The stock market is attempting to rally off of last weeks lows. Based on the internal “math of the market,” an upgrade to a yellow condition is close at hand. But not just yet.
On Friday we suspected an oversold bounce might unfold as the S&P500 index and the NYSE advance/declines lines fell to lower levels, yet the number of 52-week lows on the NYSE did not expand (second occurrence of that in the week). Further, the S&P500 did not experience distribution on Friday and the Nasdaq actually gained on the day. It looked to us like possible “oversold” selling exhaustion.
The market had a good day today but seasoned investors know that often times the stock market will pull an about-face on the day after a Fed decision. Let’s see how it goes tomorrow.
Positively, Investor’s Business Daily described today’s action on the Nasdaq as a “follow-through” day, which means conditions are improving technically enough to demand attention by investors. A key, based on their risk management system, will be to see zero “distribution days” within the next 3 trading days (DD: aka professional selling).
Historically, follow-through days that happen on the major indexes while trading under their 21-day and 50-day mav’s are notoriously prone to failure, and quickly so. Watch for Friday’s October U.S. payroll report to be a catalyst in either direction. A positive reading could ignite the bulls and cause the S&P500 to experience a follow-through day of its own, which would build on the bullish thesis.
Speaking of the S&P500, today’s positive price action was, however, accompanied by lower volume than yesterday’s trade. It is disappointing that it didn’t follow-through as well today. That sort of action is generally regarded as a sign of weakness – hesitancy by the institutions. Again, we will see how its goes tomorrow.
Even if this rally attempt builds more momentum tomorrow and into next week (which is possible given the positive seasonality of November), traders should expect a “low, rally, retest” sequence over the 2 – 3 weeks. Ideally that sort of sequence would lead to a “higher low” on the retest that could work to set up a fruitful year-end rally.
Our Current Market Outlook is still “Market in a Correction” with a red light (SPX 4,241.49). Our “Core Four” (see top of page) sits with 1 yellow and 3 red lights. Interestingly, the VIX closed just $0.01 above its 50-day mav, barely clinging to a negative condition.
The 21-day moving averages on the Nasdaq and the S&P500 lie just above today’s closing levels. A strong price move (and a close) over that level of resistance on much higher volume would be a positive development, especially if it happens right away and without any distribution days before Tuesday. The opposite is also true: a big down day on increased volume in the next few days would immediately put this rally attempt in serious doubt.
Finally, we continue to be deeply grieved by the heinous attacks on Israel. Please join us in praying for the families that have lost loved ones and in asking the Lord Jesus to bring justice upon those that were responsible for the atrocities.
“I was glad when they said to me, “Let us go to the house of the Lord.” Our feet are standing within your gates, O Jerusalem, Jerusalem, that is built as a city that is compact together; to which the tribes go up, even the tribes of the Lord— an ordinance for Israel— to give thanks to the name of the Lord.
For there thrones were set for judgment, the thrones of the house of David. Pray for the peace of Jerusalem: “May they prosper who love you. “May peace be within your walls, and prosperity within your palaces.” For the sake of my brothers and my friends, I will now say, “May peace be within you.” For the sake of the house of the Lord our God, I will seek your good. Psalm 122 NASB 1995
Game plan: Watch closely to see if the bears reemerge at the 21-day mav resistance level within the next 3 days. Closely monitor and measure the current rally attempt for technical staying power. Freshen up your watch list of technically and fundamentally superior companies making strong moves to the upside on massive volume. Please pray for Israel.
Note: You can learn more about The Triumphant Core Four risk management system by clicking here.
Have a Triumphant day! ®
Ps. Happy birthday to our son, Danny!
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice. ©2023 Triumphant Portfolio Management, LLC.
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