Special Bulletin: October 26, 2020 (12pm update)

Nervousness Runs Higher as Indexes Slide Lower

Our Current Market Outlook has been downgraded to “Uptrend Under Pressure” with a “yellow” light. Three of our Core Four indicators are yellow and the last is green. This combination creates a cautious outlook.

The stock market major indexes are sitting right on top of their 21 and 50 day moving averages. There is also a long-term uptrend line from the March low in the vicinity trying to lend support to the recent rally.

Two weeks ago in our post we noted there was a curious divergence happening with the S&P500 index, as it had not yet flashed a Follow Through day like the Dow Jones and the Nasdaq had. That observation proved to be very telling about the markets risk appetite heading into November 3rd.

We wrote, “This action is most likely telling investors that the S&P500 is being held back by the many industries represented in its index that are dependent on more stimulus and/or are more negatively affected by the pandemic.” Today’s news of soaring Covid cases over the weekend and no new stimulus from D.C. has sent the markets down sharply.

Option 3 from that post, “The markets falter over the next week and then a new wave of selling slaps the indexes back into the lower end of a bigger trading range,” appears to be unfolding.

If the markets get any surprise good news on a vaccine or other needed positive event, then they will snap back immediately and soar. But, they must hold today’s key support levels first or much bigger loses will likely happen without a positive catalyst.

What can investors do? Protect capital by employing your exit strategy now. But, stay open minded and nimble for a possibly forthcoming positive catalyst.

Have a Triumphant day! ®