The Weekly Trader

The following is a link to a column I wrote about the top 10 rules to follow if trading cryptocurrencies: https://on.mktw.net/3whLsit

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = Up, up, and away. The bulls continue to be in the driver’s seat, with the SPX rising by 72 points, moving from 4280 to 4352. There is only one problem: SPX is extremely overbought, and keeps getting more overbought. Except for that, the indexes appear unstoppable for the short-term. SPX futures are flat on Monday night.

RSI: (S&P 500) @70.81 (WEEKLY) = Extremely Overbought. RSI is over 70 and is in the danger zone. Do not be surprised if there is a major reversal. Nevertheless, RSI can remain overbought for long time periods, although it has reversed in the past after surpassing 70 on the weekly chart.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but still slightly below its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.07 = No Fear. VIX is once again telling us the only fear is the fear of missing out. Few traders are buying put protection since few believe the market will reverse. (That’s a danger sign!)

Barchart Stock Evaluator for SPY and QQQ (link below): SPY are both 100 percent strong buys (according to this indicator). 

Comment: The market is at all-time highs, investors are complacent and many believe the market will never go down (at least in the short term). And yet, RSI is telling us the market has reached extreme overbought levels.

This does not mean the market is going to reverse and plunge immediately, but RSI has been remarkably accurate in the past. Therefore, be prepared for some fireworks in the coming weeks (if not sooner).

Lance Roberts (link below) wrote a fascinating piece that included a CNBC interview with legendary investor Leon Cooperman. Cooperman said the “market structure is broken,” and he admitted that he was scared. And yet, he says he has to be invested. The CNBC interviewer, Becky Quick, called him a “fully invested bear.” And that’s where we are at: Even the bears are invested, because they can’t afford to miss out.

With the market at all time highs, with little or no fear, with a generation of investors who never experienced a bear market, the risks of a collapse have increased. And as I’ve said dozens of times before, no one can predict when the market will plunge. But it will plunge one of these days. We are in unprecedented times.

Bottom line: It’s a four day week so anything is possible.

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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:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = Up, up, and away. The bulls took over last week, with the SPX rising by an astounding 114 points, moving from 4166 to 4280. The previous week’s selloff was more than erased, and the bulls are back in control. SPX futures are flat on Sunday night. No one can stop them but reality, which is in short supply.

RSI: (S&P 500) @68.05 (WEEKLY) = Neutral. RSI is close to the danger zone. If it surpasses 70, then it will be extremely overbought. Don’t use RSI for timing, but it sure has been accurate these last few months.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but slightly below its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.62 = After a slight rise the previous week, VIX is back in the basement again. No real fear, only the fear of missing out.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY are both 100 percent strong buys (according to this indicator). 

Comment: As we expected, the bulls came roaring back, bringing the SPX higher by over 115 points in one week. Not surprisingly, SPX is back to its all-time highs, and is also overbought. It’s possible it could get more overbought this week. Back and forth as the bulls and bears fight for control.

Warning signs: Margin debt is at all-time highs. This is always a concern as it reflects the lack of fear. As a result, investors and traders are willing to borrow money from the brokerage to buy more and more shares.

I’ll leave you with this thought. For the last 13 years of this bull market, investors have not experienced a bear market or even a correction for longer than a few weeks. An entire generation of traders and investors believe that the “market never goes down.” Imagine how these people will react when a real bear market arrives. It won’t be pretty. Unfortunately, no one knows when the big bad bear will arrive, only that it will one day.

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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:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE TELLING US 

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

One-week trend = The bears finally took control: SPX plunged by 81 points last week, falling from 4247 to 4166. The Bad News Bears finally found their footing, and during a week of a Fed meeting. Surprise, surprise: The stock market can go down, as many investors learned last week. Futures are lower on Sunday night.

Mid-term (50- and 100-day MA) = Neutral: While the daily chart of the SPX is dreadful, with SPX below its 50-day moving average, the weekly chart is less volatile. As I said last week, thunderstorms can appear out of nowhere, and one did. Nevertheless, until the weekly chart changes, there is no reason to take drastic action. But it would not hurt to take measured defensive actions, including hedging and diversifying.

RSI: (S&P 500) @62.85 (WEEKLY) = Neutral. RSI worked brilliantly last week, warning us that the market had become extremely overbought. When RSI rose above 70, it was a huge red flag. The weekly RSI is still overbought, but has pulled back from extreme levels. Caution is still suggested.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but slightly below its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 20.70 = VIX is still low but it is no longer in the basement. A little fear entered the market last week, as reflected in the VIX, which rose from 15.65 to 20.70.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 64 percent buy, while QQQ is a 100 percent strong buy (according to this indicator). 

Comment: The indicators, especially RSI and VIX, did an excellent job of warning us the market was in the danger zone. While most investors were all in last week, and many commentators on TV had forecast a strong uptrend, RSI and VIX said, “Buyer beware.” And they were right.

RSI is still saying the market is overbought and VIX is no longer in the basement, but storm clouds are still threatening to ruin the bull party. As always, no one can say when. It will be interesting if the bulls come roaring back this week. Often, after a rough week, bullish algos and retail investors buy on the dip. No one can predict if they will be successful.

The news item that made investors nervous last week was inflation, something that must be watched. We all see that prices are rising, and there is inflation, but is it temporary (as the Fed claims), or here to stay? If the Fed is right, then the market should continue on its merry way. If inflation rears its head, and the Fed is forced to raise interest rates, the party will end quickly.

Bottom line: It is unknown whether this is a good time to buy on the dip, although many will try. The market is still overbought but not as much as last week. The bulls will try to take control this week, and it’s possible they will succeed. After all, they have for the last 13 years!

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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:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls remain in control: SPX rose by a decent 18 points last week, rising from 4229 to 4247. The Bad New Bears have still failed to run with the ball but their luck may finally change in the near future. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages. If you look at a chart, it looks like “blue skies,” but thunderstorms can appear out of nowhere, especially during the summer. Don’t be surprised when that happens.

RSI: (S&P 500) @70.40 (WEEKLY) = Overbought. RSI is telling us the market is extremely overbought. In the past, RSI has done an excellent job of warning us of a reversal. Now that RSI is above 70, the odds of a selloff have increased substantially.

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 15.65 = After falling to a low of 15.65 last week, VIX is low, but not at extreme levels. Along with RSI, the plunging VIX gave a warning sign last week.

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 88 percent buy (according to this indicator). 

Comment: What, me worry? One glance at a chart and it’s not surprising why investors are feeling so euphoric. Some ultra-bullish financial commentators have even proclaimed that the market forecast is bullish as far as the eye can see, and all they see is blue skies.

It’s what you can’t see that should worry investors. With RSI at extreme overbought levels, and VIX in the basement, caution is recommended. The rallies have been weak and listless. All clues point to a correction in the coming weeks, or sooner.

Granted, no one can predict what will happen, but if you look at the clues, they are pointing to a market that is slowly running out of gas. It wouldn’t take much to send this market much, much lower. As the market struggles at these elevated levels, it is time to play defense, or at least diversify.

Bottom line: No, it doesn’t mean to run out and sell everything, but it means that the odds of a reversal are likely in the coming weeks. As the pros would say, “The upside is limited.” The Bad News Bears have been losing for so long it will be a shock when they finally hit a couple of home runs. Be ready.

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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:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = The bulls took control: SPX rose by a respectable 26 points last week, rising from 4203 to 4229. Although it’s not exciting, the bulls are in control and running the market higher. The Bad New Bears have failed to take advantage of any selloffs. Futures are flat on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX and the other indexes are well above their 50- and 100-day moving averages as the bulls run with the ball. 

RSI: (S&P 500) @69.67 (WEEKLY) = Overbought. RSI is telling us the market is overbought. If it reaches 70 or above, it will be extremely overbought. In the past, RSI has done a good job of warning us of a reversal, so pay attention to the Weekly RSI if it rises above 70 (only .33 away).

MACD (WEEKLY) = Mixed Signals. MACD is above its zero line but equal to its 9-day Signal Line. MACD is still not giving a clear signal at this time. 

Daily Intraday Volatility (VIX): 16.42 = VIX is still ridiculously low, and could go even lower. 

Barchart Stock Evaluator for SPY and QQQ (link below): SPY is a 100 percent buy, while QQQ is a 72 percent buy (according to this indicator). 

Comment: Once again, the bulls took control and ran the market higher, although slowly and steadily. Every time the market showed intraday weakness, buy-on-the-dip algos and retail traders saved the day. The only losers were short sellers.

Speaking of shorting, shorting the indexes (or buying puts on the indexes) has been a losing strategy. If you can identify individual stocks that are weak, it might work. But betting against the overall market has been frustrating and difficult.

Selling covered call options on certain stocks has worked, and so has going long the indexes, especially the S&P 500. Of course this winning strategy won’t work forever, but until something unnerves the market, it’s up, up, and away. One day, however, the bubble will pop.

Many will argue that this market is not in a bubble, and that would be an interesting discussion. One aspect about bubbles is that you don’t know you’re in one until it pops. Based on my personal experience, and how many investors believe the market only goes up, my opinion is it’s probably a bubble. Of course I could be wrong, which is why I don’t dare bet against this market (right now). Another characteristic about bubbles: Trying to short a bubble is financial suicide. Don’t even try.

If this is a bubble, one day it will pop, and it won’t be pretty. If this is not a bubble, and in fact this is a continuation of the longest bull market in history, then buy and hold investors will continue to rake in the cash.

Bottom line: We’re going higher until we aren’t. Since I don’t do predictions, I cannot tell you when the bull market will end, only that it will one day. Just be diversified. Trade small, especially if trading volatile securities.

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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:www.realinvestmentadvice.com

For insightful analysis of economic conditions, read Wolf Richter: https://wolfstreet.com