RSI on SPX and the other indexes have returned to neutral.

MACD = Neutral. MACD is above its zero line and is even to slightly below its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 30.75 = Neutral. VIX is above its 200-day moving average, which reflects that some fear appeared last week.

Comments: I hope that you put in your trading diary that when RSI gets in the danger zone (above 70 or below 30), pay attention. RSI zoomed over 80 early last week, and the next day, the market sold off fast and furiously. Although RSI doesn’t always react so quickly, it worked perfectly this time. The indexes were extremely overbought and a severe selloff was the result.

Now that the indicators have returned to neutral levels, many believe that all is well. All is not well. First, the futures market is indicating a mixed market, which is always a warning sign. Second, it’s possible the selloff is not over.

The market was damaged last week, and it needs time to repair. It’s unknown what is going to happen this week, so be on guard for anything.

The charts do not look pretty at the moment, so keep your eye on the 50-day moving average. If that is breached, the selloff could continue. If the bulls can hold the 50-day, then the damage can be repaired.

The lesson is that the market can change from blue skies to a thunderstorm in seconds. Many bullish investors got too overconfident and fearless, as reflected in RSI and the VIX. And now we’ll see if the bears can take advantage or not.

Bottom line: Be on guard as anything is possible. The bulls need a calm market this week, while the bears want to take advantage of the increased volatility. Let’s see who makes it to the Winner’s Circle.

Below is further market analysis by Lance Roberts and Sven Henrich:

Lance Roberts @ realinvestmentadvice.com was right about the market decline, and now wonders if the market rally is over: https://bit.ly/33dvDwS

Sven Henrich @ Northman Trader discusses the intense selloff last week, and the damage that was done: https://bit.ly/3h9dkOj

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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

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

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3484 on Sunday night, higher from a week ago. The 200-day is at 3083. SPX futures are edging higher. 

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 79.26 (Daily) and 67.59 (Weekly) = Extremely Overbought. SPX and the other indexes are in the danger zone. More on this below.

MACD = Neutral. MACD is above its zero line and is still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.96 = Danger Zone. VIX is getting crushed by the volatility-killing algos. VIX is below its 200-day moving average, which tells me there is still no fear. 

Comments: Last week I remarked that you should wake me up when something happens. Something happened. All the major indexes are extremely overbought and in the danger zone. The RSI of SPX is near 80 on the daily chart. This is equal to the readings in February, right before the March 35% selloff. Lance Roberts referred to it as exhibiting “technical extremes,” and he is correct.

In non-technical terms, I would refer to the market as being in the Twilight Zone.

As every technician knows, indexes and stocks can remain overbought for long time periods, especially individual stocks. I have seen stocks that had an RSI of 90 and above but remained overbought for weeks before coming back to Earth.

This does not mean that the market is going to crash, or that a correction is imminent, but it does say the bulls are playing with fire right now. Any spark could send the market reeling downwards.

Some technicians are predicting a “blow-off top,” and that’s also possible. That means the indexes could have one final push higher, a last hurrah, before the ultimate downfall. Shorting a blow-off top is not recommended, as Tesla shorts learned the hard way.

On the other hand, investors are feeling invincible right now as the bears got mauled. Anyone who knows market history knows the markets are at rarified levels right now. It has moved too high and too fast under less than ideal economic conditions. Something just isn’t right.

This is not going to end well, but no one can say when it will reverse or what the cause will be. Just be on the lookout for clues. This is not the time to take on large positions. This is the time to manage risk.

Bottom line: The market has my attention now. I’m watching RSI closely to see how overbought we get this week. Be prepared for anything, including a major market selloff in the near future.

Below is further market analysis by Lance Roberts via his blog:

Lance Roberts @ realinvestmentadvice.com says you better be ready, as a major market decline is possible: https://bit.ly/3hDvgl3

__________________________________________________________

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

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

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3397 on Sunday night, slightly higher from a week ago. The 200-day is at 3073. The futures market is edging higher.

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 68.30= Overbought. A few more points higher and we’re in the danger zone. 

MACD = Neutral. MACD is above its zero line and is still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.54 = Danger Zone. VIX is still getting crushed by the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is still no fear.

Comments: Records are made to be broken because we’re at all-time highs for the major indexes. Only a handful of stocks are pushing the indexes higher, and if you’re fortunate enough to own one of these stocks, happy days are here again.

If you look at the indicators above, nothing has changed. The indexes are overbought but the market keeps climbing higher. Sadly, the economy is in deep trouble and the virus still isn’t done with us.

It’s likely that volatility will be suppressed for a while longer, perhaps until after the election. That is the most likely scenario, but then again, Mr. Market sometimes surprises everyone, but not often, and not lately.

The odds are also good we will inch higher this week and beyond but that is based on the clues, not facts. The facts are the market indexes are extremely overbought, and yet, they can get more overbought.

I know that investors are playing with fire right now, like playing a game of musical chairs, but how can you argue with success? Few are buying, and few are selling. Right now it’s a waiting game.

Bottom line: Wake me up when something changes.

I’m going to turn it over to Lance Roberts and Sven Henrich, who have more to say about the market than I do:

Sven Henrich @ NorthmanTrader does a “reality check” and includes a video: https://bit.ly/3aX5DZV

Lance Roberts @ realinvestmentadvice.com compares the market to a garden, and says that winter is coming so you better prepare: https://bit.ly/3j8Aplk

__________________________________________________________

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

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

One-month trend = Bullish. SPX is well above its 200-day MA and is in an uptrend. Note: SPX is at 3372 on Sunday night, higher from a week ago. The 200-day is at 3065. 

Mid-term (50 and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 67.27= Overbought. A few more points higher and we’re in the danger zone. 

MACD = Neutral. MACD is above its zero line and and still even with its 9-day Signal Line. 

Daily Intraday Volatility (VIX): 22.05 = Danger Zone. VIX is still getting crushed by the volatility-killing algos. VIX fell below its 200-day moving average, which tells me there is no fear. Not good.

Comments: Futures are slightly higher on Sunday night as the indexes slowly keep climbing. Although the SPX and the other indexes are overbought, as you may know, markets can remain overbought for long time periods.

Buy and hold investors with index funds are the most pleased with this low volume, volatility-suppressed market. I’m guessing the markets will keep edging higher until the election. There’s a lack of buyers except for the Fed, it appears.

You can go along for the ride but be careful, because one day this bubble will pop. No one knows when, unfortunately. The higher we go, the more convinced most investors believe the market “will never go down,” and if it does, they believe, it will bounce back. I’ve seen this story before, but this one takes the cake.

As long as volatility is suppressed, the market can keep climbing. Any hint of a selloff is met with a strong reaction by the algos, so shorting the indexes at this time is not recommended.

There isn’t a lot to say except to be patient, and wait for better opportunities. The odds are good the market will continue in this direction a while longer, so be prepared for some very boring times (if you are a trader).

Obviously, that could change at any time if investors get spooked for whatever reason. For now, however, try not to fall asleep! Investors are pleased with this environment, and that’s fine. Anyone selling options is also pleased. Traders, however, must wait for better opportunities.

Meanwhile, Lance Roberts and Sven Henrich will try to make sense of this very unusual market with their latest blogs:

Lance Roberts @ realinvestmentadvice.com says the bulls still didn’t reach all-time highs: https://bit.ly/321pQK7

Sven Henrich @ NorthmanTrader tells the truth about this market in a radio interview: https://bit.ly/31ZqI1S

__________________________________________________________

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