The Weekly Trader

Here are the most recent market indicators:

S&P 500 one-month trend = Pivot  (The trend is still broken. Caution is advised). 

S&P 500 is below its 50-day and 100-day moving averages = Bearish

S&P 500 is nearly even with its 200-day moving average = Neutral to Bearish

RSI: (S&P 500) @36.23 = Near oversold (a rally is possible) 

Intraday Volatility: Moderate to High 

Comment:  If you wanted excitement, the place to be was the stock market. After 10 years of relatively low volatility and an uptrend, the market has acted like it’s had a case of indigestion. If you’re an investor who has been used to a relatively calm uptrend for the last ten years, the increased volatility is a new and strange environment. Although the market has experienced short bouts of volatility in the past, volatility is lasting longer, and it’s possible it will be with us for a while until something breaks. 

While many traders are enjoying the volatility (if they are experienced), it’s not an easy environment to trade. For example, last week the SPX had major pullbacks and a huge rally but the SPX ended exactly where it started! Believe me, that is not a healthy sign. When you put it all together, the market has a very bearish tone. In fact, the stock market is in serious trouble right now, and few realize it.

Although it’s possible the market will get through the next few weeks unscathed, it’s unlikely. One strategy that worked last week was shorting the rallies. Nearly all of the intraday rallies failed.

Even with all this negativity, it’s important you do not enter the market with a negative bias. I have learned the hard way that you only look at the facts, ie. what the market is actually doing, and not make big bets in advance of the market direction. You can make a very good living by being a little late to the party (bull or bear). 

Right now, look closely at the 200-day moving average. For the bulls to keep control, they must defend the 200-day moving average, and they will try. But as soon as the 200-day is breached, and SPX or the DOW falls below it for more than a day or two, look out below. 

This week should be a Battle Royale between the bears and the bulls. If you are rusty or inexperienced with bear markets, now is the time to get educated. Start with Jesse Livermore’s books (i.e. Reminisces of a Stock Operator), and read one of my favorites, Jesse Livermore Boy Plunger by Tom Rubython, a biography about Livermore. I learned more from Rubython’s book than almost any other. 

Bottom line: Get out the popcorn as the market made a major pivot two weeks ago. It’s October, investors are nervous but hopeful, and the bears are licking their chops. This could get real ugly real fast so bring your “A” game.

 

 

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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

Here are the latest market indicators:

S&P 500 one-month trend = Pivot Point  (The uptrend has been temporarily broken. Caution is advised.)

S&P 500 is below its 50-day and 100-day moving averages = Bearish

RSI: (S&P 500) @29.52 = Oversold (rally is possible)

Intraday Volatility: Moderate to Heavy (anything is possible if volatility increases) 

Comment:  Last week I saw some important clues that pointed to a trend change. For example, I correctly identified what is called a “pivot point,” which I said could be a “potential trend change.” Little did I know that it would be that severe. In fact, the Wednesday afternoon plunge took nearly everyone by surprise, including me. (FYI, “pivot point” was coined by Jesse Livermore, and is worth studying). 

There were many clues that we were hitting a short-term top. For example, investors had been bragging how much money they have made in the market. (That’s how I predicted the bitcoin top almost to the day). I was also getting emails and text messages from investor friends bragging how the market “will never go down” or if it does, “it will bounce back quickly, because the market always comes back.” 

The S&P sliced through the 50- and 100-day like it was butter. Right now, it’s a point above its 200-day moving average. If SPX drops below and stays below its 200-day moving average, that would be extremely bearish. In the past, however, the market recovered from these pullbacks and went on to even higher levels. It remains to be seen if it can do that again. Unfortunately for the bulls, interest rates are rising, and that is a huge negative for the stock market. There are other issues as well, but interest rates take center stage for now. 

Moving forward, we need to see if the indexes recover from last week’s short-term disaster. At a minimum, the S&P 500 needs to retake its 100-day and 50-day moving averages, just like it did in February and July. Investors are hoping for the best, while objective market observers know the market could go in either direction. It is still too early to proclaim that the worst is over, even after Friday’s snapback rally. 

Bottom line: If the indexes fail to rise above its moving averages, or if they continue to fall, that would be a huge warning sign. The coming weeks are important as the indexes try to repair the damage from last week.

Note: Here is my latest column on MarketWatch, about how to get started trading options: https://on.mktw.net/2Nx6inI

______________________________________________________

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

Here are the latest indicators:

S&P 500 one-month trend = Pivot (Potential trend change) 

S&P 500 is even with its 50-day moving average = Neutral  

RSI: (S&P 500) @46.16 = Neutral to Near Oversold

Intraday Volatility: Moderate

Comment:  As interest rates rose last week, the market fell. It wasn’t surprising since the indexes were overbought according to the RSI and sentiment indicators. Even with the slow selloff, there was little fear. There should be light trading on Monday, a perfect environment for the algos to run the market higher. Typically, after even a mild selloff, the algos take control. However, if interest rates keep rising, the selloff may continue into the week. That would be  a huge red warning sign that a correction is underway. 

My advice, as always: Wait and see which side is winning and join them. This week will give us important clues to see if we get a last gasp run-up into the end of the year, or if the underlying problems are so severe that the smart money is selling. If the market follows the same pattern as in the past, there will be a rally this week.

What to look for: Watch what happens if and when the SPX drops to its 50-day moving average at 2877.14. In the past, it would bounce off of it and rally. If it drops below its 50-day moving average and remains below all day or week, more pain will likely follow.

History lesson: The last time the SPX hit its 50-day MA was in July, where it bounced around that level for a few weeks before staging a strong three-month rally that ended last week.

Bottom line: This is going to be an interesting week, a “pivotal” week.

Note: Here is my latest column on MarketWatch, about how to get started trading options: https://on.mktw.net/2Nx6inI

______________________________________________________

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

Here are the latest indicators:

S&P 500 one-month trend = Bullish 

S&P 500 is above its 50-day moving average = Bullish  

RSI: (S&P 500) @58.99 = Neutral

Intraday Volatility: Very Low

Comment: Although the S&P 500 is still lingering near its all-time highs, it’s been unable to move past it. Therefore, for the last few weeks, we’ve been in a holding pattern near the top of the range. I’ve learned the hard way that when the indexes are between support and resistance, it’s best to sit back and wait to see which side will win.

While waiting for the winner, observe the market action. Have you noticed that the market rises quickly but sells off slowly on most days? Those darn algos are doing everything in their power to keep the market in slow motion, and it’s working. Volatility is so low it can put you to sleep on some days. Until a winner is obvious, I’m mostly on the sidelines while making quick morning day trades on occasion. This is not the time to trade with large size until the next short-term trend can be identified. 

Medium term, sentiment indicators are telling us we’re topping out. Stocks just delivered the best quarterly run in the last five years (Bloomberg). And individual investors at brokerage firms are holding the lowest amount of cash in history. This is a flashing red warning sign. 

Bottom line: Hold your fire for now until the winning side is clear. Retail investors are expecting another Santa Claus rally this year (the bulls are dreaming of SPX 3000). You’d be wise to keep an open mind as the market often fools the most number of people, especially when “everyone” is expecting the same outcome. 

______________________________________________________

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

As. you may have noticed, my blog was disabled temporarily while I worked with my domain provider to increase security. Fortunately, the site is back up again. Thanks for your patience! 

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