Jan16

Bullish or Bearish? Week of January 16, 2023

Short-term trend (DAILY CHART)   RALLY: Last week, SPX rose from 3,895 to 3,999, an impressive 109-point gain. If the short-term technicals hold up, January may turn out to be a lot brighter than most people had expected. Nevertheless, this market can turn on a dime (and will). By the way, SPX has crawled its way back to its 200-day moving average. Resistance is at 4,000, which needs to be watched closely. Note: Futures are slightly lower on Monday night, but that could change in the morning.

Long-term trend (WEEKLY CHART) – UNCLEAR. Once again, SPX on the weekly chart made incremental gains, but the chart is unimpressive. The weekly is in a trading range -- eventually there will be a breakout or breakdown.

MACD (WEEKLY) = POSITIVE. Although the WEEKLY MACD is below the zero line, it is making an attempt to rise above. It's slightly above the 9-day signal line, a positive development.

RSI: (S&P 500) @60.58 (DAILY) OVERBOUGHT. The two-week rally, while positive, has pushed SPX into overbought territory, according to RSI.

Comment: Last week, I had a fascinating interview with Jeffrey Bierman, a veteran trader, professor, and trading room lecturer. He says we are in a bear market, which should hang around for a while, especially since the Fed is determined to keep raising interest rates. The QA interview will be published this week on MarketWatch, and you are sure to learn a few new things. One small nugget from Bierman: In the near-term, buying bonds might be a less-risky choice than buying stocks.

Whether you agree with Bierman or not, it's a difficult market. While we get these slow-moving rallies, most stocks, and the stock market, are unable to get much traction. That is frustrating for investors and even worse for traders. It's the kind of market that can destroy a buy-and-hold portfolio (in the near term). Traders, on the other hand, must be satisfied with small and quick gains. The days of buying the dip and holding for a week are over for now.

In the old days, a four-day week would translate into a volatile week. Now, all we can do is see if the S&P can surpass resistance at 4,000. If it can blow past 4,000, that would be a positive sign. If it is unable to have the strength to move higher, it could be a rough few weeks.

Bottom line: Trade small, diversify, and take profits quickly. Although the technical indicators may look positive in the short-term, it's unlikely to last, especially if the Fed keeps raising rates.

Note: I hired a brilliant Australian developer, Elliot Ritchie, who built a new website for me. I'm hoping it can launch next week.

NOTE: Here is the link to Understanding Stocks (3E): https://amzn.to/3wO761F or (Amazon)  https://bit.ly/3udwAUf or (Barnes and Noble). Here is the link to How to Profit in the Stock Markethttps://amzn.to/35lnjQy