The Weekly Trader

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 = Uptrend (Bullish)

RSI: (S&P 500) @66.67 = Overbought (Bearish) but will drop fast on Monday morning.

MACD: Above zero line but even with its signal line (Neutral)

Daily Intraday Volatility: Low (VIX remains in the basement at 12.87 with a spike expected on Monday morning)

Comment: The market indexes hit all time highs on Friday after a couple of rough days midweek (perhaps because the Fed didn’t lower interest rates). On Friday, as the bulls celebrated, few took money off the table except for millions of mutual fund investors who keep cashing out every week. In fact, based on my analysis and some excellent articles from Lance Roberts and Wolf Richter (and others), it appears as if stock buybacks are primarily keeping this market elevated (along with the buy-on-the-dip algos). Even more scary, the market hit its all time highs on extremely low volume and plenty of hubris. Early in the week, RSI hit 74, which was a flashing red warning sign, and sure enough, the market fell, bringing RSI back to earth (but still overbought).

Based on the Sunday night futures market, the indexes will open 2% lower. Of course the buy on the dippers will enter sometime in the first hour, and that’s when it will get interesting. It’s unknown right now if the market will continue plunging, or if it recovers before lunch. If it starts to get ugly, either the Fed or the White House should step in with positive announcements. One day this blatant manipulation won’t work, but for 10 years, it has, so plan accordingly.

Bottom line: This is not the time to declare that the bull market is over, but that day is coming sooner rather than later. Nevertheless, one Monday morning selloff means little right now. However, pay attention to the market close for clues as to what might happen the rest of the week. As a trader, I’m just glad volatility has returned, if only for a few days.

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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


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 = Uptrend (Bullish)

RSI: (S&P 500) @72.28 = Extremely Overbought (Bearish)

MACD: Above zero line but even with its signal line (Neutral)

Daily Intraday Volatility: Low (VIX remains in the basement at 12.73)

Comment: The S&P 500 nudged its way higher to all-time highs last week with SPX touching 2940 before retreating slightly. The big money was made in individual stocks (with a number of winners and losers) while volatility in the indexes remains extremely low.

This is the week of the Fed meeting and it should be interesting. Although GDP was a strong 3.2, a number of experts proclaim the number is actually much lower (based on the way inflation is calculated. More on this later). The indexes did rise near the end of the day on Friday but it wasn’t a huge rally. Bond market yields got crushed (and bonds rallied), which is a clue the bond market doesn’t believe the economy is as strong as advertised.

And that is why the Fed meeting will be very interesting. There are rumors the Fed might actually cut rates at this coming meeting. No one knows for sure what they will do, but it’s unlikely they will raise rates (according to the experts). All we can do is watch and wait.

With the market at all-time highs, with RSI telling us the market is extremely overbought, and with investors bullish again, it wouldn’t take much to send this market lower. Nevertheless, the Fed and the White House are determined to keep this rally going, so it’s risky to short the indexes.

For a much deeper analysis of the current market environment and steps you should take to protect your portfolio, read Lance Robert’s latest piece, The Bull is Back, but Will it Stay?: https://bit.ly/2VvPKUV

Bottom line: With the Fed meeting this week, the odds are good there will be some whiplash. No one knows how the market will react to the Fed, but the odds are also good the Fed will be very accommodating. The danger is that the market bubble will continue to grow, increasing the risks of a major dislocation in the future.

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What to Watch For This Week (week’s calendar at end of article): https://cnb.cx/2W7Tadz

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 = Uptrend (Bullish)

RSI: (S&P 500) @67.05 = Overbought (Bearish)

MACD: Above zero line but even with its signal line (Neutral)

Daily Intraday Volatility: Low (VIX is in the basement again at 12.09)

Comment: The market (SPX) hardly moved in the last week, ending the week close to where it started. Volume was extremely low, which tells me most investors are taking a “wait and see” approach.

The indexes are near their all-time highs, volume is low, volatility is extremely low, the market is overbought, and we’re close to the longest bull market in history. In addition, investors are starting to get bullish again (they always do at tops), which is a danger sign. I spoke to a few investors who believe the market is nearly invincible (and if it does plunge in the near future, it will “come back,” they say.)

Since I’m not in the prediction business, I can’t tell you what the market is going to do this week. But I can tell you that the danger signs are getting stronger. For now, with the market near its all time highs, we need to see if the bulls can blast through SPX 2900 and stay above. If it can, then SPX 3000 is within reach.

However, if the market fails to rise much higher than SPX 2900, I would not be surprised to see a substantial pullback. For now, however, it’s wise to “sit and wait” along with everyone else until the market makes up its mind which direction it wants to go.

Bottom line: This is the time to be patient and watch the clues, the trend, and your favorite indicators. Keep in mind these are very unusual times so be prepared for the unexpected. Some old-timers told me they have never seen a market this complacent.

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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


Here are the most recent market indicators:

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 = Uptrend (Bullish)

RSI: (S&P 500) @69.39 = Overbought (Bearish)

MACD: Above zero line but even with its signal line (Neutral)

Daily Intraday Volatility: Low (VIX is in the basement again at 12)

Comment: Last week, the market meandered around for four days until Friday, when it broke out to SPX 2900. Not surprisingly, institutional money managers are downright giddy and investors are bullish again (according to AAII and Investors Intelligence sentiment surveys). Typically, investors get bullish at tops and bearish at bottoms, so it’s best to be cautious at these overbought levels.

It’s emotionally difficult to sit on the sidelines when the market is sitting near all-time highs and other investors are making money. It might be difficult, but taking profits and increasing cash is exactly what prudent investors do. This ride to the top is fun, but one of these days there will an elevator ride to the bottom. Until then, be cautious. No one knows if the indexes will break out to all-time highs or retreat. Suggestions: Prepare for both scenarios by taking money off the table. Then diversify or hedge.

Bottom line: I have no idea what is going to happen this week (it’s also a four-day week). The odds are good that the bull market will continue a bit longer, which is the ideal time to take profits. As short sellers have learned the hard way over the last ten years, just because the market is overbought (it is extremely overbought right now) doesn’t mean it will reverse direction anytime soon. In fact, betting on the reversal has been a lonely and unprofitable exercise, at least for nearly ten years.

However, when the indexes do reverse direction one day in the future, it is going to be an epic plunge, one that could last years. That is why it’s so important to read about bear markets, to read books about and by Jesse Livermore, and to prepare for what will happen sometime in the future. Don’t forget that Livermore went broke at least three times betting against bull markets that were fueled by illegal (legal at the time, however) insider manipulation and buybacks, and questionable option strategies.

Don’t think we could crash again? Read the following thought-provoking piece by Lance Roberts, who points out that stock buybacks fed the latest 10-year bull market, but could also cause its demise. Here is a link to his must-read column: https://bit.ly/2UhXTrq

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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


Here are the most recent market indicators:

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 = Uptrend (Bullish)

RSI: (S&P 500) @69.79 = Overbought (Bearish)

MACD: Above zero line but even with its signal line (Neutral)

Daily Intraday Volatility: Moderate

Comment: With help from the algos, the market was able to rally during the week, but on low volume and enthusiasm. The jobs number was excellent but the market yawned at the results, but managed to drift slightly higher.

By several measurements, the market appears to be in a bubble, yet most people don’t realize it. In fact, we won’t know it’s really a bubble until after it pops or deflates. Judging from history and experience, this is a bubble that will not end well (they never do). Unfortunately, no one knows when or how it will end. But all bubbles end, and all end badly and with a huge amount of pain for investors.

I admit I’ve been amazed this market bubble has grown so big and has continued for so long. Think about this: The Fed tried to let the air out of the market bubble by raising interest rates .25% in December, and the market plunged by 20%.

Since December, the market staged one of the greatest comebacks in history. With RSI at 70, we are definitely in overbought territory, so it won’t take much to send the indexes lower.

This weekend, the financial press was filled with positive stock market news, and some of the most bearish analysts are either throwing in the towel or saying “the market will go to SPX 3000 before it retreats.” Even those calling for a recession claim it won’t happen for at least two years.

If there is anything I know about the market, no one knows what is going to happen. Once you realize that no one knows anything, then you will take steps to diversify (if you are an investor) or hedge (if you are a trader). You might be giving up some profits when using hedge strategies but it’s better than losing your shirt when the market either #1. Plunges by 20% or more within a month or so, or #2. Rises to SPX 3000 before plunging by 20% or more.

Meanwhile, here’s a must read excerpt from Lance Robert’s column (his website is listed below). In particular, look at the SPX charts:

“There Is A Decent Probability You Have Never Seen A Bear Market

There is a sizable contingent of investors, and advisors, today who have never been through a real bear market. After a decade long bull-market cycle, which only seems to go up, you can certainly understand why mainstream analysis continues to believe the markets can only go higher.

What is concerning is the rather cavalier attitude the mainstream media takes about bear markets.

“Sure, a correction will eventually come, but that is just part of the deal.”

What gets lost during these bullish cycles, and is found in the most brutal of fashions, is the devastation caused to financial wealth during the inevitable decline.

Let’s look at the S&P 500 inflation-adjusted total return index in a different manner. The first chart shows all of the measurement lines for all the previous bull and bear markets with the number of years required to get back to even.

What you should notice is that in many cases bear markets wiped out essentially a substantial portion, if not all, of the previous bull market advance. This is shown more clearly when we look at a chart of bull and bear markets in terms of points.

Whether or not the current distribution phase is complete, there are many signs suggesting the current Wyckoff cycle may be entering its final stage of completion. 

Let me remind you of something Ben Graham said back in 1959:

“‘The more it changes, the more it’s the same thing.’ I have always thought this motto applied to the stock market better than anywhere else. Now the really important part of the proverb is the phrase, ‘the more it changes.’

The economic world has changed radically and will change even more. Most people think now that the essential nature of the stock market has been undergoing a corresponding change. But if my cliché is sound,  then the stock market will continue to be essentially what it always was in the past, a place where a big bull market is inevitably followed by a big bear market.

In other words, a place where today’s free lunches are paid for doubly tomorrow. In the light of recent experience, I think the present level of the stock market is an extremely dangerous one.”

He is right, of course, things are little different now than they were then.

For every “bull market” there MUST be a “bear market.” 

The sell-off last year, which amazingly enough has already been forgotten, should have been a wake-up call to just how quickly things can change and how damaging they can be.

There is no difference between a 100% gain and a 50% loss.

(For the mathematically challenged: If the market rises from 1000 to 2000 it is a 100% gain. A fall from 2000 to 1000 is a 50% loss. Net return is 0%)

Understanding that investment returns are driven by actual dollar losses, and not percentages, is important in the comprehension of how devastating corrections can be on your financial outcome. So, before sticking your head in the sand and ignoring market risk based on an article touting “long-term investing always wins,” there is a huge difference between just making money and actually reaching your financial goals.

But experience will cure all of that.

See you next week. “

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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