The Weekly Trader

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = HIGHER. The bulls retained control and moved SPX from 4725 to 4766 last week, a 41-point gain. As expected, the market rallied early in the week and weakened later as volume and volatility decreased.

SPX 20-day (WEEKLY) = HIGHER. SPX has remained above its 20-day moving average.

RSI: (S&P 500) @66.28 (WEEKLY) OVERBOUGHT. RSI is overbought but still not at extreme levels (over 70 is extreme).

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and even with its 9-day signal line (neutral). MACD not giving significant signals (with SPX).

Daily Intraday Volatility (VIX) = 17.22 = LOW: The holidays are over but fear is still on vacation as the bull rally continues. The low VIX reflects how complacent investors and traders have become.

Comment: Although I avoid making predictions, I am certain that 2022 will be different than what we have seen in the past. With the Fed planning to raise rates (so they say), and inflation heating up, 2022 may not be as pleasant for investors. At the very least, it should be a more challenging environment.

After a 13-year bull market, investors are hoping that the good times will continue, and at first they may. Last week, the so-called Santa Claus rally brought cheer to Wall Street. Now it’s time for the “January effect.” The theory is that the first week of January determines the rest of the year. FYI: I did research on this “phenomenon” and discovered that it is statistically insignificent.

In other words, even if this week is positive, it doesn’t mean anything for the rest of the year. Instead, pay attention to the Fed, inflation, and whether the virus adversely affects company earnings. That is much more relevant than the so-called “January effect.”

Futures are higher on Sunday night although that could change in the morning. This is the first full week in a while, so it will be interesting how the month of January develops.

Advice: As always, diversify, have cash on the side for emergencies and to buy dips, and buy quality stocks. And use technical analysis to help with buying and selling decisions.

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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 = HIGHER. The bulls took control and moved SPX from 4620 to 4725 last week, an impressive 105-point gain. After a rough start on Monday, the bulls ran the “ball” higher the rest of the week. FUTURES are flat on Sunday night but that could change in the morning.

SPX 20-day (WEEKLY): SPX fell last Monday but as expected, the 20-day MA was defended and the bulls took over.

RSI: (S&P 500) @63.70 (WEEKLY) OVERBOUGHT. RSI is overbought but not at extreme levels.

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and even with its 9-day signal line (neutral). MACD is still not giving a strong signal. (Keep in mind that MACD works great with volatile individual stocks or during volatile market conditions.)

Daily Intraday Volatility (VIX) = 17.96 = LOW: Fear is still on holiday according to the VIX, which has plunged below 20, a sign that there is no fear (for now).

Comment: It’s a five-day market week but volatility should be contained, which allows the algos to take control. Unless there is an unexpected black swan event, the market should be flat to higher this week.

There isn’t a lot to say except the bull market has broken all records for another year. Nevertheless, there are danger signs everywhere, those we know and many we don’t know about yet.

Money managers want to wrap this year on the plus side so uptrending stocks will be chased and downtrending stocks will be abandoned. Managers want to show clients they are holding only the winning stocks but no losers. This is known as “window dressing.”

For this reason, the odds are with the bulls until we get closer to the end of the week, when volatility and volume should lessen. Be careful on those days as it’s easy to get whipsawed.

Bottom line: Look for a positive week unless an unusual and unknown catastrophe occurs. The odds are good that next year will be wildly different, but we will take it one week at a time.

Have a great holiday and New Year and I’ll check back with you in January!

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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 struggled to stay above water last week, culminating in a severe Friday selloff. SPX fell from 4712 to 4620 last week, a 92-point shellacking, giving back some of the 172 points from the week before. FUTURES are much lower on Monday morning, which should continue through the day. SPX 4500 will be defended by the algos.

SPX 20-day (and 50-day moving averages) (WEEKLY): SPX will FALL below its 20-day moving average on Monday morning. The 50-day MA is at 4265 and will be defended (if 4500 is breached).

RSI: (S&P 500) @59.22 (WEEKLY) SLIGHTLY OVERBOUGHT. RSI has worked off most of its extreme overbought conditions. Nevertheless, it is still mildly overbought.

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and even with its 9-day signal line (neutral). MACD is still not giving a strong signal. 

Daily Intraday Volatility (VIX) = 21.57 = ON THE LOW SIDE: VIX is still on the low side, meaning that fear is still on holiday, at least for now. As some of the old-timers might say, “You ain’t seen nothing yet!”

Comment: It was an interesting week. Although the Fed weaved a tall tale that they have everything under control, for one of the rare times in memory, the market didn’t buy it. There was selling before and after the Fed meeting, a very unusual occurrence, and not in a good way.

Two main events are interfering with the Fed’s plans: First, the Fed admitted it could have an inflation problem, and they would solve it by raising rates in 2022. The market doesn’t like higher rates, nor does it like inflation. Second, the new virus variant is rampaging through the world, causing economic upheaval as well as increased infections and shutdowns. Investors don’t like uncertainty, and there is plenty of that going around.

While it’s too early to declare a bear market, it would not be wrong to prepare for the possibility. One thing is for sure: It’s been an extremely difficult trading environment. Investors are HODL (holding on for dear life) and hoping for the best. Others, obviously, are selling.

I am pretty certain that in 2022 we will have a different market environment than we’ve had for the last 13 years. That means more volatility, more down days, and the possibility of a full-fledged bear market (this is not a prediction, only that the odds have increased).

I’m not the only one who realizes this. On his weekend blog, Lance Roberts explains that a bear market is likely. Here is the link: https://bit.ly/3GYyETK

Although the holidays are approaching, and investors are hoping for a Santa Claus rally, we only look at the facts. The facts tell us that this long bull market is gasping for air right now, and although it is probably too early to take heavy short positions, the clock is ticking.

Note: It’s a shortened week as the market is closed on Christmas Eve, December 24th. Volume should be light later in the week. Have a great holiday and see you next Monday.

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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 = HIGHER. The Bulls took firm control last week. In fact, SPX rose from 4538 to 4712, an astounding 174 point rally (wow!). After an earlier two-week selloff, the bulls came back stronger than ever right in time for the holidays. Futures are higher on Sunday night and as usual, that could change in the morning.

SPX 20-day moving average (WEEKLY): HIGHER.  SPX bounced off of its 20-day MA and rocketed higher.

RSI: (S&P 500) @65.78 (WEEKLY) OVERBOUGHT. Not surprisingly, RSI is overbought but not at extreme levels yet. If SPX continues moving higher this week, watch RSI for signs of extreme overbought levels.

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and is even with its 9-day signal line (neutral). MACD is not giving a strong signal. 

Daily Intraday Volatility (VIX) = 18.69 = LOW: VIX plunged from 30 to 18.69 as fear took a leave of absence last week. There is no fear as we head towards the holidays with an upcoming Fed meeting.

Comment: If there was any fear remaining from a few weeks ago because of COVID or higher inflation, it’s nearly gone. The market made a spectacular recovery last week, making investors happy and just in time for the New Year.

With a Fed meeting on Tuesday and Wednesday, it’s likely that Fed Chairman Powell will tell everyone that all is well and they have everything under control, including inflation and anything else that may or may not appear.

Therefore, the odds are high that this will be another positive week as Powell will not do anything to upset the apple cart. Obviously, something could come out of left field but if all goes according to plan, there will be lots of smiles on Wall Street this week.

You’ve heard my warnings before, so take heed. While all looks bright at the moment, and this could be another excellent year for the indexes, there are enough looming problems to put a scare into any investor who cares to look. Unfortunately, few are looking.

Bottom line: It’s up, up, and away unless something unexpected happens. With a Fed meeting and plenty of good cheer, investors want to party hard this year and not worry about the future. (And who can blame them?) Unfortunately, the future has a funny way of moving in a direction that no one expects or was able to predict. As I’ve said before, enjoy the fun while it lasts because nothing lasts forever.

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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

ALERT: I wrote the following column about Mark D. Cook for MarketWatch that includes the clues to look for before a bear market arrives (and what to do about it): https://on.mktw.net/3xRRHvW

WHAT THE INDICATORS ARE SAYING 

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

One-week trend = LOWER. The Bad News Bears hit another home run; that’s two weeks in a row. Once again, SPX fell — this time from 4594 to 4538, a 56-point pullback. SPX futures are HIGHER on Sunday night but that could change in the morning. Nasdaq futures are FLAT.  If there is a rally in the morning, I am looking to see how long it lasts and if it carries over into the next day.

SPX 20-day moving average (WEEKLY): NEUTRAL.  SPX is above its 20-day moving average but pointing lower, a mixed signal.

RSI: (S&P 500) @57.47 (WEEKLY) NEUTRAL. RSI fell again last week, working off almost all of the extreme overbought readings of the last two weeks.

MACD (WEEKLY) = NEUTRAL: MACD is still above the zero line (bullish) and is only slightly below its 9-day signal line (neutral). MACD is not giving a strong signal.

Daily Intraday Volatility (VIX) = 30.67 = VIX is elevated once again, meaning that professional option traders gobbled up puts for protection. Finally, a little volatility entered the market to the delight of traders and the annoyance of investors. VIX was in the basement for so many years it’s almost a shock to see it at 30 (and also above its moving averages).

Comment: After a two-week selloff, with fear and some anxiety on the rise, it may be a good time add to long positions. After all, there is a likelihood of a Santa Claus rally. It seems like everyone wants to end the year on a positive note, and they “should” get their wish. I’m sure the Fed will be very accommodative to make sure Wall Street gets a gift and not a lump of coal.

On the other hand, after 13 years of sugarplums and lollypops, it’s always possible that something comes out of nowhere and surprises nearly everyone. These black swan events cannot be predicted but traders must be on guard for the anything because when it comes to the market, anything is possible.

It’s true that very few want to end this year on a negative note, so expect a concerted effort to let investors know they should “stay the course.” There is no need to upset the apple cart and remind investors that risks have increased.

Unfortunately, some of the technical indicators and clues are telling us that problems have creeped into the market. As money manager Lance Roberts correctly concluded in his blog: “While the market is now very oversold, volume remains relatively weak along with money flows. Such suggests there is a risk of more selling pressure following any short-term bounce. So, as is always the case, be sure to manage your risk exposures accordingly.”

On one hand, after a two-week selloff, there is a strong possibility of a rally. On the other hand, the bull market is struggling to move higher. Add in a dose of inflation, the cryptocurrency shellacking, certain stocks getting creamed, and the spreading virus and you have a recipe for risk.

In a bull market, however, all of these problems are ignored as the market powers higher. The question we all want to know is: Is this still a bull market? (Answer: Only time will tell.)

Bottom line: The market could go in either direction this week so be prepared for anything. The odds favor the bulls simply because traders and investors want their money back after a 2-week pullback.

___________________________________________________________

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