The Weekly Trader


Mar24

Bullish or Bearish? Week of March 25, 2024 (UPDATED)

Welcome to my blog and thanks for reading my weekly analysis of the stock market.

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 .

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Short-term trend (DAILY CHART)   BULLISH: Last week, SPX skyrocketed higher, from 5117 to 5234, a 117-point rally. It could have gone even higher but stalled on Friday for no particular reason (i.e., profit-taking). Once again, during the week SPX and the other indexes made all-time highs. It's also the fifth month of gains. Whatever the Fed said last week, traders liked it a lot. Note: Futures are FLAT on Monday morning.

Long-term trend (WEEKLY CHART) – BULLISH: SPX looks even stronger on the weekly chart, making another all-time high.

MACD (DAILY) = BULLISH: MACD is above the zero line but only slightly above the 9-day signal line. Although not extremely bullish, it's strong enough.

RSI: (S&P 500) = 67.44 (DAILY) OVERBOUGHT: After last week's rally, RSI also rallied, and is close to extremely overbought (at RSI 70). A few more rallies this week and SPX will have entered the danger zone.

Comment: It's a four-day week next week and the market is poised to break more records, unless RSI moves above 70. At that point, it's a red flag, and RSI has had an excellent track record of warning about imminent reversals.

Meanwhile, the market keeps breaking all-time high records. Last week, the market interpreted what Jerome Powell said as bullish, and the indexes responded by shooting higher.

Because the market has moved so high over the last five months, crushing anyone who dares to sell short, there has been talk of a market bubble. The problem with bubbles is that you never know you're in one until it's over. Is this a market bubble? The answer is, no one knows.

If this really is a bubble, the move downward will be a painful one. However, if this is just a typical bull market backed up by an accommodating Fed, enjoy the ride higher, because even if it's not a bubble, it will reverse one day.

That is the day when investors find out if they are diversified, and if their asset allocation formulas really work. That is also the day when investors who dollar-cost average into indexes and certain stocks outperform the "lump-sum" investing strategy.

Good luck out there --- we will need it.

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