The Weekly Trader

Now that my new book, Make Money Trading Options, has been released, I can speak about the trading strategies I use. In Part 2 (at bottom), I discuss the winning stocks of the week using The Test Trading Strategy. You don’t need to buy the book to understand the strategy, but if you want to, here are the links: Amazon: https://amzn.to/3kqw5zQ. Barnes and Noble link: https://bit.ly/3rbr28Q

PART 1: WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = In Recovery. The short-term indexes plunged last week before recovering on Friday afternoon. It was an amazing save, as the S&P 500 ended the week HIGHER by 30 points, closing at 3841. It was a close call, because the indexes fell below their 50-day moving averages during the week. On Sunday night, the S&P 500 futures are higher (but that could change at the open). SPX is slightly above its 50-day moving average and trying to stay above. Look for either a strong uptrend or a failed rally.

Mid-term (50- and 100-day MA) = Neutral. The S&P 500 fell below its 50-day moving average during the week before a last-minute save on Friday afternoon. Indexes could go in either direction.

RSI: (S&P 500) @ 60 (WEEKLY) = Slightly Overbought. RSI warned the markets were overbought last week and it was right. The indexes plunged for the next three days. Now RSI is slightly overbought, so anything is possible this week. 

MACD (WEEKLY) = Neutral. MACD is above its zero line and slightly below its 9-day Signal Line. It’s a coin toss.

Daily Intraday Volatility (VIX): 24.66= The VIX spiked during the week as fear returned for a few days. By Friday, all was well again. 

Comment: I’ll try and be brief. Last week was vicious for many longs, who got whipsawed and smashed. On some of the trading boards, some traders complained of losing thousands of dollars, and some lost hundreds of thousands of dollars as their underlying stocks plunged. It could have been a lot worse until a last minute save by the algos on Friday at midday. This time it was the shorts who got smashed. 

These are dangerous times. It feels like we’re getting closer to a bear market, and may already be there. However, the bulls are coming out in force to make sure that doesn’t happen. Watch the 50-day moving average. If SPX and the other indexes fall below their 50-day MA this week, and stays below, that would be a huge red flag. I’m also noticing that the leaders such as Amazon are faltering, which is another red flag.

PART 2: THE TEST TRADING STRATEGY (Analysis)

On Monday, March 1, the futures pointed to a huge up day. The odds of a Bullish Steamroller was strong. Sure enough, the indexes blasted higher right out of the starting gate. My associate used the Test Trading Strategy and found three stocks that exploded higher than the others: W, ETSY, and QQQ. He used the paper money program to probe and found that W (Wayfair) was the strongest of the three. Within the hour, he had bought W call options and sold at the end of the day for a substantial gain. Because the market has been so flaky lately, we are often holding positions for a day.

Bottom line: I am always on the lookout for Steamroller Days, Bullish or Bearish. I don’t try to guess market direction. I follow the trend. Then I find the strongest stocks and I buy if an uptrend ((based on what I see in the paper money program). This week, it appears as if there will be a strong opening that could turn into a Bullish Steamroller.

Here’s a MarketWatch article I wrote about the Bullish Steamroller: https://on.mktw.net/3bkuicI

If the above analysis is helpful to you, email me at msincere@gmail.com to let me know. If you find it unhelpful or ridiculous, email me to let me know. Based on the replies, in the future, I may add to or even remove the test trading analysis.

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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: https://wolfstreet.com

BREAKING NEWS: My newest book for beginners, MAKE MONEY TRADING OPTIONS (McGraw-Hill), has just been released. In this easy-to-read, concise book, I introduce new option strategies, as well as show a new way of analyzing the stock market. Here is an Amazon link to the book. https://amzn.to/3kqw5zQ

Here is a Barnes and Noble link to the book: https://bit.ly/3rbr28Q Let me know what you think if you buy it, and THANKS! 

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

One-month trend = Bearish. The short-term trend broke last week when the S&P 500 plunged, ending at 3811, lower by a whopping 95 points from a week before. Nevertheless, on Sunday night, the S&P 500 futures are higher (but that could change at the open). SPX is resting on its 50-day moving average. If it falls below and stays below, that is a red flag.

Mid-term (50- and 100-day MA) = Neutral to Bearish. The S&P 500 is now on its 50-day moving average. It will attempt to rally from this precarious position.

RSI: (S&P 500) @ 59.36 (WEEKLY) = Overbought. Even with the selloff last week, RSI is overbought. If RSI is to be believed, more pain is possible during the week.

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. It could go in either direction.

Daily Intraday Volatility (VIX): 27.95= VIX spiked higher last week but fear is still contained. With the futures higher on Sunday night, fearless buyers should return looking for bargains.

Comment: The only hint of danger last week was RSI and VIX, which signaled the market was overbought, and that fear was in short supply. It was a dangerous combination. As if on cue, the market fell for the second week in a row. This is an important week.

This week, we should find out who is in control as the bulls and bears fight it out. While the futures are higher Sunday night, and a rally might occur at the open, watch for a Failed Rally. If the indexes are unable to move strongly higher in the morning, it could get ugly fast.

However, for 10 years, whenever there was a whiff of a pullback, the market was able to recover (thanks primarily to the Fed and QE as well as low interest rates). Although the market is vulnerable at the moment, there is no need to be unreasonably bearish at this time.

What to look for this week: See if the indexes can stay above their 50-day moving average. Watch if the rallies have upward momentum or fail. If there is a failure at the 50-day, or a failed rally on Monday or during the week, then the bears may take control.

Note: In my new book I introduce a number of different ways of identifying the market each day. On occasion, I will include those into my analysis.

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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: https://wolfstreet.com

BREAKING NEWS: My newest book, MAKE MONEY TRADING OPTIONS (McGraw-Hill), will be published on March 2, 2021. I introduce new option strategies, as well as show a new way of analyzing the stock market. Here is an Amazon link to the book. https://amzn.to/3kqw5zQ

Here is a Barnes and Noble link to the book: https://bit.ly/3rbr28Q Let me know what you think if you buy it, and THANKS!

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

One-month trend = Sideways to Bullish. Last week, the S&P 500 drifted slightly lower during the week, closing at 3906, lower by 28 points from a week before. The S&P 500 futures are slightly higher on Sunday night (although that could change at the open). The market is near all-time highs. Does it have the strength to power higher? For now, it appears to be consolidating.

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 has moved sideways, but is still way above the 50- and 100-day MA.  

RSI: (S&P 500) @ 65.26 (WEEKLY) = Overbought. The market is still overbought although it pulled back a little from extreme levels.

MACD (WEEKLY) = Bullish. MACD is above its zero line and above its 9-day Signal Line. MACD is still signaling a bullish trend. 

Daily Intraday Volatility (VIX): 22.05= VIX is still in the “no fear” zone. There is no fear, which is a huge red flag.

Comment: Not surprisingly, the market pulled back last week. It had reached overbought levels and was in danger of becoming extremely overbought. With the current retreat, the market is not out of danger but is at more reasonable levels.

It’s anyone’s guess what the market will do this week. Based on the Sunday night futures, it appears SPX will continue to drift a little higher. A correction is likely within a short time-period according to technicians who follow indicators. Some have told me they have never seen such an overbought market in their lives.

And yet, the market can continue moving higher. Markets that are at these levels can continue moving higher far longer than anyone expects. That is what makes short-selling such a difficult strategy during these times. On the other hand, the higher the market goes, the more people think the market “will never go down.” I’ve heard it before, and it never ends well.

Bitcoin at $50,000, real estate prices in some parts of the country are going through the roof, and interest rates are in the basement (an acquaintance of mine got just rates on a 30-year mortgage at 2.1 percent. 2.1 percent? I’m speechless).

Back to the stock market: I thought the market would push to SPX 4000 last week but it didn’t. So now it’s wait and see what happens. I honestly have no clue which direction the market is going this week, although I do believe a 10 percent correction (or more) is highly likely in the future (I cannot say when, and anyone who can is guessing).

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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: https://wolfstreet.com

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

One-month trend = Bullish. Last week, the S&P 500 rallied a bit higher, closing at 3934, higher by 48 points. The S&P 500 futures are higher on Sunday night (but that could change at the open). If the rally continues after the market opens, it could be a bullish day (and week). S&P 4000 is within reach.

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 has continued to rally, leaving the 50-day MA in the dust. The trend is up. 

RSI: (S&P 500) @ 67.08 (WEEKLY) = Overbought. RSI has creeped higher, and closer to a more extreme overbought signal. At over 70, it is a warning sign, so be alert this week.

MACD (WEEKLY) = Bullish. MACD is above its zero line and above with its 9-day Signal Line. MACD is still signaling a bullish trend.

Daily Intraday Volatility (VIX): 19.97= VIX has plunged as the rally continues. Risk? What’s that?

Comment: It’s a four day week so anything is possible. The rally slowed down a bit last week, and waiting to find a direction. On Sunday night, futures are higher, and S&P 4000 is likely. Although many will celebrate, wise traders will watch to see how the market reacts at the 4000 level.

I’ll keep this short. The market is overbought, but it should get more overbought. Not only stocks but many financial products are overbought (including bitcoin). Warning: Betting against overbought markets (and stocks) can be risky if you don’t get out in time. Don’t fight a strong uptrend.

If you want to bet against the market, I’d recommend moving to cash, or probing first with small positions. Unless you like to take risks, it’s not the time to bet against a market that never seems to go down. Yes, one day there will be a horrific selloff, but trying to time when that occurs is extremely difficult. Look for clues, which is what we are doing here.

Hint: I am watching the weekly MACD for clues. When that turns down, that may be an early signal of trouble ahead. I am also looking at RSI. If and when the S&P rises above 70, I will be putting on my short-term bear hat.

Bottom line: Many traders smarter than me are warning of a 10 percent pullback, but are being ignored. Timing a pullback is difficult, unless you can identify signs of trouble. For now, however, all systems are go and the market seems poised to hit S&P 4000. Bring out the party hats (but keep your eye on the door!)

_______________________________________________________

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: https://wolfstreet.com

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

One-month trend = Bullish. Last week, the indexes bounced off their 50-day moving average and rallied all week, closing at 3886, higher by 172 points, the best week since November. Futures are higher on Sunday night (but that could change at the open).

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 reversed direction and rallied strongly from the 50-day MA. The trend is up.

RSI: (S&P 500) @ 66.31 (WEEKLY) = Slightly overbought. RSI rose to 66, which is slightly overbought. Note: I switched from following the daily RSI to the weekly RSI, which gives a more reliable signal. At over 70, that will be a strong overbought signal. At over 70, it is a red warning flag, not a trigger. *Edited on February 10, 2020.

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. MACD gave the most accurate signal a week ago that the market was stronger than it appeared.

Daily Intraday Volatility (VIX): 20.87= VIX plunged back to the 20s as fear disappeared.

Comment: What a difference a week makes! After a severe plunge the week before, the market came roaring back with its best weekly return since November. Buying on the dip worked once again, and just in time.

Last week, the SPX was on the verge of falling below its 50-day moving average, the trend was broken, and it looked bleak. And just like that, the fear that had entered the market two weeks ago disappeared, and now all seems well. Many will blame the GME and AMC debacle on the selloff, but the manipulation goes deeper than that, at least according to analyst Wolf Richter, who wrote a brilliant piece on wolfstreet.com.

Richter explains how the markets have been manipulated, but this time, it blew up in the faces of some hedge funds, a kind of reverse manipulation. Here is the link to Richter’s piece, which shows how the market broke because of the “bull raid” on GMC and AMC: https://bit.ly/3aEvpCF

Also, here is a link to my latest MarketWatch column: https://on.mktw.net/39WHSCr

Back to the market indicators: After a dreadful week, the market came roaring back. Right now, all the indicators are positive except for RSI, which is showing a slightly overbought market. The shorts got creamed last week. However, let’s see how long this short-term rally lasts.

Bottom line: Don’t fight the weekly trend.

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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: https://wolfstreet.com