If someone tells you that they know where it is going, do not believe them.
We can, of course, get some indications of the delicate, very inaccurate science of action, by looking at the weight of fundamental and technical evidence – which is at least a somewhat subjective concept. However, on the basis of this evidence, one can at least try to make informed decisions, which, with any consistency, can drastically increase our results.
We have been bearish on the market since last month and we are still. But that does not mean that the market will not take different turns, depending on factors such as investor sentiment or trade between the US and China. Or the famous and capricious decision-making of US President Donald Trump.
S & P 500 Daily Chart
S & P 500 Daily Chart
This variability is clearly illustrated by the technical evidence on the daily chart. The S & P 500 traded in a rising channel since the rebound after Christmas Eve. Although remarkable media emphasize that the benchmark closed above the 200 DMA, it barely gained less than 0.1%.
That's nothing to write home about and leave everything open. The price, which reached the highest point since December 3, has stopped climbing and remains under a downward trend dating back to November.
Although the RSI offers a positive divergence when climbing above the level of November-December, it does not follow the price, which is lower than the peak in February, with a negative deviation. This positive-negative picture attracts a potential Head & Shoulders summit for the impulse indicator.
The MACD is the most overbought since January 2018 and weakened, allowing it to activate a sales signal.
Week chart S & P 500
Week chart S & P 500
The picture can become clearer if we take a step back and look at the weekly chart dating back to 2017. From this perspective, both the price and the RSI are clearly negative trends. The only outlier is the MACD, which only produced a buy signal.
But since it is an indicator of laggards, the dramatic whiplash has had little choice since December. Obviously a sudden sharp rally will trigger a buy signal after a dramatic decline, but can this sudden turnout be regarded as reliable?
Since prices have been on a downward trend since January 2018, we are forced to respond with a resounding no. In fact, what we look like is a huge head-and-head top-down.
For this reason we do not get entangled in the current Wall Street frenzy. We maintain our bearish attitude.
