The Weekly Trader

Here is a link to my most recent book, Make Money Trading Options, aimed at helping beginning option traders: Amazonhttps://amzn.to/3kqw5zQBarnes and Noble link: https://bit.ly/3rbr28Q

WHAT THE INDICATORS ARE TELLING US 

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

One-month trend = Bullish. Although the indexes struggled to gain traction early in the week, it found its footing on Friday, when SPX rallied by 65 points. Last week, SPX rose from 3911 to 3974 , or 63 points. As you can see, all of the gains came on Friday. Futures are slightly lower on Sunday night.

Mid-term (50- and 100-day MA) = Bullish: SPX bounced off of it 50-day moving average and rallied strongly later in the week. On Friday, the bulls took control. Let’s see if they can take the indexes even higher.

RSI: (S&P 500) @ 64.82 (WEEKLY) = Slightly overbought. RSI rose slightly with the market. It’s not yet in the danger zone (i.e. 70).

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. It’s another coin toss. 

Daily Intraday Volatility (VIX): 18.86= The VIX fell from a week ago, reflecting the lack of fear in the marketplace.

Comment: Remember, this is a four-day week. We will have to wait and see if the bulls can keep the rally alive. Even with the Friday rally, it’s not an easy trading environment.

Certain individual stocks are getting smashed or are faltering while the SPX rallies. On many days, its a divergent market: The Dow and SPX rally while the Nasdaq falls. Many of the stocks that were most popular over the last few years are struggling, or flatlining. I’m talking about Amazon, Netflix, Nvidia, and Google.

If you have studied bull markets in the past, one of the clues that the end is near is when the strongest stocks struggle, like what is happening now. In addition, if interest rates rise (see the federal funds rate) because of inflation, that would end the party very quickly.

As a trend trader, it’s been difficult to find winning positions. As many of you know, I use a paper money program to find winners (i.e. the test trading strategy), but finding winners has been a challenge (until Friday).

Strategy Ideas:

1. You can trade less each day, trying to identify winners on the best trading days.

2. You can wait on the sidelines for a better entry. The market is an auction. Ideally, you want to buy at lower prices and sell at higher prices.

3. You can use intraday trading strategies (i.e. scalping) to eke out small gains.

4. it’s a good time to learn how to buy put options. I can’t tell you when, but bull markets always end. After 12 years, many investors are playing with fire.

Bottom line: After Friday’s bullish rally, I would not be surprised to see a short-term pullback. And yet, as the holidays approach, we could see more buying enthusiasm. My advice is to be on guard but look for trading opportunities when they appear.

Note: I’ve talked to professional traders who are shocked at the mindless bullishness that exists in the market right now. Although no one can time the end of a bull market, I believe we’re getting closer.

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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

Here is a link to my most recent book, Make Money Trading Options, aimed at beginning option traders: Amazonhttps://amzn.to/3kqw5zQBarnes 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 = Neutral. The SPX stalled during the week, falling by 32 points from a week ago to 3911. Even with kind words from the Fed, the market was unable to move higher last week. Futures are lower on Sunday night, but that could change in the morning.

Mid-term (50- and 100-day MA) = Neutral. The S&P 500 fell last week, once again breaking the weekly trend, but remaining above its 50-day moving average.

RSI: (S&P 500) @ 62.48 (WEEKLY) = Slightly overbought. RSI pulled back slightly along with the market.

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

Daily Intraday Volatility (VIX): 20.95= The VIX didn’t budge from a week ago. It’s telling us there is still no fear.

Comment: It’s been a long time since all of the indicators I follow turn up with the same result: NEUTRAL. Anyone who can tell you what the market is going to do this week is a fortuneteller. However, there are some clues that may help us with our forecasts, but nothing definite.

After the Fed said at their meeting they are keeping interest rates unchanged and low, the market initially rallied before pulling back for the next two days. Whatever the Fed was selling, the market didn’t seem to buy.

The Fed needs interest rates low for the economic recovery to continue. If inflation rears its ugly head, and if interest rates start to rise, the Fed might be forced to raise interest rates. That would not be a pretty sight for the stock market, or real estate.

In an ideal world, the Fed would have room to cut interest rates, especially with a shaky recovery. But in the real world we are in, rates are near zero and there is no room to cut.

Let’s hope that inflation does not heat up, and that interest rates remain low. If either of these things happen, it will not be a pretty sight. Be prepared for the worst, however.

Bottom line: The market is on shaky ground, so caution is advised. It’s been an amazing 12 year bull market but the clues point to a dangerous storm ahead, especially if interest rates rise. Keep your eye on the Fed’s Fund Rate, too.

PART 2: THE TEST TRADING STRATEGY

Because of a more challenging market environment, we will only use the Test Trading Strategy on the days when the futures are pointing much higher. On the flat or down days, we use other strategies (such as buying puts, or hedge), or not trade at all.

Last week, we only had two days that we were able to find winners. It was not an easy week! Let’s hope we get better opportunities this week, but we will let the market guide us. We do not force trades or make the market bend to our wishes. We follow the market, and try not to predict what it will do.

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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

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: Amazonhttps://amzn.to/3kqw5zQBarnes 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 = Bullish. The indexes continued moving higher during the week, closing at 3943, or 102 points higher from a week ago. The bulls ran with the ball, and are firmly in control. The Fed meets this week, which often leans bullish on the days they meet (Tuesday and Wednesday). Futures are slightly higher on Sunday night.

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 rose firmly above its 50- and 100-day moving averages.

RSI: (S&P 500) @ 64.44 (WEEKLY) = Slightly Overbought. RSI is getting closer to 70, which would be a red flag. We are not there yet, however.

MACD (WEEKLY) = Neutral. MACD is above its zero line and even with its 9-day Signal Line. It’s another coin toss. 

Daily Intraday Volatility (VIX): 20.69= The VIX plunged again, which indicates no fear. Once again, how low can it go?

Comment: A week ago, everything looked bleak, but the buyers quickly entered, lifting the indexes to all-time highs. With volatility in the basement, the algos and their friends are running the market higher. The Fed meets this week, and often, the Fed has sweet things to say. If the Fed says all is well, the market could keep rallying.

Bottom line: There isn’t much to say except don’t step in front of a Steamroller to pick up dimes. Short sellers have been banished for the time being. We’ll see if they dare to show their faces this week after botching the selloff a week ago. Bitcoin at $60,000 per coin? We’re either in the Twilight Zone or “Happy Days are Here Again.” Only time will tell who is right.

Note: I added a new stock evaluation program from Barchart (at bottom). It uses a dozen indicators to determine if a stock or ETF is a buy, hold, or sell. Cool program.

PART 2: THE TEST TRADING STRATEGY (TTS) DIARY

Note: Below are my notes of the market during the week using the Test Trading Strategy. The goal is to find winning stocks.

Monday: The Test Trading Strategy (TTS) found Disney, which turned into a Bullish Steamroller. GS started strong in the morning but flatlined along with the market. In fact, the TTS saw a divergence between the Dow (up over 600 points early) and the TTS, which showed most of the winners faltering.

Tuesday: The Test Trading Strategy found these winning stocks early: DOCU, TWLO, TSLA (too risky to own for very long), NVDA, and BIDU. It was an early Bullish Steamroller that stalled out in the last hour.

Wednesday: The futures market was strong at the open. The TTS found 35 stocks that were ready to skyrocket (up by 1% and 1 point) at the open. After the market opened, every stock on the list collapsed! Only LULU and BA made it to the Winner’s Circle. The Dow was up by 1.50% in the afternoon but QQQ was down by -19%. Very dangerous day. The collapse of the 33 stocks was a warning not to participate.

Note: A reader in Asia read my book and is using the strategy exactly as it is written in the book. He told me he has made money every day except for one day by using the Test Trading account to find a winning stock. He made one adjustment: instead of buying only calls, he buys vertical spreads on the stocks that the TTS identified as a winner. Interesting. I will have to add that strategy in the next edition of the book.

Thursday and Friday: Finishing a writing assignment. Unable to monitor market or trade.

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

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Excellent evaluation program from Barchart: https://bit.ly/3v9Nj9G Enter a stock symbol and it gives BUY or SELL recommendations based on various indicators, and opinions.

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

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