Bullish or Bearish? Week of February 5, 2024

Welcome to my blog! I believe that most beginners should start by investing in index funds, which will be in their core account. I personally like selling covered call options on stocks that I own, providing income. Nevertheless, this blog was written for short-term stock and option traders who need a weekly analysis of the market using technical analysis.

Note: You can preorder my newest book, Help Your Child Build Wealth (Wiley, November 2024) at Amazon: https://bit.ly/3OGOVmO or Barnes and Noble: https://bit.ly/49x6gGS .


Short-term trend (DAILY CHART)   BULLISH: Last week, SPX rose from 4890 to 4958, a 68-point rally, and an all-time high for SPX. SPX retreated for only one day during the week, right after RSI went well above 70. Then it was off to the races again. The market just keeps rising, ignoring any and all negative news.

Long-term trend (WEEKLY CHART) – BULLISH: SPX keeps rising higher and higher on the weekly chart. Shorting this rocket ship has been a fool's errand so far this year.

MACD (DAILY) = NEUTRAL. MACD is above the zero line but even with the 9-day signal line.

RSI: (S&P 500) = 68.94 (DAILY) OVERBOUGHT: RSI is close to 70 again after retreating to 58 for only one day. RSI gives excellent clues to overbought markets (i.e., that's a red flag), but it never tells when the reversal will occur.

Comment: An excellent employment report sent the market to all-time highs once again. You have to be very brave to short this market, and anyone who tried this strategy feels the pain. This market seems unstoppable right now, and it is, until it isn't. Don't step in front of this train if bearish, and enjoy the ride if bullish.

As all seasoned traders know, this market will reverse hard one day, and it will give back much of the gains it has made (a 10 percent correction, at a minimum, is likely). However, don't try to bet on the reversal date as that is gambling, not trading.

Fed Chairman Powell says he will move cautiously on rate cuts, and isn't planning a cut in March. Traders ignored his comments, and the problems in the Middle East, and focused on the positive employment report instead. For now, the market is on a roll so enjoy it while it lasts.