I charge for this kind of chart evaluation of the market but given that this market is crazy right now and we all (those that play the stock market) need to try to understand what is happening and what to look at (chart-wise), I am giving to you for "free" (this time).
DOW Friday Closing Price - 46245
SPX Friday Closing Price - 6602
NASDAQ Friday Closing Price - 24239
RUT Friday Closing Price - 2369
This past week the SPX and the NASDAQ made new 9-week lows and on an intraweek basis, they broke pivotal and short-term-indicative intraweek supports. The weakness was unexpected given that the fundamental news was all positive (Jobs report came in better than expected and the key AI and Tech stock (NVDA) reported better than expected earnings). The market responded very positively to those reports with the indexes immediately moving up over 2% in price. Nonetheless and only a few "hours" after the initial reaction, selling interest of consequence came in and before the day was over, the indexes dropped over 4% in price, generating a negative key reversal day. The main reason for the drop was the idea that the Fed would not lower interest rates in December and that even a possible rate hike would occur. Those 2 indexes generated indicative sell signals on the daily chart, suggesting that a full-blown correction had started.
Nonetheless, and unexpectedly so, the very next day and after follow-through to the downside was seen, the indexes generated a positive reversal day that did negate the sell signals given on the daily chart the previous day, and at the end of the day and on the weekly closing chart, no confirmation of the breakdown occurred. The reason for the turn-around was that one of the Fed members (John Williams) stated Friday morning (after the market opening) that he still believed that there was a good chance of an interest rate cut in December. Suddenly, the fears created the previous day were somewhat erased and the negative chart scenario was prevented from being confirmed.
This market has now turned into a "political" mine field that can be easily manipulated with words (not actual fundamentals), making it close to impossible to trade with any degree of certainty.
Having said all of the above, the action seen (based on the fundamental news) does suggest that this market continues to be in a corrective phase. One key issue in play is that with many of the key Tech stocks, they continue to show very high P/E ratios. Normally, high P/E ratios in Tech stocks is around 25 but recently they have gone above 40 and remembering that when the dot.com era bubble broke, the P/E ratios in Tech stocks was around 44, it does support further downside in the market, no matter what the Fed does.
With the exception of the RUT, all the indexes closed in the lower half of the week's trading range, suggesting further downside below last week's lows will be seen this week. In the DOW, that is below 45728, in the SPX that is below 6521, and in the NASDAQ that is below 23854. There are important economic reports due out on Tuesday, which are the inflation figures (PPI and CPI), Retail Sales and the Consumer Confidence number. In order, expectations are for .3%, .2%, .3% and 93. Probabilities favor inflation being higher and Consumer Confidence being lower, which should have a negative effect across the board. As such, the probabilities continue to favor the market being in a full-blown correction.
Nonetheless and considering the political manipulation occurring and the fact that the traders are reacting so aggressively to it, here are the "daily close" resistance levels that need to be watched this week for chart signs that the traders are once again buyers. In the DOW that is at 46912, in the SPX it is at 6714, and in the NASDAQ it is at 25136. Having said that and in looking at the 10-minute closing chart, here are the levels that if broken, would suggest the levels above would likely get at least a retest of them, which in turn would take away short-term ammunition away from the bears. Those levels and in order once again are 46849, 6768 and 25207.
To the downside and if follow through below last week's lows is seen, here are the objectives. In the DOW 45631, in the SPX it is 6466, and in the NASDAQ it is 23712. The NAZ will continue to be the key index for now and if it generates a daily close below 23849, it will further weaken the chart, and if it generates a daily close below 23142, the target will be the 200-day MA, currently at 22333. That line has not been tested or seen since May and if further weakness is seen, that line will become an absolute magnet. It should also be mentioned that the SPX does carry quite a bit of weight and this past week the index did give a sell signal on the daily chart on Thursday, when it closed below 6552 (closed at 6538). As such, a daily close below 6538 would give the bears strong ammunition.
This market is very difficult to predict at this time but it is clearly evident that the traders will be looking (and depending on) at the charts for decisions.
DOW Friday Closing Price - 46245
SPX Friday Closing Price - 6602
NASDAQ Friday Closing Price - 24239
RUT Friday Closing Price - 2369
This past week the SPX and the NASDAQ made new 9-week lows and on an intraweek basis, they broke pivotal and short-term-indicative intraweek supports. The weakness was unexpected given that the fundamental news was all positive (Jobs report came in better than expected and the key AI and Tech stock (NVDA) reported better than expected earnings). The market responded very positively to those reports with the indexes immediately moving up over 2% in price. Nonetheless and only a few "hours" after the initial reaction, selling interest of consequence came in and before the day was over, the indexes dropped over 4% in price, generating a negative key reversal day. The main reason for the drop was the idea that the Fed would not lower interest rates in December and that even a possible rate hike would occur. Those 2 indexes generated indicative sell signals on the daily chart, suggesting that a full-blown correction had started.
Nonetheless, and unexpectedly so, the very next day and after follow-through to the downside was seen, the indexes generated a positive reversal day that did negate the sell signals given on the daily chart the previous day, and at the end of the day and on the weekly closing chart, no confirmation of the breakdown occurred. The reason for the turn-around was that one of the Fed members (John Williams) stated Friday morning (after the market opening) that he still believed that there was a good chance of an interest rate cut in December. Suddenly, the fears created the previous day were somewhat erased and the negative chart scenario was prevented from being confirmed.
This market has now turned into a "political" mine field that can be easily manipulated with words (not actual fundamentals), making it close to impossible to trade with any degree of certainty.
Having said all of the above, the action seen (based on the fundamental news) does suggest that this market continues to be in a corrective phase. One key issue in play is that with many of the key Tech stocks, they continue to show very high P/E ratios. Normally, high P/E ratios in Tech stocks is around 25 but recently they have gone above 40 and remembering that when the dot.com era bubble broke, the P/E ratios in Tech stocks was around 44, it does support further downside in the market, no matter what the Fed does.
With the exception of the RUT, all the indexes closed in the lower half of the week's trading range, suggesting further downside below last week's lows will be seen this week. In the DOW, that is below 45728, in the SPX that is below 6521, and in the NASDAQ that is below 23854. There are important economic reports due out on Tuesday, which are the inflation figures (PPI and CPI), Retail Sales and the Consumer Confidence number. In order, expectations are for .3%, .2%, .3% and 93. Probabilities favor inflation being higher and Consumer Confidence being lower, which should have a negative effect across the board. As such, the probabilities continue to favor the market being in a full-blown correction.
Nonetheless and considering the political manipulation occurring and the fact that the traders are reacting so aggressively to it, here are the "daily close" resistance levels that need to be watched this week for chart signs that the traders are once again buyers. In the DOW that is at 46912, in the SPX it is at 6714, and in the NASDAQ it is at 25136. Having said that and in looking at the 10-minute closing chart, here are the levels that if broken, would suggest the levels above would likely get at least a retest of them, which in turn would take away short-term ammunition away from the bears. Those levels and in order once again are 46849, 6768 and 25207.
To the downside and if follow through below last week's lows is seen, here are the objectives. In the DOW 45631, in the SPX it is 6466, and in the NASDAQ it is 23712. The NAZ will continue to be the key index for now and if it generates a daily close below 23849, it will further weaken the chart, and if it generates a daily close below 23142, the target will be the 200-day MA, currently at 22333. That line has not been tested or seen since May and if further weakness is seen, that line will become an absolute magnet. It should also be mentioned that the SPX does carry quite a bit of weight and this past week the index did give a sell signal on the daily chart on Thursday, when it closed below 6552 (closed at 6538). As such, a daily close below 6538 would give the bears strong ammunition.
This market is very difficult to predict at this time but it is clearly evident that the traders will be looking (and depending on) at the charts for decisions.
