Bullish or Bearish? (Updated) Week of April 22, 2024
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Short-term trend (DAILY CHART) – BEARISH: Last week, SPX fell from 5123 to 4967, a dreadful 156-point plunge, the third week in a row that SPX dropped. SPX sliced through its 50-day like it was butter and is pointing straight down towards the 100-day. If it breaks through, it won't be a pretty sight (more on this in the comments). SPX is now firmly in the bear camp. Note: Futures are HIGHER on Monday morning.
Long-term trend (WEEKLY CHART) – BEARISH: On the weekly chart, SPX is barreling straight down towards its moving averages but hasn't sliced below them yet.
MACD (DAILY) = BEARISH: MACD fell strongly below its 9-day signal line and zero line and is firmly on the bear side.
RSI: (S&P 500) = 31.29 (DAILY) OVERSOLD: After being overbought for many, many months, RSI is firmly oversold now, so a bounce-back rally is expected.
Comment: If you've been reading this blog for any length of time, you know I warned that the overbought market had to reverse eventually, and it did. RSI had repeatedly warned us that the market had gone up too far and too fast, and now it's reversed. The bullish trend has been broken, at least for now.
Even more interesting, SPX 5,000 has been taken out after celebrating its all time high. This happens a lot in the stock market. Soon after a major milestone is reached, it reverses direction. Yes, there will be many attempts in the future to get above SPX 5,000 again. We must wait and see if it can be recaptured, and most importantly, if it can stay above 5,000. It's a very "fluid" market right now.
As others have noted, this slow-moving correction is "orderly," and no one seems to be panicking yet. Yet.
The reason for the selloff has been blamed on higher interest rates, and the Fed not taking steps to lower them. Higher interest rates cause a lot of problems in the economy, and in the stock market. And yet, if the Fed lowered rates right now, the market would be in danger of overheating even more.
Bottom line: It should not be a surprise the market is correcting right now. Eventually, the Fed will cut rates, but not until the market is lower than it is right now.