The Weekly Trader

Mid-term: The S&P 500 had a lackluster week, unable to rise above its 200-day moving average. Unless something changes this week, it’s still a bear market (by my definition). Futures are higher on Sunday night so maybe the bulls can push it to SPX 3000.

One-month trend = Sideways. SPX has worked hard but has gone nowhere in the last month. It’s either going to break out or break down.

RSI: (S&P 500) @ 52.71 = Neutral. The market could go in either direction this week. 

MACD: MACD is above its zero line and even with its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 31.89 = Relatively High. Volatility remains elevated but much lower than a month ago. Volatile trading days are still expected. 

Comment: I wish I had something exciting to say but I don’t. Jerome Powell gave a harsh assessment of the economy on Thursday, and the market sold off quickly. On Sunday night he backtracked and said things are looking brighter. Which is it?

As Lance Roberts said last week, either the economy is right and we’re in deep trouble, or the stock market is right and the worst is over. But both the stock market and economy can’t be right.

The market has been drifting sideways for nearly a month with low volume and lack of institutional participation. We can continue drifting for a while longer until the market either plunges or rallies. No one can predict which, so the best strategy is sit and wait for the next trend.

Bottom line: It appears as if the economy is getting worse while the stock market keeps climbing. Unusual is an understatement. If trading, be patient and don’t try to force trades. Sometimes the best trade is not trading at all. Let’s hope we get some clarity this week.

Here are two additional and more detailed analysis of the current market:

Lance Roberts @ realinvestmentadvice.com sees a seasonal sell signal: https://bit.ly/36f5wqf

Sven Henrich @ Northman Trader with a Straight Talk video on the current market: https://bit.ly/3g0Et6n

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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

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Mid-term: The S&P 500 continued to move higher, coming ever closer to the almighty 200-day moving average. This is another pivotal week. Can SPX surpass the 200-day (and stay above)? If it can, it’s bullish. If not, it’s bearish.

One-month trend = Bullish. SPX has worked hard, with the Fed’s help, to rally right below its 100 and 200-day moving averages. The economy is in shambles but the market spikes higher. Both can’t be right (more on this later).

RSI: (S&P 500) @ 58.29 = Neutral. The market could go in either direction this week.

MACD: MACD is above its zero line and even with its 9-day Signal Line = Neutral

Daily Intraday Volatility (VIX): 27.99 = Relatively High. Volatility remains elevated but much lower than a month ago. Volatile trading days are still expected.

Comment: Most people are shaking their head at last week’s market action. The unemployment rate and job losses were the worst since the Great Depression, and some economists say it’s even worse than you think. Meanwhile, the stock market rose back near its previous highs (Nasdaq already did).

As Lance Roberts says, either we have a depressionary economy or that things couldn’t be better, according to the stock market. Both can’t be right, and we should know soon who it is.

It’s no secret that the Fed has been pouring trillions into the stock market using a variety of methods. No one knows how long they will do that, and how long it will be successful. Common sense says reality will hit one of these days, but then again, logic has taken a vacation.

Bottom line: My gut feeling says the worst is coming, and reality will be arriving at the stock market near you. But with the Fed ready to pump up any selloff, anything is possible. Read the excellent blogs below for excellent discussions on the current stock market.

The following is a must-read interview with Larry McDonald, publisher of the “Bears Trap Report.” In summary, he says, buy silver and other commodities, and sell stocks: https://bit.ly/2zu2Dp3

Lance Roberts @ realinvestmentadvice.com on how a depressionary economy and rising stock market can’t both be right: https://bit.ly/2yBfR3D

Sven Henrich @ Northman Trader with an informative video discussion with three market gurus: https://bit.ly/3blIzmn

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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

Mid-term: The S&P 500 spurted higher last week but is still slightly below its 200-day moving average = BearishThe longer it remains below its 200-day MA, the more bearish it is. It must rise above the 200-day MA and stay above for the bulls to take control.

One-month trend = Bullish. SPX has worked hard, with the Fed’s help, to rally above its 50-day moving average. Nevertheless, at this writing, it has still not risen above its 100-day or 200-day MA. Until then, the bear case is still possible, and in play.

RSI: (S&P 500) @ 52.53 = Neutral. The market could go in either direction this week but futures are lower on Sunday night.

MACD: MACD is slightly above its zero line and slightly above its 9-day Signal Line = Neutral to Bullish

Daily Intraday Volatility (VIX): 37.19 = Relatively High. Volatility remains elevated. Expect volatile trading days. 

Comment: The indexes started the week with a spectacular rally (small caps rallied 10% in 3 days) before and during the Fed meeting. Just when it appeared as if SPX would rise above its 200-day moving average (and also while hitting key Fibonacci technical levels), SPX retreated (they gave back nearly all of the gains). On Sunday night, the futures are lower and it appears as if the rally has run out of steam, at least for now.

As the market climbed higher last week, traders wondered if that was a bear market rally, another word for a Bull Trap. That is when the bulls believe the worst is over and they buy at the top of a rally, only to watch it reverse direction.

I spoke to a buy and hold investor friend of mine who has all of his money in various indexes. He was down as much as 30% a month ago and now is down only 13%. He is thinking of selling but “only when I get back to even.” You heard it here first: Many investors are not going to sell until they get ALL of their money back.

For my friend’s sake, I hope he succeeds. But I have seen this scenario before with individual stocks. You lose money, you get 75% of the money back, and you get greedy. You want 100% of your money back so you don’t sell. Then the stock plunges. I’m not predicting this will happen to the SPX, but it’s possible. After all, the economy is not in a good place and we have not solved the virus problem.

Bottom line: This will be another fascinating week. The Fed helped the market last week with monetary and fiscal injections, and helped to smash the bears…for three days. This week we will find out who really has the winning hand. I’m also curious if the Fed jumps in again to “save” the market if it starts to get ugly again. We shall see.

Once again, I recommend that you read the following pieces. Be sure to watch the video from Sven, which gives a bearish analysis of the market environment:

Sven Henrich @ Northman Trader on the failed rally last week: https://bit.ly/3fcdCUG

Lance Roberts @ realinvestmentadvice.com on why selling in May makes sense this year: https://bit.ly/2WlZmjD

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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

Mid-term: S&P 500 is still below its 200-day moving average = BearishThe longer it remains below its 200-day MA, the more bearish it is for the market. Nevertheless, SPX did make it to its 50-day moving average, so it’s best to stand back and see how high (or low) it can go this week.

One-month trend = Bullish. SPX has worked hard, with the Fed’s help, to rally back to its 50-day moving average. Let’s see if it’s a bear market rally (most likely) or a continuation of the bull market (unlikely).

RSI: (S&P 500) @ 55.01 = Neutral. The market could go in either direction this week. The Fed is meeting on Tuesday and Wednesday, so anything is possible.

MACD: MACD is even with its zero line and even with its 9-day Signal Line) = Neutral

Daily Intraday Volatility (VIX): 35.93 = Relatively High. Volatility remains elevated. Expect volatile trading days. 

Comment: The Fed meets this week so there should a number of crosscurrents. The market has made a brave attempt to rally back to its 200-day moving average (SPX 3007). With the Fed throwing gobs of money at the stock market, anything is possible.

However, the bad news keeps piling up. Unemployment is at all-time highs, the virus is still swirling around, most businesses are closed, the economy is in shambles, and most people are still hunkered down in their homes.

Maybe the Fed can pull a rabbit out of a hat and convince people that all is well, but I have my doubts. Unless there is a vaccine or some other good virus news, the bears could take control. However, the Fed will do anything possible to keep the market levitated.

Bottom line: Expect a tug-of-war this week between the bulls and the bears.

The two pieces below are brilliantly written. Sven Henrich approaches the market from a technical perspective, while Lance Roberts discusses the fundamental case (with some technical analysis). Be sure to watch the videos in the Henrich blog. Highly recommended:

Sven Henrich @ Northman Trader on the current market environment. He is leaning bearish: https://bit.ly/2Ya47iK

Lance Roberts @ realinvestmentadvice.com on whether the bear market is over: https://bit.ly/2KB6Vxx

___________________________________________________________

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

Mid-term: S&P 500 is still below its 200-day moving average = BearishThe longer it remains below its 200-day MA, the more bearish it is for the stock market. The strong rally continued last week as SPX attempts to reach the 200-day moving average.

One-month trend = Bearish. After a strong downtrend, SPX bounced back strongly. It could be a typical bear market rally, but let’s wait and see if the rally fails.

RSI: (S&P 500) @ 57.36 = Neutral. The market could go in either direction this week so be careful. 

MACD: MACD is slightly below its Zero Line but rose above its 9-day Signal Line) = Neutral to Bullish

Daily Intraday Volatility (VIX): 38.15 = High. Volatility remains elevated. Expect volatile trading days. 

The market has rallied so quickly and strongly that it surprised almost everyone. A number of bullish investors have proclaimed that the bear market is already over. Hmmm.

There is a disconnect between the stock market and the economy. As I’ve often said, the market is the news, and that is true. With the Fed’s help, the market has recovered much of its losses, and is acting as if the economy is strong and all is well.

Unfortunately, reality is going to smack the market like a 2 x 4 in the face. I would be very very cautious about being long at these elevated levels. With the economy in shambles, with millions out of work, with the virus still ravaging the world, and with bad news as far as the eye can see, eventually reality will win.

I wish I had better news but in the short-term, we are going to be in a world of pain. Eventually many of our problems will be solved, but not quickly. Many people are too impatient. They want the bear market to end, for the economy to recover, and for everyone to return back to work. In reality, we are in for a longer term process that will take time a lot of time to play out.

My advice: Be very cautious and defensive in these dangerous times. I would not be surprised to see the indexes fall well below the March lows in the next few weeks or months. It might be hard to believe we could crash again but that is typical of a failed bear market rally.

Once again, here are two pieces that I recommend reading:

Sven Henrich @ Northman Trader on how you should look at one chart to see the truth about the current market: https://bit.ly/2VmnmnB

Lance Roberts, money manager @ realinvestmentadvice.com on how the market has moved into the resistance zone: https://bit.ly/2XMyM5p

___________________________________________________________

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