Ever since the stock market, as measured by the Standard & Poors 500 Index ($SPX) broke down through support late last month (on October 23rd), the bulls have been struggling to regain control. They have not done so -- yet. However, yesterday's rally has brought $SPX right back up to the 1430 level, and we are still in the October bullish seasonal period for one more day.
The stock market — as measured by the Standard & Poors 500 Index SPX +1.04% — is struggling to stabilize after last week’s breakdown below support. The onset of the massive storm Sandy on the east coast of the U.S. has not helped matters.
While the end of the month of October is usually a bullish seasonal period, trading on two of those three days was lost to the storm. Moreover, the third day — today — saw subdued activity as not all market participants were able to, or even wanted to, get to work.
The fall of the year is a time when we trade two of our better seasonal patterns – The (month-end) October Seasonal buy and the Heating Oil Gasoline spread. In fact, it is nearly time to implement a strategy for the October Seasonal Buy – if we are going to (last year, we passed on taking a position, and that was the correct call; will this year be different?). In this article, we’ll take a more in-depth look at both of these.
For a considerable period of time, $SPX refused to break down. From the June lows to the October highs, the trend was steadily upward as $SPX traded in a bullish channel. However, that channel was broken on Tuesday of this week, when $SPX broke through it and also broke through support at 1425-1430. This has changed the $SPX chart from bullish to, at best, neutral. Those who want final confirmation would also require a breakdown below the August lows at 1395. That would confirm an intermediate-term bearish outlook for stocks.
Since early June, the stock market — as measured by the Standard & Poors 500 Index SPX had remained in a steady uptrend channel. On Tuesday, however, SPX not only broke down below the lower band of that bullish channel, but also violated previously strong support at 1,425-1,430. That was a bearish action, and it is also accompanied by sell signals from many other technical indicators.
A major support level has finally given way. With $SPX falling below 1430, a lot of selling was unleashed into the market. Rally attempts were made, but without much success. As a result, the technical picture has changed, although it could still be considered neutral rather than bearish, at least to some impartial observers. However, with the penetration of the 1430 level, not only was support broken, but so was the bullish trend line that extended back to the June lows.
A week ago, stocks seemed to be on the brink of breaking down. But the bulls regrouped, and $SPX rallied strongly off of that support base. Hence, the 1425-1430 area is now stronger support than ever.
Equity-only put-call ratios are the most bearish indicator of the lot. They continue to rise rapidly, after having given sell signals last week. Since they are still rising, they are still on those sell signals.
Market breadth indicators are hovering right on the edge of sell signals.
The Standard and Poor’s 500 Index (SPX) was under a reasonably large amount of pressure last week. By week’s end, it had declined to 1425 — a support level, right at the lower band of the bullish channel that has defined this rally that began in early June.
MORRISTOWN, N.J. (MarketWatch) — The stock market has generally been declining since September 14th — the day after the Fed announced the latest round of Quantitative Easing.
Not only was the market overbought at that time, but the Fed’s announcement was widely anticipated news.