The Weekly Trader

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).

_______________________________________________________

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.

_______________________________________________________

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 = Bearish and broken. As you know, something went wrong last week, and it wasn’t just the market. GME and AMC caused the order flow “plumbing” to clog. Until it’s fixed, caution is highly recommended. The indexes fell hard last week, closing at 3714 on the SPX, lower by 127 points. Futures are lower on Sunday night (but reversed direction overnight and opened higher).

Mid-term (50- and 100-day MA) = Neutral. The S&P 500 plunged last week, falling 1-point below its 50-day MA but above its 100-day MA. That happened fast!

RSI: (S&P 500) @ 43.27 (Daily) = Oversold. RSI fell with the indexes. It needs to fall below 30 to become extremely oversold. *(made corrections)

MACD (Weekly) = Bullish. MACD is above its zero line and slightly above its 9-day Signal Line. Remember, this is a Weekly MACD.

Daily Intraday Volatility (VIX): 33.09= Suddenly, there is fear. VIX spiked from the low 20’s to the 30’s. Investors were reminded that the market can go down for longer than a day.

Comment: Last week’s market action was extremely unusual. First, when the Fed meets, the market tends to drift higher before and during the meeting. The fact that the market plunged last week while the Fed was meeting was a red flag.

As you know, GME spiked to obscene levels, severely damaging the accounts of several hedge funds (who had large short positions), and individual traders who took on too much risk (i.e. selling naked calls).

If you want a deeper analysis of what happened last week, I suggest you read this piece by ZeroHedge. It’s a little technical but tells how things went horribly wrong: https://bit.ly/3ahThMc (Lesson #1: Don’t sell naked options, and if you do, trade small.)

Back to the current market: The futures are somewhat lower on Sunday night. I assume that because of the selloff last week, a number of traders are going to “buy the dip.” This strategy has worked before when there was a selloff, and it might work again. Nevertheless, caution is advised. * Monday night note: Once again, buying the dip worked as the indexes rallied.

Bottom line: Something went wrong last week, but it’s too early to know exactly how this will play out. I’m sure there are many high level meetings at financial institutions right now. Last week could be an aberration that will quickly be forgotten, or in a worst-case scenario, it could lead to more problems, and a more volatile market. No one can predict what is going to happen this week, but it should be fascinating.

Note: I wrote an article for MarketWatch last week on the importance of testing in a simulated account before buying. This is excellent advice if you are a beginner, or if you need to test a strategy: https://on.mktw.net/3j5z5Rv

_______________________________________________________

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 = Uptrend. The indexes drifted higher last week, closing at 3841 on the SPX, higher by 73 points from a week ago. On Friday, the indexes dropped, disrupting a low-volume uptrend. Futures are slightly higher on Sunday night.

Mid-term (50- and 100-day MA) = Bullish. The S&P 500 is well above its 50- and 100-day MA. 

RSI: (S&P 500) @ 65.00 (Daily) = Overbought. If RSI moves above 70, that is a strong overbought signal, so buyer beware. With the Fed in control this week, we could easily move into extreme overbought levels.

MACD (Weekly) = Bullish. MACD is above its zero line and above its 9-day Signal Line

Daily Intraday Volatility (VIX): 21.91= How low can we go? VIX is saying there is no fear.

Comment: Last week, a four-day week, the indexes drifted higher until Friday. With the Fed meeting this week, the odds are good the uptrend will continue early in the week.

On the other hand, the market is overbought, VIX is in the basement, and there is no fear. These are the ingredients for a severe plunge in the near future, although no one can predict when it will occur, or how bad it will get.

Professional traders smarter than me (i.e. Paul Singer) are warning of a major pullback, saying this is the “end game.” As you already know, most bearish predictions have not worked out very well. Nevertheless, it would not be a mistake to take money off the table, and trade or invest cautiously. That’s a decision only you can make.

Bottom line: Based on historical trends, the market typically moves higher right before and during the Fed meeting. I would not be surprised to see an uptrend early in the week. After that, the market will move depending on what the Fed says, or doesn’t say.

_______________________________________________________

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