Bullish or Bearish? Week of February 13, 2023

Short-term trend (DAILY CHART)   MILD PULLBACK: After a two-week rally, SPX stalled slightly last week, falling from 4136 to 4090, a 46-point drop. SPX is still well above its three major moving averages, so on one hand, the bullish setup remains. On the other hand, there was a failed rally during the week, which was an extremely negative development. In fact, it was the worst week for the S&P 500 and the Nasdaq during the last two months. Futures are FLAT TO LOWER on Monday morning.

Long-term trend (WEEKLY CHART) – UPTREND: Although SPX pulled back slightly on the daily, the weekly chart is still in an uptrend, even if it has not broken out of its trading range.

MACD (DAILY) = NEUTRAL. MACD is above its zero line but is now even with the 9-day signal line (pulling back slightly).

RSI: (S&P 500) @55.76 (DAILY) NEUTRAL. RSI came back to Earth, as predicted last week, after reaching overbought status. Although mildly overbought, it's now within the neutral zone, so anything is possible this week.

Comment: As mentioned earlier, the market started off strong last Monday but reversed direction by the end of the day. A failed rally is a very negative development, and often leads to a severe pullback. If the bulls are unable to gain control this week, expect a rough ride now and in the near future.

At this time, it is too early to determine who will gain control this week, but it's not good that SPX went up so far and fast, and then had the worst week in the last two months. This is not to say that the market is absolutely going to correct, but the odds have increased.

On Tuesday, CPI ( Consumer Price Index) numbers will be released, which could be a market moving event (at least for a day). Astute traders could clean up on Tuesday if they are on the right side of the trade, as volatility should increase on that day. CPI will give clues as to what the Fed might do (tighten or stand aside).

Bottom line: The odds have increased that the market will pull back this week, but a lot depends on CPI, which will be released on Tuesday morning.