The Weekly Trader

S&P 500 is slightly below its 200-day moving average = Bearish 

S&P 500 is below its 100-day moving average = Bearish

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @30.84 = Oversold (Bullish)

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 18.71 (Subdued). Volatility is still on the low side, which means there are many opportunities for volatility spikes in the coming weeks.

Comment: If you’ve been reading this blog over the last few weeks, you’d know that the indicators above correctly forecast the trend change last week. We went from mildly bullish to bearish within days, and with help from the tariffs, the market plunged on Friday.

And just like that, everything has turned negative except RSI, which is telling us we are oversold. As expected, the futures are lower on Sunday night but there should be a brave attempt by the algos and their bullish friends to keep the indexes above their 200-day moving averages. Therefore, be prepared for a rally on Monday and at various times during the week. The key is whether the rally will continue, or fail. Another failed rally will be an extremely negative sign for the overall market.

As I wrote last week, investors are feeling a little anxious but there is no panic yet as they believe the Fed will bail them out. This is a very dangerous belief. There are many signs a recession is drawing closer, and although the market has been falling, we’re still near all-time highs.

What does this mean? Even though the market is short-term oversold, and even though we might have bounces, the market is in the danger zone. A massive correction or crash is possible, so be prepared. It’s been a long time since I’ve seen such a dangerous market. It’s possible we’ll get out of this unscathed but the odds are there will be a lot of pain in the near future.

Bottom line: Volatility should return to the market this week although the algos will do anything in their power to keep it subdued. This is a very important week to observe. Will the indexes stay above or below their 200-day moving averages? We will know the answer by the end of the 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


S&P 500 is above its 200-day moving average = Bullish 

S&P 500 is below its 50-day moving average = Bearish

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @40.93 = Neutral

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 15.52 (Bearish). Volatility is still in the basement even as the indexes fell. This divergence will be resolved soon.

Comment: The S&P 500 fell below its 50-day moving average during the week, a bearish development, and yet, volatility was very subdued. In the near future, volatility is going to spike or the markets are going to rally, but this divergence can’t last for long.

The indicators above are telling us that winter could be coming to the stock market in the next few weeks, if not sooner, so be prepared. The drop below the 50-day moving average is an early warning sign. In addition, the trade war, multiple geopolitical problems, and economic warning signs (car sales and real estate slowdown) need to be watched closely. 

I have also observed that some of the strategies that worked in the past (such as chasing momentum stocks) have stopped working over the last few months. This is a clue to me that the market is going through a transition. I am guessing that the bull market is coming to an end, but I won’t be sure until I see further deterioration of the indexes. The next two weeks should give important clues. 

It is also a concern that so many investors are expecting a pullback but almost no one is selling. The Fed has convinced investors that no matter what happens in the market, the Fed will use their tools to reverse any correction or crash. It is very risky to believe that the Fed always has your back, and that the market will “always go up.” Yes, people are saying that a lot lately, and that is very scary because it’s not true. Markets do not “always go up.”

Bottom line: Once again, be prepared for anything. For now, use hedge strategies if you’re a trader, diversify if you’re an investor, and keep a healthy supply of cash in case a worst case scenario occurs. Futures are flat to higher on Monday night, which could be the calm before the storm.

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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 slightly below its 50-day moving average = Neutral

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @45.59 = Neutral

MACD: Below zero line and below signal line (Bearish)

Daily Intraday Volatility: 15.96 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators turned slightly negative last week, with MACD turning down and SPX falling slightly below its 50-day moving average. In addition, investor sentiment is at sky-high levels, and few investors feel anything but overconfident. If the market does pull back, investors are certain it will “come back” as it’s done several times in the past. What a recipe for trouble!

In reality, no one can predict what the market will do this week except to say that volatility has returned. With a number of geopolitical events swirling around, and a number of Fed members speaking on Monday night, anything can happen. With the market at all time highs, it’s not a bad idea to increase cash levels (no, it does not mean to sell everything).

A number of analysts I follow did turn short-term bearish over the weekend, and although the market could test all-time highs, the odds are good we’ll go lower during the week, but I wouldn’t bet the mortgage or rent on it.

Bottom line: The increased volatility has made predicting extremely difficult, especially intraday. I’ll be watching to see if the Fed says something sweet on Monday night to rally the markets higher on Tuesday (or so investors hope). I’ll also be watching to see if the 50-day moving average can hold. If not, it could get ugly very fast.

_____________________________________________________

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 slightly above its 50-day moving average = Neutral

S&P 500 one-month trend = Short-term Trend Reversal (Bearish)

RSI: (S&P 500) @46.24 = Neutral

MACD: Above zero line but below signal line (Bearish)

Daily Intraday Volatility: 16.04 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators above turned from bullish to neutral or bearish, which is reflected in the Sunday night futures market (-1%). Last week was not pleasant for the bulls, and would have been worse except for a last-minute save by the White House (who said the talks with China are going well) on Friday afternoon.

So now we have an overbought market, conflicts with China, Iran, and Venuzuela, and a lack of buyers. At the very least, we should have a volatile week. At worst, it could get ugly. The bulls will be hoping for an afternoon save on Monday, but it’s unlikely anything but a true agreement with China will appease the global markets.

What to look for: See if the S&P 500 can remain above its 50-day moving average this week. If it can’t, the 100- and 200- are within reach in the coming weeks.

Bottom line: Prepare for higher volatility and a potential selloff, if only for a week. This is not necessarily the start of a bear market, but it’s obvious the bull market is nearing an end (but it likely has a few more moves left before it finally says goodbye).

_____________________________________________________

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) @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.

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.

_____________________________________________________

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