Charts & Commentary October 2016

10/28

The S&P 500 ended the week 0.7% lower, FBI’s reopening of investigation of Hillary’s emails probably contributed to the overall negative market mood. On the positive side Friday was GDP’s Q3 2.9% rise, beating the 2.6% estimate.

The October Consumer Sentiment number fell though, to 87.2 vs. the expected 88.5 and down from the previous 87.9. Investors were disappointed to see consumer optimism waning, so this could be another factor forcing the market lower for the week.

From a technical point of view, a positive observation this week in the face of the lower market, was the FCX (Copper & Gold) upside breakout from a Falling Wedge pattern, forming a bullish divergence vs. the lower S&P 500. This reflects a higher activity in the economy, which could help lift the stock market soon.

In the very near term, this could happen anyway, as RSI-2 has reached an oversold extreme, with 38.2 Fib. and OEX weekly trendline at the same time still intact after this trading week. So the market could pop early next week, because when RSI-2 falls below 10, there is over a 70% chance the market will close above it’s daily 5 EMA within a week, before possibly heading lower again.

Using the TLT Weekly ETF as a proxy, the Bond market is most likely going for a test of major trendline support next week. Any clear weekly close below it could open up for even more weakness thereafter and even higher interest rates as a result.

10/21

The S&P 500 is probably working on another Triangle pattern. It’s possible the market has entered a more or less sleepy condition with a downside bias, until likely waking up from the outcome of the election.

The overlapping price development and triangle patterns from the August high, could mean we’re dealing with an a-b-c correction as part of a one degree higher wave d and not an Impulse structure. So this could mean more upside potential in the last wave e, once this a-b-c pattern has reached it’s termination point. Who knows, a wave d could lift the market after the election.

 

10/14

Below are a few technical facts after this trading week:

– All three of the major indexes finished the week below it’s 50 day moving average.

– The S&P 500 broke out from the earlier mentioned Triangle to the downside, which resulted in a test of first Fib. support. The snap-back move from this support area brought prices back up for a test of the lower triangle line, which now acts as a stiff resistance zone.

But sellers came in when this area was reached and forced prices lower at the end of the week, with Friday’s price action forming a bearish Pin bar. Any break of it’s low would signal another test of Fib. support down around 2,116.

– The OEX weekly trendline and a support line drawn through several important peaks from 2015 are still intact. If they give in to the bearish forces, it could open up for more serious weakness thereafter. This at a seasonal time of the year when weakness has often been the outcome in the past.

 

10/07

The market development has turned into a more complex pattern, a contracting Triangle. Here is how it looks on the S&P 500 hourly chart. The directional breakout from it, should set the market tone, short term.

A look at the weekly chart shows that the price development has taken the form of two ‘Inside Weeks’ in a row, where the trading range for the week came within the range of the previous week, which reflects indecision among investors.

The longer this consolidation phase continues, the sharper the breakout could be. Despite this sideways movement, weekly momentum is still bullish and has yet to reach an overbought condition.

 

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